Major changes in the EU rice market are predicted

Recent studies on the impact of the Commission mid-term review proposals point to the imminence of major changes for the EU rice market. The executive summary of the FAPRI study highlights: a large reduction in rice prices in the EU (-35.1% by 2004 and -41.4% by 2009); a consequent reduction in rice intervention stocks; a reduction in the increase in likely imports of rice to only slightly above current levels. A safety-net price in the EU of €120 per tonne is envisaged. The sharp reduction in the intervention price support that this entails will allow a dramatic reduction in the EU market price for rice. EU farmers will however be insulated from the income consequences of this sharp decline in the market price by an income payment of €102 per tonne and a crop specific payment of €75 per tonne. Despite the sharp decline in the EU rice price the FAPRI study predicts that following the implementation of the mid-term review proposals, rice production will rise by 20% over current levels of production (2002). Production under the implementation of the mid-term review proposals would be slightly lower (1.2%) than would be the case in the absence of reform of the rice sector, but overall this simply means that rice sector reform will marginally slow down the rate of expansion of EU rice production. The reforms will, however, substantially reduce the attractiveness of the EU market to developing country rice exports, and imports are projected to decline considerably. Comment: These marginal effects of dramatic reform on EU rice farmers contrasts sharply with the likely effects felt in Guyana, the rice industry of which is likely to take a further battering, as declining EU rice prices are reflected in lower foreign exchange earnings. Against this background Guyana's and Surinam's rice farmers may need to look to joining Southern African beef farmers in calling for the introduction of 'compensatory trade measures' to compensate traditional ACP suppliers for the income depressing effects of CAP reform. Within this concept it is argued that just as EU farmers are compensated for price reductions by increased levels of direct aid payments, so traditional ACP suppliers of these products should be compensated for price reductions through an enhancement of the trade preferences extended to them (so called 'compensatory trade measures'). In the rice sector this could involve: the elimination of the remaining 35% special duty on direct exports to the EU; the lifting of all quantitative restrictions; a review of administrative arrangements to facilitate exports and reduce transaction costs. It could also involve the fast tracking of assistance to rice sector restructuring (an area where according to recent ACP-EU Joint Parliamentary Assembly resolutions there is considerable scope for improvement), including the identification and promotion of speciality varieties, the price trends for which are not so dependent upon the level of the EU intervention price.Recent studies on the impact of the Commission mid-term review proposals point..