13 March 1998

Frozen carcass aid offers little cheer to lamb

By Philip Clarke

SHEEPMEAT traders have given a frosty reception to Brussels plans for a new private storage aid scheme, which offers them £18 a head to put carcasses into cold stores.

The introduction of PSA follows concerted lobbying by the UK farming unions and their Irish counterparts, desperate to prop up the beleaguered sheep trade.

Prices have dropped almost daily since last summer, made worse in recent weeks as farmers have started to offload hoggets.

"This overhang has been depressing the new season trade," says NFU livestock committee adviser, Dafydd Owen. "Farmers have been hanging on to stock in the hope of better prices, but now they are moving them for fear of their animals cutting second teeth and being caught by the new Specified Risk Material rules."

Under the PSA scheme, Brussels is offering traders £974/t (1400 ecu/t) to put lamb carcasses into stores for three months, with an option to keep it there for a further two months. Up to 3000t – equivalent to 150,000 carcasses – can be submitted in the UK and Ireland, from lambs born before Oct 1, 1997. Tenders open on Mar 19.

But traders warn that the scheme may not get the support farmers are hoping. The aid works out at about £18 a carcass, to cover the cost of freezing, boxing and storing sheepmeat.

"But it is the loss of value that is the big unknown," says Brian Pack of Scotch Premier Meat. "The meat will be coming out in three months time just as the fresh spring lamb trade is reaching its peak." Frozen carcasses could be trading at a £12 discount to fresh, he speculates and, with costs amounting to about £4 a carcass, the scheme represents a "big risk for a marginal profit".

This view is echoed by Welsh abattoir boss, Edward Hamer, who fears an abundance of frozen lamb in June/July will flatten the price of fresh spring lamb. "If PSA was launched a few months ago it might have helped, but now its too late."

The NFU acknowledges the concern about having to find outlets when the meat comes out of PSA. But it maintains it is better to clear the market now, so at least the Easter trade gets off to a more buoyant start.

But Duncan Sinclair of the Meat and Livestock Commission believes the market could be improving anyway by the time the scheme opens. "Slaughterings are currently about 70,000 a week up on last year. If this continues, supply could get tighter and prices may soon pick up." Anticipating this, traders may be even more reluctant to use PSA. &#42

farmers weekly and FWi are teaming up with chartered accountant Grant Thornton to provide speedy, detailed analysis of next weeks Budget.

The faxback service will reveal all from 8.30pm on the night. Farmers with access to the Internet can discover what is in store by accessing the FWi site from the same time.

Signals suggest that, after a series of modest Budgets, Gordon Browns first full-blown Budget on Mar 17 could bring several changes. The most feared of those could be a new pesticide and fertiliser tax, which, reports suggest, could slap 50-125% on to the cost of such inputs.

Capital gains tax and reinvestment relief are likely front-line targets for change. Inheritance tax and agricultural property relief may also be affected.

What will happen to income tax? And will the tractor cost more to fuel up each morning?

Dial the special faxback number (0181-652 4091) and follow the simple recorded instructions. Or visit FWi at http://www.fwi.co.uk