The European Union's executive agreed to scrap payments for putting corn into public storage in an effort to cut ballooning stocks before Romania, the region's second-biggest producer, joins the bloc next month.
Since November, the EU has applied tighter criteria for accepting corn, also known as maize, into stocks as supplies built up to 5.1 million metric tons, or two-thirds of all grains stored at public expense. The bloc pays producers to remove surplus crops, meat or milk powder to balance the 25-nation market while avoiding a repeat of the wine „lakes” and butter „mountains” that plagued markets in the 1980's. Corn stocks have been growing since 10 new members joined the EU in May 2004 and Hungary now accounts for 93% of the total.
With Romania, Europe's No. 2 corn producer after France, set to join the bloc on January 1, the surplus may triple within six years unless it acts, the European Commission says. „Farmers should base their decisions on market signals rather than simply growing cereals for public purchase,” European Farm Commissioner Mariann Fischer Boel said in an e-mailed statement from Brussels on Thursday. The European Parliament and EU governments still need to approve the plan before corn planting begins in the Q2.
The EU was a net importer of corn until the 2003/2004 marketing year, the commission says, with no intervention stocks. „Today, maize has become the main problem for the intervention system,” the commission said. Ending the measure will save the EU €618 million ($810 million) by 2014, and „allow the EU cereal market to find a new balance and cereal intervention to resume its intended role as a safety net.”
To overcome Hungarian resistance to the measure, the commission's proposal also includes provision for the EU to pay producers' costs covering „very high internal interest rates.” Hungary's benchmark interest rate is the highest in the EU at 8%. Corn for January delivery was unchanged at €155 a metric ton on the Paris exchange on Friday. The EU sets a guaranteed minimum price of €101.31 a ton for putting the crop into storage at the start of the marketing year in July. (Bloomberg)