Report from the Commission to the European Parliament and the Council on EAGF expenditure Early warning system No 8/2007
Date: 2007-09-19
Institutions: European Commission
Subjects: EU financing arrangements, agricultural expenditure, agricultural product, common agricultural policy, fund (EU), revenue, sugar industry

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 19.9.2007 
COM(2007) 544 final 

REPORT FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

on EAGF expenditure 

Early warning system 

No 8/2007 

EN 

   EN 

 
 
 
  
 
 
 
 
TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

INTRODUCTION.............................................................................................................. 3 

ASSIGNED REVENUE ..................................................................................................... 3 

SUGAR RESTRUCTURING FUND ..................................................................................... 4 

COMMENTS ON THE IMPLEMENTATION OF THE 2007 BUDGET....................................... 4 

CONCLUSIONS ............................................................................................................... 6 

EN 

2 

   EN 

 
1. 

INTRODUCTION 

For the period 16 October 2006 to 30 June 2007, the budget’s actual implementation 
level compared to the expenditure profile pointed out by the indicator, established on 
the basis of the dispositions of Article 20 of Council Regulation (EC) No 1290/20051 
is presented in the Annex. 

2. 

ASSIGNED REVENUE 

On the basis of the dispositions of Article 34 of the new CAP Financing Regulation 
(EC)  No 1290/2005,  the  receipts  originating  from  financial  corrections  under 
conformity  clearance  decisions,  from  irregularities  and  from  the  milk  levy  are 
designated as revenue assigned to the financing of EAGF expenditure. At the time of 
establishment of the 2007  budget, an estimation  of  this  revenue  was  made  and  this 
estimation  was  taken  into  consideration  when  the  Budgetary  Authority  adopted  the 
2007 budget's appropriations. Specifically: 

– 

– 

the receipts from the milk levy were estimated at EUR 349.0 million and they 
were taken into consideration by reducing the appropriations requested for the 
milk  and  milk  products  sector  for  which  the  Budgetary  Authority  granted  an 
amount of EUR 587.0 million; 

the  receipts  from  the  conformity  clearance  claw-backs  and  from  irregularities 
were  estimated  at  EUR 568.0 million  and  EUR 70.0 million  correspondingly. 
The  total  amount  of  EUR 638.0 million  was  taken  into  consideration  by 
reducing the appropriations requested for the single payment scheme for which 
the Budgetary Authority granted an amount of EUR 27 918.0 million. 

The annexed table presents the implementation of the assigned revenue account for 
which  an  amount  of  EUR 1 126.9 million  was  collected  as  of  30 June 2007. 
Specifically: 

– 

– 

– 

from  the  milk  levy  an  amount  of  approximately  EUR 360.0 million  was 
collected as compared to the initial estimate of EUR 349.0 million,  

the 
conformity 
EUR 557.8 million, and 

clearance 

claw-backs 

amounted 

to 

approximately 

the receipts from irregularities amounted to approximately EUR 209.2 million 
with additional amounts also expected by the end of the budget year. 

According to applicable rules, this revenue can be used, partly or wholly, to cover the 
financing  of  EAGF  expenditure  if  the  budget  appropriations  granted  by  the 
Budgetary  Authority  are  not  sufficient  to  finance  the  expenditure  incurred  by  the 
Member States. In the case where all or part of this revenue is not used, then, it will 
be automatically carried over into the following budget year. 

1 

OJ  L  209,  11.8.2005,  p. 1.  Regulation  last  amended  by  Regulation  (EC)  No 320/2006  (JO L 58, 
28.2.2006, p. 42). 

EN 

3 

   EN 

 
                                                 
3. 

SUGAR RESTRUCTURING FUND 

The  temporary  restructuring  amounts  in  the  sugar  sector  are  treated  as  assigned 
revenue intended to finance the sugar restructuring aid and other aids foreseen in the 
restructuring fund. For the marketing year 2006/07 these amounts relate to the sugar, 
inulin syrup and isoglucose quantitative quotas held by operators and they are to be 
collected and paid by the Member States into the Fund in 2 instalments, the deadlines 
of which are 31 March and 30 November 2007 respectively. As of the end of March, 
Member States had transferred to the assigned revenue account the first instalment of 
the restructuring amounts due amounting to approximately EUR 1 287.2 million. In 
June 2007, Member States declared an amount of approximately EUR 391.5 million 
for  payments  of  aids  to  the  restructured  sugar  industry.  These  payments  will  be 
financed out of the corresponding assigned revenue account, thus, leaving a balance 
of EUR 895.7 million to cover future payments for restructuring aid and other aids. 

4. 

COMMENTS ON THE IMPLEMENTATION OF THE 2007 BUDGET 

A  brief  commentary  on  the  reasons  for  which  the  most  significant  divergences 
between the actual and the expected level of implementation for certain sectors of the 
2007 budget is presented hereafter: 

4.1.  Monetary factors 

The  expenditure  incurred  in  the  aforementioned  period  takes  account  of  the 
movement  in  the  US$/EUR  rate.  For  a  large  part  of  export  refunds  for  agricultural 
products, particularly for cereals and sugar, and of some internal aids such as aid for 
cotton, expenditure is influenced by the trend in this parity rate. 

In accordance with Article 21 of Regulation (EC) No 1290/2005, the budget adopted 
by the Budgetary Authority was drawn up on the basis of the average parity rate for 
July–September 2006  of  EUR 1 = $ 1.27.  It  should  be  noted  that  for  the  period 
1 August 2006  to  30 June 2007  the  average  parity  rate  was  approximately  equal  to 
EUR 1 = $ 1.31,  i.e.  3.1%  above  the  rate  used  for  the  establishment  of  the  2007 
budget. 

4.2.  Market factors 

4.2.1.  Cereals (– EUR 327.0 million) 

The extremely favourable internal and external conditions in the cereals market and 
the  resulting  higher  internal  market  prices  have  led  to  lower  purchases  and  higher 
sales of cereals in public storage as well as to lower expenditure for export refunds, 
thus,  resulting  to  an  under-implementation  of  this  sector's  budget  appropriations 
which is expected to last to the end of the budget year.  

4.2.2.  Refunds on Non-Annex 1 products (– EUR 71.4 million) 

Member States are expected to incur lower expenditure on refunds for the export of 
processed agricultural products because of the overall general reduction in the export 
refund levels for the various products concerned. This situation is expected to last to 
the end of the budget year.  

EN 

4 

   EN 

 
4.2.3. 

Sugar (+ EUR 181.3 million) 

The  current  over-implementation  of  the  budget's  appropriations,  when  compared  to 
the  level  of  the  indicator,  is  primarily  due  to  the  increased  quantities  of  exported 
sugar involving both free market and public storage sugar. 

4.2.4.  Fruits and vegetables (– EUR 63.0 million) 

The current under-implementation of the budget's appropriations, when compared to 
the level of the indicator, is primarily due to the smaller quantities of tomatoes which 
have  up  to  now  received  the  processing  aid.  Furthermore,  the  rhythm  of  uptake  of 
operational  funds  for  producer  organisations  is  slower  when  compared  with  the 
corresponding level of the indicator. 

4.2.5.  Milk and milk products (+ EUR 100.3 million) 

The  budget's  appropriations,  when  compared  to  the  level  of  the  indicator,  were 
over-implemented as of 30 June 2007. 

It should be noted that this over-execution of appropriations, when compared to the 
level of the indicator, is due to technical reasons since, starting with the 2007 budget, 
the  revenue  from  the  milk  levy,  initially  estimated  at  EUR 349.0 million,  is 
separately  treated  as  revenue  assigned  to  the  EAGF.  The  2007  budgetary 
appropriations requested and granted by the Budgetary Authority for this sector did 
not  include  this  revenue  and,  therefore,  the  indicator  is  applied  at  appropriations 
which  were  lower  by  this  amount.  This  is  the  reason  for  which  the  current 
implementation of the budget points to an over-execution.  

If the revenue from the milk levy initially forecasted to be assigned to the milk sector 
is taken into consideration, then, an under-execution of – EUR 152.4 million would 
arise for this sector. 

4.3. 

Direct aids (+ EUR 30.9 million) 

Member  States  accelerated  their  rhythm  of  payments  in  the  month  of  June,  thus, 
turning the under-execution of the budget's appropriations observed until the month 
of May into a slight over-execution when compared to the corresponding level of the 
indicator. 

On the basis of the Member States forecasted expenditure to the end of August, this 
over-execution  is  expected  to  increase  to  approximately  1.0%  of  the  budget's 
appropriations, when compared to the corresponding level of the indicator, and it will 
involve  both  decoupled  and  other  direct  aids.  In  order  to  ascertain  the  budget's 
execution for certain schemes in this area, the Commission services have contacted 
certain  Member  States  in  order  to  establish  an  indication  as  to  their  payment 
intentions on these schemes for the period to the end of the budget year.  

If  the  revenue  from  the  conformity  clearance  and  from  irregularities  initially 
forecasted to be assigned to the single payment scheme is taken into consideration, 
then,  an  under-execution  of  – EUR 597.9 million  would  arise  for  the  direct  aids 
chapter as of 30 June 2007. 

EN 

5 

   EN 

 
4.4. 

Audit of agricultural expenditure 

4.4.1.  Accounting clearance of previous years' accounts (+ EUR 40.9 million) 

All the accounting clearance decisions which are expected to be executed by the end 
of  the  current  budget  year  have  been  taken  by  the  Commission.  The  net  amount 
clawed back through the corrections imposed by these decisions, as of 30 June 2007, 
stood at approximately – EUR 74.7 million. This amount compared to the amount of 
– EUR 178.0 million,  which  was  retained  in  the  2007  budget,  leads  to  an  under-
execution  of  the  budget's  appropriations.  Should  the  amount  already  clawed  back 
remain  steady  to  the  end  of  the  budget  year,  then,  it  will  lead  to  an  increase  in 
EAGF's  expenditure  by  approximately  + EUR  103.3  million  for  the  2007  budget 
year.  The  current  increase  in  EAGF's  expenditure  stands  at  approximately 
+ EUR 40.9 million  when  compared  to  the  corresponding  level  of  the  indicator  for 
the month of June 2007. 

5. 

CONCLUSIONS 

The  uptake  of  the  budget's  appropriations,  for  the  period  16 October 2006  to 
30 June 2007  amounted  to  EUR  40 371.3  million,  i.e:  it  involved  an  overall  under-
execution  of  these  appropriations  by  approximately  – EUR 191.8 million  which  is 
mainly resulting from market measures. This under-execution is expected to increase 
by the end of the budget year. However, at this point in time, it is estimated that the 
budget's appropriations for direct aids will show an over-execution by the end of the 
budget  year.  These  relative  amounts  as  well  as  the  under-execution  in  the  budget's 
appropriations coming from the audit on agricultural expenditure will determine the 
level of any eventual utilisation of the revenue assigned to EAGF. 

EN 

6 

   EN 

 
ANNEX 

BUDGET YEAR 2007 (*)

PROVISIONAL CONSUMPTION OF THE APPROPRIATIONS
AGAINST ORIGINAL APPROPRIATIONS of EAGF

Situation to the 30/06/2007
in EUR million

Original
appropriations
Budget (*)

Consumption
from
November to
June

EUR mio

EUR mio

A

B

Utilisation

Consumption profile (**)
as at June

%
C=
(B*100)/A

%

D

EUR mio
E=
(D*A)/100

Gap between
implementation and
indicator

%

EUR mio

F=C-D

G=B-E

05 01

05 02
05 02 01
05 02 02
05 02 03
05 02 04
05 02 05
05 02 06
05 02 07
05 02 08
05 02 09
05 02 10
05 02 11
05 02 12
05 02 13
05 02 14
05 02 15

05 03
05 03 01
05 03 02
05 03 03
05 03 04

05 04
05 07

05 08

11 02
17 01

17 03

17 04

6 7 0 1
6 7 0 2
6 7 0 3

Expenditure (A)
ADMINISTRATIVE EXPENDITURE OF AGRICULTURE AND RURAL
DEVELOPMENT POLICY AREA
05010401, 05010406 and 05010407: Monitoring/prevention and pilot projects
Total 05 01 Administrative expenditure of policy area Agriculture
INTERVENTIONS IN AGRICULTURAL MARKETS
Cereals
Rice
Refunds on non-Annex 1 products
Food programmes
Sugar
Olive oil
Textile plants
Fruit and vegetables
Products of the wine-growing sector
Promotion
Other plant products/measures
Milk and milk products (estimation of 349 Mio EUR credits coming from revenue)***
Beef and veal
Sheepmeat and goatmeat
Pigmeat, eggs and poultry, bee-keeping and other animal products
Total 05 02 Interventions in agricultural markets (excluding 05 02 16)
DIRECT AIDS
Decoupled direct aids (estimation of 638 Mio EUR credits coming from revenue)***
Other direct aids
Additional amounts of aid
Ancillary direct aids (outstanding balances, small producers, agrimonetary aids, etc.)
Total 05 03 Direct aids
OTHER EXPENDITURE
Rural development (050401 and 05040302)
AUDIT OF AGRICULTURAL EXPENDITURE
Accounting clearance of previous years' accounts (05070106 and 05070108)
(3) Conformity clearance of previous years' accounts (05070107 and 05070109)
Audit of agricultural expenditure, other lines (05070101, 05070102, 05070105
and 050702)
(1) POLICY STRATEGY AND COORDINATION OF AGRICULTURE AND RURAL
DEVELOPMENT POLICY AREA
(2) (4) FISHERIES MARKETS
(1) (2) ADMINISTRATIVE EXPENDITURE OF POLICY AREA HEALTH AND
CONSUMER PROTECTION
17010401, 17010404 and 17010405: Plant health meas. - Pilot study - Feed and
food safety
(1) (2) PUBLIC HEALTH
17 03 02 Community tobacco fund - direct payments by the EU
(1) (2) FOOD SAFETY, ANIMAL HEALTH, ANIMAL WELFARE AND PLANT HEALTH
170401 to 170407 Veterinary, animal welfare, public health, plant health, feed and food
and other measures
Total other expenditure
Total Expenditure (excluding 05 02 16)
Revenue (B)
Conformity clearance of previous years'accounts - EAGF (estimation : 568 Mio EUR)
Irregularities - EAGF (estimation : 70 Mio EUR)
Superlevy from milk producers (estimation : 349 Mio EUR)
Total Revenue (excluding 6 8 0 1 and 6 8 0 2)
Expenditure and revenue (A-B)
Total Expenditure and revenue (excluding 05 02 16, 6 8 0 1 and 6 8 0 2)

05 02 16
6 8 0 1
6 8 0 2

Sugar Restructuring Fund
Sugar Restructuring Fund (estimation of 757 Mio EUR credits coming from revenue)***
Temporary restructuring amounts - Assigned revenue (estimation : 1259 Mio EUR)
Irregularities concerning the temporary restructuring fund – Assigned revenue
Total Sugar Restructuring Fund

(*)   Budget year = 16.10.06 to 15.10.07 but direct expenditure possible until 31.12.07
(**)  For direct payments it concerns the commitments
(***) Including possible use of assigned revenue : see 'revenue' lines
(1)   Chapter not exclusively EAGF
(2)   Chapter outside title 05 but included in EAGF
(3)   Used only for cases in which Member States are beneficiaries
(4)   Of which EUR 15 million is entered into chapter 4002

8,5

8,5

516,0
-2,0
299,0
278,0
323,0
50,0
22,0
1.319,8
1.487,0
45,3
379,0
587,0
117,0
p.m.
194,1
5.615,2

2,6

30,3 %

43,9 %

3,7

-13,6 %

-1,2

2,6

30,3 %

43,9 %

3,7

-13,6 %

-1,2

-46,6
4,0
147,2
181,3
324,8
54,6
12,0
918,0
1.223,9
29,3
245,1
525,2
78,3
0,0
129,9
3.827,0

-9,0 %
-200,8 %
49,2 %
65,2 %
100,6 %
109,1 %
54,7 %
69,6 %
82,3 %
64,7 %
64,7 %
89,5 %
66,9 %

66,9 %
68,2 %

99,9 %
98,5 %
24,8 %
0,0 %
98,6 %

54,3 %
105,4 %
73,1 %
72,0 %
44,4 %
87,8 %
61,8 %
74,3 %
82,2 %
67,2 %
67,4 %
72,4 %
74,1 %

73,2 %
72,0 %

99,5 %
99,0 %
34,0 %

280,4
-2,1
218,7
200,1
143,5
43,9
13,6
981,0
1.222,4
30,4
255,4
425,0
86,7

142,1
4.041,1

30.037,5
6.152,4
159,1

-63,4 %
-306,2 %
-23,9 %
-6,8 %
56,1 %
21,4 %
-7,2 %
-4,8 %
0,1 %
-2,5 %
-2,7 %
17,1 %
-7,2 %

-6,3 %
-3,8 %

0,4 %
-0,5 %
-9,2 %

-327,0
6,1
-71,4
-18,8
181,3
10,7
-1,6
-63,0
1,4
-1,1
-10,3
100,3
-8,4

-12,3
-214,1

122,9
-29,5
-42,8

98,6 %

36.349,0

0,1 %

30,9

30.196,0
6.214,5
468,0
0,0
36.878,5

30.160,4
6.122,9
116,3
-19,6
36.379,9

p.m.
-172,0
-178,0
p.m.
6,0

41,2

30,5
1,3

-19,1
-68,3
-74,7
1,6
4,8

39,7 %
41,9 %

65,4 %
64,9 %

-112,5
-115,5

-25,7 %
-23,0 %

79,3 %

50,0 %

3,0

29,3 %

20,7

50,3 %

65,6 %

27,0

-15,2 %

7,9
0,5

25,9 %
36,0 %

50,0 %
69,2 %

15,3
0,9

-24,1 %
-33,2 %

44,2
40,9

1,8

-6,3

-7,4
-0,4

13,5

0,0

0,0 %

0,0 %

0,0

0,0 %

0,0

295,0

220,0

74,6 %

80,9 %

238,6

-6,3 %

-18,6

209,5
42.711,7

161,8
40.371,3

77,2 %
94,5 %

80,8 %
95,0 %

169,2
40.563,1

-3,6 %
-0,4 %

-7,5
-191,8

p.m.
p.m.
p.m.
p.m.

557,8
209,2
360,0
1.126,9

42.711,7

39.244,3

91,9 %

95,0 %

40.563,1

-3,1 %

-1.318,8

p.m.
p.m.
p.m.
p.m.

391,5
1.287,2
0,0
895,7

EN 

7 

   EN