Michigan State University Extension
Extenstion International Trade Res. - 10179505
03/31/96
Area planted to winter grains in the EU expanded significantly in a number of member states. Estimates have been reported by national agriculture ministries and traders for Germany, the United Kingdom, France, Denmark, and Spain. The estimates indicate that winter wheat area in particular has increased. However, in drought-plagued Spain, grain production is expected down 13 percent, with particularly large drops for durum wheat and triticale. For the EU-15, USDA has projected production increases of nearly 4 percent for both wheat and coarse grains for 1995/96.
A number of factors underlie the increased plantings. The EU reduced the set-aside rate 3 percentage points for the 1995 harvest, from 15 percent to 12 percent under CAP reform. Although the cut was not approved by the Council until October 25, when planting was already underway, farmers appear to have increased winter crops area instead of waiting for spring.
The lower set-aside rate affects the rotational and non-rotational set-aside under CAP reform. In addition to the CAP reform set-aside, some area remains in the 5-year set-aside program begun in 1988. According to data from the Commission, 359,000 hectares left the 5-year program in 1994/95. This land can be planted to arable crops, including winter grains and oilseeds. The majority of this area was in Germany, where participation in the 1988 program was quite high.
The expansion of winter grain area in some countries was at the expense of winter oilseeds, chiefly rapeseed. Because of high world prices, oilseed area expanded for the 1994 harvest. Oilseed compensation payments are designed to reflect world price levels. Under the terms of the Blair House agreement, EU oilseed area eligible for compensation payments is limited. The area limits were exceeded in Germany, France, Ireland, the United Kingdom, and Spain. Producer payments in these countries were reduced an additional 4 to 20 percent.
France is by far the largest oilseed producer in the EU. Because French rapeseed area is expanding, it is unlikely that total EU winter oilseeds area will decline. Spring rapeseed area should drop considerably in response to the higher winter plantings. In addition, plantings of oilseeds on set-aside land, which exceeded expectations in 1994/95 with an estimated 635,000 hectares, is anticipated to reach around 900,000 hectares in 1995/96. This may slightly exceed the levels in the Blair House Agreement.
Conditions for the 1995 crop were reported to be good. Producers were not delayed by late harvesting or bad weather, as in the previous year. Very heavy rains and flooding across most of Northern Europe in the Spring did not appear to pose problems for plant development.
Increased Set-Aside Area: Despite a 3-percent drop in the set-aside rate, the area entered into EU set-aside programs increased for 1994/95. In some member states, regional base areas were exceeded in 1993/94. Where this occurred, compensation payments for 1993/94 were reduced, and an additional, uncompensated (extraordinary) set- aside was required for 1994/95. The additional set-aside would offset part or all of the reduction in the set- aside rate.
The increase in set-aside area reflects higher participation by producers. As cereals prices fall under CAP reform, more farmers are deciding to participate to obtain compensation payments. The per hectare payment for set-aside was increased beginning with the 1994/95 year to encourage more participation. Furthermore, more farmers than expected have opted to set aside more than the minimum area required.
Under the set-aside provisions, producers can choose between rotational and non-rotational options. The basic rate, 12 percent for 1994/95, applies to the rotational set-aside and is the lower rate. Farmers opting for the non-rotational set-aside, or a combination of rotational and non-rotational set-aside, must take more land out of production. The non-rotational rate is 18 percent, except in the United Kingdom and Denmark, where it is only 16 percent.
France and Germany have the most land in the set-aside, accounting for 29 and 22 percent of the total area set aside. In France, only 55 percent of the land set aside for CAP reform was in the rotational scheme. In Germany, less than half the set-aside was rotational. Farmers can also be compensated if hey decide to set aside land beyond the minimum requirement.