Facing "Mountain" Of Surplus
Grain, Europe Hiking Setaside

BRUSSELS, Belgium —(AP)— Citing fast-growing surplus grain stock, the European Commission proposed last week that EU grain farmers take 10 percent of land out of production in 1999, double the current level.

"There is a serious danger of (surplus) stocks for grain increasing again to unacceptable levels," said EU Agriculture Commissioner Franz Fischler.

"We cannot bury our heads in the sand any longer. We have a problem."

His proposed remedy must be approved by EU agriculture ministers who have been divided over the issue.

France and Germany, the EU's biggest grain producers, want to limit the setaside of land to five percent or just over that.

Fischler said a doubling of the current rate was needed to prevent surplus stocks from getting out of hand.

"Our analysis, based on realistic assumptions, indicates that in the absence of an adjustment ... the European Union could have 30 million metric tonnes (33 million tons)" in storage by mid-2000, he said.

He called that "a level which is untenable and which must be avoided."

Coceral, an EU grain trade group, said public storage of grain now totals 13.3 million metric tonnes (14.6 million tons), up from 2.4 million tonnes (2.64 million tons) a year ago.

Commission officials predicted this will rise to 20 million tonnes (22 million tons) in mid-1999 and to 29.5 million tonnes (32.5 million tons) by mid-2000.

Surplus grain stocks have long been a nightmare scenario for the EU.

In the past, grain was stored away in huge quantities across the EU while people elsewhere went hungry.

When the surplus was sold, the EU did so with export subsidies because the world price of grain is lower than the EU price. Those subsidies then led to unfair trade charges from the United States and other trade partners.

Under EU rules, grain farmers are encouraged, or can be forced, to let land lie fallow to prevent overproduction.

They are then paid for not growing crops. The amount set-aside land depends on market conditions. This year, four million hectares have been taken out of production, half of it voluntarily.

The EU has had a five percent setaside rate in 1997 and 1998, down from 10 percent in 1996. Unless a new rate is set for 1999 and beyond, the EU will revert to a more painful rate of 17.5 percent that was imposed as the norm in 1992.