Opinion of the Economic and Social Committee on the 'Commission proposal on the prices for agricultural products (1999/2000)'
Date: 1999-04-28
Institutions: European Economic and Social Committee
Subjects: farm prices, fixing of prices, proposal (EU)

C 169/20

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sooner to achieve the objective set in the 1992 directive.
Similarly, it is concerned about a further postponement. With
initiatives underway in the Member States to prevent the
further spread of zoonoses, the Commission must lose no
time in surveying the current state of play and submitting
appropriate proposals with a view to bringing the situation

under control as soon as possible. Otherwise there is a risk of
major problems in the functioning of the internal market.
Available statistics should also be published and a scientific
conference organised as soon as possible. Early clarification of
the EU’s policy in this area is also crucially important for its
relations with the wider world.

Brussels, 28 April 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

Opinion of the Economic and Social Committee on the ‘Commission proposal on the prices for
agricultural products (1999/2000)’ (1)

(1999/C 169/09)

On 23 March 1999 the Council decided to consult the Economic and Social Committee, under Articles 43
and 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Agriculture, Rural Development and the Environment, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 8 April 1999. The rapporteur
was Mr Strasser.

At its 363rd plenary session (meeting of 28 April) the Economic and Social Committee adopted the
following opinion by 90 votes to two, with four abstentions.

1. Gist of the Commission proposal

1.2. Trends in agricultural production

1.1. The agricultural economy in 1998

1.1.1.
1998 was marked by a sharp deterioration in some
agricultural markets. In addition, the economic and financial
crisis in various non-member countries affected first and
foremost the pigmeat and beef sectors.

1.1.2.
Following two record crops in succession, world
cereal market prices fell to their lowest level for five years and
growth in demand on world markets slowed down. Cereal
intervention stocks, particularly of barley and rye, climbed to
16 million tonnes towards the end of 1998 and likewise
dragged down market prices in the sector.

1.1.3. Whilst the prices of most products fell in 1998, the
only sectors where producer prices were up on the previous
year were fruit (with the exception of citrus fruit), wine,
potatoes and beef/veal.

1.2.1. With a harvest of around 208 million tonnes (2.1 %
up on 1997), 1998 set a new record for cereal production as
a result of higher yields (up 4.2 %). Oilseed production also
went up, rising by 6.5 % to reach 15.5 million tonnes, of
which 14.2 million tonnes were used as food.

1.2.2.
1998, however, saw steep falls in the production of
sugarbeet (7.5 % reduction in areas sown and 5 % reduction in
yields) and olive oil (down 500 000 tonnes).

1.2.3.
It is estimated that milk production will turn out to
have dropped slightly (to 120 million tonnes) in 1998, whilst
beef/veal production is likely to have fallen by 4.2% to
7.5 million tonnes.

(1) OJ C 59, 1.3.1999, p.1-27.

Pigmeat production on the other hand is estimated
1.2.4.
to have risen by 6.5 %, poultrymeat by 2.1 %, and sheepmeat/-
goatmeat by 2.9 %.

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1.3. Farm incomes

in 1998
According to initial Eurostat estimates,
1.3.1.
agricultural incomes in the EU, measured as average income
per person engaged in agriculture, fell in real terms by 3.9 %.
The Commission attributes this to the following factors:

— a substantial fall in meat prices (particularly pigmeat which

is down by 26.1 %)

— a decline in the level of agricultural subsidies (down by

6.2 %)

— a marked slowdown in the contraction of the agricultural

labour force.

1.3.2.
Subsidies account on average for 29 % of agricultural
income in the European Union. This reflects a partial shift
from market price support to direct income payments.

1.4. Budget situation

The Commission estimates that the requirements of
1.4.1.
the EAGGF Guarantee Section for 1999 amount
to
40,953 million EUR, which is well within the agricultural
guideline of 45,188 million EUR.

1.5. The Commission’s price proposals

The Commission points out that now reforms have
1.5.1.
been carried through, only a few market management par-
ameters still need to be fixed annually.
It also refers to
discussions on the proposed reforms contained in Agenda
2000. The Commission therefore proposes, with one or two
exceptions, that where a decision is still necessary, amounts
should remain the same whether in respect of institutional
prices, subsidies or monthly increments for cereals and rice.

In the cereals sector, the Commission proposes only
1.5.2.
one amendment to existing regulations, namely a change in
the ‘irrigated area’ provision, whereby compensatory payments
should, in line with Agenda 2000, be reduced proportionately
(on a one to one basis) in the event of an overshooting of
‘irrigated area ceilings’ in 1999/2000, and not be reduced by
one and a half times the rate of the overrun, as provided for in
Regulation (EEC) No. 1765/92.

In the sugar sector the Commission proposes that
1.5.3.
the monthly reimbursement of storage costs be reduced from
0.38 EUR to 0.33 EUR per 100 kg to reflect lower interest
rates. The Commission also recommends that no (higher)
derived intervention price for white sugar be proposed in the
case of Italy, which is not a deficit area.

1.5.4.
Although the Commission takes the view that a
similar proposal might have been made to reduce monthly
increments in the intervention price for rice (given the fall in
the intervention price in this sector), no such proposal has
been put forward because of the difficult situation on the rice
market.

In the wine sector a package of transitional measures
1.5.5.
has been proposed, pending the entry into force on 1 August
2000 of the reformed common wine regime.

1.5.6.
In view of the fact that the Commission tabled a
proposal on 6 November 1998 fixing the guarantee thresholds
(quotas) and the premiums for the years 1999, 2000 and 2001
in the tobacco sector, it was deemed unnecessary to include a
proposal in the 1999/2000 price package.

1.5.7.
In the seeds sector, a few changes to the parent
regulation were proposed. In the case of rice and hemp, the
aim is to bring seed legislation into line with the legislation on
individual products.

2. General comments

The Economic and Social Committee has already
2.1.
expressed detailed views on the Commission’s proposals for
reforms under Agenda 2000. It therefore does not wish to use
the Opinion on the 1999/2000 price package as an excuse to
dwell once more on individual aspects of the CAP reform. The
Committee nevertheless regrets that, with a few exceptions,
the Commission has not shown much willingness to take on
board the arguments and proposals put
forward by the
Committee and other bodies on alternative ways of reforming
the CAP. A positive development however is the recognition
by farm ministers and the heads of sate or government that
amendments will have to be made to the Commission
proposals and the realisation that such amendments partly
coincide with the changes deemed by the Committee to be
necessary when drawing up opinions on legislative proposals
for CAP reform.

2.2.
The Committee views with great concern trends in
farm incomes in the majority of EU Member States, with
incomes
falling particularly steeply in some individual
countries. The sharp decline in these incomes is all the more
disturbing as CAP reforms and the price trends of major
agricultural products in 1999 suggest that such incomes will
be subject to further downward pressure.

In this connection it has become clear that institutional prices,
expressed in national currencies, have fallen as a result of the
introduction of the EUR in most EU Member States. Only in a
few Member States have the losses resulting from currency
revaluations been marked up.

The Commission cites ‘a marked slowdown in the
2.3.
reduction in the agricultural labour force’ as one of the main
reasons for the fall in farm incomes.

Rising unemployment in the EU continues to be one of our
major unresolved problems. Many rural areas are particularly
beset by unemployment so that in many areas it has been, and
is, becoming more and more difficult for farmers to find
opportunities for earning income outside agriculture. This has
inevitably had an impact on structural change in agriculture.
The Committee therefore believes that a solution to the
problem of deteriorating incomes should not be sought by
encouraging the agricultural labour force to desert farming in
large numbers. In any case, the main cause of the decline in
income levels over the past few years has been the drop in the
price of key farm products.

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The Committee would point out in this context that the ESC
Opinion on the 1997/98 farm price proposals contained the
suggestion that income trends in agriculture be looked at in
conjunction with their impact on employment.

2.4.
The Committee does not agree with the Commission
that the partial shift from market price support to direct
income support ‘has generally contributed to the consolidation
of agricultural income and the reduction in its variability’. The
massive fall
in incomes in some Member States does not
support this thesis. Even higher direct payments are unable to
income resulting from market
make up for the loss of
fluctuations, which is why it is essential to make systematic
use of available market management instruments.

2.5.
The Committee is well aware that unforeseeable events
such as the financial crises in south-east Asia and the crisis in
Russia have had a powerful effect on the market outlets
for and hence prices of major agricultural products. These
developments run counter to the assumptions made in the
Commission’s ‘long-term prospects’-assumptions which for-
med, inter alia, some of the thinking behind CAP reforms.
Events over the previous year also show that by and large
Europe cannot simply abolish the instruments it uses to
organise common agricultural markets. Such instruments after
all are needed:

— to regulate production appropriately,

— to ensure that EU farmers are not fully exposed to the

vagaries of world markets.

The Committee notes with interest that the USA has changed
the new direction of its agricultural policy — which came into
existence with the Fair Trading Act — in order to react to the
crisis on major agricultural markets. Unlike the EU, the US
administration has acted rapidly, thereby giving American
agriculture a competitive advantage.

2.6.
The Committee criticises the Commission for, in any
case, reacting too slowly to the crises in pigmeat markets. The
criticism applies both in respect of (a) the granting of subsidies
for private storage and (b) the increase in export refunds.

2.8.
The Committee would point out that in 1998, as in
the past, no additional measures were introduced to hasten the
development of renewable energy sources, and renewable raw
materials for industrial purposes. It is regrettable that no such
measures are provided for in the present price package.
Conditions for the development of renewable raw materials
continue, on the contrary, to change every year so that there
is no such thing as stable conditions for the development of
this increasingly important branch of production. There has,
moreover, been a sharp decline in the non-food use of oilseeds.

The Committee hopes that, despite the collective
2.9.
resignation of the European Commission, the work that lies
ahead will be properly carried out and there will be no legal
uncertainty in areas of importance to agriculture and the
foodstuffs sector.

3. Specific comments

3.1. Cereals

3.1.1.
The Committee notes that in the cereals sector the
Commission does not propose any changes in institutional
prices or premiums.

The Committee is pleased that

3.1.2.
the Commission
has not reduced the monthly increments. Maintaining such
increments at least at their present level would likewise be of
great importance for the future.

3.1.3.
The Committee agrees with the Commission pro-
posal that penalties for the overrun of irrigated areas should
be on a one-to-one basis and not disproportionate, which
simplifies the system.

Since the downward pressure on cereal prices has
3.1.4.
continued to gain momentum and intervention stocks in the
current marketing year have seen a further rise, the Committee
is in favour both of keeping the set-aside rate at 10 % for the
2000 harvest and of acting to stabilise markets. The Committee
would also like to see the maximum moisture content for
cereal intervention set — as before — at 15 %.

2.6.1.
The Committee expects the Commission to make
timely use of the existing market organization machinery to
prevent sharp price falls which would result in loss of income
for a majority of farmers.

3.2. Rice

The Committee has repeatedly asked the Commission
2.7.
to undertake an in-depth study of the impact of the CAP and
CAP reforms (particularly when agricultural producer prices
are being reduced) on consumer prices, food quality, health,
the environment, employment and rural areas. The Committee
continues to believe that a comprehensive analysis of this kind
is necessary and so regrets that the Commission has not yet
come up with anything.

3.2.1.
The Committee welcomes the Commission proposal
not to reduce the monthly increments in order to cope with
the difficult situation on the rice market.

3.2.2.
In view of this difficult situation, the Committee
hopes that all instruments will be fully utilised to stabilise the
market pending reform of the common organisation of the
rice market.

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3.3. Sugar

3.6. Fruit and vegetables

3.3.1.
The Committee believes that the Commission should
re-examine whether the proposed reduction of the monthly
storage refund is really justifiable. The stable interest rate
situation referred to by the Commission is, inter alia, at odds
with the fact that the introduction of the Euro on 1 January
1999 resulted in an average 1.54 % fall in beet and sugar
prices in terms of national currencies. A close look also needs
to be taken at whether conditions in Italy really warrant an
abandonment of the derived intervention price for white sugar.

The Committee notes that the Commission proposes
3.6.1.
no changes to the common organisation of the fruit and
vegetables regime following the 1997 reform.

3.6.2.
Reducing budget expenditure on this important
sector can be criticised for several reasons, one of which is the
strong pressure in prices resulting from changes in the system
of premiums for citrus fruits.

3.4. Fibre plants

3.7. Seeds

3.4.1.
The Committee welcomes the fact that the Com-
mission has not this time proposed a reduction of premiums,
as it did in previous years.

3.4.2.
The Committee proposes that administrative pro-
cedures be simplified, for example by ensuring that appli-
cations for premiums do not involve filling in more than one
form. The Committee further notes that current rules on
coefficients for flax entail costly red tape, which puts some
EU regions at a competitive disadvantage. Here too the
Commission should look at the possibility of simplifying
administration by doing away with the system of coefficients.

3.5. Wine

The Committee agrees with the Commission that
3.5.1.
existing regulations should remain in place until the reform
comes into force. For this same reason the related measures
and national derogations set out in the price package should
likewise be maintained.

3.7.1.
The Committee notes the Commission’s proposals
for amendments to the basic Regulation on seeds. It also points
out that the proposal concerning Lolium perenne L. entails a
reduction in aid for a certain category of seed,
thereby
penalizing a large number of seed growers.

3.8. Animal products

3.8.1.
The Committee notes that the Commission proposes
no changes in institutional prices or premiums in the case of
milk, beef/veal, and sheepmeat/goatmeat. Given the import-
ance of the prices of animal products for farm incomes, the
Committee calls upon the Commission to make full use of
every available instrument to ease market situations, particu-
larly through improvements in pigmeat markets.

3.8.2.
The Committee advocates a continuation of the
special measures applicable in the new German Länder with
regard to the 90-animal farm threshold.

Brussels, 28 April 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI