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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. - 5 - 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 theprinciples set out in the Treaty, in particular in ARticle 30.