EU plans farm sector shake-up in face of record food prices

The European Commission urged on Tuesday a shake-up of Europe's farm sector to ramp up production in the face of soaring food prices, with Britain and France braced for battle over hand-outs to farmers.

With food prices rocketing worldwide on tight supplies, the European Union's executive arm wants to encourage farmers to produce more after years of trying to rein in chronic overproduction.

EU Agriculture Commissioner Mariann Fischer Boel told reporters in Strasbourg that the package "aims to remove restrictions on farmers to allow them to respond to the market.

"I think it is not the time in a situation like this to micro-manage farmers," she added, describing the package as "balanced."

Even though prices of farm products have eased off recent peaks, they remain at historically high levels amid rising demand in China and India, with wheat up 84 percent over one year, maize 21 percent and butter 21 percent.

The commission proposed to phase out milk quotas and scrap rules on keeping land fallow, which it hopes would bring four to five million hectares (10-12 million acres) of idle fields into production.

The commission also wants to shift more funds used for subsidies to development of rural areas by reducing handouts for the biggest farms, although it has had to water down that proposal under pressure from Britain and Germany.

The commission wants the new wave of reforms to build on an earlier shake-up in 2003, just before the EU took in 10 mostly former communist countries, in May 2004, whose farming sectors have had to modernise quickly.