Brussels, 27/06/2006 (Agence Europe) - In a report expected to be adopted on Wednesday 28 June, the European Commission states that current rules are sufficient for resolving problems encountered in the soft and red fruit sector for processing on the EU market. It is, however, committed to simplifying compensation rules for producers in the event of crisis. This report has prompted the European Commission to think about the process for reforming the Common Market Organisation (CMO) in the fruit and vegetable sector. The Commission is expected to adopt, in autumn 2006, a communication presenting several CMO reform options.
In its report on the soft fruit and cherry sector, the Commission concludes that the main factors that led to crisis in the sector in 2004 and 2005 were the surplus in supply (for sour cherries and blackcurrants) and subsidiary fragmentation. According to the Commission, most of the problems in the sector can be resolved with existing instruments, particularly CMO rules and rural development programmes. The Commission points out that, “the EU possesses effective tools for improving how subsidiaries in the soft fruit and cherry sector work”.
The report underlines that the soft fruit and cherry processing sector had a difficult year in 2004, with low producer prices for several products (blackcurrants, strawberries and sour cherries) in several Member States. The fall in prices also affected several products in 2005, particularly strawberries and blackcurrants).
Poland represents two thirds of all EU production
The Commission document highlights the fact that EU accession of new Member States considerably changed the whole sector. With the arrival of two significant producers, Poland and Hungary, the EU became the biggest producer of soft fruit for processing in the world. Following the enlargement of 2004, soft fruit production (gooseberries, raspberries and strawberries) and sour cherries in the EU considerably increased: areas for cultivation increased between 2002-04 by, on average, 69,000 hectares in the EU15 to 237,000 in the EU25, of which 141,000 ha were in Poland. Poland represents two thirds of all EU soft fruits and sour cherries produced for the processing industry. In the context of the high level of unemployment in rural areas and small farm structures, the soft fruit for processing sector represents an important source of income and labour. In the soft fruit and sour cherry sector alone, this figures amounts to around 80,000 full-time jobs (250,000 jobs in the whole fruit and vegetable sector).
The Commission has analysed the situation in the main sub-sectors:
Strawberries: In the EU, production of strawberries specifically for the processing industry is mainly located in Poland. In other Member States, strawberries are produced for the fresh market. Poland represents around 60% of all EU supply in strawberries for the industry. The share of EU-25 imports of frozen strawberries from third countries in the total EU supply of strawberries used by the processing industry has increased from less than 20% in 2001/02 to 38% in 2003/04. Prices (for strawberries for the processing industry and frozen strawberries) collapsed in the EU in 2004 and 2005 due to the combined pressure of an increased EU production in comparison to previous years and increased cheap imports from third countries, particularly from China. The Commission is currently examining whether Chinese imports constitute dumping conditions.
Blackcurrants: Poland accounts for 70% of EU production alone and is the biggest producer in the world. Prices have collapsed since 2003 due to the increase in European production (from almost 150,000 tonnes on average in 1998-2002 to 200,000 tonnes in 2003 and 2004. Production reached a record level but consumption of blackberry juice did not show the same dynamism given the competition from other products (orange juice, cranberry juice etc.).
Raspberries: since enlargement in 2004, raspberry production has increased from 28,000 tonnes to 87,000 tonnes with two new large producers: Poland (with 48,000t) and Hungary (10,000 t). In 2004, the large supply of raspberries for the industry in Europe entailed a price fall. Around two thirds of total supply to the industry comes from frozen raspberries. Serbia has been for years the major supplier of the EU in frozen raspberries with 54,000 t exported to the EU on average in 2002-04, followed by Chile (14,000 t). The report underlines that Poland succeeded, despite this context, to capture a sizeable share of the market and seems poised to further improve its position owing to a number of advantages: strawberry growing tradition; low labour costs; strong research on cultivar creation and existence of a large semi-processing industrial basis.
By contrast, fragmentation of production and of marketing is a constraint on the improvement of the competitiveness of the sector. In Hungary, production has fallen over the last ten years. Hungarian exports of frozen raspberries have declined reflecting an eroded competitiveness. Hungary has had to face increased competition on the market.
Sour cherries: sour cherries are generally canned or frozen after harvest and used in compotes, jams and juices, and various desserts. In the EU, the sector is dominated by three countries: Poland (190,000t in 2002-2004), Hungary (51,000t) and Germany (31,000t). Together these three countries account for 87% of total EU production. From 1998 to 2004, production of sour cherries increased at an average annual rate of 5%, reaching 340,000t in 2004, with most of this growth originating in Poland. In Germany, the sector has been declining since the 90s, under increased pressure from imports from Central and Eastern Europe. In Germany and in Hungary, producers' organisations and producers' groups play an important role in the marketing of sour cherries for the processing industry: 40% of total production in Germany and 50-60% in Hungary. By contrast, in Poland producers' organisations and producers' groups still play a marginal role. Given the scale of development of new orchards, particularly in Poland, prices in this sector may well remain depressed, unless weather conditions affect the harvest, as was the case in 2005.
Sweet cherries: 15% of EU production of sweet cherries is used by the processing industry. Three Member States, France, Italy and Spain, have a part of their sector oriented towards the processing industry. Sweet cherries are mainly used in canning (cherries in syrup), preparations with alcohol (partly for the confectionary industry) and sugar-preservation (sugar-preserved cherries). From the beginning of the 90s, production of preserved sweet cherries has reduced in the EU, partly due to their substitution by preserved sour cherries imported from Central Europe or imported preserved sweet cherries. France and Italy are the major producers of sugar-preserved cherries in the EU, followed by Spain. In Italy, the industry has increased imports from third countries (Bulgaria, Turkey and Romania), to the detriment of home producers. In France, despite increased competition, the industry still uses locally produced raw materials.
The Commission report then identifies the difficulties encountered by the sector and reviews the instruments available to remedy the situation: - increased competition from imports from third countries (especially in raspberries, sweet cherries and strawberries); - excessive production (the Commission points out the possible state aid available for grubbing up schemes, Community CAP and rural development rules allowing conversion of the land to other crops and EU aid to foster demand for the products); - insufficient competitiveness caused by fragmentation of commodity chains (the Commission believes that current rules allow aid for producers' organisations and support for rural development schemes can also be used to remedy the situation, which mainly affects Poland).
Finally, the Commission notes that compensation for farmers who face losses due to unfavourable weather is allowed within EU rules on agricultural state aid. In this context, the Commission proposes to simplify the rules and to facilitate crisis support (without prior authorisation from the Commission). Non-harvesting could be tool in the event of unexpected and temporary difficulties due to oversupply of the market. The opportunity to make compensations for non-harvesting eligible in the Operational Programmes of producers' organisations would need to be discussed “in the context of the reform of the common market organisation for fresh fruits and vegetables”, stresses the Commission.