Report from the Commission - The agricultural situation in the European Union 2003 - Report {SEC(2004)1589}
Date: 2004-12-20
Institutions: European Commission
Subjects: European Union, agricultural situation, report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 20.12.2004 
COM(2004) 807 final 

. 

REPORT FROM THE COMMISSION 

The agricultural situation in the European Union 

2003 Report 

{SEC(2004)1589} 

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INTRODUCTION 

1. 

1. 

2. 

3. 

4. 

"The agricultural situation in the European Union – 2003 report", was completed in 
March  2004,  and  is  published  in  conjunction  with  the  General  Report  on  the 
Activities  of  the  European  Union.  A  separate  publication  has  been  produced  in  the 
beginning  of  2004  in  English,  with  the  title  "Agriculture  in  the  European  Union  – 
Statistical and economic information 2003". The present report deals in nine chapters 
with the main significant subjects in the year in question. 

ECONOMIC SITUATION AND FARM INCOMES 

The  2003  agricultural  year  was  marked  by  lower  production  for  both  crops  and 
livestock products (except for milk and pig meat). Inflation allowed for, input prices 
were  lower  except  for  energy  whereas  agricultural  prices  were  on  the  whole 
unchanged. Price rhythms were highly variable by sector and country but there were 
increases  for  all  cereals,  fruits  and  vegetables,  wine,  poultry  and  eggs,  and  falls  for 
sugar  beet,  potatoes,  pigmeat  and  milk.  Under  these  circumstances  agricultural 
income rose very slightly for the Union as a whole. 

Mainly owing to a fall in oil prices, the world economy continued to show a strong 
growth  in  2003.  In  the  European  Union,  however,  due  to  geopolitical  tensions  over 
the war in Iraq, difficulties on the labour market, poor stock market performance and 
uncertainty over the future of social security systems, the upswing came only in the 
second half of the year, and GDP growth for the entire year was very limited. 

In the first eight months of 2003 the overall value of Community agricultural exports 
rose by 4 % over the same period in 2002. For most products intervention stocks fell 
in 2003. 

2. 

POLICY DEVELOPMENTS AND LEGISLATIVE INITIATIVES IN 2003 

2.1. 

The CAP reform 

5. 

6. 

The Council of Agriculture Ministers of the European Union (EU) reached agreement 
in  Luxembourg  on  26  June  2003  on  a  fundamental  reform  of  the  Common 
Agricultural  Policy  (CAP),  based  on  the  Commission  proposals(1)  presented  on 
23 January  2003.  The  basic  rules  on  the  CAP  reform  were  then  set  out  in  Council 
Regulation (EC) No 1782/2003 of 29 September 2003(2) The reform, which will be 
introduced  over  the  next  two  years,  sets  out  to  establish  a  more  stable  policy 
framework for European agriculture. 

The  key  elements  of  the  new  CAP  will  be  the  introduction  of  a  single  payment 
scheme for EU farmers, independent (i.e. "decoupled") from production, the linking 
of  the  single  payment  to  observation  of  a  set  of  environmental,  food  safety,  animal 
and plant health and animal welfare standards, as well as to the requirement to keep 
all farmland in good agricultural and environmental condition ("cross-compliance"), 

1 
2 

COM(2003) 23 final. 
OJ L 270, 21.10.2003, p. 1. 

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the strengthening of rural development policy via "modulation" (the transfer of funds 
from  direct  payments  into  rural  development)  and  new  measures  to  support  the 
environment, promote quality and animal welfare and to help farmers meet new EU 
standards, significant reforms to the intervention mechanism in sectors which suffer 
from a structural imbalance as well as adjustments to support mechanisms concerning 
other sectors and finally, a financial discipline mechanism. 

2.2. 

Quality policy 

7. 

The  system  introduced  following  the  entry  into  force  of  Council  Regulation  (EEC) 
No 2081/92(3) on the protection of geographical indications (PGIs) and designations 
of  origin  (PDOs)  must  be  improved.  On  8  April  2003  Council  Regulation  (EC) 
No 692/2003(4)  has  been  adopted,  with  these  main  objectives:  comply  with 
international  agreements,  make  the  regime  available  to  third  countries  to  obtain,  in 
return, a protection outside the area of the EU, a general improvement of the system. 
With 28 new designations added, the list of PDOs and PGIs totals 632. 

2.3. 

Organic farming 

8. 

The Commission prepares a European Action Plan for organic food and farming that 
will contain proposals for future initiatives aimed to enhance the further development 
of the organic farming sector. 

2.4. 

Promotional measures 

9. 

Since the entry into force of Regulations (EC) No 2702/1999(5) and 2826/2000(6) the 
Commission approved 124 promotional programmes, 30 involving third countries and 
94 the EU. The total of the co-financing was EUR 105.7 million, of which 22.7 for 
third countries. 

2.5. 

State aids 

10. 

11. 

3 
4 
5 
6 
7 
8 

On  23  December  2003,  the  Commission  Regulation  on  State  aid  to  SMEs  active  in 
the production, processing and marketing of agricultural products(7) was adopted and 
will be valid until 2006. A draft Regulation concerning rules on De Minimis aid for 
the agricultural and fish sectors was also adopted by the Commission. 

The treatment of several cases of state aids concerning promotion and advertisement 
of  agricultural  products,  contributed  to  development  of  best  practices  for  the 
application  of  the  new  guidelines,  for  example,  concerning  state  aids  connected  to 
EST tests(8). The Commission received 268 notifications of state aid draft measures 
to be granted in the agricultural and agro-industrial sector. 

OJ L 53, 24.2.1998, p. 26. 
OJ L 99, 17.4.2003, p. 1. 
OJ L 327, 21.12.1999, p. 7. 
OJ L 328, 23.12.2000, p. 2. 
OJ L 1, 3.1.2004, p. 1. 
Community  guidelines  for  State  aid  concerning  TSE  tests,  fallen  stock  and  slaughterhouse  waste 
(OJ C 324 of 24.12.2002). 

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2.6. 

The outermost regions 

12. 

The  Commission  completed  the  implementation  of  the  reform  of  the  regulations 
concerning support of agriculture in the outermost regions. 

2.7. 

Information measures concerning the CAP 

13. 

The  number  of  applications  for  grants  received  from  Member  States  has  in  2003 
remained  at  the  same  high  level  as  in  previous  years.  In  November  2003,  a  major 
conference on rural development was organised in Salzburg, Austria. 

2.8. 

Information and communication technology 

14. 

The  year  2003  investments  to  maintain  and  further  develop  DG  Agriculture’s 
information  systems  and  services  have  been  made.  For  example,  the  financial 
information systems (AGREX and eFaudit,…) have been adapted to support the new 
Financial Regulation and Activity Based Budgeting (in use from 1 January 2004). 

2.9. 

Advisory committees and relations with bodies representing the trade 

15. 

Some 80 meetings of the advisory committees and working groups were held in 2003, 
where  the  Commission  consulted  and  informed  the  representatives.  The  European 
Parliament  had  18  plenary  sessions  in  2003.  DG Agriculture  attended  whenever 
subjects were discussed that are of importance for the policies of our DG, such as, the 
adoption of the EP reports on the CAP reform in the plenary of 26 May 2003 and the 
ongoing WTO-Doha Round. 

3. 

AGRICULTURAL MARKETS 

3.1. 

Crop products 

16. 

17. 

In  the  context  of  the  CAP  reform  launched  in  June  2003,  the  Commission’s 
Communication  to  the  Council  and  the  European  Parliament  with  the  title 
"Accomplishing  a  sustainable  agricultural  model  for  Europe  through  the  reformed 
CAP"(9), with effects on tobacco, olive oil, cotton and sugar sectors. 

The Council also adopted a new aid regime for dried fodder. The old regime will still 
be of application during the 2004/05 marketing year. The Commission also submitted 
a proposal to reform the olive oil and table olives sector to apply from marketing year 
2004/05.  Specific  regulations  were  adopted  in  September  2003  to  organise  cereal, 
rice, dried fodder and milk products markets(10). 

18. 

A new regime aid for energy crops for the production of biofuels, energy or heating 
was also approved in December 2003(11). 

9 
10 
11 

COM(2003) 554. 
OJ L 270, 21.10.2003. 
Commission  Regulation  (EC)  No  2237/2003  of 23  December  2003  laying  down  detailed  rules  for  the 
application  of  certain  support  schemes  provided  for  in  Title  IV  of  Council  Regulation  (EC) 
No 1782/2003  establishing  common  rules  for  direct  support  schemes  under  the  common  agricultural 
policy and establishing certain support schemes for farmers. 

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19. 

20. 

21. 

22. 

23. 

Concerning  the  sugar  sector,  despite  a  major  increase  in  beet  sugar  production  in 
Europe,  cane-sugar  production  has  maintained  its  important  share  in  global 
production, world sugar balance being again in a "surplus" situation. This higher level 
of  production  caused  a  quantity  of  C  sugar  over  the  quota,  4.2  million  of  tonnes  in 
2002/03. 

A  mechanism  to  stabilise  production of seeds has  been introduced in 2002, and has 
been applied for the first time to the production in the 2002/03 marketing year. The 
seed  support  was  integrated  in  the  2003  CAP  reform  for  application  as  from  the 
marketing year 2005/06. 

In 2003, the Community has started a simplification exercise of the legislation of the 
fresh and processed fruit and vegetables sectors: 

In  order  to  update  the  data  and  simplify  administration  of  the  regime  of  bananas, 
Commission Regulation (EC) No 1439/2003(12) has provided for the establishment of 
the reference quantities of the traditional operators on the basis of the usage of import 
licences in 2002 and in 2003 for the imports in 2004 and 2005 respectively. 

Commission Regulation (EC) No 753/2002(13) of 29 April 2002 laying down certain 
rules for applying Council Regulation (EC) No 1493/1999 as regards the description, 
designation, presentation and protection of certain wine sector products, amended by 
Regulation  (EC)  No 2086/2002(14),  entered  into  force  on  1  August  2003.  By 
Regulation  (EC)  No  670/2003  of  8  April  2003(15),  the  Council  laid  down  specific 
measures concerning the market in ethyl alcohol of agricultural origin. 

3.2. 

Animal products 

24. 

25. 

26. 

Beef  and  milk  and  milk  products  production  has  increased  in  2002  in  spite  of 
decrease in the EU bovine livestock and in dairy herd. During the BSE-crisis around 
205 000  tonnes  of  essentially  cow  beef  was  taken  off  the  market  under  the  Special 
Purchase Scheme (SPS). 

In the context of the new agricultural reform laid down in Council Regulation (EC) 
No  1782/2003(16),  a  fundamental  change  was  made  as  regards  the  system  of  direct 
payments  which  in  the  past,  directly  or  indirectly,  were  linked  to  production.  The 
Commission  also  adopted  Regulation  (EC)  No  1215/2003(17)  allowing  Member 
States to authorise, under certain conditions, the use of automated grading techniques 
for the classification of carcases of adult bovines. 

Poultry meat and egg production keeps on increasing at the global level. In the EU, 
production  should  decrease  in  2003  due  to  avian  influenza,  Nitrofurane  crisis  and 
conjectural reductions carried out in some Member States. The number of laying hens 
fell  slightly  in  2003  (also  due  to  avian  flu)  and  production  of  consumption  eggs 
should also fall. 

12 
13 
14 
15 
16 
17 

OJ L 204 of 13.8.2003, p. 30. 
OJ L 118 of 4.5.2002, p. 1. 
OJ L 321 of 26.11.2002, p. 8. 
OJ L 97 of 15.4.2003, p. 6. 
OJ L 270 of 21.10.2003, p. 1. 
OJ L 169 of 08.07.2003, p. 32. 

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4. 

27. 

5. 

28. 

29. 

6. 

30. 

31. 

18 
19 

20 
21 
22 

23 

AGRIMONETARY ARRANGEMENTS 

The  agrimonetary  measures  adopted  in  2003  were  limited  to  the  application  of 
Council Regulation (EC) No 2799/98 establishing agrimonetary arrangements for the 
euro(18). In 2003, the only compensatory aids still being dealt with concerned the UK. 

RURAL DEVELOPMENT IN 2003 

For  the  period  2000–2006  the  rural  development  programming  consists  of  the 
following:  68  Rural  Development  Programmes  –  RDPs  –  (cofinanced  by  EAGGF-
Guarantee),  69  Objective 1  region  programmes  with  rural  development  measures 
(EAGGF  Guidance  cofinanced)  and  20  for  Objective 2  regions  with  rural 
development measures (EAGGF Guarantee cofinanced). 

expenditure  on 

2003),  Guidance 

rural  development 

In  2003,  Community 
to 
EUR 6 871 million:  EAGGF  Guarantee  EUR  4  705  million  (from  October  2002  to 
October 
programmes 
EUR 2 166 million (calendar year 2003). In 2003, 33 rural development programmes 
(RDPs)  modifications  were  approved  by  the  Commission  and  73  LEADER+ 
programmes  have  been  approved  for  the  period  2000–2006.  Of  the  expected 
938 Local  Action  Groups  (LAGs),  853  had  been  selected  at 
the  end  of 
December 2003. 

development 

amounted 

financed 

rural 

ENVIRONMENT AND FORESTS 

In  2003,  apart  from  the  production  of  an  interim  report  concerning  the  IRENA(19) 
project, the Commission has also continued the implementation of the "Biodiversity 
Action  Plan  for  Agriculture"(20)  and  adopted  a  proposal  for  a  Council  Regulation 
establishing  a  new  pluri-annual  Community  programme  on  the  conservation, 
characterisation,  collection  and  utilisation  of  genetic  resources  in  agriculture(21) 
amongst other initiatives. 

In  the  context  of  the  protection  of  forests  against  atmospheric  pollution(22),  the 
Commission  has  continued  the  management  of  projects  and  national  programmes 
2000,  2001  and  2002.  The  results  have  been  presented  in  the  series  of  reports  "The 
Condition  of  Forests  in  Europe"  Concerning  the  protection  of  Community’s  forests 
against  fire(23),  the  Commission  has  continued  the  management  of  projects  and 
national programmes 2000, 2001, 2002. The results have been included in the report 
presented to the Council and the European Parliament on the activities implemented 
during the period 1992–2002. 

OJ L 349 of 24.12.1998, p. 1. 
IRENA  is  the  acronym  of  “Indicators  Report  on  the  integration  of  Environmental  concerns  into 
Agriculture policy”. 
COM(2001) 162 final, volume III. 
COM(2003) 817 final. 
Council  Regulation  N°  3528/86  (OJ  L326  of  21.11.1986,  p.2-4  Finnish  and  Swedish  special  editions 
Chapter 3, Volume 22, p. 59). 
Council  Regulation  (EEC)  No  2158/92  (OJ  L217  of  31.7.1992,  p.  3;  Finnish  and  Swedish  special 
editions Chapter 3, Volume 44, p. 3). 

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7. 

32. 

33. 

34. 

35. 

8. 

36. 

37. 

FINANCING OF THE CAP IN 2003 

CAP  expenditure  takes  into  account  the  financial  perspectives  decided  at  the  Berlin 
Summit in 1999 as adjusted at the Copenhagen Summit end of 2002 to comply with 
the financial effects of Enlargement. 

The EAGGF Guarantee Section in 2003 appropriations adopted in the general budget 
for 2003 total EUR 44 780.5 million (including EUR 18 million for the agricultural 
budgetary reserves and provisions – Chapter B0-40)(24) In application of the Council 
Regulation (EC) No. 2040/2000 of 26 September 2000, on budgetary discipline, the 
monetary  reserve  was  abolished  with  effect  from  financial  year  2003.  EAGGF 
Guarantee  Section  expenditure  comprises 
(EUR 
3 432.3 million); public and private storage (EUR 1 163.1 million); withdrawals and 
similar operations (EUR 831.9 million); direct payments(25) (EUR 28 800.8 million); 
other 
organisations 
the 
(EUR 3 479.4 million);  and  other  expenditure,  principally  rural  development 
(EUR 5 506.7 million). 

common  market 

in  2002:  export 

intervention 

relating 

refunds 

to 

EAGGF  Guidance  Section: 
the  new  2000–2006  programming  period 
communitarian  support  in  favour  of  rural  regions  is  not  reduced.  In  fact,  actions  in 
favour of agricultural structures and diversification of rural areas except objective-1 
regions and compensatory aids are now paid by EAGGF Guarantee. 

In 

Evaluation:  In  the  field  of  market  policies,  the  evaluation  of  tobacco  and  olive  oil 
CMOs  were  completed.  For  the  wine,  a  contract  was  signed;  a  call  for  tenders  was 
published  for  bananas,  and  preparatory  work  is  well  advanced  for  pork,  eggs,  & 
poultry, as well as the environmental effects of CMOs relating to permanent crops. In 
the  field  of  rural  development  policies,  four  evaluations  studies  were  finalised 
(Regulations (EC) No 950/97 and (EC) No 951/97, Objective 5b, and LEADER II.). 

ENLARGEMENT 

Discussions proceeded with the ten accession countries on the implementation of the 
results of the negotiations which were finalised at the Copenhagen European Council 
in  December  2002.  The  negotiation  process  with  Bulgaria  and  Romania  and  pre-
accession  work  concerning  Turkey  continued  while 
the 
Commission Opinion on Croatia’s accession started. 

the  preparation  of 

During  the  year  all  countries  continued  the  implementation  of  their  SAPARD 
programmes. In April the Council adopted a modification of the SAPARD Regulation 
(EC)  No  1268/1999  of  21  June  1999.  As  of  end  December  a  total  amount  of 
EUR 1.214 million  (cumulative  amount  of  Community  contribution)  has  been 
committed to beneficiaries by the SAPARD Agencies. 

24 
25 

Not including EUR 250 million of appropriations entered in the monetary reserve (B1-6). 
Direct  payments  as  defined  in  the  Annex  to  Regulation  (EC)  No  1259/1999  of  17  May  1999 
(OJ L 160 of 26.6.1999, p. 113). 

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9. 

INTERNATIONAL RELATIONS 

9.1. 

International organisations and agreements 

38. 

The EU continued to participate in the various meetings in the various organisations, 
as, for example: 

– 

– 

the  World  Trade  Organisation  (WTO),  more  particularly,  in  the  Cancún 
Ministerial  Conference,  where 
the  WTO  multilateral 
negotiations priority; 

the  EC  stressed 

the Organisation for Economic Co-operation and Development (OECD), where 
questions of trade distortion through a further continuation of studies regarding 
"de-coupling"  and  the  impact  of  risk-related  support  on  production  decisions 
were discussed. 

39. 

The  Food  Aid  Convention  and  the  Grains  Convention  were  extended  until  30  June 
2005.  The  International  Sugar  Organisation  was  extended  until  31  December  2005. 
The  International  Agreement  on  Olive  Oil  and  Table  Olives  was  extended  until 
31 December 2004. 

9.2. 

Bilateral and regional trade relations 

40. 

In 2003, the Commission met, for example, with: 

– 

– 

– 

ACP Council of Ministers in October; 

the  Joint  Committee  on  Agriculture,  created  end  2002  by  the  "Agreement 
between  the  European  Community  and  the  Swiss  Confederation  on  trade  in 
agricultural products", twice; 

the  High-Level  Conference  on  agricultural  cooperation,  held  in  Beijing,  end 
2003, in the context of the Asia-Europe Meeting (ASEM); 

41. 

42. 

Moreover, in the framework of the Barcelona process, new Association Agreements 
have been signed with all Middle Eastern and Mediterranean countries and there were 
talks  with  Mexico  (on  Tequila  norms)  and  Chile  (Association  agreement),  for 
example. 

Bilateral  relations  in  agriculture  intensified  with  Russia  in  the  framework  of  the 
Partnership  and  Cooperation  Agreement  or  within  the  preparatory  process  for 
accession  at  the  WTO,  but  there  are  limited  prospects  for  increasing  of  these 
relationships with other NIS countries. 

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