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   The Commission has adopted its proposals on agricultural prices
   and related measures for 1985/86 (1).  In presenting these
   before the end of January, the new Commission wishes to enable
   Parliament to give its opinion in good time and to allow the
   Counsil to reach its decisions before 1 April, as is required.
   The Commission's purpose, in these proposals, is to maintain
   continuity in the development of the agricultureal policy
   following the reforms approved in 1984.  In the short term,
   there is no alternative to the maintenance of a policy on
   prices more closely adapted to the real conditions prevailing
   on internal and external markets, while at the same time the
   Community's obligations to the farmers and their families must
   be allowed for.  Also, the guarantee thresholds must be
   maintained, in accordance with the guidelines already approved
   by the Council.
   For most products, the Commission feels that prices should be
   kept unchanged or than only modest increases, up to 2%, should
   be made.  However, for certain items, the Commission is
   proposing significant reductions, either because the guarantee
   threshold has been exceeded (e.g. ceeals and rape), or because
   of the market situation (in particular for citrus fruit and
   tomatoes, and certain tobacco varieties) (see Table 1).
   The Commission is also proposing a further step towards the
   dismantlement of the MCAs following the agrimonetary agreements
   of 31 March 1984, but this will allow for price adjustments and
   developments with regard to incomes in the relevant Member
   States.  Thus, the Commission proposes that through a reduction
   in the "monetary gap", the negative MCAs should be discontinues
   in France and Greece.  For the positive MCAs applied in Germany
   and the Netherlands, the Commission is proposing sufficient
   adaptation to enable the MCAs for milk and cereals to be
   aligned on the level for the other products (see Table 2).
   (1) COM(85) 50.
               
                                - 2 -
   When presenting its proposals, the Commission bore in mind:
   -  that the market situation has not improved since the March
   1984 agreement and that for several products it has actually
   deteriorated;
   -  that the average inflation rate is still falling, from 4.7%
   in 1984 to an esstimated 4.1% for 1985, and that the
   inflation rate disparities between the various Member States
   are also narrower than in previous years;
   -  lastly, that farm incomes increased in 1984 by about 4% in
   real terms after declining in 1983.  Compared with the
   1979/80/81 average, farm incomes showed an improvement of
   about 7% in 1984, with very good results for cereals, but
   disappointing figures for milk and beef/veal.
   The Commission's main proposals are summarized below, by
   product.
   Cereals
   For cereals other than durul wheat, the Commission is proposing
   a reduction of 3.6%, includuing the 5% reduction resulting from
   the guarantee threshold overrun in 1984, and adjustment of the
   carry-over payments.  The Commission does not intend to fix a
   reference price for bread-making wheat of minimum quality.
   The prices and aid for durum wheat remain unchanged.  For all
   cereals a single guarantee threshold is proposed of 126 million
   tonnes for cereals other than durum wheat and 4.6 million
   tonnes for durul wheat in 1984).
   Otherwise, the inconsistency between theprices fixed for durum
   wheat and for the other cereals could well further aggravate
   the disequilibrium on the market for durum, more of which is
   being grown athough consumption is declining.
   The Community's self-sufficiency rate for all cereals was 130%
   for 1984/85, and is estimated at about 135% by 1990/91.  In
   view of the trends, the Commission will carry out a thorough
   policy review of further measures to achieve better equilibrium
   in this area, it being clear that the prices policy, unless it
   were extremely restrictive, could no longer be used alone.
   Fruit and vegetables
   For citrus fruit, the Commission is proposing a 6% reduction in
   the basic prices.  Withdrawals have steadily mounted to
   excessive levels (25% of total production for oranges, 47% for
   lemons and 60% for mandarins in 1983/84), and this suggests
   that the intervention machinery is no longer effective in the
   role it is supposed to play under the Community regulations,
   withdrawals having become a majo outlet for growers.  The
   reduction should help to restore equilibrium on the market,
   while providing an incentive to growers to take advantage of
   conversion schemes available.  Also, the Commission is
   proposing a 3% reduction in the basic prices for peaches and
   apricots, withdrawals of these products in 1983/84 having
   reached 14% and 12.5% respectively of total production.
               
                                - 3 -
   With regard to tomatoes, the Commission is proposing a 6%
   reduction in the basic prices for the fresh product.  The aid
   to processed products for 1985/86 will not only be reduced, in
   accordance with the rules applying where the guarantee
   thresholds are overrun, but this reduced aid will be confined
   to the quantities fixed at the present time as guarantee
   thresholds, i.e. a total of 4.7 million tonnes: tomato
   production, especially for processing, is steadily increeasing
   and the figure could well reach 7.4 million tonnes for 1984/85,
   a 33% increase over the preceding marketing year and an
   increase of 67% over 1982/83.
   The Commission is also proposiong that verification procedures
   concerning the application of Community arrangements should be
   tightened up, notably with regard to compliance with quality
   standards and market price reporting.
   Milk
   Following the implementation of the additional levy
   arrangements, and having regard to income trends int his area,
   the Commission has decided to propose an increase in the target
   price - confined, however, to 1.5% - the main parameters being
   the market situation and the existence of very heavy stocks.
   At the same time, the coresponsibility levy would be reduced
   from 3% to 2%, and the aid to small dairy farmers would be
   retained.  It must, however, be clearly understood that the
   price increase can be granted only subject to full compliance
   with the additional levy scheme, and in particular subject to
   retention of the reference quantities already approved by the
   Council.
   To facilitate the disposal of butter, the Commission is
   proposing a further adjustment in the fat/protein ratio. The
   resulting reduction in the intervention price for butter, which
   will be offset by an increase in the intervention price for
   skimmed-milk powder, will enable the butter consumption aid to
   be discontinued, without changes to the consumer prices in the
   four Member States concerned (1).
   Meat
   The reduction in the cost of animal feed and the adjustment
   proposed to cereals prices are two of the factors which have
   led the Commission to propose no adjustment in meat prices:
   after the introduction of the milk production quotas, great
   prudencne must be shown in the fixing of prices for other
   products to which productive resources may be switched from the
   dairy sector.  For beef/veal, even a very small increase would
   serve only to aggravate the disequilibrium between supply and
   demand.
   Following its guidelines proposed in July 1983 (2) on
   beef/veal, the Commission is proposing that the calf premium
   and the variable slalugther premiuum be discontinued, but that
   the premium for suckler cows be retained at the present level.
   With regard to sheepmeat, the Commission is repeating its
   proposals for a ceiling on the variable slaugther premium and   the alignment of the marketing year on the calendar year.
   e
   (1) United Kingdom, Ireland, Denmark, Luxembourg
   (2) COM(83) 500.
    
   
                                - 4 -
   Oil seeds
   The Commission is proposing a 3.6% price reduction for rape,
   which allows for the guarantee threshold overrun (-5%).  In
   1984, production actually exceeded the threshold set for 1990,
   and this means that a very cautious policy is indispensable.
   With regard to sunflower, production of which has risen sharply
   (it has quadrupled since 1979), the Commission is proposing a
   1.5% reduction in the target price, which should protect   growers while keeping the expansion of production within the
   guarantee threshold limits.
   Other products
   The Commission is proposing that present prices for wine and
   sugar-beet be maintained, but a 2% increanse is proposed for
   olive oil and cotton.
   Economic and financial implications
   The price adjustment proposed should have no effect on the
   general level of consumer prices (see Table 3).  The proposals
   taken as a whole will entail additional expenditure on market
   support that is estimated at 138 million ECU in 1985, followed
   by a saving of 34 million ECU in 1986.  Foreseeable expenditure
   under the EAGGF Guarantee Section for 1985 is now put at 19 900
   million ECU, as against the 19 300 million ECU originally
   estimated, the main reason for the discrepancy being short-term
   changes in the economic situation.
   Conclusion : giving farmers a future to look forward to
   The Commission's policy is to help Eueropean farmers rise to
   the challenges of the nineties.
   What are these challenges?  The demand for food is lagging
   behind the steady - and even accelerating - improvements in
   agricultural productivity, based on the use of modern equipment
   and techniques; this is mainly because popuulation growth is so
   slow.  Now that the Community is more than self-sufficient for
   most of the main items, it depends more nd more on world
   markets for outlets.  As demand is inelastic, aids to disposal
   on the Community's internal markets are expensive.  New uses of
   agricultural products in the areas of biotechnology, industry
   or energy, though promising, are still only at the developing
   stage.  In the meantime, in a difficult economic situation,
   public funds to aid agriculture, whether at national or
   Community level, are necessarily limited.
   There is no panacea for these problems.  The review already
   presented by the Commission in its memorandum on the future of
   the CAP of 3 July 1983 remains valid.
   However, the Commission is well aware that the farming
   commcunity must be able to plan for the medium and long term.
   It therefore intends to organize, during the first half of
   1985, a discussion within the Community institutions, and with
   the farmers' organizations concerned, with a view to defining
   the outlook for European farming.
               
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   All avenues must be explored, but the following are the main
   policy goals:
   -  the establishment of modern and efficient farming, which
   steadily improves productivity in the interests both of
   farmers and consumers, but which, at the same time, respects
   the environment and protects one of the Community's greatest
   asessts, its countryside and its wild life;
   -  provision of a proper response to the problem of marketing:
   one aspect is the market in the Community - with the outlook
   for new practices with regard to biotechnology or energy -
   and the other is the external market, with the need to meet
   competition in world trade and the moral obligatin to
   provide food aid;
   -  the ever-closer integration of agriculture into the general
   economy; this means that country-dwellers must be iver
   assisstance in their efforts to improve the economic and
   social situation, not only through policy with regard to
   agricultural structures, but also through other policies and
   instruments, e.g. the integrated Mediterranean programmes.
   The Commission firmly believes that this approach will enable
   the Community to improve the context and the instruments
   whereby the common agricultural policy can in the medium and
   long terem achieve its objectives, in compliance with the
principles set out in the Treaty, in particular in ARticle 30.

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