Crisis measures offer cold comfort to EU beef sector

Date: 24/10/1996

IF THE most pessimistic beef market analysts are to be believed, European entrepreneurs should seriously look into investing in cold store technology.

Even before the BSE crisis, forecasters spoke of 1.9 million tonnes of surplus beef in EU storage in ten years' time, as the GATT world trade agreement starts to bite, exports fall and the long-term decline in consumption continues.

But the disastrous collapse in the beef market since the announcement in March of a probable link between the cattle brain disease and its human equivalent has forced them to make radical recalculations.

Participants at a recent international meat conference were told by former senior UK civil servant Geoffrey Hollis that the quantity of beef in the Union's intervention stores could now rise to 7 million tonnes by 2005.

But establishing an accurate up-to-date picture of the gravity of the situation is an almost impossible task.

European Commission officials stress that only half of the 15 member states have so far been able to provide complete balance sheets for the production and trade in meat for 1995, let alone for this year.

However, estimates from the British Meat and Livestock Commission show that by the end of August - five months into the crisis - consumption was still 28&percent; down in Germany, 25&percent; in the UK, 22&percent; in Italy and Spain and 17&percent; in France.

Amazingly, Swedes are eating more beef now than they did in 1995, according to the Liaison Centre for the Meat Processing Industry in the EU (Clitravi). Sweden has proudly defended its tight monitoring system after negotiating a special dispensation in its accession treaty to maintain its unique arrangements.

The difficulty in pinning down precise figures is underlined by projections from German analysts ZMP suggesting that, after its sharp fall, EU consumption is already back up to between 85&percent; and 90&percent; of last year's levels.

Considerable amounts of Union finance have been reallocated to dig beef producers out of trouble, but they remain far from happy, as was underlined by the sight of thousands of Irish farmers taking to the streets during the recent informal ministerial meeting in Killarney.

British farmers complain about the backlog in the slaughter programme for animals over 30 months old. They point out that the delay is forcing them to spend their diminishing cash reserves feeding cattle which no one will ever buy.

If Agriculture Commissioner Franz Fischler has his way, beef farmers will at least enjoy some solidarity from their cereal-growing counterparts.

Plans on the table for the next meeting of agriculture ministers on 28 and 29 October would see cereal aid payments cut by 7&percent; and set-aside compensation slashed by 27&percent; to finance extra help for beef producers.

Fischler's plan is guaranteed a rocky ride. “Why should cereal growers suffer permanent cuts in support to pay for a temporary crisis in another sector?” asks one diplomat.

Despite the scope for other branches of the food industry to gain from the losses suffered by beef producers, the Confederation of the Food and Drink Industries of the EU (CIAA) stresses considerable damage has also been inflicted on the financial results of several of its major member companies.

Among those benefiting from the crisis, the Vegetarian Society in the UK claims 1 million new converts since March, although it has come in for stinging criticism from the Advertising Standards Authority for its attack on farming practices.

Firm statistical evidence is hard to come by, but the consensus in the meat trade is that poultry producers have been the main beneficiary of the misfortunes of beef farmers. However, with the cost of producing chickens continuing to rise, this advantage is unlikely to last.

Sheep products have also fared remarkably well, despite the Commission's decision in July to risk a media backlash by unveiling research suggesting sheep could, under laboratory conditions, contract BSE.

Pig farmers have found it more difficult to cash in, due to high prices caused by expensive feed and tight supplies.

Bizarrely, sales of processed meat products have suffered less than fresh meat, even though it is often the less savoury cuts which find their way into sausages and pies.

“Consumers do not seem to see a link between processed products and cows running around in fields,” says Clitravi's Dirk Dobbelaere.

There is evidently more to the public's eating habits than mere health concerns. Italian consumers are believed to be veering away from higher-priced meat products as they are forced to dig deeper into their pockets to pay taxes aimed at helping the economy fulfil the Maastricht criteria for monetary union.

Despite fears, especially in Germany, that milk could also be a health threat, Commission officials believe that the cheese industry has benefited, too.

Ironically, at the very time the Commission is battling to persuade reluctant governments of the need to reduce catches in EU waters, the fishing industry is another winner from the beef crisis.

The UK Seafish Industry Authority saw a 10&percent; increase in sales in the four weeks following the UK government's announcement. By September, sales remained 8&percent; higher than average for the same period in the previous three years.

“It would be wrong to crow over the problems of the beef industry. We want to focus on the benefits of fish,” stressed an industry expert.

Apart from the beef sector itself, perhaps the greatest single victim of the crisis has been the carefully-planned work programme of the Commission's veterinary department.

Officials have been unable to make any progress whatsoever on a series of measures which are already way behind schedule. Part of the problem lies in staffing levels.

Whereas the UK's agriculture ministry has taken on 70 extra officials since the onset of the crisis, the Commission's veterinary division within the Directorate-General for agriculture (DGVI) has had to make do with just 18 vets.

Perversely, extra staff were only made available with the advent of the European Parliament's committee of inquiry into BSE, in order to pull together the huge volume of documents requested by MEPs.

Officials in DGVI feel particularly bitter at the lack of resources. They claim that while they struggle to make ends meet in Brussels, ten members of the EU's inspection staff are only now establishing the veterinary inspection office outside Dublin, which had been delayed for three years by political wrangling.

The paucity of resources means that the Commission's long-promised Green Paper to simplify the Union's complex raft of food legislation has still not seen the light of day, despite having been promised this spring.

Apart from diverting resources away from work on food policy, the BSE crisis has also raised major questions about how the exercise should proceed.

The original intention was to streamline and simplify legislation. But the crisis in consumer confidence since March has made the Commission acutely aware that liberalisation should not weaken existing safeguards even further.

Low staff numbers have also held up long-running negotiations with the EU's major trading partners and future member states to establish mutual recognition of veterinary inspection standards. There is simply no one to do the work.

In the flurry to persuade anybody to buy its beef, the UK has all but forgotten its high-profile efforts to force through a ban on the practice of rearing calves in veal crates.

“The major reason the dossier has not been pursued is that changing the rules could destabilise an already weak market even further, and leave more surplus beef lying around,” explained a member state official.

But the ban on UK beef exports makes the question largely academic, since it was mainly British pressure which led to the proposals to phase out veal crates by 2008.

Accompanying proposals to improve nutrition of calves raised for veal have also fallen victim to the log-jam in the now infamous Standing Veterinary Committee. Its agenda for the past seven months has been dominated by mad cows.

Whoever the winners and losers are from the BSE crisis, the one thing which is certain to suffer - at least until the turn of the century - is the Union's farming budget.

At a time when EU governments are looking to freeze 1997 spending at 1996 levels, it is now estimated that the beef crisis will cost more than 1 billion ecu every year until the turn of the century.

Unless the Commission can find a credible way of balancing the books, something somewhere will have to give.