Beef safety net looms as prices slump

By Philip Clarke, Europe editor

SAFETY-NET intervention for beef seems certain to be triggered in several member states next week.

It would boost the cost of the BSE crisis and raise the prospect of direct payment cuts.

EU farm commissioner Franz Fischler has been desperate to avoid the safety net, which could quickly break the bank.

In particular, he has argued that beef taken into store now will not be saleable in two years time and will have to be destroyed anyway.

The EUs Purchase For Destruction (PFD) scheme, introduced last month to take over-30-month cattle out of production, is the cheaper option.

Recent figures from the commission put the total cost of PFD at 2590/t (1650/t), of which 1400/t (892/t) would be picked up by Brussels.

That compares with the full cost of intervention including purchase, storage, stock depreciation and eventual destruction of 3800/t (2420/t).

In other words, intervention would cost the commission almost three times as much.

But prices have slumped so far in continental Europe that safety net intervention is now inevitable.

To trigger the measure, domestic beef values have to be below 68% of the full intervention price for two weeks running, while at the same time the EU beef market is under 78% of support values.

Price information for the last week of January shows that in Germany U, R and O grade young bulls were below 55% of intervention, with every indication this has been repeated in the first week of February.

Similarly in Spain, R grade bulls are into their second week below the trigger point, and all three grades are under in Austria.

(UK values are well above the 80% threshold at which normal intervention is triggered.)

The next tender is on Tuesday, (13 February), with adjudication due at the management committee on Friday (16 February).

“The significance of the safety net is that the commission will have to take the full tonnage offered by traders, assuming they are below the maximum cut-off price,” says the Meat and Livestock Commissions Jane Connor.

This is in contrast to normal intervention, where the commission is able to scale back offers by applying a reduction co-efficient. At the last tender it took just 18,684t, despite being offered 29,972t.

If safety net intervention continues, it will soon eat up funds.

Last week, the commission released a further 971m (618m), taking the EU budget almost to the maximum allowed under Agenda 2000.

But the bulk of this (700m) is intended to pay for PFD.

Just 238m (152m) is available for beef intervention.

Budget commissioner Michaele Schreyer has warned that any further BSE expenditure will have to be met by cuts in other parts of the farm budget.