Opinion of the Economic and Social Committee on the "Proposal for a Council Regulation on the common organisation of the market in sheepmeat and goatmeat"

(2002/C 36/10)

On 22 May 2001 the Council decided to consult the Economic and Social Committee, under Articles 36 and 37 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 27 September 2001. The rapporteur was Mr de las Heras Cabañas.

At its 385th plenary session of 17 and 18 October 2001 (meeting of 17 October 2001), the Economic and Social Committee adopted the following opinion by 75 votes, with 10 abstentions.

1. Gist of the Commission proposal

1.1. The proposal for a Regulation suggests a number of very important changes to this common market organisation, in particular a new approach regarding aid to the producer. Premiums will no longer go towards reducing or eliminating loss of income by the producer; instead, the producer will be allocated a fixed premium, regardless of developments in each marketing year.

1.2. The main changes are as follows:

1.2.1. Introduce a flat-rate premium of EUR 21 for heavy ewes and EUR 16.8 for light ewes and goats, and maintain the 20 % differentiation between premiums.

1.2.2. Raise the "rural world premium"(1), now called a "supplementary premium", to EUR 7 and remove the differentiation between heavy and light lamb producers. Besides producers in less-favoured areas, farmers who practise transhumance will also be able to apply for this supplementary premium, subject to certain conditions.

1.2.3. Prevent a producer who markets milk and milk products benefiting from the heavy lamb premium, even if he fattens at least 40 % of the lambs born on his holding.

1.2.4. Fix a minimum guaranteed quantity per Member State based on the sum of individual rights in force before the reform.

1.2.5. Maintain private storage aid as an intervention measure.

2. General comments·

Market overview

2.1. External dimension: The EU is approximately 80 % self-sufficient in sheep and goatmeat, with the shortfall being met by imports. Most of these imports attract zero duty. They include 226,700 mt from New Zealand, 23,000 mt from Argentina and 18,650 mt from Australia, which can be used as ceilings. The accession of the eastern European countries will not present a major distortion to the CMO as their production has fallen substantially and they are not consumers of these products, with the exception of Romania and Bulgaria. Current levels of production in each applicant country will be taken into account in the accession process. The countries which could possibly have a greater impact are Bulgaria and Romania as they are the only ones at present which fill their zero-duty export quota to the EU (Romania 8,050 mt and Bulgaria 7,000 mt). Other applicant countries also have quotas but do not use them to the full: Poland 9,200 mt, Hungary 14,832.5 mt, Czech Republic 2,150 mt.·

Situation in the European Union

2.2. Under the current CMO, aid to sheepmeat and goatmeat producers is calculated according to loss of income in each marketing year and market price within the EU. The philosophy behind this aid is fundamental, as the current system compensates sheep and goat producers for loss of purchasing power and income caused by a fall in the market price. The new proposal, however, intends to fix a flat-rate premium of EUR 21 per ewe, regardless of how the sector is performing. The ESC believes that the amount proposed is totally inadequate since it will not enable goat and sheep producers to achieve a fair income compared with other livestock sectors.

2.3. Sheep and goat producers' incomes have fallen over the last decade despite the application of the current CMO. Farmers' incomes in this sector are still below the average income in all other farming sectors. This loss of income was not because the philosophy of compensating for loss of income is not the correct one, but because the measures to implement it are not the most appropriate:

2.3.1. At the moment the base price is calculated annually according to: the market situation during the current year, predicted increases in sheepmeat and goatmeat production and consumption, production costs, the market situation in other farming sectors, in particular the beef and veal sector, and past experience. The base price has not been adjusted since this CMO was approved in 1998; in fact it has not changed since 1993. Sheep and goat farmers' incomes have suffered as a result since this sector has not seen an increase in productivity comparable with that in other sectors, which might have offset at least partially the rise in costs. Far from closing the income gap with other sectors of production, the gap has actually widened.

2.3.2. As to date the base price reduction coefficient of 7 % has stayed the same, the final premium received by the farmer has fallen by approximately 25 %.

2.3.3. If we compare, in euro/LU, the suckler-cow premium and the flat-rate premium proposed by the Commission, we discover that the premium offered to a sheep and goat producer in 2002 will be more than 30 % less than that offered to a suckler-cow producer. Such a comparison is justified because the production method for suckler cows is very similar to that for sheep and goats. Unless this situation is changed, it will be very difficult to bring the income of sheep and goat farmers into line with that of other livestock farmers.

2.4. Preventing loss of income would not be the only effect of properly remunerating this type of production; the industrial and commercial sectors would also benefit as they would be able to work with a product which met a series of requirements which consumers and society in general increasingly insist on.

2.5. The ESC believes that producers of light lambs (i.e. who sell milk) and goatmeat must receive the same premium as producers of heavy lambs. This is the case for the suckler-cow premium, to which farmers are entitled provided that the holding's milk production does not exceed a certain annual quantity established by the Member State. A similar measure is needed for milking ewes so that farmers are not obliged to reduce production in order to receive the premium, which they would receive up to a given number of heads per holding, thus acknowledging the multifunctional nature of these holdings.

2.6. Given the sensitivity of this sector, it is very important that premiums are revised on a regular basis so they can be readjusted according to the situation in the sector. It is not appropriate to set an amount for this premium up until 2006 as this would, again, lead to a downward spiral in producer's incomes.

2.7. Another intervention measure put forward in this proposal is the maintenance of the private storage aid, even though it has had almost no impact whatsoever on the sector to date. In general, this measure accounted for approximately 0.15 % of the sector budget. This is largely due to a self-sufficiency rate of 80 % and to the fact that this sector has not been directly involved in any food crises.

2.8. The introduction of a fixed premium which failed to take account of income loss in each marketing year would place the sector in a very difficult position in the event of a downturn in the market, as the proposed premium does not reflect changes in price. All the recent food crises have provoked a crash in the markets. In addition to the measures put forward in Article 26 of the Commission proposal, a mechanism therefore needs to be drawn up whereby the existing premium is automatically supplemented when the market price falls below a threshold or reference price.

2.9. Further research is needed into introducing a system for the individual identification and registration of animals that allows them to be traced from producer to consumer. This would offer consumers transparency regarding the conditions under which sheep and goat meat is produced and sold; this would in turn have a positive impact on consumption by improving consumer confidence and preventing fraud or scams. In its recent opinions on food safety and traceability, the ESC highlighted the need to extend the introduction of such systems in order to achieve this goal. It therefore attaches importance to the implementation of Directive 92/102/EEC(2) on the identification and registration of animals which takes account of advances in the new technologies to facilitate the identification and registration necessary for full traceability (e.g. electronic identification).

2.10. The ESC proposes that the CMO in sheep- and goatmeat reinforce the role of producers groups in this sector, by offering incentives to breeders who sell their products through such groups. These producers groups could have a beneficial impact on the application of policies for improving product quality, facilitate the traceability of products, promote environmentally friendly practices and improve the prevention of epidemics.·

Rural development

2.11. Although sheepmeat and goatmeat account for a relatively small percentage of total meat production (i.e. 10 % of pigmeat production and 12 % of beef and veal production), they are very important in the predominantly hilly and less-favoured rural areas where they are produced. The ESC would subscribe to this statement by the Commission. Approximately 80 % of the aid requested is concentrated in such areas. The ESC therefore believes that the supplementary premium needs to be raised above the proposed level to encourage producers to stay in such areas.

2.12. Sheep and goat production in less-favoured areas is essential to keeping people in the countryside and thereby preserving a living rural community. The role of sheep and goat producers in society therefore goes far beyond mere production. This system of production helps protect the rural fabric in areas where there is a real threat of depopulation. Population density in such areas of the EU is lower than 80 inhabitants per km2; however, in Mediterranean areas (which account for more than 90 % of goatmeat production and, together with the United Kingdom, more than 80 % of sheepmeat production) population density falls to less than 25 inhabitants per km2. Recognition must be given to the role this sector plays in the demographic structure of these regions by raising the supplementary premium, previously known as the "rural world premium". Other activities in rural areas, such as rural tourism, also depend on sheep and goat breeding.·

Environment

2.13. Protection of the environment is crucial in this type of extensive farming. Consequently sheep and goat producers provide a service to society for which they must be adequately compensated to reflect its high ecological and environmental value. Grazing on scrubland and in hilly areas hinders the spread of forest fires and makes it easier to regenerate woodland without damaging biodiversity. Rational grazing also prevents the erosion, compacting and subsequent degradation of the soil.

2.13.1. Under the system of extensive farming, animals are fed on natural grazing; no substances are therefore used to fatten lambs and kids artificially. Extensive farming therefore offers not only a model of production that respects the surroundings, but also a model for food safety and animal welfare. For this model to continue to be used, producers must be compensated in a way that reflects the important role they play.

2.13.2. If this proposal were adopted as it stands, the current system of production would run a very high risk of being replaced by intensive systems whose main priority is to reduce costs, with scant regard for the objectives described above.

3. Specific comments

3.1. Replacing the current system - whereby premiums are calculated according to loss of income and farmers therefore guaranteed an acceptable income - with a fixed premium has a number of disadvantages. The current system does need to be improved and the imperfections arising from its implementation over previous years corrected. However, it would be very difficult to really compensate farmers for loss of income by way of a fixed premium alone, unless this was sufficiently high and combined with an anti-crisis safety net.

3.2. The introduction of a fixed premium could help reduce bureaucracy and make it easier for the competent authorities to check claims. Premiums would also be easier to calculate and farmers would be able to plan their marketing year in advance. However, despite these advantages, a safety net needs to be created to compensate farmers for loss of income during crisis situations. Fixing a premium without taking account of market contingencies may seriously jeopardise a farmer's final income in such crisis situations.

3.3. The premiums proposed in this reform are insufficient given the current situation in the sheep and goat sector. A level of premiums is needed that allows producers in this sector to earn the same income as producers in other farming sectors and maintain it over time. This will help to achieve the general objective of cohesion policy in disadvantaged rural areas.

3.4. Although the World Trade Organisation does not agree with aid based on prices or production, this must not be used as a pretext for changing the current CMO for sheepmeat and goatmeat. Before any changes are made, an acceptable level of income must be achieved for this type of production.

4. Conclusions

4.1. The ESC believes the sheepmeat and goatmeat sector is very sensitive, due not only to the market situation but also to its relationship with other key issues, such as the environment, rural development, food safety and animal welfare. These are very important values which the Common Agricultural Policy must promote in a much more active and effective manner.

4.2. The ESC therefore considers that, as part of the reform of the CMO for sheepmeat and goatmeat, the fixed premiums proposed by the Commission should be increased, with a corresponding increase in the budget, to reflect the current situation in the sector and to encourage producers to continue in this line of work. Hence they should receive a level of compensation that reflects their role in society.

4.3. In addition, a safety net which automatically compensates producers for loss of income when a crisis occurs should be set up and included in the Council regulation, since the vulnerability of this sector in a crisis situation could lead to the loss of many activities in the rural world with grave repercussions.

Brussels, 17 October 2001.

The President

of the Economic and Social Committee

Göke Frerichs

(1) Aid to producers located in less-favoured areas, as described in Council Regulation (EEC) 3493/90.

(2) OJ L 355 of 5.12.1992 and Commission report on the identification and registration of animals (COM(98) 207 final).