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Set-asides Set Aside In Poor Harvests

  • September 13th, 2007
  • Posted by EUEditor

belgium-open-fields-reduced.jpgGone are the days, for now, when wheat farmers could obtain some money for not planting their fields.

The European Commission says it is proposing to set at zero the set-aside rate for autumn 2007 and spring 2008 sowings of cereals – in response to the shortages worldwide.

TIGHT MARKET DECIDES
The Commission said today (13.9.07) it was moving to zero because of an “increasingly tight situation on the cereals market.”

Lower than expected harvests in the European Union (265.5 million tonnes) had led to curtailment of supplies at the end of marketing year 2006/2007 and to historically high prices.

Intervention stocks – bought in by the EC when markets were more heavily supplied — had shrunk from 14 million tonnes at the beginning of the marketing year to around one-million tonnes this month — mainly maize held in Hungary.

Reducing the set-aside rate from 10% to 0% was expected to increase output by at least 10 million tonnes.
LONG-TERM OPTIONS

The Agriculture Commissioner, Mariann Fischer Boel, said the future of the set-aside system itself would form part of the debate, in the next phase of the review of the EU’s Common Agricultural Policy (CAP) this November.

That process would have to address the issue of how to retain environmental benefits which set-aside had brought.

Setting the rate at zero would does not oblige farmers to cultivate all their land as they might continue with voluntary set-aside, and apply for funded environmental schemes.

“A poor 2008 harvest combined with 10% set-aside would expose the internal market to potentially serious risks,” she said.

The cereals market is currently characterised by historically high prices. The 2006 crop was lower than expected, at 266 million tons, due to adverse meteorological conditions. Intervention stocks have considerably tightened during the campaign 2006/2007, from 14 million tonnes to around 1 million tonnes. The estimate of private stocks varies, but all analysts agree they significantly decreased in 2006/2007.

The current area under obligatory set-aside amounts to 3.8 million hectares, and once the set-aside rate is set at 0 %, the effective return of land may be between 1.6 and 2.9 million hectares.

On average trends that is likely to bring around 10 million tonnes of grains onto the market – possibly much more.

BACKGROUND ON SET-ASIDES PROVIDED BY EUROPEAN COMMISSION

Set-aside was introduced to limit production of cereals in the EU and applied on a voluntary basis from 1988/89. After the 1992 reform, it became obligatory i.e. 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 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 purposes. In the new Member States that opted for the Single Area Payment Scheme (SAPS), farmers are exempted from the obligation of set-aside (Poland, Czech Republic, Slovak Republic, Hungary, Lithuania, Latvia, Estonia, Cyprus, Bulgaria and Romania).

Commissioner Fischer Boel already announced to the Council on 16 July her intention to submit the present proposal. Since then the estimate for the EU cereals crop has been revised down and prices have kept rising.

Reference:

European Commission, “Cereals: Commission proposes to set at zero the set-aside rate for autumn 2007 and spring 2008 sowings”, IP/07/1329 (13.9.07)

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