European Commission Proposes to End Public Intervention for Maize
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.
18/12/06 The European Commission has proposed to abolish the system of public intervention purchases for maize from the 2007/2008 marketing year. At the end of the 2005/2006 marketing season, EU maize intervention stocks had spiralled to 5.6 million tonnes, or 40 percent of total intervention stocks. 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. Possible outlets for soaring stocks of maize are limited, and maize is unsuitable for long-term storage. Regions that historically exported maize onto the world market are now offering a large part of their harvest directly for intervention. Ending intervention for maize would allow the EU cereals market to achieve a new balance and see intervention regain its original purpose as a safety net. The proposal will now be transmitted to the Council and the European Parliament.
“Farmers should base their decisions on market signals rather than simply growing cereals for public purchase,” said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. “That is the whole basis of the reforms we have been carrying out since 2003. Unless we make this change, public stocks will continue to rise and many farmers will simply continue to grow maize for sale into public storage. The experience with rye shows that the removal of intervention for this cereal in 2003 resulted in a more dynamic market and better prices for farmers. Even with this change for maize, cereals growers will continue to benefit from intervention operating as a safety net for other major cereals like wheat and barley.”
Possible outlets for intervention maize stocks are limited. International maize prices are the lowest of all major cereals and resale on the world market entails a high financial cost. Disposal within the EU is constrained by high transport costs and might disrupt the efficient functioning of the internal market.
Maize is not suited to long-term storage. Quality can decline rapidly, triggering the biological deterioration of the grains, including the proliferation of fungi and pests. Although the Commission recently adopted stricter eligibility criteria to ensure that maize entering intervention is more suited to storage, this is not a definitive solution to the problem of rising stocks.
This proposal will enhance the integration of the EU cereals market. Maize grown in surplus Central European regions will regain its competitiveness, both domestically and on world markets. It will also help boost the competitiveness of pig and poultry production in these regions by reducing the cost of feedstuffs, and so underpin economic development.
The overall level of intervention stocks would diminish substantially. It is estimated that maintenance of the current system would lead to a total volume of 18.9 million tonnes (of which 15.6 mt of maize) in 2013. The removal of maize from intervention would result in stocks of about 10 mt by 2013. These stocks would consist purely of cereals suitable for long-term storage and would be better located for trading purposes.
While the status quo would keep the annual level of expenditure on storing excess cereals at more than €300 million, ending maize intervention would entail global savings of €617.8 million over the period 2008-2014. Annual expenditure would fall below €300 million as from the 2008 budget year and below €200 million as from 2012.
As maize is only sown in spring, the timing of this proposal is fully appropriate for farmers taking their decisions for the 2007 growing season.
The EU intervention system for cereals is a single price of €101.31 per tonne which farmers receive for selling their cereals into public storage, if they cannot find an outlet on the market. It is currently applicable to breadmaking wheat, durum wheat, barley, maize and sorghum.
In most Member States, market prices tend to be above this buying-in price. However, the current intervention system is very attractive in regions with lower production costs and which are far removed from the main areas of consumption. In such regions, intervention no longer serves its intended purpose as a safety net, and has instead turned into a commercial outlet. As a result, deficit areas in the EU suffer from high prices while large quantities are bought into intervention in surplus regions.
