Grain input prices could fall for European food manufacturers because of a European Commission proposal to temporarily scrap EU limits on grain production.

Under the EU's set aside rules within the Common Agricultural Policy (CAP), farmers must set aside 10% of their land to control overproduction. But with poor weather slashing EU grain yields and US producers switching production for bio-ethanol markets, grain prices have soared worldwide.

The EU Council of Ministers for agriculture will be asked to authorise the change on 26 September 26 for an initial one-year period.

"We don't have overproduction now. We have a shortage of grain on the market," said a spokesman for EU agriculture Commissioner Mariann Fischer-Boel. He said the move would "help the market" by making 10 to 17m additional tonnes available.

Environmentalists, however, have raised concerns that the expansion will threaten wildlife habitat on previously uncultivated land and damage freshwater sources.