Measures to soften the impact of poor cereal harvests in Europe and boost the grain market were introduced by Europe's agriculture commissioner this week.
Severe droughts in Europe this summer have hit the cereals sector, with prices reaching record highs in the grain market. Steps to ease pressure on the sector effect were announced by Franz Fischler, Commissioner for Agriculture, Rural Development and Fisheries and essentially include reducing the compulsory set-aside rate for the cereals harvest 2004 (marketing year 2004/05) from 10 per cent to 5 per cent.
"A lower set-aside rate will boost cereals production in times when the supply is worryingly low. Such a measure would bring much needed relief to farmers and the EU grain market," said Fischler announcing the measures that have yet to be approved by the Council and Parliament.
In order to qualify for area payments for arable crops under the reform of the common agricultural policy (CAP), producers must set aside a percentage of their arable land with a view to achieving a balance between EU production and foreseeable outlets.
The Commission estimates that reducing the set-aside rate to 5 per cent should boost EU grain production by around seven million tonnes.
The production of soft wheat fell by 10 million tonnes from 94 million tonnes in the marketing year 2002/2003 to 84 million tonnes in 2003/2004. In recent weeks estimates of the maize harvest have been steadily revised downwards. Latest estimates say that it will be some 31 million tonnes - some 25 per cent lower than in 2002/2003. The total cereals production in the current marketing year has decreased from 209 million tonnes to 183.6 million tonnes.
"Under this situation the final stocks of the 2003/2004 campaign are estimated to fall to a very low level," said the Commission this week.
As margins at Europe's ingredients companies continue to feel the impact of rising raw material prices, Commission figures show why. On the world market the consumption of wheat in 2003/2004 is estimated at 585 million tonnes, compared to a global production that falls short 556 million tonnes.