The duties were initially suspended last December in response to record price levels and tight supply on EU and world markets.
EU Commissioner for Agriculture and Rural Development Mariann Fischer Boel proposed their restoration following a rapid slide in wheat prices from a peak of over €300 a tonne in September 2007 to around €160 this October.
According to its Agricultural Policy, the EU buys excess crops if their price drops below a certain level, set at just over €100 per tonne for wheat. It hopes that raising the import duties to keep the price above around €155 a tonne will help ensure that European farmers are able to make a living without the EU becoming obliged to buy up large amounts of surplus grain. This year’s European wheat harvest is up 20 per cent on last year, to 300m tonnes.
Precautionary measure
While the EU hopes that restoring the duties will prevent wholesale prices from falling too far and having a negative impact on farmers, it emphasised that the measures were only precautionary. Officials stressed that if prices stabilise, the duties could be set at zero.
The European Union statement said: “The restoration of MFN [Most Favoured Nation] duties for cereals would not have any disruptive effect on the EU market or any significant impact on prices. This precautionary measure is taken in order to avoid undue risk while intervention mechanism will be open from the 1st November onwards.”
Initial suspension of duties
Duties on cereals were initially suspended at the beginning of January and, as recently as June 16, Fischer Boel had announced that import duties would remain suspended until the end of the next marketing year, due to end on June 30, 2009. Rapidly falling cereal prices, however, have forced the use of a clause allowing the duties to be reintroduced “in the event of disruption or threatened disruption of the Community market.”
Due to market price interdependence between grains, the decision was taken to reintroduce the duties simultaneously across all cereals.
A draft Regulation was put forward on Thursday. Following formal adoption by the Commission, it will come into force three days after its publication in the EU’s Official Journal, although the duties will not apply to wholesalers who have already dispatched their grain to the EU, or who do so before the journal’s publication.
Food prices
Europe has seen record food price rises over the past year, and this latest announcement comes not long after an EU statement on September 17 which said: “Surplus stocks are extremely low and unlikely to increase in the foreseeable future.”
That statement included a pledge to increase the European food aid budget by two thirds, to almost €500m from 2009, in light of the sharp food price rises over the past year.
Wheat prices have fallen particularly quickly, however, following this year’s record harvest.