GREECE'S DOMESTIC COTTON PROGRAMS

UNCLAS SECTION 01 OF 02 ROME 005601 SIPDIS STATE PASS TO USTR/AG/MSLOAN USDA FOR FAS FOR OA/KROBERTS USDA FOR FAS FOR CMP/COTSD/BLUM BRUSSELS PASS USEU FOR AG MIN-CNSLR ATHENS FOR ECON, DCM, AMB E.O. 12958: N/A TAGS: EAGR EU GR EU GR IT USTR ITEAGR USTR SUBJECT: GREECE'S DOMESTIC COTTON PROGRAMS AND POLICIES UNCLASSIFIED PAGE 02 ROME 05601 01 OF 02 210247Z REF: UNCLASS USDA FAS 57863 ¶1. SUMMARY: GREEK COTTON PRODUCTION IS SUSTAINED BY EU PRICE SUPPORTS WHICH VARY ACCORDING TO OVERALL PRODUCTION TARGETS. BECAUSE OF OVERPRODUCTION IN THREE OF THE LAST FIVE YEARS, THE AVERAGE PRICE PAID FOR SEED COTTON HAS VARIED FROM 62.50 EUROS PER 100 KG TO 88.0 EUROS PER 100 KG. ¶2. KEY SUPPORT FOR GREECE'S COTTON PRODUCTION IS THE EU COTTON REGIME. EU REGULATIONS 1051/2001 AND 1591/2001 SET NEW POLICIES AND MEASURES FOR PREVENTING OVERPRODUCTION OF EU COTTON AND NEW CORESPONSIBILITY. THE LATTER IS THE MECHANISM (LEVY) FOR PENALIZING COTTON PRODUCERS FOR EXCEEDING A TARGET. THE MAXIMUM PRODUCTION LEVEL WAS SET AT 1,031,000 MT OF RAW COTTON (SEED COTTON). WHENEVER PRODUCTION EXCEEDS THIS LEVEL, THE TARGET PRICE IS REDUCED FOR BOTH STATES, GREECE AND SPAIN, AS DESCRIBED IN ARTICLE 3, PARAGRAPH 1 OF THE REGULATION NO.1051 IN CHAPTER II (UNDER PRICE MECHANISMS). ¶3. IN 2001 GREEK COTTON PRODUCTION EXCEEDED THE QUOTA BY ALMOST 200,000 MT (RAW COTTON BASIS.) CONSEQUENTLY, HIGH PENALTIES WERE IMPOSED BY THE EU ON FARMERS, REDUCING THEIR UNCLASSIFIED PAGE 03 ROME 05601 01 OF 02 210247Z TARGET PRICE BY OVER 20 PERCENT. ¶4. IN MAY 2001 THE GOG OFFERED SUGGESTIONS TO COTTON FARMING GROUPS ON WAYS TO CONTINUE FARMING BUT TO REDUCE COTTON ACREAGE. THIS ADVICE WENT LARGELY UNHEEDED. NO INCENTIVE OTHER THAN THE USUAL EU PAYMENT WAS OFFERED. THIS ACTION PROVED TO BE UNSUCCESSFUL AND BOTH THE GOG AND FARMERS WERE DISAPPOINTED TO SAY THE LEAST. HOWEVER, IN 2002 A REDUCTION OF COTTON ACREAGE BY 25,000 HA TOOK PLACE, CAUSED BY THE 'DOCKING' OF PRICES PAID OUT FOR THE RECORD HIGH GREEK 2001 HARVEST. THIS YEAR'S (2003 HARVEST) OUTPUT IS EXPECTED TO REACH APPROXIMATELY 1,000,000 MT (WITHIN THE QUOTA),COMPARED TO A 2001 CROP OF 1,350,000 MT (RAW BASIS). ACREAGE FOREGONE FROM COTTON WAS UTILIZED FOR DURUM WHEAT, CORN, ALFALFA AND FORAGE PLANT CROPS. ¶5. ALL COTTON CROP ACREAGE IN GREECE IS IRRIGATED. FARMERS PAY A FLAT FEE OF 120 EUROS PER HECTARE/YEAR REGARDLESS OF HOW MUCH WATER THEY CONSUME. ON-FARM USE OF FUEL ALSO IS SUBSIDIZED AT A DISCOUNT OF 10-15 PERCENT UNDER MARKET PRICES. ¶6. A 5-YEAR (MARKETING YEAR) SERIES ON FARM GATE PRICES FOR RAW COTTON IN EUROS/LOO KG IS SHOWN BELOW. FIGURES GIVEN ARE AVERAGED, SINCE ACTUAL PRICES PAID VARY BY QUALITY AND UNCLASSIFIED PAGE 04 ROME 05601 01 OF 02 210247Z BY MONTH. CROP AVERAGE PRICE PAID BY GINNERS TO - FARMERS (EUROS) 1997 85.69 (75.42 MINUS LEVY) 1998 98.30 (83.63 MINUS LEVY) 1999 71.00 (NO LEVY) 2000 88.00 (NO LEVY) 2001 88.10 (62.50 MINUS LEVY) ¶7. FOR SEVERAL YEARS THE GOG HAS UNSUCCESSFULLY PETITIONED BRUSSELS TO INCREASE THE COTTON PRODUCTION QUOTA THE GOG ARGUED THAT THE EU SHOULD ATTEMPT TO COVER "PRAGMATIC" ACREAGE PLANTED TO COTTON TO SUPPORT FARM INCOME. THE COMMISSION HAS REJECTED ALL SUCH REQUESTS. TO THE CONTRARY, UNDER THE COTTON REFORM OF MAY 2001 THE EU HAS CHANGED BASIC REGULATIONS PERTAINING TO COTTON CULTIVATION AND HAS IMPOSED STRICTER PENALTIES FOR OVERPRODUCTION. ¶8. THIS YEAR THE GOG HAS ABOLISHED THE HELLENIC COTTON BOARD (HCB),A QUASI - UNCLASSIFIED UNCLASSIFIED PTQ0224 PAGE 01 ROME 05601 02 OF 02 190836Z ACTION EUR-00 INFO LOG-00 AID-00 CEA-01 CIAE-00 COME-00 CTME-00 DODE-00 ITCE-00 SRPP-00 EB-00 EXME-00 E-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00 INR-00 ITC-01 LAB-01 VCE-00 AC-01 NSAE-00 NSCE-00 OMB-01 OPIC-01 ACE-00 SP-00 SSO-00 SS-00 STR-00 TEST-00 TRSE-00 USIE-00 EPAE-00 ECA-00 DRL-02 G-00 SAS-00 /009W -------------- 0AEE58 190837Z /38 R 190718Z NOV 02 FM AMEMBASSY ROME TO SECSTATE WASHDC 6971 USDA FAS WASHDC 2430 INFO AMEMBASSY ATHENS AMEMBASSY BERLIN AMEMBASSY BRUSSELS UNCLAS SECTION 02 OF 02 ROME 005601 SIPDIS STATE PASS TO USTR/AG/MSLOAN USDA FOR FAS FOR OA/KROBERTS USDA FOR FAS FOR CMP/COTSD/BLUM BRUSSELS PASS USEU FOR AG MIN-CNSLR ATHENS FOR ECON, DCM, AMB E.O. 12958: N/A TAGS: EAGR EU GR EU GR IT USTR ITEAGR USTR SUBJECT: GREECE'S DOMESTIC COTTON PROGRAMS AND POLICIES UNCLASSIFIED PAGE 02 ROME 05601 02 OF 02 190836Z GOVERNMENT ORGANIZATION WHICH OPERATED OUT OF NATIONAL BUDGET FUNDS. HCB'S RESPONSIBILITIES WERE: CROP QUALITY GRADING, SEED CERTIFICATION AND CONTROL, TECHNICAL ADVICE (EXTENSION SERVICES),IMPLEMENTING EU POLICY REGULATIONS AND PROVIDING ADVISE TO FARMERS, GINNERS, SPINNERS AND THE TEXTILE INDUSTRY ON NEW TECHNOLOGY AND INTERNATIONAL TRADE DEVELOPMENTS. THESE RESPONSIBILITIES ARE TRANSFERRED TO THE FIELD CROPS DIVISION, MINISTRY OF AGRICULTURE, AS OF JUNE 2002. THERE IS LITTLE INDICATION THAT THE MINAG WILL BE ABLE TO QUICKLY FULFILL THE FUNCTIONS OF THE HCB. ¶9. FERTILIZERS, PESTICIDES AND SEED ARE NO LONGER SUBJECT TO PRICE SUPPORTS AND HAVE NOT BEEN FOR A MINIMUM OF FIVE YEARS. SEMBLER UNCLASSIFIED > 2002ROME05601 - Classification: UNCLASSIFIED