Brussels ponders change to direct aid calculations

7 May 1999

Beef cash claim rebuffed

By Philip Clarke

CLAIMS that beef producers will be over-compensated for lower prices under Agenda 2000 have been challenged by Meat and Livestock Commission economists.

The suggestions were made by Richard Cowan, head of beef and sheep at MAFF, at an MLC briefing in London this week.

With support price cuts limited to 20%, instead of the full 30% the commission was after, and with the compensation package unchanged, producers could expect to recoup 100% of their losses, he said. And if markets did not fall by the full amount, there was a "significant risk" of over-compensation, he added.

But MLC senior economist Duncan Sinclair argued that the compensation was unlikely to be so generous.

In particular, sterling continues to strengthen, reaching just 65.4p/k this week compared with the 71p/k at the start of the year. "If the £ stays strong, then premium payments will not be so great," he said.

Despite a rise in the k value of beef special premium next year, in sterling terms it could actually be lower. Producers should bear this in mind before paying too much for stores, he advised.

Mr Sinclair also warned that scalebacks could reduce BSPs value. The extra 100,000 units added to the UKs regional ceiling, taking it to 1.52m, should provide some leeway, despite the end of the calf processing scheme.

"If we assume 250,000 bull calves are slaughtered in 2000 and 2001 then there should be no scaleback. But if only 100,000 calves are slaughtered, we could see a 15-20% reduction in BSP in 2000 and 7-12% in 2001."

Mr Sinclair agreed that farmgate prices were unlikely to fall the full 20%. "The relationship between market prices and intervention is not as strong as it once was."

Suckler cow quota

But the planned 40,000 unit cut in suckler cow quota to 1.7m head threatened the UKs ability to produce quality beef. This reduction could be exacerbated by allowing up to 20% of claims for SCP to be made on unproductive heifers.

Mr Cowan said he was still pressing for a minimum age of 18 months for heifers, but doubted this would be included in the implementing texts to be drawn up by the commission this summer.

&#8226 Governments will be obliged to pay out compensation to producers contained in the so-called national envelopes under the Agenda 2000, said Mr Cowan. Worth up to k64m (£43m) to UK beef producers and k113m (£76m) to dairymen, there had been fears the Treasury would resist making the payments. &#42

Brussels ponders change to direct aid calculations

BRUSSELS is planning to change the method of calculating direct aid to farmers, taking a longer term view of currency fluctuations.

Area aid is currently set on the basis of the £:k exchange rate on Jul 1 each year (or Jan 1 for livestock payments). But, following pressure from Denmark and Sweden, which are also outside the k-zone, the commission is now suggesting using the average rate during the preceding month.

The advantage of this is that it would avoid "unrepresentative" exchange rates due to sudden market movements, says MAFF. But it would also be more complex to administer and could cause confusion.

MAFF is currently consulting on the planned change, but takes the view it is still too early to tell whether there is anything wrong with the current mechanism. Also, since this years aid payments are guaranteed to match last years under the agri-money compensation package agreed last December, producers will be protected from currency movements in 1999. &#42

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