Date set for decision on suspending import duties

By Charlotte Eyre

- Last updated on GMT

Related tags: European union, International trade, European commission, Eu

Cereal supply chain shortages may start to ease this winter, as the
EU's agricultural ministers will decide on whether to suspend
import duties at a meeting starting on 18 December.

The European Commission proposals, initially put forward in September, are aimed at easing the commodity price and supply pressure currently affecting the European food industry, as manufacturers would no longer have to pay to import from outside the bloc. The EU commissioner for agriculture and rural development, Mariann Fishcer Boel, said that the move was in response to an "exceptionally tight situation". "I hope this proposal will help facilitate cereals imports from outside the EU and reduce tensions on European grains markets,"​ she said. "We have seen a modest harvest inEuropeand high prices both at home and on world markets." ​According to the Commission, unfavourable weather conditions have reduced the 2007 EU harvest to 256 million tonnes, a 3.5 per cent decrease from the year before. The bloc has also turned from being an exporter to an importer, the Commission added, and imported 5.2 million tonnes between July and 20 November. Not surprisingly, this shortage in crops has led to massive increases in price. On the French market, the price of milling wheat in Rouen rose from €179 per tonne to almost €300 per tonne in September, while maize prices in Bayonne followed the same trend, rising from €183 per tonne to a peak of €255 per tonne over the same period. In Germany, bread-making wheat was selling at 70 per cent higher than the previous year by mid-August, the Commission said. Meat processors are also suffering, the Commission added, as feed barley has more than doubled since 2006, costing as much as €270 per tonne in Rouen. "There are tensions on the small-grain cereals and maize markets, as a result of reduced stocks of common wheat and maize, poorer than forecast quality, and the exhaustion of intervention stocks, currently down to 0.5 million tones,"​ the Commission said. The proposed suspension will apply to import duties on all cereals except oats. The EU first set tariffs for all cereals under the international General Agreement on Trade and Tarrifs (GATT), which defined rates depending on world reference prices for different types on cereals. Tariff rate quotas on barley and certain types of wheat were also introduced in 2003, in response to large imports from former Soviet bloc countries. Earlier this year the Confederation of European Food and Drink Industries (CIAA) said that the recent increase in the cost of raw materials has forced manufacturers to increase the price of their products around the world. The CIAA​ said that over the past year the price of wheat has risen by 35 per cent, for dairy products by an average 50 per cent, and by 25 per cent for sunflower oil in the EU. Many food companies have this year posted a drop in profits, with every one laying the finger of blame on the rising costs of grains, milk and meat. Sara Lee today reported a 40 per cent drop its quarterly profits compared to the same period last year, blamed on "historically high"​ commodity prices, while Kraft said operating profit for the fourth quarter 2007 fell 20 per cent. Some global food companies have managed to keep the books balanced, but Associated British Foods, Unilever, Arla, SAB Miller and PepsiCo have all had to restructure operations, increase marketing spend and raise consumer prices in order to offset higher costs. Passing on costs to consumers is a risky strategy, however, as many regulators and retailers are opposed to the idea. Earlier this month, German retailer metro​ pulled all Kellogg products of its shelves, saying that the cereal manufacturer's price hikes were "absolutely not acceptable."​On a legislative level, the Food and Agriculture Organisations (FAO) has expressed concern that high prices could cause widespread hunger problems in third world nations. Quotas ​Tariff rate quotas currently apply to medium and low quality soft wheat. The duty payable on imports under the quota is set at €12 per tonne. For barley, the duty is €16 per tonne depending on the quota, while there is another quota of 50,000 tonnes of malting barley at a duty of €8 per tonne. A duty-free quota of 242,074 tonnes of maize was introduced in 2006 which is split into two equal tranches open to all third countries. The quota has been entirely used for 2007, the Commission reported.

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