The European Commission today proposed wide-ranging reforms to the Common Market Organisation for fruit and vegetables to bring this sector into closer line with the rest of the reformed Common Agricultural Policy. The proposals aim to improve the competitiveness and market orientation of the F&V sector, reduce income fluctuations resulting from crises, increase consumption, enhance environmental protection and, where possible, simplify the rules and reduce the administrative burden. The reform would encourage more growers to join Producer Organisations; offer POs a wider range of tools for crisis management; integrate the F&V sector into the Single Payment Scheme; require a minimum level of spending on environmental measures; higher EU funding of organic production and promotional measures; and abolish export subsidies for F&V. The Commission hopes that the Council and Parliament will approve the reform, which will be budget neutral, before the middle of 2007, allowing it to enter into force in 2008.

"We need to bring the fruit and vegetable sector into line with our other reforms, which were all about making European agriculture more competitive and market-orientated," said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. "Some of the aid schemes in the current scheme don't belong in the CAP of 2007, so we need to replace them with decoupled direct aid payments. One of the keys to success will be encouraging producers to work better together by strengthening the Producer Organisations. Fruit and vegetables have a crucial role to play in improving people's diets. That is why I want to encourage consumption. Finally, it's extremely important that farming does all it can to protect the environment."

Background on the fruit and vegetable sector

Fruit and vegetable production accounts for 3.1 percent of the EU agriculture budget and 17 percent of total EU agricultural production.

Over the last ten years, the sector has faced strong pressure from the highly concentrated retail and discount chains, which play a major role in setting the price, and from imported products, which are taking a growing share of the market thanks to improved quality and relatively low prices. Since the last reform in 1996, POs and their so-called Operational Programmes have been key elements in grouping supply and are effective in helping producers to face up to the retail sector. However, a high proportion of producers in some Member States still prefer not to participate.

The current CMO is also based partly on providing support to producers on the basis of the quantity of produce delivered to the processing industry, aid directly to processors and aid to the producer, via the PO, in some cases based on land area. These systems, which are not in line with the rest of the reformed CAP, cover tomatoes, citrus fruit, pears, nectarines, peaches, dried figs, prunes and dried grapes.

Proposals for reform

Producer Organisations: POs will gain greater flexibility and their rules will be simplified. Producers will be free to join different POs for each product. There will be additional support (60 percent Community co-financing rather than of 50 percent) in areas where production marketed via POs is less than 20 percent, and in the new Member States, to encourage the creation of POs. There will be extra support for mergers of POs and associations of POs. Extra support to POs operating in a trans-national scheme or on an inter-branch basis will continue. Member States and POs will develop Operational Programmes based on a national strategy. The budget for POs is currently around €700 million.

Crisis Management: This will be organised through Producer Organisations (50 percent financed by the Community budget). Tools will include green harvesting/non-harvesting, promotion and communication tools in times of crisis, training, harvest insurance, and financing of the administrative costs of setting up mutual funds. Withdrawals can be carried out by POs with 50 percent co-financing. Withdrawals for free distribution to schools, children's holiday camps, hospitals, charitable organisations, old people's homes and penal institutions will be 100 percent paid by the Community up to a limit of 5 percent of the quantity of marketed production of each PO.

Inclusion of fruit and vegetables in the Single Payment Scheme: land covered by fruit and vegetables will be eligible for payment entitlements under the decoupled aid scheme which applies in other farm sectors. All existing support for processed F&V will be decoupled and the national budgetary ceilings for the SPS will be increased. Member States will be allowed to establish reference amounts and choose which farmers will be eligible for new entitlements based on a representative period. The total amount that will be transferred to the SPS is around €800 million.

Environmental measures: The inclusion of F&V in the SPS means that Cross Compliance will be compulsory for those farmers receiving direct payments. In addition, each Operational Programme must spend at least 20 percent of expenditure on environmental measures. There will be a 60 percent Community co-financing rate for organic production in each Operational Programme.

Promotion: The World Health Organisation recommends consumption of 400g per day of F&V. Currently, only Greece and Italy reach this level. POs will be able to include promotion of F&V consumption in their operational programmes. Community co-financing will be increased to 60 percent if the promotion of F&V is targeted towards school-age children and adolescents. Market withdrawals can be distributed for free to charitable organisations, schools and children's holiday camps.

Trade with third countries: Given that world trade talks are still ongoing, the proposal does not touch on the current legal framework on external trade. However, it is proposed that export refunds be abolished.
Simplification: The abolition of the processing aids will contribute significantly to simplification, as will the new rules on POs and the abolition of export refunds. Simplification will be further enhanced by harmonising the basic principles relating to marketing standards for all agricultural products, including F&V.

http://ec.europa.eu/agriculture/capreform/fruitveg/index_en.htm

BACKGROUND

Speech by Mariann Fischer Boel, Member of the European Commission responsible for Agriculture and Rural Development
Time to shape up: a new deal for fruit and vegetables in the EU
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BACKGROUND

Fruit and vegetable reform

The European Commission today adopted its proposal for a reform of the Common Market Organisation for fruit and vegetables. The proposals aim to bring the fruit and vegetable sector into line with other sectors under the Common Agricultural Policy (CAP) which have already been reformed. The proposed revision eliminates product-coupled support, including export refunds and EU-financed withdrawals (except for free distribution) and integrates the F&V sector into the Single Farm Payment Scheme, introducing specific environmental commitments that growers must meet in order to qualify for payments. The reform will meet the need to simplify and cut the administrative burden.

Why a reform?

• To strengthen market orientation and competitiveness of the sector

• To reduce fluctuations in farmers’ income

• To contribute to better balance the F&V chain

• To take more account of the diversity of the sector

• To reinforce the capacity of producers to manage crises

• To reduce pressure on the environment: Minimum of 20% spending on environmental measures (and promotion for encouragement of consumption) in each operational programme.

• EU co-financing rate of 60% for organic production in each operational programme

• To encourage a greater consumption of F&V

• To ensure coherence with WTO rules and with development and neighbourhood policies

• To reinforce predictability and control of public expenditure

• Elimination of export subsidies

• To simplify management and improve control

Overview

In the years 2003-2005 world production of fruit & vegetables amounted to 1,314 Mio tonnes (EU27 108 Mio tonnes), of which fruit accounted for 440 Mio tonnes (EU27 36.3 Mio tonnes) and vegetables for 874 Mio tonnes (EU27 72 Mio tonnes). The largest producer is PR China (35%) with India (10%), EU25 (8.3%) and the USA (5%) following.

The fruit & vegetable (F&V) sector is responsible for 17% of total EU agricultural production in terms of value.

The EU25 trade balance in fruit & vegetables remains firmly negative due to high imports accounting for 16 Bio€ in 2005 compared to exports of only 5 Bio€.

Major F&V producing regions in EU27

Below map shows the Utilised Agriculture Area (in ha) for EU27 Member states for horticulture (comprising all areas for production (both outdoor and under glass) of fresh vegetables, melons, strawberries, flowers & plants and mushrooms) and for specialised fruit and citrus fruit (why these products specified?). Data source is the Farm Structure Survey 2003.
[ Figures and graphics available in PDF and WORD PROCESSED ]

EU25 total F&V production

The pie chart below shows the respective Member States' share in the total value of fresh fruit & vegetable production (at producer prices).


[ Figures and graphics available in PDF and WORD PROCESSED ]

The EU25 total value of F&V production in 2005 is 44 967.8 Mio€, Spain and Italy contributing more than 50%, followed by France, Greece, the Netherlands, Germany and Poland.

Structural Aspects

Fruit and vegetable production is under pressure these days. High levels of concentration among retailers and discount chains have enabled them to assume a strong role in the determination of market prices. Increasing competitive pressure from third country imports is only making matters worse. The only way to solve our structural problems is to strengthen the role of our producer organisations (POs). Over 70% of POs have an operational programme, which are financed, on a 50/50 basis, by the PO and the European Union. They are the main resource for helping growers modernise and compete.

In 2004, close to 34 % of total production was marketed via POs. The new CMO aims to increase significantly this percentage and boost producers' bargaining power and economies of scale. The total value of production marketed by POs varies by country, ranging from below 10% in Poland to over 80% in Belgium, Ireland and the Netherlands. Farmer membership in POs also varies, averaging about 33.7% Union-wide, well below the Commission's 60% target for 2013.

Importance of Producer organisations in the Member States

[ Figures and graphics available in PDF and WORD PROCESSED ]

Number of Producer organisations
Member state	PO and APO
CY	6
MT	2
PL	7
FI	6
HU	8
CZ	8
DA	5
SE	7
AT	5
EL	127
PT	60
IE	16
DE	37
BE	18
NL	14
FR	311
UK	75
ES	594
IT	222
EU25	1.528

Source: PO

The 2007 reform emphasises the need to make POs more attractive to growers, not only to concentrate supply and prevent crises but also to improve production quality and protect the environment. Further, it creates specific measures to offer extra support to organic producers, to support free distribution of products to the likes of charities and schools and to increase the consumption of fruit and vegetables, in particular for children.

This last approach comes against the background of increasing obesity, particularly among the young. The World Health Organisation recommends an average daily intake of 400 grams of fruit and vegetables. Since 1995, the available data show that the average daily intake in the EU has ranged from a little above 200g in the UK and Sweden to about 500g in Greece. Specific measures, including direct financial assistance from the EU budget to encourage higher consumption, are proposed by the Commission. An approach which just has been positively underlined by the fact that an EU-financed promotion campaign recently won a WHO (World Health Organisation) Counteracting Obesity Award.

Consumption of F&V (g/day per capita).

[ Figures and graphics available in PDF and WORD PROCESSED ]

Use of Operational Funds

In the EU25, the most important use of OP funds in the share of total funds (962 Mio€) available in 2004 is for technical measures both in marketing (312 Mio€) and production (265 Mio€). Other important categories of use are control for quality and phytosanitary measures (139 Mio€) and special environmental measures (79 Mio€):

[ Figures and graphics available in PDF and WORD PROCESSED ]

Major EU imports

Major imports are apples (around 900,000 tonnes), oranges (around 800,000 tonnes), pears (more than 300,000 tonnes) and lemons (more than 200,000 tonnes). Since the EU exports much less fresh F&V to third countries than it imports, it carries a trade deficit of around €300 million per year (averaged over the last three years) for vegetables, and more than €8 billion for fruits (tropical fruits included).

Marketing practices have changed under the influence of the large retail chains. This is characterised by centralised supply and the use of specialised wholesalers, 'preferred suppliers' and private standards (such as EurepGap). The development of these private standards, which were just emerging when the fruit & vegetable reform of 1996 was implemented, is a good illustration of the changes that have affected the commodity chain in the course of the decade.

Marketing standards

Classifying products according to a single, internationally accepted reference facilitates trade based on fair competition and, consequently, helps improve the fruit & vegetable sector's profitability. These standards ensure that retailers know what they are buying without having to physically check the products at the time of ordering. At the same time, rules on definition, presentation and labelling prevent consumers from being misled. European marketing standards are set for the main fresh fruits & vegetables.

They establish requirements for:

• Minimum quality – mainly external quality (appearance, defects) and, for some fruits, maturity (juice content, sugar content, firmness)
• Classification – Extra, Class I and Class II, according to external appearance
• Presentation and labelling – including country-of-origin labelling

These EU marketing standards are aligned with international standards, as pursued by the United Nations Economic Commission for Europe (UNECE). They apply to products marketed within the EU and to import and export. Checks on conformity are carried out by Member States; for imported products, checking operations can be performed by approved third countries.

Recognition of checks performed by third countries facilitates the work of importers and national administrations. This approach will be favoured in the future.
All data year 2005 - all sources EUROSTAT (if not otherwise indicated)

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