Proposal for a COUNCIL REGULATION (EC) derogating from Regulation (EEC) No 1765/92 establishing a support system for producers of certain arable crops as regards the set-aside requirement for the 1997/98 marketing year
Date: 1996-06-18
Institutions: European Commission
Subjects: aid per hectare, cereals, marketing year, regulation of agricultural production, set-aside

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  18.06.1996 
COM(96)  285  final 

96/0162  (CNS) 

Proposal  for  a 

COUNCIL  REGTTTATTnM (FP) 

derogating  from  Regulation  (EEC)  No  1765/92  establishing  a support  system 

for  producers  of  certain  arable  crops  as  regards the  set-aside  requirement  for 

the  1997/98  marketing  year 

(presented  by  the  Commission) 

EXPLANATORY  MEMORANDUM 

In  order  to  qualify  for  compensation  for  arable crops under  the reform  of the  common 
agricultural  policy,  producers  participating  in  the  general  scheme  must  set  aside  a 
percentage  of their  arable  land  with a view to achieving a balance between  Community 
production  and  foreseeable  outlets.  Small  producers,  on  the  other  hand,  can  opt  for  a 
simplified  scheme under  which  they  are  dispensed  from  the set-aside  requirement. 

The set-aside rate for the  1996 harvest is  10% both for  rotational set-aside and for  other 
forms. 

As part of the  1996/97 price package, the Commission has proposed that there should no 
longer be a distinction between rotational  set-aside and other forms  of set-aside and that 
the basic rate be set at  18%. However, the Commission has already stated that it intends 
derogating  from  this rate  for  cereals being  sown for  the  1997 harvest. 

Stocks  on  the  world  market  are  currently  at  an  all-time  low,  mainly  as  a result  of  the 
unfavourable  weather  which  affected  the  1995  cereals  crop  in  the  principal  producer 
countries. In the Community, production  in the southern areas has been particularly hard 
hit by  drought. 

The present level of stocks worldwide and in the Community together with  unfavourable 
weather  conditions  in  the  United  States,  which  are  chiefly  affecting  its  production 
potential  for  wheat and hence  its export prospects throughout  the whole of  1996/97, has 
led  to  an  extremely  volatile  price  situation  with  prices  running  at  very  high  levels, 
aggravated  by  speculation. 

This  has  had  a  knock-on  effect  on  market  prices  for  other  cereals  and  has  encouraged 
those  holding  cereals  in  the  Community  to  maintain  some  of  their  stocks  throughout 
1995/96. 

In these  circumstances  and at the request  of the Council, the Commission has made use 
of the market management tools available  to it, including the sale of  stocks from  public 
storage and controls on exports, to ensure that the Community market obtains supplies at 
prices  which  are  more  in  line  with  the  market  organization  in  cereals  and  the  reform 
objectives.  Intervention  stocks  have  fallen,  therefore,  from  7  million  tonnes  in  early 
1995/96 to 3.5 million tonnes at present, almost all of them consisting of bailey  and rye. 

Higher  prices  on the world  market  and  in the Community  have forced  the  Commission 
to impose a charge on exports and have raised appreciably the prices for cereal substitutes 
in animal  feed,  resulting  in much  greater  use of Community cereals. 

Initial,  extremely  provisional  estimates  of  the  Community  harvest  for  1996/97  put 
production  at around  187 million  tonnes  on an area sown to cereals of  some 37 million 
hectares. 

/ 

In the  light  of the  world  market  situation  described  above,  Community  consumption  of 
cereals  during  the  1996/97  marketing  year  is expected  to  be  above  162 million  tonnes. 
The crisis in the beef sector and the preference  shown by consumers for poultrymeat  and 
pigmeat, sectors that traditionally have overtaken beef in the consumption of cereals, may 
raise this consumption  further. 

In performing  its role of traditional exporter in order to contribute to greater world market 
stability,  the Community  is likely  to end  1996/97 with  very  small  carry-over  stocks. 

In  these  circumstances,  and  in  the  interests  of  security  of  supplies  given  the  weather 
hazards facing the production of arable crops, steps should be taken to increase production 
potential temporarily, without however undermining the aim of controlling production by 
allowing  an  excessive  build-up  of  public  stocks  and  without  making  it  harder  to  find 
alternative  outlets  for  arable  crops in industrial  uses. 

A set-aside  rate of  5% for  cereals sown  for  1997/98 seems appropriate  therefore.  It will 
be  necessary  then  to  adjust  the  increase  in the  set-aside  percentage  to  be  applied  in the 
event  of  a transfer  by  lowering  it to  1%. 

In presenting  this proposal  for  a rate of  set-aside  which  is far  below the proposed  18% 
single rate, the Commissin wishes to stress that it remains firmly attached to the principle 
of the  1992 reform  of  the arable regime.  It recalls, however,  that the  Regulation  (EEC) 
N° 1765/92 which instituted this reform  in its article  15 provides that the rate of set-aside 
as  well  as  compensatory  payments  and  compensation  for  set  aside  may  be  changed 
according  to  the  procedure  laid  down  in  Article  43  (2)  of  the -Treaty  in  the  light  of 
developments  in prodution,  productivity  and markets. The present proposal  is limited to 
set  aside  but  the  Commission  reserves  the  right  to  make  proposals  on  compensatory 
payments  and  set aside compensation  as and when  appropriate. 

2. 

proposal  for  a 

COUNCIL  REGULATION  (EC) No 

/96 

derogating  from  Regulation  (EEC) No  1765/92 establishing  a support  system 

for  producers  of  certain  arable  crops as regards the  set-aside  requirement  for 

the  1997/98 marketing  year 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 

Articles  42  and  43  thereof, 

Having  regard  to  the  proposal  from  the  Commission1, 

Having  regard  to the  opinion  of  the  European  Parliament2, 

Whereas  the  support  system  for  producers  of  certain  arable  crops  introduced  by 
Regulation  (EEC) No  1765/923, as last amended by Regulation  (EC) No .../964, provides 

that, in order to qualify  for  compensatory payments under the general scheme, producers 

must  set  aside  a predetermined  percentage  of their  arable  land;  whereas this percentage 

is to  be  reviewed  to  take  account  of production  and market  developments; 

Whereas,  since  the  introduction  of  this  system, the cereals market  has achieved  a better 

balance  as  a  result  of  a  reduction  in  production  and  an  increase  in  Community 

consumption;  whereas this situation,  together with the very  low level of stocks and very 

firm  prices  on  the  world  market,  has resulted  in  a significant  reduction  in  stocks  and  a 

sharp  rise  in the  prices  for  cereals on the  Community  market; 

1 
2 
3 
4 

OJ  No C 
OJ  No C 
OJ No  L  181,  1.7.1992,  p.  12. 
OJ  No  L ... 

1 

Whereas the present market situation for cereals is threatening to undermine, in the short 

term,  the  Community's  presence  on  the  world  market  and  to  jeopardize  some  of  the 

results achieved  since the reform  of the arable  sector, in particular  the continuing  rise in 

the  consumption  of  cereals  in  animal  feed;  whereas the  rate  for  set-aside  beginning  not 

later  than  15 January  1997  should  therefore  be  set  for  the  1997/98  marketing  year  at a 

level  lower  than  that  resulting  from  the provisions  in  force; 

Whereas  in  the  event  of  a transfer  of the  set-aside  requirement,  the basic  18%  set-aside 

rate is increased by 3%; whereas this increase should be adjusted  in order to maintain the 

same ratio between the basic rate and the percentage increase due on transfer,  as a result 

of  the  drop  in the  basic rate, 

HAS ADOPTED  THIS  REGULATION: 

For  the  1997/98  marketing  year,  notwithstanding  Article  7  of  Regulation  (EEC)  No 

Article 1 

1765/92, 

the  set-aside  requirement  referred  to  in paragraph  1 is set  at 5%; 

the  increase  referred  to  in  the  second  indent  of  paragraph  7  is  set  at  one 

percentage  point. 

This Regulation  shall enter  into force  on the seventh day following  its publication  in the 

Official  Journal  of the  European  Communities. 

Article 2 

It  shall  apply  to  set-aside  for  the  1997/98 marketing  year  only. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly  applicable  in  all  Member 

States. 

Done at  Brussels, 

For the  Council 

1 

FINANCIAL  STATEMENT 

BUDGET  HEADING:  Bl-10 

DATE:  11/6/1996 

APPROPRIATIONS:  ECU  17.185 m 

TITLE: 
Proposal  for  a Council  Regulation  derogating,  as regards  the obligation  to  set  aside  land  for  the  1997/98 marketing 
year,  from  Regulation  (EEC)  No  1765/92 establishing  a support  system  for  producers  of  certain  arable  crops 

LEGAL  BASIS: Articles 42  and 43  of the Treaty 

AIMS  OF  PROJECT: 

To  fix  the  set-aside  rate at 5% 

FINANCIAL  IMPLICATIONS 

5.0. 

5.1. 

EXPENDITURE 
-  CHARGED  TO  THE  EC  BUDGET 

(REFUNDS/INTERVENTION) 
- NATIONAL  ADMINISTRATION 
-  OTHER 

REVENUE 
-  OWN  RESOURCES  OF THE  EC 
(LEVIES/CUSTOMS  DUTIES) 

-  NATIONAL 

5.0.1. 
5.1.1. 

ESTIMATED  EXPENDITURE 
ESTIMATED  REVENUE 

5.2. 

METHOD  OF  CALCULATION: 

SEE  ANNEX 

CURRENT 
FINANCIAL 
YEAR 
(96) 
million  ecu 

FOLLOWING 
FINANCIAL 
YEAR 
(97) 
million  ecu 

PERIOD  OF  12 
MONTHS 

million  ecu 

81.6 

1998 

50.9 

1999 

30.7 

2000 

2001 

6.0. 

6.1. 

6.2. 

6.3. 

CAN  THE  PROJECT  BE  FINANCED  FROM  APPROPRIATIONS  ENTERED  IN  THE  RELEVANT 
CHAPTER  OF THE  CURRENT  BUDGET? 

CAN  THE  PROJECT  BE  FINANCED  BY TRANSFER  BETWEEN  CHAPTERS  OF THE  CURRENT 
BUDGET? 

IS A SUPPLEMENTARY  BUDGET  NECESSARY? 

WILL  FUTURE  BUDGET  APPROPRIATIONS  BE NECESSARY? 

YES/NO 

YES/NO 

Y-ES/NC 

YES/NG 

OBSERVATIONS: 

ANNEX TO FINANCIAL NOTO 

The  cost  evaluation  is based  on the current  situation  (10%  set-aside  rate) 

1. 

SAVINGS  IN  AID  PER  HECTARE 

The 5 point drop in the rate of set-aside liberates an area estimated at  1.7 million ha. The historic average 
yield is 4.84 t/ha, the aid amounts to ECU 68.83 per tonne for  set-aside  land and ECU  54.34 per tonne  for 
land  under  cereals.  It  is assumed  that  all  the  liberated  land  will  be under  cereals. 

Savings:  1.7  million  ha x (54.34  - 68.83)  ECU/t  x 4.84  t/ha = - ECU  119.2  million 
These  savings  are  chargeable  in their  entirety  to the  1998 financial  year. 

2. 

EXPENDITURE  ON THE DISPOSAL  OF  CEREALS 

It  is estimated  that the  1.7  million  ha can be allocated  as  follows: 

Soft  wheat: 
Barley: 
Maize: 

0.6  million  ha (yield  = 6.05  t/ha) 
1.0  million  ha (yield  = 4.12  t/ha) 
0.1  million  ha (yield  = 7.60  t/ha) 

On the basis of the refunds  used  in the PDB, the disposal  cost for  these  quantities produced  is as follows: 

Soft  wheat: 
Barley: 
Maize: 

0.6  million  ha x 6.05  t/ha x ECU 4.25/t = 
1.0  million  ha x 4.12  t/ha x ECU  39.35/t= 
0.1  million  ha x  7.60  t/ha x ECU  27.65/t= 

ECU  15.4 million 
ECU  162.1  million 
ECU  21.0  million 

TOTAL 

ECU  198.5  million 

85%  of the  cost  (ECU  168.7 million)  is chargeable  to the  1998 financial  year. 
The  balance  (ECU)  29.8  million)  is chargeable  to the  1999 financial  year. 

3. 

NET COST  OF THE  MEASURE 

In relation  to the budget cost for  the  1996/97 financial  year, the fixing  of a 5% set-aside  rate results in an 
additional  cost: 
for  1998 of: 
and  for  1999 of 

(168.7  -  119.2) x  1.029  (DT) 
29.8  x  1.029  (DT) 

= ECU  50.9 million 
= ECU  30.7  million 

G 

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