The northern part of Italy produces primarily grains, sugarbeets, soybeans, meat and dairy products, while the south specializes in durum, fruits, vegetables, olive oil and wine. Although much of Italy's mountainous terrain is unsuitable for farming, the country has a large work force — about 1.4 million people — employed in farming. Italy has slightly fewer than 3 million farms, with the average farm size 7 hectares.

As a member of the European Union, Italy's agriculture conforms to the E.U.'s Common Agricultural Policy. When Agenda 2000 is fully implemented, aid per hectare for grains and oilseeds will be equalized, which could favor Italy's winter grains sector if growers in the Po Valley switch back to bread wheat and barley from oilseeds.

Italy has experienced a long-term downward trend in area. Historically, this trend has been based primarily on decreased interest among farmers who sought more profitable crops.

Recently, the Italian government reorganized the Ministry of Agricultural, Food, and Forestry Resources. The change calls for all of the old Ministry's functions in agriculture, forestry, fishing, agro-tourism, hunting, rural development and food to be performed by regional governments.

The new Ministry of Agricultural Policies will continue as a reference center for agricultural, food, and forestry policy issues of national interest and will serve as the liaison with the European Union. The largest impact from this decision will be the ability of the regional governments to determine their own budgets for marketing and aid programs.

The change has raised some concerns among Italy's agricultural interests. For one thing, regional authorities have widely varying levels of commitment and influence, leading to fears that technical and marketing programs and support for the agriculture sector will be uneven, at best.

Consequently, some farm interests are urging the formation of producer collectives or cooperatives to increase contracting power and influence marketing processes and to build vertically integrated farm-to-table structures to add value. Calls also have been made for a strengthening and restructuring of agricultural schools to provide technical support.

Another issue currently predominant in the Italian agricultural sector, as elsewhere in Europe, is genetically modified organisms. The GMO issue has become particularly intense in Italy with the appointment of Green Party member Alfonso Pecoraro Scanio as Italy's agriculture minister. Pecoraro Scanio also has stated in several television interviews that the E.U. moratorium on GM crops must remain because GM products represented "a threat to health, the environment and traditional Italian agriculture."

According to one published report, Pecoraro Scanio is "pushing Italian ag biotech research to the point of collapse" by imposing strict conditions on public funding. These include a condition that no field trials of GM crops would be allowed if funding were accepted.

More recently, the minister in March ordered an investigation into 21 Italian companies importing and marketing soybean and maize seeds to determine whether they stored GM material. And in April, Italian police confiscated 88 tonnes of soy seed at a Monsanto facility in northern Italy based on suspicions the U.S.-based biotech company had imported banned GM seeds.

WHEAT AND FLOUR MILLING. Italy's domestic consumption of bread, bakery and confectionery products and milled rice remains fairly stable, although pasta use is declining slightly. Feed use of wheat is expected to rise in 2000-01, as animal producers look for alternative protein sources because of the ban on meat and bone meal.

Most of Italy's domestic durum wheat supply is used to produce pasta. Pasta production, after reaching a record high in 1997, has decreased slightly in connection with the domestic consumption trend, but exports have remained at record high levels. In 1999, according to industry sources, pasta production for domestic use was 2,272,000 tonnes, or 0.3% less than in 1998.

Italy has a mature milling industry, with large industrial operations as well as small mills. The Association of Industrial Millers and Pasta Makers of Italy (ITALMOPA) estimates about 700 milling companies in operation throughout the country.

Of the total companies, about 190 mill durum and have a total annual capacity of 7.1 million tonnes, wheat equivalent. The remainder are bread wheat mills with a total annual capacity of 10.7 million tonnes, wheat equivalent. According to ITALMOPA, durum milled in 1998 totaled 4.8 million tonnes, while bread wheat milled totaled 6.76 million tonnes.

Italian millers are highly conscious of quality, both in the wheat ground and the flour produced. Traders and millers demand wheat with specific characteristics from a reliable supply source and are willing to pay premium prices.

In 1998, 59.2% of domestic wheat flour was for bread use, with 19.5% exported and the remainder used for various domestic biscuit and confectionery products, according to ITALMOPA. In the same year, 51.6% of durum milled went to the domestic pasta market and 40% went to the export pasta market.

RICE. Italy is the European Union's largest producer of rice, and an average of about 70% of annual milled production is exported. Domestic use is primarily for the traditional dish risotto, consumed mainly in the north of the country, as well as for the animal feed industry. The industry consists of about 6,000 rice farmers and 60 rice millers, represented by the milling industry association AIRI.

Among Italy's most important farm policy issues currently under discussion is reform of the CAP in the rice sector. Discussions among E.U. members have been frozen since last October, as major disagreements continue to exist. At this point, no decision is likely to be adopted before 2002, when a general revision of the CAP for arable crops is scheduled.

The Italian rice industry is divided on CAP reform. AIRI, supported by one farmer organization, has submitted a proposal requesting the removal of the intervention price; establishment of a single import duty, regardless of the rice variety or country of origin; maintenance of current acreage ceilings (428,000 hectares for the whole E.U. and 239,000 hectares for Italy); a substantial increase in the per-hectare payments for rice; and establishment of a fund to promote rice consumption in the E.U. and to manage possible market crises through a minimum farmer price.

The other two leading farmer organizations do not agree with all points of the proposal, especially the market uncertainties tied to the removal of the intervention price. These groups argue that a possible rise in per-hectare aid would not necessarily guarantee farmers' income.

COARSE GRAINS AND FEED. Italy relies on domestic and imported grains, particularly maize, as a primary feed stock. Italy's use of non-grain feed ingredients always has been marginal and continues to decline.

The use of NGFI's in Italy, always marginal, has continued to decline in the most recent years. Imports of corn gluten feed, mainly coming from the U.S., dropped in 1999 to 175,000 tonnes (from 196,000 tonnes in 1998), and 123,000 tonnes in January-September 2000.

In early 2001, the Ministry of Health reported discovery of bovine spongiform encephalopathy in domestically raised beef. By late March, Italy had tested about 23,000 of the estimated 800,000 cattle more than 30 months of age, and officials said they expected to discover at least 30 cases of BSE before all testing was complete.

Since the BSE situation developed, Italian beef consumption has fallen 60% to 70%, but consumption of pork meat, turkey meat and fish have increased by 18%, 14% and 11%, respectively. Authorities have begun widespread inspections of animal feed, resulting in almost daily press reports about the discovery of feed sources that still contain meat and bone meal.

Indications are the use of grains in feed rations could increase with the bans on MBM, but feed demand could decline overall if consumers continue to reduce meat in their diets. In addition, the recent foot-and-mouth disease outbreak in some E.U. states has forced widespread culling, reducing animal numbers and probably feed demand.

TRADE. Italy currently imports about 60% of its wheat needs annually, up from about 30% in the early 1980s, following the decline in domestic production. During 1999-2000, about 78% of Italy's imports came from other E.U. countries, with France as a leading supplier, followed by Germany, Austria and the U.K.

Italian durum imports in 2000-01 are expected to remain fairly stable at the previous year's level of about 1.4 million tonnes. Imports from the United States are increasing based on the growing popularity among major Italian pasta makers of U.S. desert durum, much of which is grown under contract with Arizona and California growers.

Italian exports of bread wheat flours, after reaching a record high level of 962,000 tonnes in 1997-98, declined in both 1998-99 (883,000 tonnes) and 1999-2000 (707,000 tonnes), and are expected to drop again this season. The declines are related to reduced flour exports to Yemen, where the local milling industry has expanded sharply.

Italian pasta exports have now stabilized between 1.2 million and 1.3 million tonnes. Shipments to the E.U. continue to expand, reaching 735,000 tonnes in 1999-2000. But exports to the U.S. have dropped as Barilla, a leading Italian manufacturer, established a pasta plant in Iowa.

Italian rice exports, after a slight recovery reported in 1999-2000 (mainly following the increased import demand of Indica rice from France, Germany and the Netherlands), are expected to rise slightly in 2000-01. This increase is due to a possible consumption increase in northern Europe, mainly due to the BSE crisis as consumers switch away from meat, according to some trade sources. Exports to third countries are also growing.

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