September 19, 2019

EU CAP: Set Aside Requirement Draws Focus

Categories: EU

A Dow Jones article from Tuesday (via DTN, link requires subscription) reported that, “European Union farm groups are demanding a quick and complete elimination of the E.U.’s mandatory land set-aside scheme so farmers can react to high agricultural prices and tight world grain stocks in time for the 2008 harvest.

“E.U. farmers currently set aside about 4 million hectares — or close to 8 percent of arable land — under a mandatory system set up in the early 1990s to eliminate a glut of E.U. grain supplies.

“However, both global and domestic grains stocks have tightened significantly in recent seasons. The International Grains Council forecasts world ending stocks will fall to a 30-year low in 2007-08.”

The Dow Jones article added that, “‘This situation only confirms (our) belief that the (European) Council must urgently review the obligatory set-aside rate,’ according to a joint statement issued by E.U. farmer associations COPA and COGECA.

COPA and COGECA ask for complete elimination of the program by September, when farmers need to plant winter crops such as wheat, barley and rapeseed for the 2008 harvest.”

The article did point out that, “Crops contracted for non-food use, such as in biofuels, can already be grown on set-aside land. However this has been mostly confined to rapeseed use in biodiesel, as only about 1 percent of E.U. 2007 grain production is forecast for use to make ethanol.”

Meanwhile, Stephen Castle reported in Wednesday’s New York Times that, “Efforts to shore up the European wine industry by tearing out thousands of acres of vineyards and scrapping some subsidies have set the stage for a fierce debate Wednesday as Europeans contemplate the cost of their love affair with the grape.

“Vigorous competition from New World producers and complex regulations in Europe have helped create a vast amount of surplus wine, leading also to problems of quality and to increased spending to ease the surplus. To address those problems, the executive arm of the European Union has proposed overhauling the industry by reducing production, cutting subsidies and providing incentives to efficient winemakers.”

The Times article added that, “But winemaking is regarded as part of national cultures in many of the bloc’s 27 members, and efforts to reduce the size of the industry have touched raw nerves like few other European proposals.

“‘This has been one of the most difficult agricultural reforms,’ said Michael Mann, spokesman for the European agricultural commissioner, Mariann Fischer Boel. ‘People tend not to get so passionate about fruit and vegetables.’”

Mr. Castle also noted that, “The commission has already scaled down its proposal to cut back the wine industry since it offered its first plan just over a year ago. Originally, it envisioned ripping out 400,000 hectares, or 988,000 acres, of vineyards, a figure it has now halved, to 200,000.

“The plan also proposes to scrap subsidies for distilling unsold wine into industrial alcohol, one of the main ways it has suggested for absorbing excess European production.

“Instead, it would make payments directly to farmers, encouraging them to diversify into other crops, rather than continue to overproduce sometimes poor-quality wine.”

Reuters writer Jeremy Smith, added on Wednesday that, “Europe’s farm chief unveiled an ambitious five-year plan on Wednesday that offers generous cash rewards to winemakers to encourage them to dig up some of their grape vines, hoping to drain the EU’s substantial ‘wine lakes.’

“Under a scheme to start in August 2008, if EU farm ministers agree, subsidies to abandon vineyards would fall gradually each year in a carrot-and-stick approach to promote early ‘take-up’ similar to that used in the EU’s recent sugar reform.

“Authored by EU Agriculture Commissioner Mariann Fischer Boel, the plan would scrap crisis distillation — an emergency subsidy used to correct market imbalances and a huge drain on the EU wine budget of 1.3 billion euros ($1.77 billion) a year.

The EU is the world’s largest producer, consumer, exporter and importer of wine. In recent years it has lost part of its traditional export markets to cheaper wines from Australia, Chile and also the United States, and seen a surge in imports.”

More specific details of the wine proposal were included in this EU press release from Wednesday (“CAP Reform: wine reform will help Europe regain lost market share”).

Keith Good