The Joint Committee has examined the Commission’s proposal [R/238/76] for a Council Regulation (EEC) on the common organisation of the market in potatoes. This proposal was sent by the Commission to the Council in January last and the Council was asked to act on the proposal so that the suggested Regulation could enter into force on 1 April, 1976. This timetable has not been adhered to and as it appears that the proposal in its present form is not acceptable to some Member States, it may be some time before a consensus can be reached.
2. Community Production and Trade
There are 2.4 million potato growers in the EEC Countries. Production at 40 million tons annually is equivalent to 13% of the world total. Over the past 20 years production has fallen by 30%. The EEC exports an average of 150,000—190,000 tons of seed potatoes each year but it is now a net importer of ware (maincrop) potatoes. It is self-sufficient in potatoes for industrial requirements. Intra-Community trade represents 4%—5% of production.
Since climate greatly influences yield there is a considerable variation in the volume of production. The demand is inelastic. When prices are relatively high consumption drops but with even fairly small surpluses, prices drop sharply and average prices remain low. Consequently, nearly all Member States have taken measures to ensure regular supply and a degree of stability. However, these measures vary considerably from country to country. In the United Kingdom the Potato Marketing Board directly controls the area under cultivation, France applies a system of minimum prices to all potatoes for trading purposes and Germany and the Benelux countries have similar schemes for early potatoes only. Ireland has been operating a guaranteed floor price for ware potatoes meeting specified standards.
Consumption of fresh potatoes is virtually stable at present but the consumption of processed forms (crisps, packed/mashed potatoes and frozen chips) is increasing. Because of the potato’s importance as a food-stuff and its effect on the cost of living index in certain countries, it is in the general interest of consumers to ensure that the Community market is always supplied. The present proposal is designed to that end.
3. Proposed Regulation
The main features of the proposals are—
(a) Marketing Standards
These are to be established for potatoes intended for human consumption in a fresh state or for the manufacture of processed products. This will involve in particular the classification of products by quality, size, weight, packaging, market presentation and labelling.
(b) Producers Groups
These groups will be given the responsibility for managing supply and stabilising the market. Their members will market all their products only through the groups. The groups will have the sole responsibility for administering the support measures. Member States may grant aid to producers’ groups in the first three years following their recognition as such. It may not exceed 3%, 2% and 1% in each of the three years respectively of the value of the product put on the market or 60%, 40% and 20% of the administration costs of the group. Fifty per cent of this aid will be recoverable from the EAGGF.
(c) Support Measures
Each year the Commission will draw up estimates of the Community’s requirements and supply, including imports. If supply is anticipated to exceed demand producers’ groups may be granted aid for private storage. If at the end of the storage period marketing difficulties continue, aid may be given for the dehydration of the product for use as animal feed. Fifty per cent of the cost of private storage and 100% of the cost of dehydration up to a certain maximum will be recoverable from EAGGF.
(d) National Aids
On the adoption of the Regulation, Articles 92 to 94 of the EEC Treaty will apply in the case of all aid for the production and trade in potatoes save such aid as the Regulation itself provides for.
(e) Protection against Imports
Protection against low-priced imports of new potatoes will be arranged by applying a special countervailing charge when the import price is less than an average price computed annually for the Community as a whole added to the Common Customs Tariff. Protective measures against imports of main crop potatoes may be taken if the Community market is disturbed or threatened with disturbance.
(f) Export Refunds
An export subsidy will be payable if potatoes from Member States cannot compete in the world market.
(g) General provisions
General provisions provide inter alia for the setting up of a Management Committee and temporary measures in the event of difficulties during the transition period—up to 31 July, 1977.
4. Grading and Guaranteed Prices in Ireland
At present all exports of potatoes from this country must be graded but there are no grading requirements for potatoes sold on the home market. Seed potatoes sold on the home market as from 1 July, 1976 will have to be up to quality standards prescribed in an EEC Directive on the marketing of seed potatoes (Directive 403/66/EEC of 14 June, 1966).
Under the price support scheme operated by the Minister for Agriculture and Fisheries in 1973, 1974 and 1975 floor prices of £16, £19 and £24.50 per ton respectively were guaranteed for ware potatoes meeting specified standards. A price has not been announced for 1976. This scheme would not be allowed to continue if the proposed Regulation is adopted.
5. Producers’ Groups
The Joint Committee considers that the idea of producers groups has much to commend it as conducive to securing a fair and regular return for producers. However, it observes that producers groups in the Community at present control only 10 per cent of main crop and 5 per cent of all potato production. It is informed that with the adoption of the proposed Regulation, it is anticipated that these producers would increase their control by 5 per cent and 7 per cent of the supply in the first two years of the operation of the scheme. Consequently, the Joint Committee considers that producers groups’ control of the market is not sufficiently extensive to regulate supply and stabilise prices. For an initial period therefore, it would seem that additional measures are required if the object of the Commission’s proposal is to be attained.
The Joint Committee also believes that the general efficacy of producers groups depends on the enforceability of the agreements between the group and its members. It would seem that such agreements should constitute legally binding contracts.
6. Proposed Aids
The proposed system of aids would be less favourable to producers than the existing guaranteed price scheme which operates in this country. The aid for storage would work out at about £2 a ton for a four-month period. This aid does not appear to be designed to cover the full cost of storage but seems to be based on compensation for the immobilisation of capital and possibly on marketing costs. The Joint Committee considers that £8 a ton for a four-month period would be a more realistic figure.
At present there is no plant in this country for the dehydration of potatoes and the Joint Committee is informed that the cost of providing one would be considerable. It is estimated that the cost would work out at about £7 a ton whereas aid from EAGGF would come to £5 a ton. Moreover, the Joint Committee is advised that the dehydration of potatoes is not necessary for their conversion to animal feed. Its information is that an alternative and much cheaper method would be denaturing by dyeing. It understands that this process has been successfully utilised in Great Britain.
8. General View of the Joint Committee
The Joint Committee fully accepts the need to stabilise the market in potatoes but does not accept that the Commission’s proposals will achieve that purpose. It considers that the Commission should come forward with more realistic proposals.
In its examination of this matter the Joint Committee had before it the views of the Irish Farmers Association, the Irish Potato Federation, the Irish Potato Merchants’ Association and North Dublin Growers’ Ltd. It wishes to acknowledge with thanks the considerable assistance it received from these bodies.
(Signed) CHARLES J. HAUGHEY,
Chairman of the Joint Committee.
28th April, 1976.