Committee Reports > List of Committees > Joint > 1978 > Committee on the Secondary Legislation of the European Communities > Report No. 04 - Market in Beef and Veal

REPORT

Introduction

1. The Joint Committee has examined two communications sent by the Commission to the Council in October, 1977 pertaining to the common organisation of the market in beef and veal as a follow up to discussions which took place in the Council when the agricultural prices for the 1977/78 marketing year were being fixed. One of these (R/2291/77) deals with the respective merits of the system of premiums and intervention measures. The second (R/2292/77) deals with a possible amendment of the common organisation of the market.

2. The Commission has indicated that it would be premature to submit formal legislative proposals to implement all the changes mooted in document R/2292/77. However, in its proposal (R/545/78) on the fixing of prices for 1978/79 the Commission has included a formal proposal for certain immediate changes in the intervention system. Reference is made to these changes later in this report.

Bodies Consulted

3. In its examination of these matters the Joint Committee considered written memoranda received from the Irish Farmers’ Association, CBF (Irish Livestock and Meat Board) and the Irish Fresh Meat Exporters Society Ltd. Members of the Joint Committee had also an opportunity of discussing the subject with representatives of the Irish Farmers’ Association. Unfortunately, a meeting arranged with representatives of the Irish Creamery Milk Suppliers’ Association could not be held when other urgent commitments of the Association unexpectedly intervened. The Joint Committee wishes to express its sincere thanks for the unstinting help it received from these bodies.

4. Members of the Joint Committee who visited Brussels at the invitation of the Commission from 19th to 21st March, 1978 availed themselves of the opportunity to discuss the situation in the beef and veal market with an official of the Commission. The members concerned derived considerable benefit from a full and frank discussion for which the Joint Committee is deeply grateful to the Commission.

Market Background

5. In the long term (1963/76) production has been increasing by about 2·7 per cent a year. Consumption has been increasing by about 1·5 per cent a year (1960/76) but tended to level out over the past few years. Production follows a cyclical pattern. In 1977 it amounted to 6·3 million tonnes, a fall of 2 per cent on 1976. On present trends the cycle which began with a peak in 1975 is expected to reach its lowest point in 1978/79 and it is anticipated that thereafter production will again rise to a peak in 1980/81. The Commission forecasts a slight increase in consumption in beef and veal between now and 1985 but a continuing fall in percentage of total meat consumption represented by beef and veal. The uncompetitive price of beef compared with pigmeat and poultry prices is considered to have a depressing effect on consumption.

6. In the Commission’s view its forecasts show that a recurrence of crisis cannot be ruled out. It points out that the organisation of the market has not, as in the past, been able to prevent cycles in production. It believes that the failure of the methods adopted in the crisis caused by overproduction in 1974 resulted not so much from intrinsic ineffectiveness but from the manner of implementation and the timing, in particular, which tended to aggravate rather than relieve the situation. Overall, the measures adopted proved insufficient to guarantee specialised cattle producers income comparable with that of mixed producers. They did, however, prevent producers experiencing the full brunt of the depression. During the period of shortage in 1972 and 1973 the Community was unable to prevent an upsurge in prices and a substantial fall in the consumption of beef and veal.

System of Premiums and Intervention Measures

7. The Commission has analysed the measures taken to manage the market between 1974 and 1977 and has reached the following conclusions on the respective merits of the systems of premiums and intervention measures:—

(a)The objectives of the Treaty may be attained either by an intervention system to stabilise prices or by a system of variable premiums which allows free play of market forces.

(b)Both systems can reduce the swings of the production cycle and hence stabilise markets.

(c)Only intervention measures can stabilise prices.

(d)Intervention has no effect on specialisation whereas some premiums can steer producers towards meat production and away from milk production.

(e)In a period of oversupply, intervention restrains consumption while variable premiums stimulate it but in a shortage, intervention is more favourable to the consumer. However, consumers’ reaction to price changes vary according to the Member State.

(f)Non-uniform application of premium and intervention measures causes irregularities in intra-Community trade and in the intervention system financed by EAGGF. However, the granting of variable premiums in the U.K. in 1975 did not cause serious disturbance.

(g)Neither premiums nor intervention measures seem to affect trade with non-member countries.

(h)The intervention system is less costly.

Objectives to be Pursued

8. The Commission considers that the market organisation should pursue the following aims

(i)Counteract the cyclical nature of beef production,

(ii)Allow sufficient flexibility in the interplay of supply and demand, and

(iii)Contribute to the restoration of equilibrium in the dairy market and to greater specialisation in beef production.

9. Measures taken in pursuance of the foregoing aims should in the Commission’s opinion (a) apply throughout the Community so as to avoid distortions in competition, (b) enable the market to be managed efficiently, (c) make efficient use of resources, (d) deal with all phases of the production cycle, (e) cope with the relatively high elasticity of demand and (f) benefit producers and consumers equally.

Suggested Changes in Market Organisation

10. The following amendments in the common organisation of the market are proposed by the Commission:—

(a)The intervention price should be fixed below 90 per cent of the guide price (the present intervention price) and the threshold at which buying in should cease (currently when market prices reach 95 per cent of the guide price) should be lowered.

(b)Private storage aids would be available when market prices fall below 93 per cent of the guide price.

(c)A variable premium, covering the difference between 90 per cent of the guide price and the Community market price but limited to 10 per cent of the guide price, would be paid on the slaughter of eligible cattle when the Community market price falls below 90 per cent of the guide price. When the Community market price is over 90 per cent of the guide price, payment of premium would be suspended. However, in an individual Member State where the market price deviates considerably from the average market price in the Community, payment of the premium could be suspended or maintained. The part of the premium which exceeds the difference between 90 per cent of the guide price and the intervention price would be deducted from the buying price in the case of eligible animals. The premium would be financed entirely from EAGGF.

(d)When market prices are above the guide price and on the increase slaughter premiums for dairy cows and/or heifers would be introduced.

(e)In the case of imports from third countries the existing levy system would be maintained. In addition, the common customs tariff duty would be reduced when the market price exceeds 106 per cent of the guide price and the levy is nil.

(f)Additional measures would be taken when the dairy cow non-marketing premium scheme terminates.

(g)Efficient forecasting of trends would be required and market prices would be recorded on the basis of a Community-wide carcase classification instead of on the prices of live animals.

11. The Commission considers that it is necessary to follow a cautious price policy in order to withstand competition from poultry and pigmeat and to discourage milk production.

Changes in Intervention in 1978/79

12. The Commission has indicated that it would be premature for it to make formal legislative proposals at this stage along the lines of the suggestions in document R/2291/77. However, it has made a formal proposal for a Council Regulation to effect certain changes in the intervention system in 1978/79. The most important of these is a proposed linking of the intervention price with the prices of qualities eligible for intervention. Intervention would be suspended in whole or in part when the price for the quality on question exceeds the maximum buying-in price. The latter would be calculated by multiplying 90 per cent of the guide price by a coefficient expressing the normal relationship between the price for the quality in question and the price of live animals recorded on respective markets, this relationship being adjusted according to the characteristics of each Member State’s production.

Views of the Joint Committee

13. The enormous importance of the beef trade to Ireland makes it essential that Irish producers should be adequately safeguarded. Whatever changes in the common organisation are eventually adopted should not, in the Joint Committee’s view, amount to an overall diminution in the Community support arrangements.

14. The Joint Committee is apprehensive that the Commission’s proposals regarding intervention could have a detrimental effect on Irish producers. Ireland is the largest exporter in the Community and any diminution in the intervention system would increase our dependence on the export trade. Irish beef has not yet succeeded in making any significant penetration of the Continental market. The Joint Committee acknowledges that for the future there must be greater efforts in Ireland to improve quality and bring about more efficient and effective marketing. At this juncture, however, the Joint Committee is totally opposed to any changes in the present arrangements for intervention.

15. The Joint Committee considers that the proposed variable premium system could have positive advantages. However, a good deal would depend on the conditions under which premiums would be payable to Irish producers. Irish prices are consistently below the Community average and until it emerges what precise arrangements there would be for the payment of premiums in such circumstances, it is not possible to assess the overall effect for this country.

Processed Beef Trade

16. Following the devaluation of the Irish green pound when the U.K. green pound was not devalued, beef exports from Ireland to the U.K. qualified for an MCA subsidy to the exporter. However, cooked processed Irish beef products do not qualify for the subsidy. As a result Irish firms have been placed at a serious disadvantage in the British market at a time when they are facing serious competition in the home market from U.K. canners. The Joint Committee believes that the case for removing this anomaly is unanswerable and it trusts that the matter will be rectified as part of this year’s prices packet.

(Signed) MARK CLINTON,

Chairman of the Joint Committee.

19th April, 1978.