December 18, 2006

 

European Commission proposes to end corn intervention

 

 

The European Commission Friday proposed to halt purchases of corn through the public intervention system starting in the 2007-08 marketing year.

 

Other major cereals such as milling wheat, durum wheat, barley, and sorghum would continued to be offered into intervention. The proposal would now be moved to the Council and the European Parliament.

 

Corn stocks in the European Union's intervention programme had climbed to 5.6 million tonnes, or 40 percent of total intervention stocks, at the end of the 2005-06 marketing year.

 

"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," an EU statement said.

 

Maintaining the current system would also mean annual grain storage costs of over EUR300 million, but excluding corn would see that figure fall below EUR200 million as of 2012.

 

It added possible outlets for the large corn stocks are limited, and the grain is unsuitable for long-term storage.

 

The problem has been particularly great in new member Hungary, as its landlocked status made it more attractive for producers to offer corn into intervention than to release on to the free-market where transport costs are high.

 

"Farmers should base their decisions on market signals rather than simply growing cereals for public purchase," said Mariann Fischer Boel, EU Commissioner for Agriculture and Rural Development.

 

Fischer Boel said when rye was excluded from intervention purchases in 2003 it resulted in a "more dynamic market and better prices for farmers."

 

The Commission recently adopted stricter criteria for corn offered into intervention in the 2006-07 season, but the EU Commission said "this is not a definitive solution to the problem of rising stocks."

 

Estimates by the Commission hold that a maintenance of the current system could lead to a total volume of 18.9 million tonnes by 2013, but an exclusion of corn would results in intervention grain stocks of about 10 million by 2013.

 

The EU commission said the exclusion of corn from intervention would help increase Central European competitiveness of pig and poultry production.

 

The EU intervention system for cereals provides a single price of EUR101.31 a tonne.