European Commission launches measures to boost cereals production

The surge in the price of cereals has forced the European Commission to introduce measures to increase supply.

European Agriculture and Rural Affairs Commissioner Mariann Fischer Boel yesterday unveiled a proposal to lower to zero per cent the obligatory set-aside rate for the cereal sowings of this autumn and spring 2008.

According to the EU agricultural system, farmers are obliged not to sow at least 10 per cent of their land in cereals in order to limit production and so qualify for EU subsidies. This system has been in place since 1988. Now that the EU is under pressure to increase production, the Commission is proposing to remove this set-aside capping.

Brussels said the cereals market is characterised by historically high prices.

According to the latest data, the 2006 crop was lower than expected, at 266 million tons, due to adverse meteorological conditions. Intervention stocks have considerably tightened during the campaign 2006/2007, down from 14 million tonnes to about one million tonnes.

The 2007 cereals crop is now estimated below last year's level because of dry and unusually hot weather in April, followed by adverse summer weather in western member states and drought and heat waves in the southeast of Europe. This outlook is likely to lead to a further reduction in the EU of private cereal stocks by the end of the 2007/2008 marketing year. At global level, closing stocks in 2007/2008 are expected to fall to a historically low level, especially in the major exporting countries. This means that the price of cereals is expected to continue rising. Ms Fisher Boel said the supply situation has become increasingly tight.

"A poor 2008 harvest combined with 10 per cent set-aside would expose the internal market to potentially serious risks. Setting the rate at zero should add at least 10 million tonnes to EU output and help to ease the market situation. Looking further ahead, in the 'Health Check', I want to take a good look at whether set-aside is still an appropriate tool. But I also want to ensure that we retain the environmental benefits it has brought about," she said. The Commission's proposal will now be put to member states for approval.

The increase in the price of cereals has resulted in higher prices for bread and other products. In Malta, the government has just announced a price increase for the traditional Maltese loaf and an increased subsidy for flour.