Brussels, 19/06/2002 (Agence Europe) - As announced in EUROPE of 15 June (p.10), the European Commission published its report on Wednesday on "Prospects for Agricultural Markets 2002-2009", which identifies those sectors that will have to be the subject of proposals in the framework of the mid-way review of the common agricultural policy (CAP), i.e., especially rye (which is said to have a "continuous and structural imbalance") and rice (which will suffer enormously from preferential trade agreements concluded especially in the framework of the "Everything but Arms" initiative with the least advanced countries). This report comprises a chapter especially devoted to the consequences, for European markets, of the new American "Farm Bill", the "Farm Security and rural Investment Act" (FSRIA).
According to the Commission's forecasts, the EU's medium-term prospects are on the whole positive for most agricultural products. A continued increase in consumption is, notably, predicted, as well as "a sustained increase in the export of Union cereals". Beef production should return to "more normal levels". The sectors in difficulty are rye, the price of which is too high and outlets difficult to find, and the European rice market, which is said to be condemned to disappear due to massive imports from third countries.
American Agricultural legislation especially to affect European wheat market
"Downward pressure on world prices" affecting "producers throughout the world, with the notable exception of American farmers": such is one of the main foreseeable consequences of the new agricultural law adopted by the United States in May, of which, according to this report, the estimations will be used by the Commission for proposals that it must finalise on 10 July with a view to mid-term review of the CAP. The document specifies that "for the European Union, the largest impact is to be expected on the wheat sector, and, to a lower extent, on coarse grains and meat production". The Commission also writes that "the increased level of US support" granted to American farmers under this new American law compared to the previous "Fair Act", "implies higher production levels and should thus exert further downward pressure on market prices". The report goes on to say that this could "increase the competitiveness" of American farming in the short term and stimulate internal and external demand, while reducing imports. In the long term, the capitalisation of support in land prices could increase production costs and result in deterioration of the financial situation of American agriculture, which could cause even greater need for additional support, states the assessment. The other points noted are that: - given the downward pressure thus exerted on world prices, the American farmers protected by "deficiency payments" (including counter-cyclical payments) should maintain their production at a higher level than what market prices would normally imply; - the production of oilseeds could be reduced to a certain extent, thus easing off a little pressure on world prices.
Given these new developments in the United States, it is not to be ruled out that the Commission will propose, in the context of mid-term review, an additional fall of 5% in the intervention price for cereals (in addition to the falls in intervention prices for rye and additional aid for durum wheat) (see also yesterday's EUROPE, p.14).
The report on agricultural forecasts is available on the Internet at: http: //europa.eu.int/comm/agriculture/publi/caprep/propsects2002/index_en.htm