Grain output is expected to increase by at least 10 million tonnes, if the measure is approved, the Commission stated.

Recent price hikes for most grains and have wreaked havoc with the supply chain, with managers having to search for other sources due to low harvests in many regions, and increased demand from China and other emerging economies.

The Commission said the proposal is intended for the autumn 2007 and spring 2008 sowings, in response to the increasingly tight situation on the cereals market. The normal land set aside rate is 10 per cent.

In the EU's 27 members a lower than expected harvest in 2006 (265.5 million tonnes) led to tightening supplies at the end of 2006 to 2007 season and to historically high prices.

Intervention stocks, grain held back from the market, have shrunk to around 1m tonnes in September from 14 million tonnes at the beginning of the 2006 to 2007 marketing season.

The stocks are mainly composed of maize held in Hungary, the Commission reported.

Setting the land set aside rate at zero does not oblige farmers to cultivate all their land. They can continue with voluntary set-aside and apply environmental schemes.

The cereals market is currently characterised by historically high prices. The 2006 crop was lower than expected, at 266 million tons, due to adverse weather.

The 2007 cereals crop is now estimated below last year's level because of dry and unusually hot weather in April followed by adverse summer weather in western member states and drought and heat-waves in the Southeast of Europe.

At the global level, closing stocks in 2007/2008 are expected to fall to a historically low level, especially in the major exporting countries.

The current area under obligatory set-aside amounts to 3.8 million hectares in the EU.

If the set-aside rate was set to 0 per cent, the effective return of land could be between 1.6 and 2.9 million hectares, the Commission estimated. Considering average trends, it is likely to bring around 10 million tonnes of grains onto the market.

If farmers decide to use the maximum amount of land possible to produce cereals at the expense of other crops especially oilseeds, the quantity could reach 17 million tonnes.

Set-aside was introduced to limit production of cereals in the EU and applied on a voluntary basis from 1988. After a 1992 reform, producers under the general scheme were required to set-aside a defined percentage of their declared areas in order to be eligible to direct payments.

With the 2003 reform, they received set-aside entitlements, which give the right to a payment if they are accompanied by eligible land put into set-aside.

Over the past year EU prices for wheat has risen by 35 per cent, for dairy products by an average 50 per cent, and by 25 per cent for sunflower oil.