With the aid of both hands and a bank of klieg lights, the EU finds its backside
The ever wise commissariat has been looking at the intervention system for maize, and appears to have stumbled upon some very, very basic economic principles. Which is nice.
Here is what currently happens with maize: "The EU intervention system for cereals is a single price of €101.31 per tonne which farmers receive for selling their cereals into public storage, if they cannot find an outlet on the market". The intervention will be phased out completely over three years.
So, what they have been doing is deliberately setting a minimum price for maize that is above that which the market will support. Guess what happens - a glut: "By the end of the 2005/2006 season, EU maize intervention stocks had spiralled to 5.6 million tonnes, or 40 percent of total public cereal stocks. Without changes to the current system, these stocks, which are bought and stored at public expense, would have risen to as much as 14.1 million tonnes by 2013. Possible outlets for maize stocks are limited, and maize is unsuitable for long-term storage". One does not have to be that cynical to ask quite how enthusiastically a producer of either goods or services would market said goods and services on the open market if there is already aschmuck buyer ready to pay over the odds
Marian Boell, the agriculture commissar and occasional blogger notes, "When we abolished rye intervention in 2003, the market became immediately more dynamic and prices rose. I anticipate a similar result for maize".
And yet "As well as maize, it is currently applicable to breadmaking wheat, durum wheat, barley and sorghum". So Marian, how about an intervention on those interventions?
Here is what currently happens with maize: "The EU intervention system for cereals is a single price of €101.31 per tonne which farmers receive for selling their cereals into public storage, if they cannot find an outlet on the market". The intervention will be phased out completely over three years.
So, what they have been doing is deliberately setting a minimum price for maize that is above that which the market will support. Guess what happens - a glut: "By the end of the 2005/2006 season, EU maize intervention stocks had spiralled to 5.6 million tonnes, or 40 percent of total public cereal stocks. Without changes to the current system, these stocks, which are bought and stored at public expense, would have risen to as much as 14.1 million tonnes by 2013. Possible outlets for maize stocks are limited, and maize is unsuitable for long-term storage". One does not have to be that cynical to ask quite how enthusiastically a producer of either goods or services would market said goods and services on the open market if there is already a
Marian Boell, the agriculture commissar and occasional blogger notes, "When we abolished rye intervention in 2003, the market became immediately more dynamic and prices rose. I anticipate a similar result for maize".
And yet "As well as maize, it is currently applicable to breadmaking wheat, durum wheat, barley and sorghum". So Marian, how about an intervention on those interventions?
Labels: EU fun and games, Sane economics
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on Monday, June 11, 2007 at 11:56 am.
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Hey Croydonian, sorry to add a comment that isn't related to the post but have you seen the last Sopranos episode yet???
I have, ahem, got hold of it, and am holding off on watching it tonight. Hence no North American-related posts for fear of having the thunder spoilt by finding out beforehand by accident when perusing other sites....
oddly I have just done a post on the current trade talks and prospects.
The EU do seem ready to move a little as long as the USA does. However, I think even generous uncle sam only subsidises Maize to the tune of $65 per ton.
room for some agricultural arbitrage here?
CAP? Grrrr!
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