The operation and development of the common market for agricultural products is accompanied by the establishment of common market organisations (CMOs) which may, according to Article 40 of the Treaty on the functioning of the EU, take various forms depending on the product. At present, almost all the Community's agricultural production is regulated by common organisations. Article 38 of the TFEU (ex-Article 32 TEC) defines agricultural products as products of the soil, stockfarming and of fisheries, along with products of first-stage processing which are directly related to these products. Foodstuffs are considered as products of second-stage processing and are therefore not included in agricultural products. To make matters as clear as possible, products covered by the provisions under the heading "agriculture" are listed in Annex I of the TFEU. This is why, in European Community/Union terminology, agricultural arrangements are often stated as being applicable to "Annex I products".
Since the introduction of the CAP, the Council had adopted 21 CMOs for each product or group of products, each governed by a separate Council basic regulation, often accompanied by a collateral set of further Council regulations. The market organisation of each agricultural product used different mechanisms defined by its basic regulation and adopted by the Council using the full-blown procedure [see section 21.3.2], but all of them were underpinned by, on the one hand, internal market measures, more often than not relating to price setting and support, and, on the other, by a trade regime with third countries, which was in conformity with the Agreement on agriculture concluded in the context of the GATT Uruguay Round [see section 23.4].
The fifth CAP reform (September 2003) established common rules for direct support schemes under the common agricultural policy and support schemes for producers of certain crops (durum wheat, protein crops, rice, nuts, energy crops, starch potatoes, milk, seeds, arable crops, sheep meat and goat meat, beef and veal and grain legumes) [Regulation 1782/2003, replaced by Regulation 73/2009]. The reform takes account of increased consumer concerns over food quality and safety and environmental protection. Indeed, the full payment of direct aid is henceforth linked to compliance with rules relating to agricultural land, agricultural production and activity, which should serve to incorporate in the common market organisations basic standards for the environment, food safety, animal health and welfare and good agricultural and environmental condition. The reform includes a reduction in direct payments ("modulation") for bigger farms to finance the rural development policy and introduces a financial discipline mechanism to ensure that the farm budget fixed until 2013 is not exceeded. The reform of the support schemes for farmers concerns also the twelve new Member States [Regulation 583/2004 and Decision 2004/281].
Pursuing the aim of simplifying the regulatory environment of the CAP, Regulation 1782/2003 (replaced by Regulation 73/2009) established a horizontal legal framework for all direct support schemes under the common agricultural policy. Thereafter, this approach was applied to the basic CMO regulations. The sectoral regulations were repealed and the rules contained therein were replaced by horizontal rules incorporated in Regulation 1234/2007 (Single CMO Regulation). This Regulation established a common organisation of the markets for the products of the following sectors: cereals, rice, sugar, dried fodder, seeds, hops, olive oil and table olives, flax and hemp, fruit and vegetables, processed fruit and vegetables, bananas, wine, live plants and products of floriculture, raw tobacco, beef and veal, milk and milk products, pigmeat, sheepmeat and goatmeat, eggs, poultrymeat and other products of Part XXI, Annex I. Regulation 1234/2007 establishes in particular common rules concerning marketing periods, public intervention, private storage, reference prices, intervention prices and disposal of products bought under public intervention.
