Brussels, Belgium
December 15, 2006
The European Commission today
proposed to abolish the system of public intervention purchases
for maize from the 2007/2008 marketing year. At the end of the
2005/2006 marketing season, EU maize intervention stocks had
spiralled to 5.6 million tonnes, or 40 percent of total
intervention stocks. Without changes to the current system,
these stocks, which are bought and stored at public expense, are
forecast to rise to as much as 15.6 million tonnes by 2013.
Possible outlets for soaring stocks of maize are limited, and
maize is unsuitable for long-term storage. Regions that
historically exported maize onto the world market are now
offering a large part of their harvest directly for
intervention. Ending intervention for maize would allow the EU
cereals market to achieve a new balance and see intervention
regain its original purpose as a safety net. The proposal will
now be transmitted to the Council and the European Parliament.
“Farmers should base their
decisions on market signals rather than simply growing cereals
for public purchase,” said Mariann Fischer Boel, Commissioner
for Agriculture and Rural Development. “That is the whole basis
of the reforms we have been carrying out since 2003. Unless we
make this change, public stocks will continue to rise and many
farmers will simply continue to grow maize for sale into public
storage. The experience with rye shows that the removal of
intervention for this cereal in 2003 resulted in a more dynamic
market and better prices for farmers. Even with this change for
maize, cereals growers will continue to benefit from
intervention operating as a safety net for other major cereals
like wheat and barley.”
The logic of the proposal
Possible outlets for intervention maize stocks are limited.
International maize prices are the lowest of all major cereals
and resale on the world market entails a high financial cost.
Disposal within the EU is constrained by high transport costs
and might disrupt the efficient functioning of the internal
market.
Maize is not suited to long-term storage. Quality can decline
rapidly, triggering the biological deterioration of the grains,
including the proliferation of fungi and pests. Although the
Commission recently adopted stricter eligibility criteria to
ensure that maize entering intervention is more suited to
storage, this is not a definitive solution to the problem of
rising stocks.
This proposal will enhance the integration of the EU cereals
market. Maize grown in surplus Central European regions will
regain its competitiveness, both domestically and on world
markets. It will also help boost the competitiveness of pig and
poultry production in these regions by reducing the cost of
feedstuffs, and so underpin economic development.
The overall level of intervention stocks would diminish
substantially. It is estimated that maintenance of the current
system would lead to a total volume of 18.9 million tonnes (of
which 15.6 mt of maize) in 2013. The removal of maize from
intervention would result in stocks of about 10 mt by 2013.
These stocks would consist purely of cereals suitable for
long-term storage and would be better located for trading
purposes.
While the status quo would keep the annual level of expenditure
on storing excess cereals at more than €300 million, ending
maize intervention would entail global savings of €617.8 million
over the period 2008-2014. Annual expenditure would fall below
€300 million as from the 2008 budget year and below €200 million
as from 2012.
As maize is only sown in spring, the timing of this proposal is
fully appropriate for farmers taking their decisions for the
2007 growing season.
Background on the intervention system:
The EU intervention system for cereals is a single price of
€101.31 per tonne which farmers receive for selling their
cereals into public storage, if they cannot find an outlet on
the market. It is currently applicable to breadmaking wheat,
durum wheat, barley, maize and sorghum.
In most Member States, market prices tend to be above this
buying-in price. However, the current intervention system is
very attractive in regions with lower production costs and which
are far removed from the main areas of consumption. In such
regions, intervention no longer serves its intended purpose as a
safety net, and has instead turned into a commercial outlet. As
a result, deficit areas in the EU suffer from high prices while
large quantities are bought into intervention in surplus
regions.
|
