12 June 1998

Set-aside rate increase to 8% likely – pundits

By Philip Clarke

Europe editor

A RISE in the rate of set-aside for next season looks increasingly likely, with most pundits suggesting 7% or 8% as the eventual figure.

EU farm ministers are expected to decide at their meeting in Luxembourg later this month. This week the commission proposed a 10% rate – double the current level.

It believes the move will prevent another grain mountain, since it would take an extra 1.8m hectares (4.5m acres) of land out of cultivation, cutting production by 8m tonnes.

"At the end of this season we are going to have 24m tonnes of grain in merchants stores and another 14.5m tonnes in intervention," said EU farm commissioner, Franz Fischler, this week. "Half of last years rye crop in Germany is still in store."

As Europe heads towards another big harvest – more than 200m tonnes – and with demand seemingly static at home and abroad, Brussels believes intervention could top 20m tonnes by the end of the 1998/99 marketing year and 30m tonnes by June 2000.

Chief concern is that depressed market prices will make it harder for the commission to realise the proposed 20% support price cut included in its Agenda 2000 reforms.

Getting Council to agree such a high rate is another matter, and some form of compromise seems likely. Initial discussions in April revealed a split between the French, who wanted less than 5%, and the Germans and Austrians, who wanted more.

Germany is particularly keen on higher set-aside, as about half the EU grain stocks are held in its stores. But France wants a lower rate to remain competitive in world markets.

The UK is angling for 5%. "It makes little sense to raise set-aside now, when Agenda 2000 aims to cut it to zero," said an NFU spokesman in Brussels.

EU grain traders body COCERAL agrees. "The reason intervention stocks have increased this year is because the commission has conducted such a bad export campaign, missing crucial markets early in the season. Any rise in set-aside now means we have less grain to trade with."