REGIMEREFORMSWELCOME
REGIMEREFORMSWELCOME
What should producers make of the sheep regime reforms?
Farmers Weekly European editor Philip Clarke takes a look
LAST summer farmers weekly predicted two things about the reform of the EU sheep regime – that final decisions would be left to the last minute and that more money would have to be put in to secure a deal.
On the first of these, farm ministers could not have left it much later if they had tried. Agreement was only reached on the Wednesday before Christmas last year, giving EU civil servants just two days to complete the implementing regulations.
On the second, extra funding was wrung out of the commission, though this was far more modest than might have been expected.
In addition to the k21/ewe (£13/ewe) basic premium originally offered, farm commissioner Franz Fischler only had to cough up an extra k1/ewe (62p/ewe) into a national envelope.
That had the effect of taking the cost of the revamped regime from a planned k1.84bn (£1.14bn) to a new total of k1.91bn (£1.18bn), considerably more than sheep support cost in 2001, but still within the maximum allowed by heads of state.
At first glance, the new regime seems to end much of the uncertainty and complexity that has plagued the sheep sector for so many years.
Gone is the system of base prices, "average" EU sheep values, stabilisers, co-efficients, first and second advances and balancing payments. In its place is a straight forward flat-rate headage payment.
But, as ever, the devil will be in the detail, and much of this still has to be thrashed out.
The greatest concern for UK producers – well, English ones, at any rate – is what the government intends to do with the £12.5m national envelope. A number of options are available, (see panel).
Northern Irelands agriculture minister, Brid Rodgers, Scotlands Ross Finnie and Waless Carwen Jones have already hinted they favour a simple across-the-board top-up.
More ambitious
But for England, DEFRA secretary, Margaret Beckett, has more ambitious plans. While her department is preparing to consult widely in the coming weeks, the expectation is that she will seek to use the national envelope for a quota buy-up scheme.
The government says it wants to help producers hit by foot-and-mouth to realise something for their sheep quota.
But the NFU sees this as a possible way for DEFRA to use Brussels money to downsize the UK sheep flock. "That is the last thing we need," says NFU sheep advisor, Kevin Pearce. "The EU is not self-sufficient in sheepmeat and, after deducting New Zealand imports, neither is the UK."
Scaling back
He is also concerned that DEFRA will make full use of an option to scale back everyones ewe premium to k20/ewe (£12.40/ewe), and use the extra k1/ewe (62p/ewe) to effectively double the English national envelope to about k17m (£10m).
At recent values of just £10/unit for English Less Favoured Area (LFA) quota, that would be enough to buy up about 1m units, having a sizeable impact on the structure of the sheep industry.
But with the new ewe premium at around £13/ewe, plus another £4.34/ewe LFA supplement, LFA sheep farmers will soon be getting a premium of over £17/ewe. Historically, quota has tended to trade at around double the premium, suggesting values could soon be into the £30s when the next trading window opens later this year.
At these levels, the £10m buy-up scheme would only get around 300,000 units, and even that could be optimistic if market prices go higher.
Faced with these problems, DEFRA may prefer to use the funds to pay farmers to reduce stocking rates in environmentally sensitive areas where over-stocking is seen as a problem.
"But there is a real danger that, if the government goes down this route, more money will be used in the administration of fancy schemes than actually ends up in producers pockets," says Mr Pearce. "A flat rate top-up would be a much more effective use of funds."
Same status
One positive development to emerge from the new regime, however, is the treatment of sheep producer groups. These are to be granted the same legal status as they currently enjoy for suckler cow premium.
"In the past there have been recurring problems as the sheep quota has been deemed to belong to each individual in a producer group, not to the group itself," explains Mr Pearce.
"What may then happen is that the group would take in a new member, re-allocate some of the sheep to that person, but forget to re-allocate the quota. Those sheep would then be ineligible for ewe premium, resulting in a loss of revenue."
The new definition will ensure the quota is owned by the group, not the individuals.
"There are still important points of detail to be clarified, including how to handle the transition from the current producer group status to the new definition," says Mr Pearce. "But generally the new scheme is a big improvement.
"We would have liked to see more money for the sector. The k1.9bn (£1.18bn) is no more than the long-term average spend on a sector that has been at the bottom of the EU pile for too long. But compared with the dismal £5.48/ewe premium producers got for 2001, the new basic payment of £13/ewe will be very welcome." *
Country ks
United Kingdom 20,162,000
(£12.5m)
Belgium 64,000
Denmark 79,000
Germany 1,793,000
Greece 8,767,000
Spain 18,827,000
France 7,083,000
Ireland 4,875,000
Italy 6,920,000
Luxembourg 4,000
Netherlands 743,000
Austria 185,000
Portugal 2,275,000
Finland 61,000
Sweden 162,000
EU total 72,000,000
(£44.6m)
(Based on average number of claims in 1997-1999, weighted to allow for the fact some member states only received 80% premium on milk sheep)
• Basic rate of ewe premium: k21/ewe (£13/ewe) for heavy lamb producers, k16.8/ewe (£10.40) for milk sheep.
• Less favoured area supplement: k7/ewe (£4.34/ewe).
• National envelope top-up: k1/ewe (62p/ewe) for heavy lamb producers.
• Member states may deduct k1/ewe from the basic ewe premium to add to the national envelope.
• UK share of national envelope k20.162m (£12.5m), split: England, k8.67m (£5.37m); Wales, k5.65m (£3.50m); Scotland, k4.44m (£2.75m); Northern Ireland, k1.41m (£0.87m).
• National envelope may be used: for an across-the-board top-up; to encourage certain types of quality production; to reduce stocking rates; to support restructuring; for area based payments; for quota buy-up schemes; to improve marketing.
• Individual quotas are maintained and, for the first time, national quota ceilings are specified (UK set at 19.5m units out of 79.2m units for EU).
• Ewe premium will be paid in one lump sum, starting from mid-October each year.
• A minimum size of claim will be set, between 10 and 50 ewes.
• Private storage aid (PSA) is retained as a safety net measure.
• New sheep tagging and tracing rules expected during 2002.