Report from the Commission to the European Parliament and the Council on EAGF expenditure Early warning system No 9–11/2007
Date: 2007-12-13
Institutions: European Commission
Subjects: agricultural expenditure, aid for restructuring, common agricultural policy, fund (EU), implementation of the budget, revenue, sugar industry

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.12.2007 
SEC(2007) 830 final 

REPORT FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

on EAGF expenditure 

Early warning system 

No 9–11/2007 

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REPORT FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

on EAGF expenditure 

Early warning system 

No 9–11/2007 

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TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

INTRODUCTION.............................................................................................................. 4 

ASSIGNED REVENUE ..................................................................................................... 4 

SUGAR RESTRUCTURING FUND ..................................................................................... 5 

COMMENTS ON THE IMPLEMENTATION OF THE 2007 BUDGET....................................... 5 

CONCLUSIONS ............................................................................................................... 7 

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1. 

INTRODUCTION 

the  period  16 October 2006 

For 
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. 

to  30 September 2007, 

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 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 1 148.6 million  was  collected  as  of  30 September 2007. 
Specifically: 

– 

– 

– 

from  the  milk  levy  an  amount  of  approximately  EUR 363.3 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 227.6 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). 

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Considering the expected under-execution of the appropriations for the 2007 budget, 
then, the totality of the revenue assigned to EAGF will be carried forward into 2008 
and it will be used to finance the expected budgetary needs for that year. 

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. 
After having paid approximately EUR 398.7 million for aids to the restructured sugar 
industry, Member States declared, in September 2007, an amount of approximately 
EUR 152.7 million  for  payments  of  diversification  aids  as  well  as  aids  to  sugar 
refiners.  Therefore,  total  payments  under  the  Fund,  as  of  30 September 2007, 
amounted to EUR 551.4 million. 

These payments will be financed out of the corresponding assigned revenue account 
while the balance of EUR 735.9 million will be carried forward into 2008 in order 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  31 July 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 527.0 million) 

The extremely favourable internal and external conditions in the cereals market and 
the resulting higher internal and world market prices have led to: 

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– 

– 

lower purchases and higher sales of cereals from public storage which will lead 
to significant net gains by the end of the budget year; and 

to lower expenditure for export refunds as the refund rate has been set at 0 for 
most of the budget year, thus, resulting to savings in this scheme's expenditure 
by comparison to the budget appropriations. 

Therefore,  for  the  sector  as  a  whole,  the  2007  budget  appropriations  will  be 
significantly under-implemented. 

4.2.2.  Refunds on Non-Annex 1 products (– EUR 107.7 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.  Equally  for  this  sector,  the  2007 
budget appropriations will be significantly under-implemented. 

4.2.3. 

Sugar (+ EUR 125.9 million) 

The current over-implementation of the budget appropriations, when compared to the 
level  of  the  indicator,  is  primarily  due  to  the  increased  export  refunds  expenditure 
incurred  by  the  Member  States  concerned  as  the  quantities  of  exported  sugar,  both 
free  market  and  public  storage  sugar,  have  been  much  higher  compared  to  the 
assumptions retained in the 2007 budget. 

4.2.4.  Fruits and vegetables (– EUR 77.7 million) 

The  current  under-implementation  of  the  budget  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 56.1 million) 

The  budget  appropriations,  when  compared  to  the  level  of  the  indicator,  were 
over-implemented as of 30 September 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  by  the  end  of  the  budget 
year.  

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 282.1 million would 
arise for this sector. 

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4.3. 

Direct aids (+ EUR 101.8 million) 

Member  States  incurred  expenditure  higher  than  the  appropriations  retained  in  the 
2007 budget for both the single payments as well as for the other direct aids schemes. 

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. On the basis of the information received from these Member States 
the forecasted expenditure, primarily for the single payments scheme, to the end of 
October is expected to exceed this scheme's appropriations by approximately 1.0%, 
i.e. an over-execution of approximately EUR 300.0 million is expected by 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 536.0 million  would  arise  for  the  direct  aids 
chapter as of 30 September 2007. 

4.4. 

Audit of agricultural expenditure 

4.4.1.  Accounting clearance of previous years' accounts (+ EUR 91.7 million) 

through 

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 
these  decisions,  as  of 
30 September 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 appropriations. By the end of the 
2007 budget year, this expected shortfall in claw backs will have to be covered and it 
will lead to a corresponding increase in EAGF's expenditure. 

the  corrections 

imposed  by 

5. 

CONCLUSIONS 

The favourable internal and external market conditions, which characterised the 2007 
budget  year,  led  to  exceptionally  high  prices,  especially  in  the  cereals  and  dairy 
markets.  The  resulting  liquidation  of  public  storage  stocks  in  these  sectors  and  the 
lower  levels  of  export  refund  rates  led  to  savings  in  EAGF  expenditure,  mainly  in 
these  markets.  On  the  other  hand,  higher  quantities  of  exported  sugar  led  to  higher 
expenditure in export refunds for sugar. The net result is an under-implementation of 
the  2007  budget  appropriations  for  market  measures.  This  under-implementation  is 
partly  offset  by  expected  higher  year-end  expenditure  for  direct  aids  and  for  the 
coverage  of  the  expected  shortfall  in  claw-backs  under  the  accounting  clearance 
procedure. At this point in time, the overall under-implementation of the 2007 budget 
appropriations  is  estimated  at  about  EUR 400.0 million.  As  a  consequence,  the  full 
amount  of  revenue  assigned  to  the  EAGF  in  2007  will  be  carried  over  to  2008  in 
order to cover the needs of that year's budget. 

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ANNEX 

BUDGET YEAR 2007 (*)

PROVISIONAL CONSUMPTION OF THE APPROPRIATIONS
AGAINST ORIGINAL APPROPRIATIONS of EAGF

Situation to the 30/09/2007
in EUR million

Original
appropriations
Budget (*)

Consumption
from
November to
September

Utilisation

Consumption profile (**)
as at September

Gap between
implementation and
indicator

EUR mio

EUR mio

A

B

%
C=
(B*100)/A

%

D

EUR mio
E=
(D*A)/100

%

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

3,2

38,1 %

62,1 %

5,3

-24,0 %

-2,0

3,2

38,1 %

62,1 %

5,3

-24,0 %

-2,0

-108,2
-0,5
179,8
245,0
410,9
61,2
13,1
1.153,2
1.374,9
41,7
346,9
624,8
95,9
0,0
156,4
4.595,2

-21,0 %
23,8 %
60,1 %
88,1 %
127,2 %
122,4 %
59,3 %
87,4 %
92,5 %
92,0 %
91,5 %
106,4 %
81,9 %

80,5 %
81,8 %

100,4 %
100,5 %
91,8 %
0,0 %
100,3 %

81,2 %
76,2 %
96,2 %
98,5 %
88,2 %
98,1 %
65,3 %
93,3 %
95,7 %
92,9 %
93,8 %
96,9 %
95,4 %

91,3 %
93,3 %

418,8
-1,5
287,6
273,7
285,0
49,1
14,4
1.231,0
1.423,5
42,1
355,4
568,7
111,7

-102,1 %
-52,4 %
-36,0 %
-10,3 %
39,0 %
24,3 %
-5,9 %
-5,9 %
-3,3 %
-0,9 %
-2,3 %
9,6 %
-13,5 %

177,3
5.236,7

-10,8 %
-11,4 %

100,0 %
99,9 %
99,8 %

30.196,0
6.208,3
467,1

0,4 %
0,6 %
-8,0 %

-527,0
1,0
-107,7
-28,7
125,9
12,2
-1,3
-77,7
-48,6
-0,4
-8,6
56,1
-15,8

-20,9
-641,5

125,7
34,6
-37,4

100,0 %

36.871,4

0,3 %

101,8

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

30.321,7
6.242,9
429,7
-21,1
36.973,2

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

41,2

30,5
1,3

-25,6
-67,2
-74,7
1,6
5,9

39,0 %
41,9 %

94,1 %
93,5 %

-161,9
-166,4

-55,1 %
-51,5 %

97,9 %

75,0 %

4,5

22,9 %

33,8

82,2 %

82,1 %

33,8

0,1 %

0,1
0,6

0,4 %
44,0 %

50,0 %
76,9 %

15,3
1,0

-49,6 %
-32,9 %

94,7
91,7

1,4

0,0

-15,1
-0,4

13,5

0,0

0,0 %

0,0 %

0,0

0,0 %

0,0

295,0

232,2

78,7 %

90,5 %

267,1

-11,8 %

-34,8

209,5
42.711,7

174,0
41.745,6

83,1 %
97,7 %

74,1 %
99,0 %

155,3
42.268,6

8,9 %
-1,2 %

18,7
-523,0

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

557,8
227,6
363,3
1.148,6

42.711,7

40.597,0

95,0 %

99,0 %

42.268,6

-3,9 %

-1.671,6

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

551,4
1.287,2
0,0
735,9

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