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Beef and veal.

European Community (EC) beef production began a cyclical downturn in 1992, and is expected to fall 2.4 percent in 1993. In 1993, consumption and trade are forecast to remain unchanged from the previous year. The EC will face difficulties in disposing of its record intervention stocks. Additional reform measures will be necessary to reduce future dependence on intervention.

EC beef production is forecast to drop 2.4 percent in 1993 to just under 8 million tons. Production fell an estimated 5.7 percent in 1992 as the EC entered a downturn in the cattle cycle. German production, expected to fall 8 percent, will register the largest decline because of the smaller east German herd. Output in France, the second largest EC producer, will fall 3.3 percent. Production is expected to increase slightly in Ireland, the United Kingdom, and Italy.

Beef consumption for 1993 is forecast unchanged at about 7.5 million tons. In recent years, EC beef and veal consumption has been affected by consumer concern about animal diseases such as Bovine Spongiform Encephalopathy (BSE), and illegal hormone use. AcCording to the EC Commission, consumption is trending down. Consumer preferences for white meat and the price competitiveness of pork and poultry have eroded beef's share of total meat consumption. EC per capita beef consumption is 22 kilograms per person, compared with 40 for pork and 19 for poultry.

The recovery of beef producer prices began in early 1992. EC average producer prices were 2.4 percent higher than in 1991 but did not recover to 1990 levels. Lower production should help the continued recovery of beef producer prices in 1993. In the first 5 months of 1993, producer prices were 2.2 percent higher than the same period in the previous year. The beef intervention price was reduced 5 percent in July 1993, which could limit producer price increases in the future.

High beef intervention stocks remained a costly problem for the EC throughout 1992 and in the first half of 1993. EC beef intervention purchases totaled 852,000 tons in 1992 after the normal intervention ceiling was waived. This included normal intervention purchases of 749,000 tons and "safety net" purchases of 103,000 tons. A new record for beef intervention stock levels of 1.13 million tons was reached in March 1993. The Commission's chief goal in the beef reform is to reduce the dependence of beef producers, particularly in Ireland, France, and Germany, on intervention. Given the EC's estimated 106 percent beef self-sufficiency ratio for 1993, and essentially stable consumption, there is little prospect of disposing of intervention stocks on the internal market.

EC Beef Exports Remain Over 1 Million Tons

EC exports of beef are expected to remain above the 1-million-ton mark in 1993. Potential export markets for EC beef will be determined by a number of factors. The former Soviet Union was an important export market in 1992, taking 37 percent of extra-EC beef exports, but continued sales depend on financial and political stability in the region. EC beef stocks could be donated as food aid to the FSU. The EC has agreed not to ship subsidized beef to Asia, especially Japan. The Danish and Irish beef industries had pressured the EC to begin subsidized shipments to Japan. An eventual GATT agreement would also limit subsidized beef exports.

Imports from third countries, forecast at 469,000 tons in 1993, remain basically unchanged from last year. The EC restricted the import of calves for fattening in early 1991. These restrictions mainly affected Central and East European supplier countries, including Poland, Hungary, Bulgaria, and the Czech and Slovak Republics. In April 1993, the EC instituted a ban on imports of beef and other livestock products from these countries, because of a case of foot-and-mouth disease (FMD) traced to Croatia. Poland, Hungary, and the Czech and Slovak Republics opposed the ban as a purely protectionist measure, and instituted a retaliatory ban on EC imports. The bans were eased a month later, but live calf imports from these countries remain subject to a 15-day quarantine period, and must be tested for FMD.

CAP Retorm Reduces Beef Prices, Increases Payments

Common Agricultural Policy (CAP) reform reduces beef intervention prices and increases existing direct payments to producers. The beef intervention price was reduced 5 percent on July 1993, and premiums for suckler cows and male bovines were increased. The number of premiums a producer may receive will be limited by the livestock density or stocking rate on the farm. Those producers with stocking rates above the limit will not receive premiums for all their suckler cows or male bovines. A new deseasonalization premium was introduced to encourage producers to delay slaughter from the traditional autumn period until the spring. EC beef intervention purchases in 1993/94 will be limited to 750,000 tons, and this ceiling will be reduced progressively. The trigger price for opening unlimited safety-net intervention buying was reduced 25 percent to 60 percent of the intervention price. In addition to these measures under the CAP Reform, the Commission decided to introduce a weight limit on carcasses eligible for intervention. Since July 1993, beef carcasses sold into intervention may not exceed 380 kilograms. The weight limit on intervention carcasses will be reduced to 360 kilograms on January 1, 1994, and to 340 kilograms on July 1, 1994. The carcass weight limit will reduce EC expenditures on intervention by reducing the total quantity sold into EC stocks, and discourage use of illegal growth hormones that produce larger animals. The exclusion will apply to higher quality carcasses, in the "U" and "R" conformation classes rather than the lower quality "O" and "P" carcasses. All bull beef from the "O" conformation class was excluded from intervention as part of CAP Reform. By one estimate at least 25 percent of all EC intervention beef in Ireland and France currently would be ineligible for intervention under this change.

The Commission has also placed a restriction on deboning of beef for intervention. Deboning and slaughter may no longer take place at the same location. This requirement will impose additional transport and deboning costs on beef processors, and further discourage their reliance on intervention as a market outlet.

CAP Reform Changes Herds

EC dairy cow numbers declined nearly 5 percent in 1992, continuing the downward trend introduced by the milk quota. The creation of individual quotas for suckler cows resulted in some dairy cows being transferred to suckler herds. The total number of nondairy or other cows, including suckler cows, in the EC increased over 7 percent in 1992, and some member States showed marked increases in suckler cow herds. In The Netherlands, for example, the number of other cows grew 57 percent, and Germany and Belgium registered increases of 27 and 24 percent, respectively. The deseasonalization premium, which effectively is available only to producers in Ireland, has shifted some slaughter out of the traditional September-November period into January-April. The payment is 60 ECU ($82) per head, and resulted in an estimated 33,000 head being carried over the winter for slaughter in the spring.
Table 9.1: 1992 EC beef intervention purchases

Country Normal Safety net Total

 Tons

Belgium 1,951 -- 1,951
Denmark 41,628 615 42,243
Germany 183,107 4,536 187,643
Spain 598 -- 598
France 201,516 -- 201,516
Ireland 169,928 73,622 243,550
Italy 75,253 -- 75,253
Netherlands 918 -- 918
U.K. 32,392 10,302 42,694
Ireland 41,890 13,612 55,502

EC 749,181 102,687 851,868

-- = none or negligible.

Source: Agra Europe.


The stocking rate limitation is not expected to reduce herd sizes. Herds that exceed the stocking rate are not excluded from receiving premiums, although producers will not receive premiums for all their animals. Producers can also reduce their stocking rates by increasing forage area rather than reducing animal numbers. For example, a producer can declare part of his/her wheat area as forage area, although this area would not receive the compensatory payment for grains. Some producers are declaring part of their grain area as forage in order to reduce their stocking rate below 1.4 livestock units/hectare, making them eligible for an additional 30 ECU ($41) per head payment for all qualified animals.

CAP Reform Impact On Beef Unclear

Contradictions in CAP Reform make it difficult to predict the impact on beef production. Although the intervention price will be reduced by 15 percent over 3 years, direct payments to producers have been increased substantially, encouraging them to maintain or expand their herds. The intervention ceilings will be lowered progressively, but even in 1996 the ceiling will be higher than it was before the reform (235,000 tons). The lower trigger price for safety-net intervention could result in significantly lower market prices after the regular intervention limit has been reached. Given the cyclical nature of beef production, however, lower safety net prices may not substantially affect aggregate output.
Table 9.2: EC suckler cows (1/)

 Change
Country 1990 1991 1992 91/92

 Thousand head Percent

Belgium 350 370 460 24.3
Denmark 86 103 119 15.5
France 3,666 3,772 3,912 3.7
Germany 414 379 460 24.3
Greece 95 93 102 9.7
Ireland 680 783 912 46.5
Italy (2/) 475 666 700 5.1
Luxembourg 24 26 26 0.0
Netherlands 55 60 94 56.7
Portugal 206 232 236 1.7
Spain 1,082 1,213 1,275 5.1
U.K. 1,635 1,662 1,731 7.4

EC-12 8,768 9,359 10,050 7.4

1/ Includes nursing, suckler, and beef cows.

2/ Includes 33,000 buffalo in 1990, 31,000 in 1991 and 33,000 in 1992.


The Commission has recognized that the reform agreed to thus far in the beef sector may not be sufficient. The carcass weight limit and deboning restrictions impose further discipline on intervention, and aim to force producers to sell on the market rather than into intervention stores. The Irish and French would be most affected by the carcass weight limitation, and the Irish are directly targeted by the deboning restrictions. Both Ireland and France sell considerable quantities of beef into intervention.

Additional changes to the beef regime are likely to be needed at the end of the 3-year period envisioned by CAP Reform. Agriculture Commissioner Rene Steichen has already indicated that area payments could replace headage payments in the beef sector. The diversity of production methods in the EC--ranging from intensive fattening operations in The Netherlands and Belgium to extensive grass-based systems in Ireland--make a single reform program inappropriate for resolving the problems in the EC's beef market.

References

Agra Europe, Ltd. Agra Europe. London. Various issues.

EPA Associates. The EC Animal Feed Sector, 1993-1998. Agra Europe Special Report, No. 68. Agra Europe Ltd. London. January 1993.

Commission of the European Communities. The Agricultural Situation in the Community. Brussels. Various years.

Madell, Mary Lisa. CAP Reform: A New Era for EC Agriculture. U.S. Department of Agriculture. Economic Research Service. Agricultural Information Bulletin, No. 674. June 1993.

USDA, Foreign Agricultural Service. World Livestock Situation, various issues.
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Title Annotation:EC beef production
Author:Brent, C. Philip; Madell, Mary Lisa
Publication:Frozen Food Digest
Date:Feb 1, 1994
Words:1860
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