Report from the Commission to the Council on the quota system for the production of potato starch
Date: 1997-11-11
Institutions: European Commission
Subjects: EU aid, EU production, agricultural quota, potato, starch

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 11,11.1997 
COM(97) 576  final 

97/0300 (CNS) 

REPORT FROM THE COMMISSION TO THE COUNCIL 

on the quota system for the production of potato starch 

Proposal for a 
COUNCIL REGULATION (EC) 

amending Regulation (EC) No 1868/94 establishing a quota system 
in relation to the production of potato'starch 

(presented by the Commission) 

REPORT FROM THE COMMISSION TO THE COUNCIL 

ON THE QUOTA SYSTEM FOR THE PRODUCTION 

OF POTATO STARCH 

1. 

INTRODUCTION: The need for the Report 

Article 3(1} of Council  Regulation  (EC) No  1868/941 stipulates that  on  or  before 
3!  October  1997  the  Commission  must  present  to  the  Council'  a  report  on  the 
aliocLtion  cf  quota  within  the  Community,  accompanied 
if  necessary  by 
appropriate  proposals.  The  report  must  take  account  cf  the  development  of  the 
potato-starch market as well as that of the cereal-starch market. 

Article 3(2) of Council Regulation  (EC) No  186S/94  stipulates that  on or  before 
30 November  1997 and thereafter  at three-yearly  intervals the Council, acting on 
the basis of Article 43 cf the Treaty, must allocate quota between. Member States 
on the basis of the report referred to in Article 3(1). 

Quotas were established  for  the  1995/96,  1996/97  and  1997/98  marketing  years 
for  the  following  Member  States:  Denmark,  Germany,  Spain,  France  and 
the Netherlands. 

The  expansion  of  the  Union  on  1  January  1995  required  the  amendment  of 
Regulation  (EC)  No  ÎS68/942  so  as  to  grant  quotas  to  Austria,  Finland  and 
Sweden, the three new Member States ai2 being potato-starch producers. 

2.  The quota system 

Council Regulation (EEC) No  1543/93 fixing the amount of the premium paid to 
producers  of potato  starch  during  the  19=93/94,  1994/95 and  1995/96 marketing 
years3 provided for the Council to decide what measures to take if the  production 
of  potato  starch  within  the  Community  exceeded  1.5  million  tonnes  in  the 
1993/94 or  1994/95 marketing year. 

Production  in  1993/94  did  in  fact  exceed  that  figure.  As  a  result  the  Council 
decided,  in July  1994, to  introduce  a quota  system  for  the  production  cf" potato 
starch  so  as  to  restrict  the  amount  of  Community  potato-starch  production 
eligible for Community aid, while taking account of the fact  that the potato starch 
sector is not  subject  to the restrictions  on production, and in particular  set-feside, 
applying  in the cereals sector.  In addition,  the  product  does  not  come  under  thz 
support system for producers of certain arable crops. 

OJNoL197,  30.7.1994, p. 4. 
Regulation (EC) No 1863/95 (OJ No L  179, 29.7.1995, p. 1). 
OJNoL154,  25.6.1993, p. 4. 

Originally,  quotas  were  allocated  to  producer  Member  States  in the  Community 
of  12  on  the  basis  of  the  average  amount  of  starch  produced  by  those  countries 
during  the  1990/91,  1991/92  and  1992/93  marketing  years  for  which  a premium 
had  been  paid;  the  quotas  were  subject  to  a  proportional  adjustment  so  as  to 
obtain a total Community quota of  1.5 million tonnes. 

One  exception  was  Germany,  for  which  the  selected  reference  period  was 
1992/93  because  of restructuring  of agricultural  production  in the new  Lander as 
a result of unification.  In addition, the Council deemed it necessary to increase the 
quantity resulting  from  the  choice  of  that  reference  period  (501  717  tonnes)  by 
90 000 tonnes. 

Also,  an additional  reserve  of  110 000  tonnes was  created  for  Germany  to  cover 
production  in  1996/97  in  that  country  resulting  from  irreversible  investments 
made before 31 January  1994. 

Lastly,  the  Council  decided  to  grant  a quota  of  2 000  tonnes  to  Spain  after  that 
country was also judged to be a starch producer. 

The total  amount  of  quotas allocated  to  the  Community  of  12,  taking  account  of 
the  German reserve,  was  a maximum  1 702 000 tonnes  compared to the quota  of 
1 500 000 tonnes initially proposed by the Commission. 

For  the  Community  of  15,  the  quota  system  was  expanded  to  cover  Austria, 
Finland  and  Sweden  on  the  basis  of  the  quantity  of  potato  starch  produced  by 
undertakings  in the  new  Member  States  during the  1993  calendar year  for  which 
state aid was paid. 

However,  in  1995  the  Council  decided  to  increase  by  11000  tonnes  the 
Commission's  initial  proposal;  this  made  the  total  amount  of  Community  quotas 
for  the  enlarged  Union  1 759 750  tonnes  without  the  German  reserve  and  a 
maximum  1 869 750 tonnes with it. 

The  resulting  total  national  quotas  were  distributed  by  each  Member  State  to 
existing  starch-producing  undertakings  for  use  in  the  1995/96,  1996/97  and 
1997/98  marketing  years.  Where  necessary,  account  was  taken  of  investments 
carried out by the undertakings before  31 January  1994. 

The purpose of the  system is solely  to  cover potato  starch production  eligible  for 
Community  assistance;  starch  obtained  without  assistance  (for  example,  as  a 
by-product) is excluded from the quota system. 

The  management  tools  in force  before  1992  have  been  retained  under the  quota 
system, having been adapted to take account of the CAP reform.  They are: 

the minimum potato  price: This price is equivalent to the price of cereals, in 
particular  maize  (indicative  October  price);  the  price  has  fallen  at  the  rate 
set by the reform,  so that, after agrimonetary correction, it was ECU  209.78 
per tonne of potato starch from 1 July  1995 on. 

the  compensatory  payment  to  farmers.  This  is  granted  to  producers  of 
potatoes  intended  for  starch  production.  It  is  applied  to  the  quantity  of 
potatoes required to produce one tonne of starch and was set at ECU  86.94 
on the same date. 

the  special  starch producer's premium:  Introduced  about  20  years  ago,  the 
premium  was  set  at  ECU  22.25  per  tonne  of  starch;  it  is  paid  to 
starch-producing  undertakings  for  the  quantity  of  starch  corresponding  to 
their  quota  provided  that  the  minimum  price  is  paid  to  the  farmer.  It  was 
intended to  offset  certain  structural  disadvantages  in the  starch industry,  in 
particular special anti-pollution investments, the lack of by-products and the 
seasonal nature of production. 

The  rules  also  include  a  compulsory  system  of  cultivation  contracts  between 
potato  growers  and  starch  producers.  The  compensatory  payment  and  the 
starch-producer's premium are only granted  within the strict  quota limit, with the 
exception  of  a  5% degree  of flexibility allowing  a  starch  producer  to  exceed  his 
quota by a maximum of that percentage provided  that the quota for the  following 
marketing year is reduced  accordingly. 

Lastly,  any  starch  produced  in  excess  of  quota,  plus  the  5% flexibility,  must  be 
exported  as  such  from  the  Community  before  1 January  of  the  following 
marketing  year  without  being  ehgible  for  any  compensation,  premium  or 
export refund. 

The  Commission's  detailed  implementing  rules  are  set  out  in  Regulation  (EC) 
No 97/954  which  explains  various  matters,  such  as  the  subject  of  cultivation 
contracts,  the  minimum  starch  content,  verification  and  penalties  relating  to  h, 
rules  relating  to  exports  without  refund  and  penalties  for  non-compliance,  rules 
applicable  to  mergers,  changes  of  ownership  and  the  commencement  or 
termination of commercial activities by starch-producing undertakings. 

3.  Operation of the quota system: report and rliture prospects 

3.1.  Report on  1995/96 and  1996/97 marketing years 

OJ No L 16, 24.1.1995, p. 3. 

Table  1  shows  quotas  allocated  and  production  during  the  1995/96  and  1996/97 
marketing years. 

Table 1 

Quotas and starch production for which aid was 2ranted 
{tonnes) 

Member  State 

Basic  quota 

Production 
1995/96 

Available 
quota  1996/97 

Production 
1996/973 

Denmark 

178 460 

154 312 

178 460 

183  1142 

498 067 

250 967 

543 9052 

29 412 

54 8512 

46 470 

591 717 
104 5541 

2 000 

281 516 

532 709 

49 100 

54 577 

63 900 

} 

710 0052 

269 704 

535 2892 

48 100 

57 3152 

58 720 

Germany 
.  quota 
.  reserve  96/97 

Spain 

France 

591 717 
110 OOO1 

2 000 

281 516 

Netherlands 

538 307 

49 100 

54 750 

63 900 

Austria 

Finland 

Sweden 

Sub-total 
(without 
reserve) 

Reserve 

TOTAL 

1 759 750 

1 577 984 

1 753 979 

110 000 

104 554 

1 869 750 

1 577 984 

1 858 533 

1  862 247 

Expenditure 

ECU  177.1 million 

ECU 205 
million* 

104 5541 out of 110 000 were allocated. 
Including the maximum 5% flexibility,  not including quantities exported without  refund. 
Including German reserve. 
Source: Member State communications. 
Estimate based on 1997 budget year expenditure up to August 1997. 

During the  1995/96 marketing year overall production was below  the quota level 
(90%) as a result of average to poor weather conditions. 

At Member State level,  the Netherlands exceeded  the quantity of starch produced 
under  Annex  II  to  Regulation  (EC)  No  97/95  by  1.046%,  still  less  than  the 
maximum  5%  allowed  under  the flexibility clause  in  Article  6(2)  of  Regulation 
(EC) No  1868/94,  and Finland exceeded it by 0.184%. 

In the  1996/97 marketing year total production was 0.2% above the overall quota 
(including  the  German  reserve  and  corrected  to  take  account  of  the  overruns  in 
1995/96);  quotas  were  exceeded  in  Denmark,  Germany,  Finland  and  the 
Netherlands.  In the  other  producer  Member  States  there  was  an  increase  which 
stayed  within  the  quota  limit.  This  was  the  result  of  particularly  good  weather 
conditions  in  summer  1996  which  increased  per  hectare  potato  yields  and  also 
increased potatoes' average starch content. 

In 1996/97 some starch-producing undertakings which had exhausted their quotas 
even  after  partly using  up the  5% flexibility, chose  to  export  quantities  of  starch 
without  refund  and  without  compensation  or  premium  before  1 January  1998 
(Germany  11118 tonnes, Finland 3 048 tonnes). 

3.2.  Treatment of the German reserve 

For the  1996/97 marketing year Germany was authorised to use the reserve  of up 
to  110 0001 on condition that: 

its  initial  quota  was  fully  allocated  in  accordance  with  Article  2  of 
Regulation (EC) No  97/95 no later than 8 March  1995, 

the  sub-quotas  which  became  available  after  8 March  as  a  result  of  the 
cessation of trading were fully utilised before 31 March  1996, 

the reserve was used only in respect  of irreversible investments made before 
31 January  1994 in conformity with the conditions laid down. 

On the basis of  information  supplied by the  German  authorities,  the  Commission 
had no reason to doubt that the conditions had been  satisfied. 

Taking  account  of  these  now  completed  investments  the  German  authorities 
distributed an additional  quota of  104 554 tonnes of starch. 

In  fact,  the  starch-producing  undertakings  concerned  produced  more  starch  in 
1996/97 than their basic quota plus the quantities allocated from the reserve. 

3.3.  Development  of the cereal and non-cereal  starch market 

The  starch  product  industry  covers  three  main  activities:  maize  starch,  wheat 
starch and potato  starch. Apart from those three production sources, there are the 
following  forms  of  production  for  special  and  marginal  applications:  rice  starch 
(using  broken  rice),  barley  starch  in  Sweden  and  Finland,  which  is  in  decline  to 

the  benefit  of  wheat  starch,  and,  to  a  lesser  extent  (for  experimental  research) 
oats starch. 

The  industry  manufactures  unprocessed  and  modified  starches,  hydrolysis 
products  (glucose)  and  products  produced  after  the  crystallisation,  isomerisation 
and fermentation  of hydrolysates. 

It  remains  to  be  seen  to  what  extent  the  allocated  quota  quantities  can  be 
absorbed  by the  cereal  and  potato  starch  market,  which  has been  expanding  by 
some 2-3% per year.  Industry  sources  state that  there were no difficulties  in the 
1995/96  marketing  year  in  selling  at  relatively  high  prices  and  relatively  low 
year end  stocks.  During  the  1996/97  marketing  year  cereal  and  potato  starch 
availability  was  greater  than  in  the  previous  year  (potato  starch:  some 
30 000 tonnes more) and this led to a levelling-off  of prices. Larger quantities of 
the  starches  were  exported  with  refund:  385 000  tonnes  of  unprocessed 
non-cereal  starch  (67%  more  than  in  1995/96)  and  400 000  tonnes  of 
cereal-based  starch  and  glucose  (40%  more  than  in  1995/96).  However,  these 
quantities  were  lower  than  those  exported  during  the  1994/95  marketing  year 
tonnes  of  cereal 
(394 000 
starch/glucose). 

tonnes  of  non-cereal  starch  and  588 000 

Table 2  Non-cereal  and  cereal  starch  exports  (unprocessed  product 
('000  t) 

equivalent) 

Non-cereal starch 

Maize/wheat 
starch 

Total 

1993/94 

1994/95 

1995/96 

1996/97 

354 

394 

232 

384 

458 

588 

300 

417 

812 

982 

532 

801 

Table 3 shows actual production of non-cereal and cereal starch and thç quantities 
forecast  for future years. 

Table 3 

Production of cereal and non-cereal starch 
(million tonnes) 

1993/94 

1994/95 

1995/96 

1996/97 

1997/98 

1998/99 

3.4 

1.5 

3.6 

1.6 

3.6 

1.7 

3.6 

1.8 

3.7 

2.2 

0.05 

0.Ô5 

0.05 

0.05 

0.05 

1.7 

1.5 

1.73 

23 

1.9 

6.65 

6.75 

7.05 

7.45 

7.85 

3.4 

2.2 

0.05 

1.92 

7.55 

25.6 

22.2 

24.1 

26.8 

24.2 

25,2 

Maize1 

Wheat1 

Barley/oats 

Non-cereal 

TOTAL 

Proportion  of  non-
cereal starch  as a  % 

1 
2 

Source: AAC (Association des Amidonneries de Céréales de l'TJE). 
Assuming no change for quota system. 
Including non-quota production, in particular production losses not incurred. 

Table  3  shows  that  production  of  non-cereal  starch  as  a  proportion  of  cereal 
starch  went  from  24.1% in  1995/96  to  26.8% in  1996/97.  In  future  marketing 
years the proportion  of non-cereal  starch,  assuming no change in quotas,  should 
show a slight levelling-off in view of the likely increase in starch production based 
on wheat. 

3.4.  5% flexibility 

This  is  a  flexibility  of  5%  in  excess  of  the  quota  granted  to  starch-producing 
undertakings  on  condition  that  the  quota  for  the  following  marketing  year  is 
reduced accordingly. Proposals to improve the clause have been put by the trade, 
mainly consisting in an increase in the percentage. 

In 1995/96, a small number of undertakings used this facility, whereas in  1996/97 
a  larger  number  used  it  for  a  total  of  about  24 000  tonnes  (1.3%  of  the 
total quota). 

In  1995/96  no  undertaking  exceeded  105%  of  its  quota.  In  1996/97, 
four undertakings  out  of  16 did  so,  albeit  for  small  quantities  (a  total  of  about 
14 000 tonnes). 

3.5.  Agenda  2000 

The  Commission  has  just  proposed  an  adjustment  to  the  cereal  prices  and 
compensation  arrangements  as  part  of  its  Agenda  2000  proposals.  It  is  also 
proposing to maintain the set-aside instrument, but at a level of 0%. 

Since  the  non-cereal  starch  price  and  compensation  arrangements  have  always 
been governed  by the basic  cereals Regulation  (link to  maize),  the  adjustment  of 
those  arrangements  will  follow  the  measures  taken  for  maize  as  part  of  the 
Agenda 2000 decisions. 

4.  CONCLUSION 

In view of the arguments put forward  in this report, particularly with regard to the 
equilibrium  in  the  internal  cereal/non-cereal  starch  market  coupled  with  the 
exports in the period under review, the Commission recommends no change in the 
size  of quotas and renewal  for three years of the current  quotas  as resulting from 
Regulation  (EC)  No  1868/94,  except  in  the  case  of  Germany  whose  reserve 
should be definitively  included  at a volume of  104 554 tonnes,  thereby  setting the 
new German quota at 696 271 tonnes. 

However,  if  a  disequilibrium  occurs  in  the  next  three-year  period  between 
non-cereal  starch production and outlets for it in the internal market, thus causing 
an  appreciable  increase  in  quantities  exported  with  refund,  the  Commission 
reserves  the  right  to  propose  to  the  Council  an  adjustment  in  the  prevailing 
quotas. 

where  the  percentage  and  rules  of  application  of  the  flexibility  clause  are 
concerned,  the  commission  also  recommends  no  change,  particularly  since  the 
improvement proposed by the trade is likely to lead to a maximising of production 
and  therefore  to  an  additional  quantity  for  sale  on  a  market  already 
relatively saturated. 

10 

Proposal for a 
COUNCIL REGULATION (EC) 

amending Regulation (EC) No 1868/94 establishing a quota system 
in relation to the production of potato starch 

11 

1.  EXPLANATORY MEMORANDUM 

The  purpose  of  this  Regulation  is  to  amend  Regulation  (EC)  No  1868/94  so  as  to 
allocate the three-year quota between starch producer Member  States for the  1998/99, 
1999/2000  and  2000/01  marketing  years  on  the basis  of the  Commission's  report  to 
the Council on the quota system for potato starch. 

This  Regulation  renews  the  existing  quotas  for  three  years,  taking  account  of  the 
definitive inclusion in the quota for Germany of the reserve of  104 554 tonnes  referred 
to in the original second subparagraph of Article 2(1) of Regulation (EC) No  1368/94. 

Where  necessary,  any amounts utilised  in excess  of  quota  by  starch  producers  in the 
Member States under the flexibility clause in Article 6(2) during the  1997/98 marketing 
year will be taken into account. 

12 

Proposal for a 
COUNCIL REGULATION  (EC) 

amending Regulation (EC) No  1868/94 establishing a quota system 
in relation to the production of potato starch 

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 Commission5, 

Having regard to the opinion of the European Parliament6, 

Having regard to the opinion of the Economic and Social Committee7, 

Whereas  Article  2 of  Council  Regulation  (EC)  No  1868/948  of  27 July  1994,  as  last 
amended by Regulation  (EC) No  1863/959, fixes the potato starch quotas for  producer 
Member States for the  1995/96,  1996/97 and  1997/98 marketing years; 

Whereas Article 3(2) of Regulation  (EC) No  1868/94 provides that  the  Council  must 
allocate the three-year quota between the producer Member  States on the basis of the 
Commission's  report  to  the Council; whereas, to that  end,  the  existing  quotas  should 
be renewed  for  three years taking  account  of the  definitive  inclusion  in the  quota  for 
Germany  of the reserve  of  104 554 tonnes  referred  to  in the  second  subparagraph  of 
Article 2(1) of that Regulation; 

Whereas the producer Member States should allocate their quotas for a period of three 
years between all undertakings producing potato starch on the basis of the quotas used 
for the  1995/96 marketing year, with the exception of Germany, for which account will 
be  taken  of  the  quota  transfers  resulting  from  mergers  and  supplementary  quota 
allocations from the reserve made in 1997/98; 

Whereas  calculation  of  the  sub-quotas  to  be  used  for  each  undertaking  producing 
potato  starch will take  account  of the  possible use  of the flexibility  clause  during  the 
1997/98 marketing year, 

OJNoC 
OJNoC 
OJNoC 
OJ No LI 97, 30.7.1994, p. 4. 
OJNoL179, 29.7.1995, p. 1. 

13 

HAS ADOPTED THIS REGULATION: 

Article  1 

Article 2 of Regulation (EC) No  1868/94 shall be replaced by the following: 

"Article 2 

1. 

The  following  producer  Member  States  are  hereby  allocated  quotas  for  the 
production  of  potato  starch  within  the  following  limits  for  the  1998/99, 
1999/2000 and 2000/01 marketing years: 

Denmark 
Germany 
Spain 
France 
Netherlands 
Austria 
Finland 
Sweden 

178 460 tonnes 
696 271 tonnes 
2 000 tonnes 
281 516 tonnes 
538 307 tonnes 
49 100 tonnes 
54 750 tonnes 
63 900 tonnes 

1 864 304 tonnes. 

2. 

Each producer Member State shall allocate the quota referred  to in paragraph 1 
to undertakings producing potato starch for use in the  1998/99,  1999/2000 and 
2000/01  marketing  years  on the basis of the  sub-quotas  used  for  the  1995/96 
marketing  year,  with  the  exception  of  Germany,  for  which  account  shall  be 
taken  of  transfers  of  sub-quotas  as  a  result  of  mergers  and  of  additional 
allocations of sub-quotas from the reserve made in 1997/98. 

The  sub-quotas  used  for  each  undertaking  producing  potato  starch  shall  be 
adjusted  to take account  of any amount  utilized  in excess of quota  during the 
1997/98 marketing year under Article 6(2)." 

Article 2 

This  Regulation  shall  enter  into  force  on  the  seventh  day  following  that  of  its 
publication in the Official Journal of the European Communities. 

It shall apply from 1  July 1998. 

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

Done at Brussels, 

For the Council 
The President 

14 

FINANCIAL STATEMENT 

BUDGET HEADING: 

Bl  - 1021 

APPROPRIATIONS:  ECU  182.6 million 

2. 

TITLE: 

Council Regulation amending Regulation (EC) No  1868/94 establishing a quota system  in relation to the production of 
potato starch. 

LEGAL BASIS:  Articles 42 and 43 of the Treaty 

AIMS: 

'lb allocate the three-year quota between  potato starch producing Member States for  1998/99,  1999/2000 and 2000/2001. 

FINANCIAL  IMPLICATIONS 

5.0 

5.1. 

EXPENDITURE 
-  CHARGED TO THE EC BUDGET 
(REFUNDS/INTERVENTION) 

-  NATIONAL  AUTHORITIES 
-  OTHER 

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

-  NATIONAL 

5.0.1 
5.1.1 

5.2 

ESTIMATED  EXPENDITURE 
ESTIMATED  REVENUE 

METHOD OF CALCULATION: 

PERIOD OF 
12 MONTHS 

(ECU  million) 

CURRENT 
FINANCIAL 
YEAR  (98) 
(ECU  million) 

FOLLOWING 
FINANCIAL 
YEAR  (99) 
(ECU  million) 

205.4 

2000 
ECU million 
205.4 

2001 
ECU million 
205.4 

2002 
ECU million 

2003 
ECU million 

Potato starch  premium: 
Compensatory  payment: 

I 864 304 1 x  ECU 22.25/t  x  1.009 (DR) 
I 864 304 t  x  ECU 86.94/t  x  1.009 (DR) 

ECU  41.9 million 
ECU  163.5 million 
ECU 205.4 million 

Payments will commence  in  1999. 

6.0 

6.1 

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? 

6.2 

WILL A SUPPLEMENTARY  BUDGET BE NECESSARY? 

WILL FUTURE BUDGET APPROPRIATIONS BE NECESSARY? 

OBSERVATIONS: 

The measure  is restricted to the years  1998/99,  1999/2000 and 2000/2001 

YES/NO 

YES/NO 

YES/NO 

YES/N© 

15 

ISSN 0254-1475 

COM(97) 576 final 

DOCUMENTS 

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03  08  10 

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ISBN 92-78-26901-8 

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