Proposal for a Council Regulation derogating from Regulation (EC) No 1251/1999 as regards the set-aside requirement for the 2004/2005 marketing year
Date: 2003-11-11
Institutions: European Commission
Subjects: aid per hectare, derogation from EU law, marketing year, set-aside

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 11.11.2003
COM(2003) 691 final

2003/0271 (CNS)

Proposal for a

COUNCIL REGULATION

derogating from Regulation (EC) No 1251/1999 as regards the set-aside requirement
for the 2004/2005marketing year

(presented by the Commission)

EXPLANATORY MEMORANDUM

In  order  to  qualify  for  area  payments  for  arable  crops  under  the  reform  of  the  common
agricultural policy, producers must set aside a percentage of their arable land with a view to
achieving a balance between Community production and foreseeable outlets. Small producers
are dispensed from the set-aside requirement.

The set-aside rate in the framework of Agenda 2000 is set at 10% and is covered by Council
Regulation (EC) No 1251/1999.

The 2003/2004 marketing year for cereals in EU-15 is characterised by a very low production
due  to  a  severe  drought  in  main  production  regions  of  the  Community.  In  particular  the
production  of  soft  wheat  has  fallen  from  94  Mio  tons  in  the  2002/2003  marketing  year  to
84 Mio tons in the 2003/2004 marketing year. In recent weeks estimates of the maize harvest
have been steadily revised downwards. Latest estimates are that it will be some 31 Mio tons,
viz. 25% lower than in 2002/2003. The total cereals production in the current marketing year
has decreased from 209 Mio tons to 183,6 Mio tons. In this situation the ending stocks of the
campaign 2003/2004 are estimated to decrease to a very low level.

The harvest in the 10 candidate countries was also very bad due to severe drought. Production
has decreased from 53,5 Mio tons in 2002/2003 to 46,4 Mio tons in the 2003/2004 marketing
year.  Confronting  this  production  with  consumption  of  50  Mio  tons  in  these  candidate
countries, there is also a decrease in ending 2003/2004 stocks estimated.

On  the  world  market  the  consumption  of  wheat  in  2003/2004  is  estimated  at  585  Mio  tons
compared with a production of 556 Mio tons. Ending stocks are  estimated to  decrease from
161  Mio  tons  in  2002/2003  to  132  Mio  tons  2003/2004.  For  coarse  grains  the  situation  is
nearly the same. The production in 2003/2004 is estimated at 893 Mio tons, compared with a
consumption of 923 Mio tons, despite a record harvest of maize in the USA. Ending  stocks
are estimated to decrease also from 158 Mio tons in 2002/2003 to 128 Mio tons in 2003/2004.

In  these  circumstances  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 Community market obtains supplies.

Regarding the above mentioned situation there is the conclusion that a normal harvest 2004 at
a 10% set-aside rate would not be expected to lead to a significant revival of stocks in EU-25
unless  exports  or  internal  consumption  were  to  be  significantly  lower  than  normal.  On  the
other hand a poor harvest 2004 would expose the internal market to potentially serious risks.

Under these circumstances it is proposed that the set-aside rate for 2004/2005 shall be reduced
to 5%.

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2003/0271 (CNS)

Proposal for a

COUNCIL REGULATION

derogating from Regulation (EC) No 1251/1999 as regards the set-aside requirement
for the 2004/2005 marketing year

THE COUNCIL OF THE EUROPEAN UNION,

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular
Articles 36 and 37 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Whereas:

(1) 

(2) 

The  support  system  for  producers  of  certain  arable  crops  introduced  by  Council
Regulation (EC) No 1251/19991, provides that, in order to qualify for area payments,
producers must set aside a certain proportion of their arable land.

The  cereals  market  in  the  Community  during  the  2003/2004  marketing  year  is
characterised by a low production due to severe drought in main production regions of
the Community.  This  situation is expected to  cause  a significant  reduction  in  ending
2003/2004  stocks  on  the  Community  market.  A  normal  2004  harvest  would  not  be
expected to lead to a significant increase in stocks. A poor harvest would expose the
internal market to potentially serious risks.

(3) 

For the 2004/2005 marketing year, the rate for set-aside should therefore be fixed at a
lower level than that set out in the second subparagraph of Article 6(1) of Regulation
(EC) No 1251/1999.

HAS ADOPTED THIS REGULATION:

Article 1

By  way  of  derogation  from  the  second  subparagraph  of  Article  6(1)  of  Regulation  (EC)
No 1251/1999,  the  basic  rate  of  compulsory  set-aside  is  fixed  at  5%,  for  the  2004/2005
marketing year.

1

OJ  L  160,  26.6.1999,  p.  1.  Regulation  last  amended  by  Regulation  (EC)  No  1782/2003  (OJ  L  270,
21.10.2003, p. 1).

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Article 2

This Regulation shall enter into force on the day of its publication in the Official Journal of
the European Union.

It shall apply to set-aside for the 2004/2005 marketing year.

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

Done at Brussels,

For the Council
The President

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1.

2.

3.

4.

5.

5.0

5.1

FINANCIAL STATEMENT

BUDGET LINE:
B1-10

APPROPRIATIONS:
€ 16 790 million

TITLE:
Council  Regulation  derogating  from  Regulation  (EC)  No  1251/1999  as  regards  the  set-aside
requirement for the 2004/2005 marketing year

LEGAL BASIS: Treaty Articles 36 and 37

AIMS:
To increase the available quantity of cereals on the Community market for the 2004/05 marketing year.

PERIOD OF
12 MONTHS

(EUR million)

CURRENT
FINANCIAL
YEAR 2003
(EUR million)

FOLLOWING
FINANCIAL
YEAR 2004
(EUR million

+74
(+18)
(+56)

–

–

FINANCIAL IMPLICATIONS

EXPENDITURE
–

CHARGED TO THE EC BUDGET
of which: export refunds

intervention
NATIONAL ADMINISTRATION
OTHER

–
–
REVENUE
–
(LEVIES/CUSTOMS DUTIES)
–

NATIONAL

OWN RESOURCES OF THE EC

5.0.1 ESTIMATED EXPENDITURE
5.1.1 ESTIMATED REVENUE

5.2 METHOD OF CALCULATION:

2005
+41

2006
+33

2007
–

2008
–

The proposed reduction of the set-aside rate from 10% to 5% for the 2004/05 campaign can be expected
to have as a consequence an increase in cereals production in the EU-25 of about 7 mio t. This change
is forecast to have an impact on the budgetary credits required for the years 2005 and 2006. The credits
required will be higher as a result of an increase in the quantities of cereals to be exported (+2 mio t)
and the temporary taking-over into intervention of 1 mio t of cereals.

For the estimated impact, the following elements have been used:
€/$ exchange rate: €1=$1,12 (LA 2004)
Cereals price for the 2003/2004 campaign: (LA 2004)
The  cereals  price  for  the  campaigns  2004/05  and  2005/06  are  aligned  on  those  used  for  the  same
campaign in the 2003 CAP reform (wheat: $115/t, barley: $110/t, rye: $72/t, maize: $105/t).

6.0

CAN BE FUNDED BY APPROPRIATIONS INCLUDED IN RELEVANT CHAPTER
OF CURRENT BUDGET

YES / NO

6.1

CAN BE FUNDED BY TRANSFER BETWEEN CHAPTERS OF CURRENT BUDGET

YES / NO

6.2 WILL A SUPPLEMENTARY BUDGET BE NECESSARY?

6.3 WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS?

YES / NO

YES / NO

OBSERVATIONS:

It may be pointed out that if world prices in euro for the 2004/05 campaign remained at the price levels used
for establishing the LA to the PDB 2004, the rates of export refund for wheat and barley will be zero, and the
budgetary impact for export refunds for these products would also be zero.
This corresponds to the current situation where the refund rates for wheat and barley stand at zero.
The 2 million tonnes export result from the restoration of the normal balance between internal domestic
consumption and exports of cereals that has been disturbed by the drought.

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