A lower than expected EU harvest in 2006 led to tightening supplies at the end of the current marketing year, forcing up cereal prices.
Intervention stocks have shrunk considerably, from 14m tonnes at the beginning of 2006/2007 to 2.5 million tonnes now – mainly composed of maize held in Hungary.
This year, initial results of the barley and wheat harvests are moderate, except in Spain, and the wet weather continues to disrupt or delay the harvests in most member states.
Commenting on her proposal, Mrs Fischer Boel said: “This should be seen as an answer to the present tight market situation. This initiative should not be seen as an attempt to pre-empt the 2008 health check of the common agricultural policy. In that context a review of the cereals policy will take place, including the issue of set-aside.”
At global level, closing stocks in 2007/2008 are expected to fall to their lowest level in 28 years, at 111m tonnes, including only 31m tonnes in the five major exporters.
Exceptionally high prices are likely to persist due to a combination of bad harvests in important cereal producing countries as well as growing demand for cereals, and in particular maize, for the production of bio-ethanol. In particular, the strong development of the bio-ethanol industry in the USA is having a snowball effect on the price of other cereals.
According to EU Commission estimates, a 0% set-aside rate could encourage EU farmers to produce an additional 10-17m tonnes in 2008, which could contribute to easing market tension.
The proposal has been welcomed by NFU Scotland. “Since the 2003 CAP reform, NFUS has been campaigning for the abolition of compulsory set-aside, currently set at 10%,” said a statement. “As with most changes in EU rules, the process for approval can be laborious. It is unlikely we will see formal ratification of this before September this year, which is too late for many farmers who need to make planting decisions.”
Setting the set-aside rate at zero does not oblige farmers to cultivate their lands. They can continue to set them aside on a voluntary basis and to apply environmental schemes.