Further CAP reform inevitable MLC

By FWi staff

CAP reforms are intended to save money – but the actual outcome will be a rising budget due to increased payments, says MAFF head of beef and sheep division, Richard Cowan.

Speaking at yesterdays Meat and Livestock Commission (MLC) conference Agenda 2000 – Will the CAP fit, Mr Cowan said that in the near future the EU will have to return to the table for more reforms.

Increased pressure from the pending WTO talks and from the introduction of new member states means that the reforms are unaffordable as CAP reform stands, said Mr Cowan.

Agenda 2000 reforms on beef have moved away from market price support towards direct income measures, although compensation is expected to be set at 100%.

Intervention

Intervention will be much weaker, with a reduction in value of 20%.The UK had hoped for 30%, said Mr Cowan, although the 20% cut is hoped to increase European consumption.

This could result in a modest reduction in prices, although senior MLC economist Duncan Sinclair believes that the cut will be greater in other EU countries, as UK farmers saw that drop during the BSE crisis.

But Mr Sinclair said that the 20% cut will not allow the EU to trade without export refunds which, he says, was a key issue of these latest reforms.

As from 1 July, 2002, intervention will disappear altogether, to be replaced by Private Storage Aid (PSA). But the provision remains for safety-net intervention to operate if prices fall below 1560/t (£1022/t at todays rate).

In the reforms the beef special premium (BSP) eligibility was reduced by one month for the first claim and two months for a second giving an extra 100,000 units to the UK regional ceiling.

An option to drop the 90-head limit has been put in place, with the decision being moved to member states.

The BSP payments for young bulls will have increased by £44 million in 2002, encouraging earlier sales at lower carcass weights thus better meeting market requirements.

However, Mr Sinclair warned that higher beef production is expected due to the higher payments and UK farmers will have to budget carefully and secure an outlet before committing to production.

Steer payments

The price rise is more modest for BSP steer payments and will have risen by 2002. But in the meantime, if Sterling continues to strengthen, payments could go down.

A new slaughter premium has been introduced which is expected to be paid directly to producers. Rates will be phased in over three years, with ceilings in the UK thought to be set at 3.3 million cattle and 26,300 calves.

However, the slaughter premium has not had any formal discussion within the Commission as to how it will work, but it is thought it will contain a retention period, said Mr Cowan.

“I think the Commission will set a retention period of two months, which would enable the BSP to be claimed at the same time as the slaughter premium,” he added.