Proposal for a Council Regulation derogating from Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, as regards set aside for year 2008
Date: 2007-09-13
Institutions: European Commission
Subjects: aid system, aid to agriculture, common agricultural policy, fallow, financial aid, production aid

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.9.2007 
COM(2007) 523 final 

2007/0194 (CNS) 

Proposal for a 

COUNCIL REGULATION 

derogating from Regulation (EC) No 1782/2003 establishing common rules for direct 
support schemes under the common agricultural policy and establishing certain support 
schemes for farmers, as regards set aside for year 2008 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

The  proposal  is  justified  by  the  cereals  market  situation.  The  use  of  hectares 
accompanying  set-aside  entitlements  for  agricultural  purposes  is  expected  to 
encourage farmers to produce additional quantities of cereals which could contribute 
to easing market tension. 

•  General context 

The cereals market at the beginning of marketing year 2007/2008 is characterised by 
historically high prices. 

The low level of the European Union 2006/2007 closing stocks was a consequence of 
a lower than expected 2006 crop, at 266 million tons, due to adverse meteorological 
conditions during the harvest. Intervention stocks have considerably tightened during 
the campaign, from 14 million tons to 2.5 million tons, mainly composed of maize 
held  in  Hungary.  Insignificant  quantities  were  offered  to  intervention.  More  than 
8 million  tons  have  been  put  from  intervention  onto  the  internal  market,  including 
2.9 million tons  of wheat,  3.4 million  tons of maize, 1.4 million tons of  barley  and 
around  395 000  tons  of  rye.  The  estimate  of  private  stocks  varies,  but  all  analysts 
agree they significantly decreased in 2006/2007. EU-27 cereals imports are estimated 
to  stand  at  12.4  million  tons,  against  10  million  tons  in  2005/2006  and  exports  at 
19.1 million  tons  against  24.9  million  tons  in  2005/2006.  Despite  the  quite 
unfavourable euro/dollar exchange rate, exports were possible without refunds. 

This  year,  dry  and  unusually  hot  weather  in  April  is  likely  to  have  substantially 
damaged  yields  potential.  This  was  partly  offset  by  beneficial  rains  in  May  in 
western  Member  States,  but  the  southeast  region  of  Europe  remained  hot  and  dry, 
especially  Romania  and  Bulgaria  which  suffered  from  a  historical  drought.  The 
preliminary  forecasts  of  the  2007  harvest  remain  close  to  last  year's  level  and  will 
lead  to  a  further  reduction  in  the  EU  of  private  cereal  stocks  by  the  end  of  the 
2007/2008 marketing year. At global level, closing stocks in 2007/2008 are expected 
to fall to a historically low level, especially in the major exporting countries. 

In  this  context,  a  "normal"  2008  harvest  with  trend  yields  and  the  proposed 
derogation for set aside in 2008 in the European Union would only allow for a partial 
rebuilding  of  the  private  stocks  and  the  total  end  stocks  for  the  marketing  year 
2008/2009 will be lower than the beginning stocks of the current marketing year. A 
poor 2008 harvest combined with a 10 % set aside would expose the internal market 
to potentially serious risks. 

Set  aside  was  introduced  as  a  supply  management  instrument  in  a  time  where 
potential  grain  production  in  the  European  Union  exceeded  market  outlets  and 
applied  on  a  voluntary  basis  from  1988/1989.  After  the  1992  reform,  it  became 
obligatory; producers under the general scheme were required to set aside a defined 
percentage of their declared areas in order to be eligible to direct payments. With the 
2003 reform, they received set-aside entitlements, which give the right to a payment 
if they are accompanied by one ha of eligible land put into set aside. 

The rate of obligatory set aside was initially decided every year but in 1999/2000 it 
was  set  permanently  at  10 %  for  simplification  purpose.  In  the  Member  States  that 

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opted  for  the  Single  Area  Payment  Scheme:  Poland,  Czech  Republic,  Slovak 
Republic,  Hungary,  Lithuania,  Latvia,  Estonia,  Cyprus,  Bulgaria  and  Romania, 
farmers are exempted from the obligation of set aside. 

The  current  area  under  obligatory  set  aside  amounts  to  3.8  million  hectares  in  the 
European  Union.  If  the  set-aside  rate  was  set  to  0 %,  the  effective  return  of  land 
could  be  between  1.6  and  2.9  million  hectares.  Considering  average  trends,  it  is 
likely to bring around 10 million tons of grains onto the market. In a scenario where 
farmers decide to use the maximum of lands to produce cereals to the detriment of 
other crops especially oilseeds, this quantity could reach 17 million tons. 

Setting the set aside rate at zero does not oblige farmers to cultivate their lands. They 
can  continue  to  set  them  aside  on  a  voluntary  basis  and  to  apply  environmental 
schemes. Cross compliance applies on all arable lands. 

Finally,  although  it  was  introduced  as  a  market  measure,  set-aside  has  brought 
environmental  benefits  in  many  regions.  The  removal  of  long  term  obligatory  set-
aside  therefore  raises  the  question  of  how  these  benefits  can  be  retained.  The 
Commission will address this issue in the context of the CAP review in 2008. 

•  Existing provisions in the area of the proposal 

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 2529/2001. 

•  Consistency with the other policies and objectives of the Union 
A  decision  on  a  permanent  basis  would  require  an  analysis  on  how  and  by  which 
means the positive environmental side effects of set aside can be addressed. 

2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 
The proposal was announced to the Agriculture Council on 16 July 2007 and a press 
release  was  published.  The  main  European  associations  of  farmers,  industry  and 
traders have expressed their support to the proposal1. 

The decision is urgent given the seriousness of the market situation. Farmers should 
be aware before they decide on their autumn 2007 sowings. 

•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 
Not applicable. 

1 

Press  release  from  COPA  COGECA  dated  2  July  2007  and  joint  reflections  on  the  current  and 
forthcoming  EU  policy  framework  conditions  –  European  Grain  and  Oilseed  Convention  Brussels 
4 May 2007, AAF, COCERAL, FEDIOL, FEFAC, EUROFLOUR, GAM. 

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3. 

LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 
The  aim  of  this  proposal  is  to  set  at  0 %  the  obligatory  set  aside  rate  for  the  year 
2008. 

In the context of the functioning of the Single Payment System this measure implies 
to allow the use of any eligible hectare to give right to the amount corresponding to 
set  aside  entitlements  as  well  as  to  allow  the  use  of  land  set  aside  for  agricultural 
purposes. 

•  Legal basis 

Article 37(2) of the Treaty establishing the European Community. 

•  Subsidiarity principle 

The  proposal  falls  under  the  exclusive  competence  of  the  Community.  The 
subsidiarity principle therefore does not apply. 

•  Proportionality principle 

The  proposal  complies  with  the  proportionality  principle  because  a  poor  cereals 
harvest in 2008 would expose the internal market to potentially serious risks. 

•  Choice of instruments 

Proposed instrument: Council regulation.   
Other  means  would  not  be  adequate  for  the  following  reason:  a  regulation  must  be 
amended by a regulation. 

4. 

BUDGETARY IMPLICATIONS 

Assuming trend yields, it is estimated the reduction of set aside to 0 % will not lead 
to an increase  in intervention stocks during  2008/2009 marketing  year.  Taking into 
account  the  current  tight  market  situation,  high  market  prices  as  well  as  the 
foreseeable developments the proposal should not lead to building extra intervention 
stocks and related budget expenditure in budget years 2009 and 2010. 

5. 

ADDITIONAL INFORMATION 

•  Simplification 

The  proposal  provides  for  simplification  of  administrative  procedures  for  public 
authorities (EU or national). 

The proposal is included in the Commission Work and Legislative Programme under 
the reference 2007/AGRI/052. 

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2007/0194 (CNS) 

Proposal for a 

COUNCIL REGULATION 

derogating from Regulation (EC) No 1782/2003 establishing common rules for direct 
support schemes under the common agricultural policy and establishing certain support 
schemes for farmers, as regards set aside for year 2008 

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 Parliament2, 

Whereas: 

(1) 

(2) 

Article  54  of  Council  Regulation  (EC)  No 1782/20033  provides  that,  in  order  to  be 
entitled  to  single  payment  scheme  payments,  set  aside  entitlements  shall  be 
accompanied by a hectare of land set aside from production. 

The cereals market at the beginning of marketing year 2007/2008 is characterised by 
historically  high  prices  both  at  Community  and  world  level.  The  low  level  of  the 
Community  2006/2007  closing  stocks  was  a  consequence  of  a  lower  than  expected 
2006 harvest. There are many uncertainties on the rebuilding of the stocks, given the 
preliminary  forecasts  for  the  2007  harvest.  At  global  level,  closing  stocks  in 
2007/2008  are  expected  to  fall  to  a  historically  low  level,  especially  in  the  major 
exporting  countries.  Against  that  background,  even  if  the  2008  harvest  was  normal, 
stocks would not increase significantly while a poor harvest would expose the internal 
market  to  potentially  serious  risks.  Furthermore,  cereals  prices  and  stocks  have  an 
important impact on the availability and prices of other arable crops, such oilseeds and 
protein crops, and of the livestock sector, contributing to the potential extension of the 
risk to these other sectors. 

(3) 

It is therefore appropriate, for 2008, to allow the use of land set aside for agricultural 
purposes, 

HAS ADOPTED THIS REGULATION: 

By way of derogation from Article 54(3) of Regulation (EC) No 1782/2003, for 2008, farmers 
shall not be obliged, in order to be entitled to the amount fixed by the set aside entitlements, 
to set aside from production land eligible for those entitlements. 

Article 1 

2 
3 

OJ C …, …, p. …. 
OJ L 270, 21.10.2003, p. 1. Regulation as last amended by Regulation (EC) No 552/2007. 

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

Article 2 

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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FINANCIAL STATEMENT 

BUDGET HEADING: 
5/2/2001 

Fichefin/07/24545 
REV1 
OJ/mlc 
6.1.2007 
DATE: 16/8/2007 
APPROPRIATIONS: 
516 million EUR 
(Budget 2007) 

TITLE: 
Proposal for a Council Regulation derogating from Regulation (EC) No 1782/2003 establishing common 
rules for direct support schemes under the common agricultural policy and establishing certain support 
schemes for farmers as regards set aside for year 2008. 
LEGAL BASIS: 
Art. 37 (2) of the Treaty 
AIMS: 
To ease market tensions by putting set aside at zero to encourage farmers to produce additional quantities 
of cereals. 
FINANCIAL IMPLICATIONS 

12 MONTH 
PERIOD 

CURRENT 
FINANCIAL 
YEAR 
2007 
(EUR million) 
- 

FOLLOWING 
FINANCIAL 
YEAR 
2008 
(EUR million) 
- 

CHARGED TO THE EC BUDGET 

EXPENDITURE 
- 
(REFUNDS/INTERVENTIONS) 
- 
- 

NATIONAL AUTHORITIES 
OTHER 

(EUR million) 
- 

1. 

2. 

3. 

4. 

5. 

5.0 

5.1  REVENUE 

- 

- 

- 

OWN RESOURCES OF THE EC  

- 
(LEVIES/CUSTOMS DUTIES) 
NATIONAL 
- 

5.0.1  ESTIMATED EXPENDITURE 
5.1.1  ESTIMATED REVENUE 
5.2  METHOD OF CALCULATION: 
6.0  CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE 

2009 
- 
- 

2010 
- 
- 

2011 
- 
- 

2012 
- 
- 

YES NO 

RELEVANT CHAPTER OF THE CURRENT BUDGET? 

6.1  CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF 

YES NO 

THE CURRENT BUDGET? 

6.2  WILL A SUPPLEMENTARY BUDGET BE NECESSARY? 
6.3  WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS? 
OBSERVATIONS: 

YES NO 
YES NO 

The proposed reduction of set aside obligation to 0 % for the marketing year 2008/2009 would increase the EU 
cereals production by around 10 mio t. Following the very low harvest in 2007 (2007/2008 marketing year), this 
increased  production  in  2008  arising  from  setting  the  set  aside  rate  at  zero  together  with  the  return  to  trend 
yields for the harvest in general would re-establish a more balanced situation ensuring the supply for food, feed 
and  industrial  uses  within  the  EU  and  allow  to  replenish  the  private  stocks  to  a  certain  degree.  Taking  into 
account  the  current  tight  market  situation  and  foreseeable  developments,  the  proposal  should  under  normal 
climatic  conditions  not  lead  to  building  of  extra  intervention  stocks  and  related  budget  expenditure  in  budget 
years 2009 and 2010. 

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