Report from the Commission to the European Parliament and the Council on the flax and hemp sector
Date: 2006-03-16
Institutions: European Commission
Subjects: aid system, common organisation of markets, flax, hemp, report, textile fibre

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 16.3.2006 
COM(2006) 125 final 

2006/0043 (CNS) 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on the flax and hemp sector 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1673/2000, as regards the processing aid for flax and 
hemp grown for fibre, and Regulation (EC) No 1782/2003, as regards hemp eligible  
for the Single Payment Scheme 

(presented by the Commission) 

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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on the flax and hemp sector 

Article 15(2) of Council Regulation (EC) No 1673/2000 on the common organisation of the 
markets  in  flax  and  hemp  requires  the  Commission  to  submit  a  report,  and  if  necessary 
proposals,  to  the  European  Parliament  and  the  Council.  The  report  “shall  include  an 
assessment of the impact of processing aid, in particular on 

— the position of producers as regards areas sown and prices paid to them, 

— market trends for textile fibres and the development of new products, 

— the processing industry. 

The report shall indicate, in the light of alternative production, whether the industry is able to 
function with the guidelines laid down. It shall also examine the possibility of putting on to a 
permanent footing, beyond the 2005/2006 marketing year, processing aid per tonne of short 
flax fibre and hemp fibre and additional aid per hectare of flax.” 

The objective of this report is to answer these questions. In this context, the Commission took 
into account the analysis and the results in the evaluation report on the flax and hemp sector, 
finished in October 2005. 

1. 

DEVELOPMENTS IN THE FLAX AND HEMP SECTOR 

The last reform of the common market organisation for flax and hemp grown for fibre took 
place  in  2000.  It  introduced  aid  for  processing  flax  and  hemp  straw  intended  for  fibre 
production. That aid is granted to the processors, while the producers of flax and hemp straw 
benefit  from  the  general  support  scheme  for  arable  crops.  The  intention  was  to  avoid 
speculative  cultivation,  which  increased  under  the  previous  scheme,  and  to  promote  the 
production of long flax fibres by granting a higher amount of aid for them. The results have 
been  very  positive:  subsidy-driven  production  has  disappeared  and  production  of  long  flax 
fibres has risen significantly.  The  current budget of the  CMO for flax and  hemp  totals  only 
approximately EUR 20 million. 

The  aid  granted  to  authorised  primary  processors  is  based  on  the  quantity  of  specific  fibres 
actually obtained from straw covered by a sale/purchase contract.  

The amount of the aid is:  

(1) 

for long flax fibre: 

– 

– 

EUR 160 per tonne for the 2002/2003 to 2005/2006 marketing years;  

EUR 200 per tonne from the 2006/2007 marketing year onwards; 

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(2) 

for short flax and hemp fibre (containing not more than 7.5% impurities and shives): 

– 

EUR 90 per tonne for the 2001/2002 to 2005/2006 marketing years. 

Under  certain  conditions,  Member  States  are  also  allowed  to  grant  aid  for  short  flax  fibres 
containing  between  7.5%  and  15%  of  impurities  and  shives  and  for  hemp  fibres  containing 
between 7.5% and 25%.  

The processing aid is granted within a maximum guaranteed quantity (MGQ) per marketing year 
of 80 823 tonnes  for  long  flax  fibre  and  146 296  tonnes  for  short  flax  and  hemp  fibres.  These 
amounts are apportioned between the Member States as national guaranteed quantities (NGQ). 
Transfers of quotas between long flax fibres and short fibres are allowed, applying a coefficient 
of equivalence that keeps the operation budget-neutral. 

In order to support traditional long flax fibre production in certain areas of the Netherlands, 
Belgium  and  France,  additional  transitional  processing  aid  is  granted  to  authorised  primary 
processors. 

1.1. 

Flax 

1.1.1.  Areas sown and production 

The EU holds a central position in world flax production. After the last enlargement 
the Community now accounts for more than 20% of the area under flax worldwide 
(about  500  000  ha  according  to  FAO).  In  2004  the  flax-growing  areas  were 
concentrated  in  five  main  producing  countries:  France  (65%),  Belgium  (15%), 
Poland (7%), the Czech Republic (4.4%) and the Netherlands (3.6%). 

Since 2001 the area under flax has stabilised at around 120 000 ha in EU-25, close to 
the level before subsidy-driven production practices began (in 1999 the areas sown 
totalled 233 000 ha). 

The  areas  under  flax  have  increased  significantly  in  France  (up  by  25 000  ha),  in 
particular in Normandy, and in Belgium/northern Wallonia (increase of 6 500 ha). In 
the Netherlands the flax-growing areas have grown to a limited extent (by 500 ha). 

The long-term trend in flax straw production displays marked variations. Production 
reached 775 000 tonnes in 2004, of which 86% were grown in France and Belgium. 
The share taken by the new Member States remains marginal on around 10% of the 
total  (80 000  tonnes  produced  in  2004).  Despite  the  decrease  in  the  total  cultivated 
area after the reform, straw production shows an upward trend (up by 192 000 tonnes 
between 1999 and 2004), confirming the disappearance of speculative cultivation. 

As  for  fibre  production,  between  2000  and  2004  the  volume  of  long  flax  fibres  in 
EU-15 increased from 93 500 tonnes to 136 500 tonnes (60%) and short flax fibres 
from 41 000 tonnes to 60 000 tonnes (65%)1. 

Short  flax  fibres  are  generally  the  co-product  of  long  flax  fibre  production.  The 
evaluation report points out that there are no processing plants dedicated exclusively 

1 

The quantities of fibre produced do not necessarily match those receiving the processing aid 

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to production of short flax fibres in the EU apart from a few units with very limited 
trading activity, i.e.: 

– 

– 

– 

two pilot units in the United Kingdom; 

two plants manufacturing pulp for special papers in France outside the support 
scheme (in view of the impurity rates); 

one unit in Germany with an output of less than 150 tonnes per year. 

In  the  new  Member  States  the  market  outlets  for  flax  fibres  remain  the  textile 
industry  and  traditional  applications  in  rope  manufacture.  Short  flax  fibres  are  not 
produced in specialised plants but are co-products of long fibre manufacture. Only in 
Slovenia  is  flax  cultivated  with  a  view  to  producing  short  flax  fibre  (about 
100 tonnes were produced in 2004, compared with 400 tonnes in 2001). 

It is worth noting that the quality of the long flax fibres varies considerably between 
the Member States.  

1.1.2.  Prices 

According  to  the  evaluation  report,  flax  straw  prices  in  France  averaged  around 
EUR 248/tonne in 2001 and 2003, but climbed to EUR 272/tonne in 2002. 

On  the  long  flax  market,  despite  strong  export  demand  prices  suffered  a  decrease 
related to the appreciation of the euro against the US dollar. The price for long flax 
fibres fell by 30% during the period from 2000/2001 to 2003/2004 before stabilising 
at EUR 1 600/tonne in 2004.  

Regarding prices of short flax fibres, between July 2001 and July 2004 a sharp fall of 
25 to 30% was reported in Belgium, France and the Netherlands. However, prices are 
very variable, depending on the economic destination of the fibre:  

– 

– 

– 

– 

special paper industry: EUR 170/tonne,  

textile fibres: EUR 345/tonne, 

non-woven materials: EUR 400/tonne,  

composite materials: EUR 500/tonne. 

As  a  general  rule,  the  gross  margin  per  hectare  widened  between  1999  and  2003. 
Even though the 2000 reform led to a fall in subsidies, good market trends and good 
yields have compensated for this reduction.  

Before the reform most producers received one quarter of the aid per hectare under 
fibre flax and the remaining 75% was paid to the processor. As a result of the reform 
the farmers’ share of the subsidies has increased to more than 60%. Thus producers’ 
incomes have become less dependent on price fluctuations. 

1.1.3.  Market trends and processing industry 

European long flax fibre production is mainly used in the textile industry. The outlet 
shares seem to have remained stable over the last few years between clothing (50%), 
household  linen  (20%)  and  home  fashion  (13%),  with  the  rest  being  used  to 
manufacture products like ropes and filters (17%). 

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Last  year  almost  70%  of  long  flax  fibres  were  exported  –  mainly  to  China  (50%). 
Demand  for  long  flax  fibres  has  been  driven  by  the  expansion  of  the  Chinese 
spinning industry and exports to China grew on average by 20% a year between 1999 
and  2003.  Other  trading  partners  included  Russia  and  some  of  the  new  Member 
States (Poland, the Czech Republic and Lithuania). 

The  high  demand  from  China  seems  to  have  prompted  European  (in  particular 
French) producers to favour quantity to the detriment of quality.  

It  is  difficult  to  quantify  exactly  the  final  destination  of  flax  fibres  after  further 
processing  in  non-EU  countries.  A  number  of  semi-finished  and  finished  textile 
products  containing  European  flax  fibres  are  re-exported  from  China,  especially  to 
Europe and the United States. Imports of flax clothes from China into the EU grew 
by 50% a year from 1999 to 2003. 

EU exports of manufactured textile products to the USA fell by 10% for tissue and 
by 25% for clothes between 1999 and 2003.  

The turnover of the long flax fibres sector stabilised at around EUR 200 million over 
the period 2000–2004 (EUR 183.7 million in 2003) as a result of an increase in the 
quantities sold coupled with a steady fall in prices. 

In  the  case  of  short  flax  fibres,  the  textile  industry  absorbed  around  40%  of 
production  for  pure  flax  tissues  or  multi-fibre  materials  with  cotton  or  synthetic 
fibres.  The  main  developments  on  this  market  since  1999  have  been  the  decline  in 
European spinning and the increase in exports to China and especially Hong Kong.  

Since  1999  the  market  for  short  fibres  has  adapted  to  new  technical  applications. 
Production of fibres used for this purpose grew almost four times between 1999 and 
2003,  from  4 800  to  18 500  tonnes,  equivalent  to  9%  and  25%  respectively  of  all 
short fibres.  

The share taken by the paper industry outlet, including cigarette paper and technical 
papers, remained stable in terms of volume, but its share of total fibre production fell 
from  45%  to  34%.Volumes  remained  stable  at  25 000  tonnes  per  year  but  suffered 
from  growing  competition  from  wood  fibres.  In  spite  of  the  low  prices,  the  paper 
industry  remains  an  attractive  outlet  for  short  flax  fibres  as  it  can  absorb  large 
volumes and does not demand high-quality fibres.  

The new technical applications for short flax fibres account for 25% of production, 
of which only a small part (2.5%) is intended for making non-woven materials like 
geotextile felts, agricultural mulching or insulation panels. Production of composite 
materials  for  the  car  industry  is  the  most  advanced  new  market  (particularly  in 
Germany), using 16 500 tonnes (23% of all short flax fibres). For this purpose, flax 
fibres are processed in thermoplastics thanks to their low weight and good resistance 
to  shocks.  This  market  is  considered  promising  if,  on  the  one  hand,  prices  of  flax 
fibres stay stable and, on the other, prices of exotic fibres (sisal, kenaf, jute, etc.) do 
not fall significantly. The guarantee of regular supplies of fibres is a strong constraint 
for  the  industry,  and  therefore  the  competition  from  exotic  fibres  is  serious.  The 
German automobile industry decided to diversify its supplies of fibres when, in 2001, 
flax production in Europe fell due to bad weather conditions.  

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On the basis of the average prices, the total value of the market for short flax fibres 
can be estimated at around EUR 25 million. Textile uses constitute the main source 
of  revenue  (EUR  10  million)  followed  by  composite  materials  for  the  car  industry 
(EUR 8.5 million). The paper industry generates only EUR 4.2 million. Non-woven 
materials account for EUR 0.7 million. 

Capacity  for  secondary  processing  of  short  flax  fibres  has  expanded  substantially 
since  the  reform  due  to  better  use  of  existing  capacity  and  the  construction  of  a 
number of cleaning units.  

1.2. 

Hemp  

1.2.1.  Areas sown and production 

The EU takes a relatively important share of world hemp production with 15 000 ha 
(29% of the 52 000 ha sown around the world according to FAO). The areas under 
hemp  have  remained  relatively  stable  since  2001,  but  still  account  for  a  negligible 
share  of  arable  crops.  They  are  far  lower  than  in  1998  when  subsidy-driven 
production hit a record 40 000 ha.  

Hemp-growing is concentrated mainly in six Member States accounting for 90% of 
the area under hemp in EU-25 in 2004: France (54%), Germany (11%), the UK (9%), 
Poland (6%), Italy (6%) and Spain (4%). The new Member States account for 11% 
of the area under hemp in EU-25 (Poland 6%, Hungary 3% and the Czech Republic 
2%). However, it is worth pointing out that in Hungary the area under hemp used to 
be  very  high  in  the  1980s  (more  than  60 000  ha  in  1987,  55%  higher  than  in  the 
whole of the EEC). 

Production  of  hemp  straw  in  the  EU  is  highly  variable,  which  is  related  to  the 
fluctuations in the areas under cultivation, especially in France. From 2000 to 2004, 
hemp  straw  production  averaged  around  86 000  tonnes  (with  a  maximum  of 
101 000 tonnes  in  2003,  coinciding  with  the  maximum  area  under  cultivation  of 
18 000 ha). 

Hemp fibre production shows an upward trend and climbed to 28 000 tonnes in 2000 
and around 31 000 tonnes in 20042. 

1.2.2.  Prices 

Before the 2000 reform the aid per hectare of hemp was paid in full to farmers. With 
the reform, both the total support and the aid paid directly to the farmer decreased. 
However, the purchase prices paid by processors to producers increased: in Germany 
straw prices almost doubled after the reform (from EUR 80 to EUR 145 per tonne); 
in  the  United  Kingdom  they  rose  by  22%  (from  £90  per  tonne  in  2001  to  £110  in 
2004). In France over the last three years hemp processors have been passing on the 
increase  in  straw  prices  through  sales  of  their  fibres  to  the  paper  industry.  In  this 
country straw prices increased from EUR 60 to EUR 72 per tonne after the reform. 

2 

The quantities of fibre produced do not necessarily match those receiving the processing aid 

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for  non-woven  materials  and  EUR 600/tonne 

There  are  big  differences  between  the  prices  of  fibres  used  in  the  special  paper 
industry  (on  average  EUR 371/tonne  in  2003)  and  those  for  technical  applications 
(EUR 500/tonne 
for  plastic 
compounds).  Between  1999  and  2003  prices  of  fibres  for  the  paper  industry 
increased  sharply  (by  27%).  This  is  mainly  explained  by  the  arrangement  between 
processors and the paper industry to compensate for the reduction in the Community 
aid. However, even though the paper industry accepted to pay higher prices to hemp 
fibre  processors,  it  seems  that  in  the  long  run  the  competition  from  wood  fibres, 
which  are  three  to  four  times  cheaper,  could  seriously  affect  this  market,  including 
the market for special papers. 

1.2.3.  Market trends and processing industry 

After  a  reduction  in  use  in  the  paper  industry  in  2001  and  2002,  this  market  outlet 
bounced back in 2003 to the volume of fibres used in 1999: 86% of total hemp fibre 
production (20 700 tonnes).  

Composite  materials  for  the  car  industry  rose  from  1 770  tonnes  to  2 470  tonnes 
(about 10%) whereas 824 tonnes were used in non-woven materials for construction 
and insulation. The insulation materials market has not achieved the expected growth 
due  to  an  unfavourable  price  difference  and  lower  technical  performance  than  the 
competing fibres. It remains fairly stable in terms of volume. 

The  turnover  of  the  hemp  fibres  market  is  close  to  EUR  10  million.  Most  of  this 
(EUR 7.7  million)  was  generated  by  the  paper  industry.  The  composite  materials 
industry  generates  EUR  1.2  million  and  non-woven  materials  EUR  0.4  million. 
Taking into account developments on the market, the reduction in the amount of aid 
has not affected the competitiveness of hemp fibre prices against the main competing 
products (short flax and wood fibres). This can be explained by three main reasons: 

– 

– 

– 

stability  of  margins,  thanks  to  sales  of  co-products,  which  account  for  about 
50% of processors’ revenue;  

hemp fibres (like short flax fibres) match certain specific demand, for example 
the tobacco industry wants a stable composition in its paper supplies; 

a well organised paper industry: certain hemp processors concluded exclusive 
sale contracts with paper manufacturers. 

Growth of production capacity for hemp fibres has been modest, leading to saturation 
of  the  main  production  units  (especially  in  France),  which  now  plan  further 
investments  in  order  to  match  the  expansion  of  the  new  markets  (technical  fibres). 
Present  production  capacity  for  hemp  fibres  stands  at  35 000  tonnes;  in  future  the 
projected increase could be as high as 23 000 tonnes.  

The main scutching capacity for  hemp  straw  is situated in  more  or less  ten  sites in 
France, the UK, Germany and the Netherlands. Scutching capacity in EU-15 totalled 
around 107 000 tonnes of straw in 2004/2005.  

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1.3. 

Conclusions on development of the sector  

Almost 90% of the total turnover of EUR 216.5 million for flax and hemp fibres in 2003 came 
from  the  “textiles”  outlet.  “Special  and  technical  papers”  accounted  for  8%,  “composite 
materials” for 4% and “non-woven materials” for 1%. 

1. 

Textiles:  since  the  reform,  the  textiles  outlet  has  grown  significantly,  in  line  with 
demand from China. 

The processing aid has had a smaller impact downstream from the European textile 
industry  (spinning  and  exports).  Its  main  contribution  lies  in  agriculture  upstream: 
the aid maintains the gross margin per hectare which has kept flax and hemp crops 
attractive.  

2. 

Paper:  the  market  for  special  and  technical  papers  is  a  major  outlet  for  European 
hemp fibres and a by no means negligible outlet for short flax fibres.  

It  is  worth  pointing  out  that,  contrary  to  long  flax  fibres  which  mainly  supply 
industries  outside  the  EU,  hemp  and  short  flax  fibre  production  sustains  European 
industry,  which  is  frequently  located  close  to  the  areas  where  those  fibres  are 
produced. 

3. 

4. 

Composite materials:  this  outlet,  even  if  of  limited  value  and  volume,  has  shown  a 
big increase since 2000, especially for short flax fibres. It is important to note that the 
processing  aid  has  made  a  by  no  means  negligible  contribution  to  those  new 
applications by supporting the expenses for research and development and business 
expansion. Removal of the present aid scheme at this juncture could threaten the very 
existence of this outlet. 

Non-woven materials: this is a minor outlet for hemp and short flax fibres. The main 
market  is  for  the  production  of  insulation  panels.  Its  growth  is  limited  because 
products  based  on  natural  fibres  are  more  expensive  and  of  lower  technical  quality 
than competing fibres. 

The processing aid for long fibres, along with the favourable market situation created by the 
demand from China, has contributed to a spectacular boom in flax production. This increase is 
mainly linked to the expansion of the processing capacity of existing enterprises, and the aid 
has permitted some investments in equipment, research and promotion. 

As  for  hemp,  the  positive  impact  of  the  aid  on  the  financial  balance  of  undertakings  has 
allowed an increase in the purchase price for hemp straw plus investments in R&D and in new 
outlets.  The  aid  has  also  brought  stabilisation  (or  a  small  improvement)  of  supplies  to  the 
downstream  industries,  both  for  paper  and  for  the  new  outlets  (aid  constitutes  a  stabilising 
factor, which ensures industries of the durability of their supplies). 

2. 

ASSESSMENT OF THE PROCESSING AID  

The information available on the results of the 2000 reform in the EU-15 Member States is 
limited by the fact that it takes 22 months to process straw into fibre and that definitive figures 
are  not  obtained  until  more  than  two  years  after  the  start  of  the  marketing  year  concerned. 

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Moreover,  2001/2002  cannot  be  considered  a  representative  marketing  year  because 
production was seriously affected by unfavourable weather conditions. 

The  new  Member  States  have  not  yet  received  any  processing  aid.  However,  processors  in 
these countries are investing in order to adapt their plants to the EU legislation.  

Under these circumstances, only limited conclusions can be drawn on the effectiveness of the 
processing aid system. It is difficult to examine whether or not the aid for short fibres and the 
additional aid per hectare of flax should be extended beyond the 2005/2006 marketing year. 
However, certain conclusions can be drawn on the basis of the data available and information 
from operators.  

2.1. 

Importance of the aid for downstream industries 

The processing aid has allowed the fibres sector to develop and led to stabilisation of the main 
outlets. 

Regarding flax, market outlets for long fibres grew substantially over the period 2001–2004. 
However, this trend could take a different direction if there is a drop in demand from China 
and/or  in  prices,  unfavourable  exchange  rate,  etc.  In  the  present  favourable  situation,  it  is 
difficult to estimate the role of the aid itself because the market is very profitable. 

In  the  case  of  hemp,  special  papers  are  the  main  outlet.  New  technical  applications 
(composite  materials)  have  not  yet  reached  the  large-scale  development  phase.  Removal  of 
the aid at this juncture could jeopardise further development of this outlet. Other outlets, like 
insulation  panels,  have  likewise  not  developed  as  initially  expected  due  to  their  less 
competitive  prices  in  comparison  to  competing  fibres  such  as  fibreglass  and  other  synthetic 
fibres. 

2.2. 

Aid for short fibres 

Implementation of the current CMO would spell the disappearance of the processing aid for 
short fibres from the 2006/2007 marketing year.  

In the case of short flax fibres, the effect of the processing aid cannot be singled out since 
nearly all the volumes produced are co-products of long fibre scutching and the area of land 
growing flax intended specifically for short fibre production remains marginal. 

For hemp producers, removal of the aid would entail a proportional reduction in prices. In 
such  a  case  the  margin  for  hemp  producers  would  be  squeezed  considerably  and  would  be 
significantly  narrower  than  the  margin  obtained  from  cultivation  of  other  alternative  arable 
crops. Note that hemp cultivation is more labour-intensive than other field crops. A significant 
reduction  in  the  area  under  hemp  and  a  consequent  fall  in  supplies  of  hemp  straw  to  the 
primary processing industry would be expected. 

The  table  set  out  below  compares  the  margin  per  hectare  obtained  from  various  crops  in 
France and Germany and shows the loss of competitiveness of hemp-growing without transfer 
of an estimated 80% of the processing aid to the farmer: 

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France 

Germany 

Hemp  Wheat  Rapeseed  Hemp  Barley  Maize 

Margin (EUR/ha) 

Average yield (t fibre/ha) 

Aid transferred (EUR) – 80% 

Margin without aid (EUR/ha) 

554 

1.95 

140 

414 

442 

490 

– 

– 

– 

– 

442 

490 

486 

1.67 

120 

366 

553 

499 

– 

– 

– 

– 

553 

499 

Note:  Figures  are  illustrative  and  do  not  allow  immediate  comparisons  between 
countries in view of the different methods of calculation. 

The  economic  impact  of  the  removal  of  the  aid  on  the  short  flax  fibres  industry  would  be 
mitigated  by  the  increase  envisaged  in  the  aid  for  long  fibres.  Only  specialised  processing 
units, which make up a negligible part of the sector, would be directly affected by a reduction 
in income.  

By  contrast,  in  the  case  of  hemp,  removal  of  the  aid  could  affect  the  financial  balance  of 
processors  for which  the aid makes up an important  part of their net profit. The survival of 
processors  focusing  exclusively  on  fibre  intended  for  new  technical  applications  could  be 
jeopardized, while “mixed” units producing fibres for special papers and  new outlets  would 
return  to  their  traditional  activity  (paper  industry).  In  addition,  the  traditional  outlet  (paper) 
could  be  threatened  in  the  medium  term  by  cheaper  substitute  products  or  by  relocation  of 
production. 

Extension of the support for short flax and hemp fibre production for the next two marketing 
years  is  therefore  advisable  with  a  view  to  allowing  the  industry  to  consolidate  the  new 
markets  for  these  fibres.  In  addition,  such  an  extension  will  allow  more  time  to  assess  the 
functioning of the CMO in the new Member States properly. 

2.3. 

Additional aid 

If the aid of EUR 120 per ha for regions in the Netherlands and Belgium is removed, the gross 
margin for flax  will  be lower than the margin for wheat and barley. Since the  workload  for 
this  crop  is  heavier  than  for  cereals,  this  crop  will  no  longer  be  competitive  and  a  big 
reduction in the area under flax in the Polders region can be expected. 

A  similar  comparison  for  the  areas  in  France  and  in  Belgium  qualifying  for  aid  of  EUR  50 
per ha does not point to the same conclusions. Instead, removal of the additional aid will not 
have  such  a  dramatic  effect  on  producers’  income  levels.  However,  some  uncertainty  exists 
about the future of production – especially during years with bad weather conditions.  

It  is  important  to  note  the  strong  annual  variations  in  income  from  flax  in  contrast  to  most 
other crops. It needs to be underlined that the aid has made it possible to mitigate the effects 
of relocation to other regions with lower land prices and better suited agricultural structures.  

Economic analyses show that the aid of EUR 120 per ha for flax produced in the Netherlands 
and in the Belgian Polders has been useful in maintaining or even slightly increasing the areas 
under flax there. However, these studies do not determine what would be the appropriate level 
of aid for these areas. The proposal is to maintain the current level of aid for a period of two 
years. 

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2.4. 

Level of impurities 

As for the level of impurities, this measure dates back to the second half of the 1990s that is 
the  period  marked  by  major  speculation.  The  objective  was  to  introduce  an  obligation  to 
proceed with costly cleaning of the fibres and thereby to discourage the production of fibres 
of very low quality which were not even intended for the market. 

However,  in  short  fibres  for  papers  a  high  level  of  impurities  is  in  fact  necessary  for  the 
further  processing.  The  cost  of  cleaning  is  so  high  that  it  equals  or  even  exceeds  the  added 
value of the products.  

In  the  case  of  the  textile  industry,  a  low  level  of  impurities  is  required.  However,  since  the 
selling prices are higher, the processors have an interest in cleaning the fibres. 

In technical fibres, a low level of impurities is required for certain outlets. 

Therefore,  in  practice  most  Member  States  use  the  derogation  from  the  maximum  level  of 
impurities. Under the system it is necessary to calculate a reduction of aid based on the level 
of  impurities,  which  creates  an  administrative  burden,  but  is  the  only  way  to  guarantee  fair 
distribution of the aid. 

As outlets for short fibres are developing and are not yet very stable, it is advisable to extend 
the current provisions, including the reduction of aid in proportion to the impurity level. 

3. 

SUMMARY AND CONCLUSIONS 

This report has been drawn up in response to the Council’s request for an assessment of the 
impact of the aid for processing flax and hemp straw into fibre, introduced by the last reform 
of the common market organisation for this sector which entered into force on 1 July 2001. 

In  the  light  of  the  analysis  carried  out,  a  roll-over  of  the  existing  aid  scheme  for  a  certain 
period  should  be  proposed.  This  would  give  time  to  gain  more  experience,  which  is 
particularly  needed  in  the  case  of  the  new  Member  States.  The  aid  for  short  fibres  and  the 
additional  aid  for  flax  cultivation  in  certain  traditional  growing  areas  should  therefore  be 
extended under the current conditions. 

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EXPLANATORY MEMORANDUM 

Article 15(2) of Council Regulation (EC) No 1673/2000 on the common organisation of the 
markets in flax and hemp lays down that:  

“In 2005 the Commission shall submit a report to the European Parliament and the Council 
on processing aid, if necessary accompanied by proposals.  

The report shall include an assessment of the impact of processing aid, in particular on 

–  the position of producers as regards areas sown and prices paid to them, 

–  market trends for textile fibres and the development of new products, 

–  the processing industry. 

The report shall indicate, in the light of alternative production, whether the industry is able to 
function with the guidelines laid down. It shall also examine the possibility of putting on to a 
permanent footing, beyond the 2005/2006 marketing year, processing aid per tonne of short 
flax fibre and hemp fibre and additional aid per hectare of flax, as referred to in Article 4.” 

The overall assessment of the present organisation of the flax and hemp sector3 seems positive 
and  points  to  the  conclusion  that  the  current  common  market  organisation  is  working  well. 
The most significant consequence of the introduction of the processing aid for fibres has been 
that  it  has  eliminated  speculative  production.  The  reform  undertaken  in  2000  has  led  to  a 
significant  reduction  in  Community  expenditure  and  stabilisation  of  the  budget  at  about 
EUR 20 million.  In  addition,  the  reform  has  resulted  in  growth  of  the  economically  viable 
outlets  and  generally  safeguarded  or,  in  some  cases,  improved  producers’  income  over  the 
period concerned. 

The  processing  aid  has  supported  EU  production  of  flax  and  hemp  fibres,  materials  which 
have  a  positive  impact  on  environment  (preservation  of  biodiversity).  Moreover,  the  CMO 
processing aid has helped to preserve  and  create jobs  in traditionally producing  regions  and 
other areas and to support investments in R&D to improve processing methods and develop 
new products containing vegetable fibres. 

It  is  difficult  to  evaluate  the  full  impact  of  the  2000  reform  and  the  exact  role  of  the 
processing aid on the EU-15 Member States production. Only the figures for the 2002/2003 
and 2003/2004 marketing years are definitive and can be considered representative, since the 
2001/2002 harvest was severely affected by bad weather.  

Among the new Member States which acceded to the European Union on 1 May 2004, six of 
them  are  producers  of  flax  fibres  and  three  producers  of  hemp  fibres.  The  data  currently 
available  do  not  allow  detailed  analysis  of  production  trends  and  implementation  of  the 
system in those new Member States. 

Under these circumstances, a two-year extension of the system in force during the 2005/2006 
marketing  year  is  proposed.  Therefore,  until  the  2007/2008  marketing  year  the  aid  for  long 
flax fibre would remain at the current level of EUR 160 per tonne and the aid for short flax 

3 

See evaluation report finished in October 2005: “Evaluation de l’organisation commune de marché dans 
le secteur du lin et du chanvre». http://europa.eu.int/comm/agriculture/eval/index_fr.htm. 

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and  hemp  fibres  would  be  kept  at  EUR  90  per  tonne.  As  for  the  national  guaranteed 
quantities, the present levels would continue to apply. 

As  regards  the  maximum  content  of  impurities  and  shives,  considering  that  most  Member 
States make use of the derogation from the 7.5% limit and that certain end-uses require a high 
level  of  impurities,  the  current  system  should  be  maintained  in  order  to  permit  the  Member 
States to grant aid for short flax fibre containing a maximum of 15% of impurities and shives 
and hemp fibre containing a maximum of 25%.  

The  additional  aid  granted  to  primary  processors  of  long  flax  fibre  in  certain  traditional 
production areas of the Netherlands, Belgium and France would remain unchanged, that is aid 
of  EUR  120  per  hectare  in  zone  I  and  of  EUR  50  per  hectare  in  zone  II,  as  laid  down  in 
Regulation (EC) No 1673/2000. 

This extension of the current system will allow a more in-depth analysis based on experience 
gathered in the mean time and will also leave sufficient time to complete an overall impact 
assessment in order to evaluate the possibility of simplifying this aid scheme by means of its 
integration in the general framework 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. 

On  the  occasion  of  the  revision  of  the  regime  of  flax  and  hemp  grown  for  fibre,  it  is 
convenient to amend Council Regulation (EC) No 1782/2003 in order to make the cultivation 
of hemp compatible with uses other than just for the production of fibres. 

According to Article 52 of the above mentioned Regulation, land under hemp is eligible under 
the Single Payment scheme if the hemp variety has a THC content not exceeding 0.2% and 
the raw production is used for textile fibre processing. The second condition, which originates 
from  the  previous  relationship  between  the  arable  crops  regime  and  the  aid  to  the  fibre 
industry, is not anymore necessary under the Single Payment scheme, and in addition to that, 
this  condition  prohibits  de  facto  the  use  of  hemp  for  other  industrial  uses  e.g.  for  energy 
purposes. 

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2006/0043 (CNS) 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1673/2000, as regards the processing aid for flax and 
hemp grown for fibre, and Regulation (EC) No 1782/2003, as regards hemp eligible  
for the Single Payment Scheme 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular the third 
subparagraph of Article 37(2) thereof, 

Having regard to the proposal from the Commission, 

Having regard to the opinion of the European Parliament4, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

4 
5 

Article  15(2)  of  Council  Regulation  (EC)  No  1673/2000  of  27  July  2000  on  the 
common organisation of the markets in flax and hemp grown for fibre5 lays down that 
the  Commission  presents  a  report  to  the  European  Parliament  and  the  Council  on 
processing aid, if necessary accompanied by proposals. On the basis of the report, it is 
appropriate  that  the  current  system  continues  to  be  in  force  up  to  and  including  the 
marketing year 2007/2008. 

The processing aid for short flax fibre and hemp fibre containing not more than 7,5% 
impurities  and  shives  applies  until  the  2005/2006  marketing  year.  Nevertheless,  in 
view of the favourable trends on the market for this kind of fibre under the current aid 
scheme  and  in  order  to  contribute  to  consolidating  innovative  products  and  their 
market  outlets,  application  of  this  aid  should  be  extended  until  the  end  of  the 
2007/2008 marketing year.  

Regulation (EC) No 1673/2000 provides for an increase in the level of processing aid 
for long flax fibre from the 2006/2007 marketing year onwards. Since the processing 
aid for short fibres  is  maintained until  the 2007/2008 marketing year, the processing 
aid  for  long  flax  fibre  should  be  limited  to  the  present  level  until  the  2007/2008 
marketing year. 

In order to promote the production of high-quality short flax and hemp fibres, the aid 
is granted to fibres containing a maximum of 7,5% of impurities and shives. However, 
the Member States may derogate from this limit and grant processing aid for short flax 
fibre containing a percentage of impurities and shives of between 7,5% and 15% and 

OJ C …, …, p. … 
OJ  L  193,  29.7.2000,  p. 16.  Regulation  as  last  amended  by  Regulation  (EC)  No  393/2004  (OJ L 65, 
3.3.2004, p. 4). 

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(5) 

(6) 

(7) 

(8) 

for hemp fibre containing a percentage of impurities and shives of between 7,5% and 
25%.  Since  this  possibility  is  open  only  until  the  2005/2006  marketing  year,  it  is 
necessary to give the Member States the possibility to derogate from that limit for two 
more marketing years. 

In order to continue to ensure reasonable production levels in each Member State, it is 
necessary to extend the period in which the national guaranteed quantities apply. 

Additional aid has been supporting the continuation of traditional production of flax in 
certain regions of the Netherlands, Belgium and France. In order to continue enabling 
gradual adaptation of farm structures to the new market conditions, it is necessary to 
extend this transitional aid until the 2007/2008 marketing year. 

The Commission should submit a report to the European Parliament and the Council 
in  sufficient  time  before  the  beginning  of  the  2008/2009  marketing  year  in  order  to 
assess whether the present system needs to be adapted or should continue. 

Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common 
rules  for  direct  support  schemes  under  the  common  agricultural  policy  and 
establishing  certain  support  schemes  for  farmers  and  amending  Regulations  (EEC) 
No 2019/93,  (EC)  No 1452/2001,  (EC)  No 1453/2001,  (EC)  No 1454/2001,  (EC) 
No 1868/94,  (EC)  No 1251/1999,  (EC)  No 1254/1999,  (EC)  No 1673/2000,  (EEC) 
No 2358/71  and  (EC)  No 2529/20016  provides  that  only  hemp  grown  for  fibre  is 
eligible for the Single Payment Scheme established under Title III of that Regulation. 
It is appropriate to make the cultivation of hemp for other industrial uses also eligible.  

(9) 

Regulations  (EC)  No  1673/2000  and  (EC)  No  1782/2003  should  be  amended 
accordingly, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Regulation (EC) No 1673/2000 is amended as follows: 

(1) 

In Article 2, paragraph 3 is replaced by the following: 

“3.  The amount of processing aid per tonne of fibre shall be fixed as follows: 

(a) 

for long flax fibre: 

– 

– 

– 

EUR 100 for the 2001/2002 marketing year, 

EUR 160 for the 2002/2003 to 2007/2008 marketing years, 

EUR 200 from the 2008/2009 marketing year onwards; 

(b) 

for  short  flax  fibre  and  hemp  fibre  containing  not  more  than  7,5% 
impurities  and  shives:  EUR  90  for  the  2001/2002  to  2007/2008 
marketing years. 

6 

OJ L 270, 21.10.2003, p. 1. Regulation as last amended by Commission Regulation (EC) No 2183/2005 
(OJ L 347, 30.12.2005, p. 56). 

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However, for the 2001/2002 to 2007/2008 marketing years, the Member State 
may, with reference to traditional outlets, also decide to grant aid: 

– 

– 

for  short  flax  fibre  containing  a  percentage  of  impurities  and  shives  of 
between 7,5% and 15%, 

for  hemp  fibre  containing  a  percentage  of  impurities  and  shives  of 
between 7,5% and 25%. 

In the cases provided for in the second subparagraph, the Member State shall 
grant  the  aid  in  respect  of  a  quantity  which  amounts  to  not  more  than  the 
quantity produced, on the basis of 7,5% of impurities and shives.” 

(2) 

In Article 3(2), the second subparagraph is replaced by the following:  

(3) 

(4) 

(5) 

“The national guaranteed quantities for short flax fibre and hemp fibre shall cease to 
apply from the 2008/2009 marketing year.” 

In the first paragraph of Article 4, “2005/2006” is replaced by “2007/2008”. 

Article 12 is deleted. 

In Article 15, the following paragraph is added: 

“3.  The  Commission  shall  submit  a  report  to  the  European  Parliament  and  the 
Council, if necessary accompanied by proposals, in sufficient time to allow the 
implementation  of  the  proposed  measures  during  the  2008/2009  marketing 
year. 

The  report  shall  assess  the  impact  of  processing  aid  on  producers,  the 
processing  industry  and  the  market  for  textile  fibres.  It  shall  examine  the 
possibility of extending processing aid for short flax fibre and hemp fibre and 
additional aid beyond the 2007/2008 marketing year, as well as the possibility 
of integrating this aid scheme in the general framework of support for farmers 
under  the  common  agricultural  policy  laid  down  by  Regulation  (EC) 
No 1782/2003.” 

In Regulation (EC) No 1782/2003, Article 52 is replaced by the following: 

Article 2 

“Article 52 
Production of hemp 

1. 

In  case  of  production  of  hemp, 
the  varieties  used  shall  have  a 
tetrahydrocannabinol  content  not  exceeding  0,2%.  Member  States  shall 
establish a system for verifying the tetrahydrocannabinol content of the crops 
grown  on  at  least  30%  of  the  areas  on  hemp.  However,  if  a  Member  State 
introduces a system of prior approval for such cultivation, the minimum shall 
be 20%. 

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2. 

In accordance with the procedure referred to in Article 144(2), the granting of 
payments  shall  be  made  subject  to  the  use  of  certified  seeds  of  certain 
varieties.” 

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

Article 3 

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 

FINANCIAL STATEMENT 

BUDGET HEADING:  
05 02 07 01 

APPROPRIATIONS: 
EUR 24 million 

TITLE: Council Regulation amending Regulation (EC) No 1673/2000 – Processing aid for long and 
short-fibre flax and hemp 

LEGAL BASIS: Article 37 of the Treaty 

AIMS: To extend the arrangements in force for two years. 
FINANCIAL IMPLICATIONS 

12 MONTH 
PERIOD 

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

NATIONAL ADMINISTRATION 
OTHER 

(EUR million) 
4,84 

CURRENT 
FINANCIAL 
YEAR  2006 
(EUR million) 
0 

FOLLOWING 
FINANCIAL 
YEAR  2007 
(EUR million) 
2,9 

5.1  REVENUE 

– 

– 

– 

– 
EC OWN RESOURCES 
(LEVIES/CUSTOMS DUTIES) 
– 

NATIONAL 

5.0.1  ESTIMATED EXPENDITURE 
5.1.1  ESTIMATED REVENUE 
5.2  CALCULATION METHOD: 

2008 
4,84  
– 

2009 
1,94 
– 

Total expenditure for this item in 2005: EUR 20.045 million 
Total expenditure for this item in 2004: EUR 17.893 million 
Expenditure – current arrangements 
2002/03 marketing year: EUR 18.8 million, broken down as follows: 
Long flax fibres: 100 000 tonnes x EUR 160 = EUR 16 million 
Short flax fibres/hemp: 14 444 tonnes x EUR 90 = EUR 1.3 million 
Additional aid: EUR 1.5 million 
2003/04 marketing year: EUR 20.19 million 
Long flax fibres: 101 125t x EUR 160 = EUR 16.18 million 
Short flax fibres/hemp: 21 767 tonnes x EUR 90 = EUR 1 959 million 
Additional aid: EUR 2 million 
Estimates 

Long flax fibres
Short flax 
fibres/hemp
Additional aid
Total

MGQ long fibres/t

80.823 x

Aid EUR million
200 =

16,16

Est. Quantities

102.124 x

Aid
160 =

0
0
16,16 Total

29.600 x

90 =

EUR millionEUR million

16,34

2,66
2
21,00

4,84

6.0  CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN 

THE RELEVANT CHAPTER OF THE CURRENT BUDGET? 

6.1  CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS 

OF THE CURRENT BUDGET? 
IS A SUPPLEMENTARY BUDGET NECESSARY? 

6.2 
6.3  WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS? 

YES NO 

YES NO 
YES NO 
YES NO 

OBSERVATIONS: If the current trend continues, the foreseeable impact is EUR 4.84 million. However, if 
the  MGQs  for  long  and  short  fibres  are  reached,  the  impact  would  be  EUR 11.94  million  and  total 
expenditure EUR 28.10 million. 

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