2000/760/EC: Commission Decision of 30 May 2000 on aid measures put in place by the Irish authorities to alleviate the situation of livestock farmers whose production was affected by adverse weather conditions in summer and autumn 1998 (notified under document number C(2000) 1604) (Text with EEA relevance) (Only the English text is authentic)
Date: 2000-05-30
Institutions: European Commission
Subjects: EU financing, State aid, aid system, atmospheric conditions, control of State aid, fodder

6.12.2000

EN

Official Journal of the European Communities

L 305/11

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 30 May 2000

on aid measures put in place by the Irish authorities to alleviate the situation of livestock farmers
whose production was affected by adverse weather conditions in summer and autumn 1998

(notified under document number C(2000) 1604)

(Only the English text is authentic)

(Text with EEA relevance)

(2000/760/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to Council Regulation (EC) No 2467/98 of 3
November 1998 on the common organisation of the market in
sheepmeat and goatmeat (1), and in particular Article 22
thereof;

Having called on interested parties to submit their comments
pursuant to the provision cited above (2),

Whereas:

I. PROCEDURE

(1)

Ireland forwarded a notification of an aid measure (Ewe
Supplementary Measure) pursuant to Article 88(3) of the
Treaty on 2 December 1998 in reply to a letter from the
Commission of 26 November 1998 asking for informa-
tion about a scheme, of which the Commission had
learned through information in the public domain. The
aid was registered on 9 December 1998 under the State
aid N 678/98.

(1) OJ L 312, 20.11.1998, p. 1.
(2) OJ C 280, 2.10.1999, p. 12.

(3)

(4)

By letters of 12 February 1999 and 14 April 1999 the
Irish authorities submitted additional
information in
relation to that aid scheme. In their letter of 12 February
1999 they confirmed that the measure had been put
into effect before the Commission had submitted its
comments under Article 88(3) of the Treaty. The aid was
consequently transferred to the register of non-notified
aids as NN 23/99.

By letter of 11 February 1999, registered on 18 February
1999, the Irish authorities notified a further aid scheme
under the title Assistance for Winter Fodder Losses
(February 1999) under Article 88(3) of the Treaty. Addi-
tional information was submitted by letter of 29 April
1999, registered on 3 May 1999. In the letter the Irish
authorities confirmed that the aid had been put into
effect. The aid was consequently transferred to the
register of non-notified aids as NN 79/99.

In view of the fact that both measures were intended to
support Irish livestock producers against losses resulting
from adverse weather conditions in the summer and
autumn of 1998, and since it appeared that certain
the
producers could benefit under both measures,
Commission considered that
it was appropriate to
examine the two dossiers jointly within the framework
of a single procedure. By letter of 30 July 1999 the
Commission informed Ireland that it had decided not to
raise objections against the additional winter fodder aid,

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which is the first submeasure of the Ewe Supplementary
Measure (NN 23/99), and to the top-up payments to
certain beneficiaries under N 605/98, which is the
second submeasure under the Scheme of Assistance for
Winter Fodder Losses (aid NN 79/99).

By that same letter, however, the Irish authorities were
informed that the Commission had decided to open the
investigation procedure under Article 88(2) of
formal
in respect of the second submeasure (ewe
the Treaty,
premium) of the Ewe Supplementary Measure (NN 23/
99) and the first submeasure (new beneficiaries) and
third submeasure (Special Fodder Hardship Fund) of the
Scheme of Assistance for Winter Fodder Losses. The
procedure also covered certain of the beneficiaries under
the second submeasure (top-up payments to beneficia-
ries under N605/98),
in so far as it concerns aid to
suckler-cow and small dairy-cow farmers (NN 79/99).

as 75 % of production exported. For 1998 as a whole,
the average price of lambs in Ireland was 19 % below
that of the previous year.

(13)

The situation reached crisis point by mid-autumn when
lamb processing plants ceased accepting cull ewes or
light mountain lambs even from their traditional local
farmer suppliers. In addition, during the 1998 growing
season, severe wet weather and below average sunshine
resulted in difficulties in saving adequate winter feed for
animals. The situation was acute in some areas, particu-
larly on peaty or heavy clay soils, and conditions were
so poor that a large proportion of winter fodder could
not be harvested due to ground conditions.

The decision to initiate the procedure was published in
the Official Journal of the European Communities (3). The
Commission called upon interested parties to submit
their comments.

(14)

The Irish authorities submitted their comments on the
questions raised by the Commission in their letter of 3
September 1999, registered on 6 September 1999.

Bilateral meetings between the Irish authorities and
representatives of the Commission took place on 20 and
27 September 1999.

information concerning the Special
Further additional
Fodder Hardship Fund and the ewe premium was
submitted by letters of 13 October 1999 (registered on
14 October 1999) and of 3 January 2000 (registered on
6 January 2000) respectively.

(15)

II. DESCRIPTION

NN 23/99 — EWE SUPPLEMENTARY MEASURE

The notified aid consisted of two distinct measures in
the sheepmeat sector, the additional winter fodder aid
and the ewe premium. As the additional winter fodder
aid has already been approved by the Commission, the
description and assessment deal with the ewe premium
only.

In their notification the Irish authorities explained the
economic background underlying their decision to intro-
duce a disposal scheme for ewes which otherwise would
not have a sufficient commercial value to be sold to
slaughterers.

Farmers using commonage land, where no single owner
takes action to protect
the vulnerable grazing, were
regarded as being at risk in the event of a fodder
shortage. The welfare of sheep on these grazing lands
was of particular concern, as producers with cull ewes
which could not be slaughtered, had no option but to
return these animals to an already fragile environment
where supply of grazing was not adequate to meet the
need. The scheme was consequently confined to moun-
tain sheep farmers operating in the areas designated, that
is mountain commonage in six western counties of
Ireland (4). Total expenditure under the scheme was
about IEP 1 million (EUR 1,27 million).

The scheme provided slaughter
facilities to remove
about 100 000 cull mountain ewes from mountain
commonage land in six western counties of Ireland. The
Department of Agriculture and Food made payments to
sheep slaughter plants to provide slaughter facilities in
the case of two categories of ewes which would not have
had a sufficient commercial value to cover the slaughter
involved. Assistance was only
and handling costs
provided in respect of
the disposal of ewes during
November and December 1998. Approximately 12 meat
plants participated. The question of participation was a
matter of choice for plant management. The payment
was:

— IEP 10 (EUR 12,7)

in the case of condemned
animals which would not have any commercial
value,

— IEP 3 (EUR 3,8)

in the case of ewes suitable for
boning (boner ewes) which would yield a limited
value to plants in terms of the meat harvested.

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12) During autumn 1998, availability of competitively
priced pork, chicken and beef depressed the lamb
market in many of the main European markets. The
impact was especially acute in Ireland because of the
extent of dependence on export markets, with as much

(16)

The number of ewes to be disposed of by each producer
amounted to 30 % of
the producers individual ewe
quota. The producers were allowed to choose which
ewes in their flocks to dispose of.

(3) See footnote 2.

(4) Donegal, Sligo, Leitrim, Mayo, Galway and Kerry.

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(17) According to the Irish authorities'

letter of 14 April
1999 the aid of IEP 3 per animal enabled the meat
plants to enable to dispose of 35 300 boner ewes. This
amount covered the cost of disposal of soft offal and
heads as specified risk material to an approved rendering
plant, as well as the cost of disposal of skins. These costs
are normally borne by the meat plant and are indeed
passed on to the producer in terms of an in-built deduc-
tion in the price of the lamb. For these animals the
question of payment was
for negotiation between
producer and plant, and according to the Irish authori-
ties only token sums were paid.

steps necessary to minimise the effects of the measure
on competition.

(22)

Finally,
the Commission expressed doubts as to the
compatibility of the ewe premium aid measure with the
common market organisation of
sheepmeat. The
measure might have constituted an alternative interven-
tion mechanism liable to interfere with the provisions of
the common market organisation. If these doubts were
the aid would have been found to be
confirmed,
contrary to the Treaty.

(18) Meat from the animals purchased by meat plants, under
this arrangement, was sold for human consumption,
subject to the normal conditions of health, hygiene and
safety, which apply to all meat handled by these plants.
The predominant commercial outlet
from
boner ewes is supply to the catering trade. This meat is
suitable for use as burgers, kebabs, ethnic dishes, etc.
The quantity of meat yield in this case was about 150
tonnes in total and this meat found sale through the
domestic festive food-service industry in December
1998.

for meat

(19)

specified risk material.

The aid paid to factories was expected to cover the costs
that arise from killing, processing and handling the
animal. Because the animals involved were over one year
old there was a considerable cost associated with the
disposal of
In the case of
carcasses which had to be completely condemned, to
minimise risk to the human food chain, factories were
directed to dispose of the whole carcass as specific risk
material. The fee agreed by the Department was
intended to cover
associated with
condemned ewes but in the case of the second category,
boner ewes,
the fee paid by the Department would
represent only a contribution of the costs involved. The
balance was to be contributed by the producer in terms
of carcass meat value.

cost

full

the

(20) After studying the data provided, the Commission had
doubts whether Article 87(2)(b) of the Treaty, according
to which Member States may grant aid compensating for
damages due to exceptional occurrences, could be
applied to the present case. Indeed the measure appeared
to counteract problems that were due to an economic
downturn in the sector rather than being the appropriate
response to the winter fodder problem caused by excep-
tionally adverse weather conditions.

(21)

Furthermore, by permitting the meat obtained from
boner ewes to be sold on for human consumption, and
thus compete in the market place with other meat,
whose slaughter costs have not been subsidised,
it
appears that the Irish authorities have failed to take the

NN 79/99 — SCHEME OF ASSISTANCE FOR WINTER
FODDER LOSSES

(23)

This scheme provided for three submeasures directed at
different groups of beneficiaries. Only the second
submeasure, which provided for top-up payments to
beneficiaries under N 605/98 has so far been approved
by the Commission in so far as it concerns aid for sheep
farmers benefiting from the submeasure. The procedure
had been opened in respect of submeasure 1 (new bene-
ficiaries), submeasure 3 (Special Fodder Hardship Fund)
and part of the beneficaries under submeasure 2 (top-up
payments). The budget for submeasures 1 and 2 in total
amounted to EUR 25,4 million, while EUR 635 000
was foreseen for submeasure 3.

New beneficiaries

(24) Aid under this title extended the circle of beneficiaries
under N 605/98 to farmers who sustained winter
fodder losses but did not receive aid under N 605/98 as
they were not situated in those areas of the less-favoured
areas identified as worst affected by the Agricultural
Advisory Training and Research Body (Teagasc) survey
of September 1998. In their notification of the N 605/
98 scheme the Irish authorities had assumed that while
all holdings in less-favoured areas were affected by the
wet weather the farmers in the areas which were not
considered to be seriously affected should be in a better
position to cope with losses. However, a further Teagasc
report prepared in January 1999 showed that the situa-
tion in the less-favoured areas had deteriorated signifi-
cantly and therefore the Irish authorities decided to
make aid also available to producers situated in those
areas which initially were deemed to be less seriously
affected.

(25)

Payment rates were the same as in N 605/98. For sheep
farmers with mountain ewes they were set at EUR 5,08
(IEP 4) per ewe or hogget up to 75 head, for suckler
cow farmers at EUR 50,79 (IEP 40) per suckler cow up
to a ceiling of EUR 380 (IEP 300) equivalent to 7,5
cows and for small-scale dairy farmers (up to 35 000
gallons milk quota) at EUR 38,01 (IEP 30) per 1 000
gallons milk up to 10 000 gallons. In excess of 40 000
farmers were in this category.

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(26)

The formal procedure of investigation was opened in
respect of this measure as the Commission had doubts
whether all recipients of aid under this submeasure were
using extensive farming methods.
Intensive farming
indeed would mean that farmers to a significant extent
could have relied on in-bought fodder and animal food-
stuffs, and as such would have suffered less from winter
fodder production deficits caused by adverse weather
conditions.

Top-up payments to beneficiaries under N605/98.

(27)

In recognition of the fact that farmers who had already
received support under N 605/98 were located in the
worst affected areas, a 50 % top-up payment was made
available to them. The Agricultural Inspectorate of the
Department in association with local Teagasc officials
listed the worst affected areas by District Electoral Divi-
sion (DED). There were 45 000 farmers in this category.

(28)

In the following the top-up premiums and the resulting
total premiums are listed:

— EUR 2,5 per ewe or hogget up to 75 head for sheep
farmers with mountain ewes leading to an overall
grant of EUR 7,5 per animal,

— EUR 25,4 per suckler-cow up to a ceiling of 7,5
cows for suckler-cow farmers leading to a total grant
of EUR 76,19 per animal,

— EUR 19 per 1 000 gallons up to 10 000 gallons for
small scale dairy farmers leading to a total grant of
EUR 57 per 1 000 gallons.

safety mechanism which consists

in paying
the
compensation for up to 7,5 cow units when the average
suckler cow herd in Ireland is over 12 cows would also
apply. The Irish authorities were therefore of the opinion
that the question of overcompensation did not arise.

(32) However, the Irish authorities had not submitted appro-
priate evidence which would demonstrate that
the
average level of winter fodder losses of the producers
concerned reached 50 % or more. Indeed, the January
1999 Teagasc report they referred to speaks of losses of
20 % to 50 %. Since the correspondence of damages and
compensation had so far not been demonstrated in a
satisfactory manner the Commission was bound to emit
doubts as to measure's compatibility with the common
market under Article 87(2)(b) of the Treaty.

(33)

to further

explain the

In the same context the Commission also invited the
Irish authorities
argument
presented in point 3 of their letter of 29 April 1999 to
the effect that farmers with suckler cows would have
experienced grazing and fodder losses not only for their
cows but also for the progeny of these cows and that
compensation had therefore also to be available for
these weanlings. Prima facie this approach seems incon-
gruous with the concept of compensation of losses in
fodder production as compensation would not be estab-
lished in accordance with fodder production in normal
years but in relation to the current number of animals in
the stock and their
requirements. Such an
fodder
approach would allow for aid relieving the producer of
day to day expenses and would be incompatible with the
concept underlying Article 87(2)(b) of the Treaty.

(29)

(30)

From its initial assessment the Commission concluded
that there was no risk of overcompensation in respect of
the sheep producers, as it was established that the addi-
tional costs of bought-in fodder for sustaining the sheep
and hoggets through the winter amounted to an average
of EUR 29,20 (IEP 23) per ewe for the producers
concerned, compared to a total premium Level of
EUR 20,32 (IEP 4 + IEP 10 + IEP 2).

(34)

Suckler-cow producers are the main group of beneficia-
ries with 80 % of the aid being expected to be paid to
them. As the costs for food per cow in winter in Ireland
were EUR 152, an overall grant of EUR 76 corresponds
to an aid rate of 50 %. Assuming that sucklercow produ-
cers in normal years do not buy in fodder — the Irish
authorities have confirmed this by letter of 29 October
1998 in the context of State aid N 605/98 — in order
to exclude overcompensation they ought to have conse-
quently sustained losses of winter fodder of 50 % and
more.

The Special Fodder Hardship Fund

In addition a Special Fodder Hardship Fund (SFHF) was
operated for a small number of farmers who had not
qualified for aid in 1998 and who would not qualify for
aid under the first submeasure (see section II.2.1) of the
present scheme. The objective was to grant aid to
farmers almost totally dependent on a relatively small
farm enterprise as a source of income. Severe fodder
shortage had to be demonstrated by each applicant and
certified by a Teagasc advisor. Farmers were only
accepted into the scheme if
the fodder shortage in
comparison to the quantities needed to sustain the herd
until turnout to grass in spring was found to be in
excess of 50 %, and if they also fulfilled the other criteria
for eligibility.

(31) According to the Irish authorities (point 3 of the letter
of 29 April 1999), the actual
losses of winter fodder
were considerably in excess of those originally estimated
by the Teagasc surveys in September 1998 and January
1999 which found the losses to be between 20 % and
50 % of normal winter fodder production. Furthermore

(35)

In their letter of 29 April 1999 the Irish authorities had
further described the conditions under which aid had
been granted under the SFHF. From the terms of refer-
ence of the SFHF there was no indication that grants
under the measure had been conditional on or in
proportion to losses of winter
fodder due to wet
weather.

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(36)

The Commission therefore considered that this measure
might have constituted an operating aid that would have
to be considered to be incompatible with the common
market. In particular it seemed that Article 87(2)(b) of
the Treaty would not be applicable.

Market returns: 4 kgs of meat at 90 pence/kg:

IEP 3,60

Ewe Premium:

Balance:

IEP 3,00

IEP 6,03

III. COMMENTS FROM INTERESTED PARTIES

(40)

(37) No comments were received from interested parties
following the publication of the notice in the Official
Journal.

IV. COMMENTS FROM IRELAND

NN 23/99 — EWE SUPPLEMENTARY MEASURE

The Irish authorities stress that low meat yield and poor
quality rather than market factors discouraged plants
from buying cull ewes. This was substantiated by the
data related to the plant profit/loss balance obtained by
the participating abattoirs in 1998, which should be
considered in relation to the profit/loss balance for cull
ewes in good condition in normal years.

(38)

(39)

In 1998, very many of the animals offered through the
Ewe Supplementary Measure were in very poor condi-
tion. 76 000 animals were condemned and yielded no
meat. The total net profit on these animals for the
participating abattoirs was 76 000 × IEP 1,41 =
IEP 107 160. A total of 35 000 ewes went for boning.
The net loss on these animals was 35 000 × IEP 6,03 =
IEP 211 050. The measure as a whole thus ended up
with a negative balance for the participating slaughter-
houses of IEP 103 890.

(41) According to information in the letter of 3 September
1999, two thirds of the culled animals were condemned
by veterinary Department staff as unfit
for human
consumption, mainly due to poor physical condition
and emaciation, and disposed of through the rendering
plant. In the case of animals that were condemned, the
factory made no payment to the producer.

The following breakdown of costs incurred and market
returns received by the abattoirs participating in the
scheme in late 1998 was submitted (expressed in Irish
pounds per animal). The data originate from the Irish
Meat Association and were reviewed by the Irish author-
ities.

(42)

In the case of condemned ewes:

Cost:

Transport:

SRM disposal:

Skin disposal:

Negative offal credit:

IEP 1

IEP 1

IEP 0

IEP 1

Levies (Board Bia and meat inspection)

IEP 0,59

(43)

Killing costs (wages, overheads, variable costs, etc.) IEP 4

Administrative costs:

IEP 1

Total costs for delivery, slaughter and handling: IEP 8,59

Ewe premium:

Balance:

IEP 10,00

IEP 1,41

In the case of boner ewes:

(44)

Cost:

Payment to producer:

Delivery, slaughter and handling

Deboning:

Packing, freezing, storage:

Disposal of bone:

0

IEP 8,59

IEP 3,00

IEP 0,70

IEP 0,34

Total
boning:

for

delivery,

slaughter,

handling

and
IEP 12,63

In normal market circumstances a good quality ewe in
satisfactory condition might be expected to command a
producer price of IEP 1,10/kg, with an average weight
of 16 kg. The normal expected meat yield of such an
animal would be approximately 9,3 kg of useable
product and plants would need to command a price
from retailers of at least IEP 3,25/kg to allow a break-
even situation. It is stated that retail return in excess of
this amount would be the norm for satisfactory quality
ewe meat. This leads to IEP 30,23 at
the cost side
(IEP 12,63 for delivery, slaughter, handling and boning,
plus IEP 17,6 paid to the producer), against IEP 30,23
as a return for the meat sold.

The 150 tonnes of meat yielded from the boner ewes
constitutes 0,177 percent of the volume of the sheep
meat market which, according to the official figures of
the Central Statistics Office, totals 84 000 tonnes. The
Irish authorities claim that this minute market share was
not capable of influencing market prices or flows.

they attached a table of

To underpin this statement, and to demonstrate that the
cull measure had no measurable effect on the market for
Irish sheepmeat
sheepmeat,
prices for a four-year period. From this table it appears
that there was no lift in market prices at the time of, or
immediately following the measure. They remained at a
stable very low level until mid-February, when the spring
lambs came on the market. Demonstrably there was no
artificial increase in the value of the remaining sheep as
a result of the measure. As such it is claimed that the
measure did not interfere with the market organisation
for sheepmeat, one of the aims of which is a price-regu-
lating mechanism.

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(45)

(46)

(47)

(48)

It is stressed that, if market intervention had been the
objective,
it would have been necessary to open the
measure to the 48 000 sheep farmers in Ireland and to
provide aid in respect of the one million sheep and
lambs slaughtered between October and December 1998
in Ireland. Instead the measure was limited to 4 564
producers in six western counties who depended on
commonage grazing and therefore faced the most severe
problems in terms of
fodder shortage. The animals
which were the subject of the measure were low-grade
and low-value cull ewes, a by-product of lamb produc-
tion, not commercial, meat-producing lambs.

New beneficiaries

In their letter of 3 September 1999, the authorities
stressed that the recipients of aid were all engaged in
extensive production, which means cattle and sheep are
grazed on their holdings for most of the calendar year.
These farmers save their own winter fodder require-
ments during the summer period for feeding the animals
during the winter. This is further substantiated by the
fact that over 90 % of the applicants who were paid
suckler-cow premia in disadvantaged areas (the area
where this measure applied) qualified for extensification
payments.

Top-up payments to beneficiaries under N 605/99

In their letter of 3 September the Irish authorities under-
lined that the shortfall of 20 to 50 % mentioned in the
Teagasc surveys of September 1998 and January 1999
referred to the quantity of winter fodder produced. This
fodder unfortunately was in general of very poor quality
with a dry matter digestibility (DMD) two to five units
lower that normal. Silage dry matter was significantly
lower as well. The preservation of baled silage was vari-
able due to the high moisture content and soil contami-
nation. They concluded that while Teagasc reported a
general shortfall of 20 to 50 % in quantity terms, when
quality deterioration in the available supplies was taken
into account, the losses in general were much higher.

(49)

The following calculations were made:

The fodder cost of overwintering 1 LU is EUR 152,4
(data provided in the context of N 605/99). The fodder
cost of overwintering 29 LU is EUR 4 419. A fodder
shortage of 20 % therefore corresponds to a financial
deficit of (4 419 × 0,2 =) EUR 883,8 for the average
herd. Knowing that the maximum premium (the top-up
inclusive)
to a
compensation of 65 % of the losses incurred. Where
farmers incurred a 50 % fodder deficit, the financial loss
is EUR 2 209,5 and the aid rate accounts for 26 % of
the direct losses.

is EUR 571,4,

situation leads

this

(50)

(51)

Further data were provided in relation to the usage of
feed compounds by the cattle sector in the September
quarter of 1998, of which it is indicated that it was 54 %
up compared with 1997. This also indicates the serious-
ness of the fodder crisis and in particular points at the
poor quality of the fodder saved and the need to supple-
ment it with richer types of nutrition.

The CSO December livestock census of 1998 revealed
that total cattle numbers had gone up by 1,4 % and
sheep numbers had gone down by 0,2 % relative to
1997. This should satisfy the Commission that increased
livestock numbers did not significantly contribute to the
fodder crisis.

The Special Fodder Hardship Fund

(52)

The letter of 3 September 1999 provides further details
on the fodder deficit profile of the applicants that were
accepted under the scheme.

Deficit
(%)

Number of cases

Cases
(%)

>50-60

>60-70

>70-80

>80-90

>90-100

410

284

225

229

665

22,6

15,7

12,4

12,6

36,7

In reply to the doubts expressed in paraghaph 73 of the
decision to initiate the procedure, it was explained that
indeed both suckler-cow producers and small dairy
farmers have to maintain a number of other lifestock on
their farm, which also, under the extensive farming prac-
tices of the western counties concerned, largely depend
on winter fodder that was saved on the farm. According
to Teagasc data, the average number of 12 suckler cows
on a farm corresponds with a total stock held on the
farm of 29 livestock units (LU).

Total: 1 813

Total: 100

Weighted average deficit: 77,5 %

Of 1 813 applicants having a fodder deficit of over
50 %, only 1 417 actually received payments, which
should illustrate how strict the requirements for eligi-
bility under this submeasure were interpreted.

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(53)

(54)

The letter of 13 October 1999 addresses the concern of
the Commission that aid was given on the basis of an
established shortage of winter fodder rather than on the
basis of production deficits. To quantify the actual
fodder deficit under the SFHF the number of days from
5 March to turn-out to grass (taken as 15 April) was
taken to be 42 days. As the total over-wintering period
was 150 days, this gives an average fodder shortage of
21,7 % throughout
the entire over-wintering period
(42÷150 × 77,5 % = 21,7 %). This is a general underes-
the whole
the shortage, as throughout
timation of
period farmers had been making great efforts to restrict
fodder feeding to animals and used all available means,
including supplementation with concentrate feed,
to
extend the availability of fodder. This general restriction
of access to feed was evident at the time of inspection
from the general body condition of the animals. The
Teagasc fodder survey dated 12 August 1998 reported a
fodder shortage of 20 % to 50 % and the figure of
21,7 % for the SFHF is compatible with the range of the
reported shortage for the general fodder scheme.

V. ASSESSMENT

The measures covered by this Decision concern support
for livestock farmers, in particular producers of ovines
and bovines. Production and trade in sheepmeat are
covered by Council Regulation (EC) No 2467/98. Article
22 of that Regulation stipulates that, save as otherwise
provided in the Regulation, Articles 87, 88 and 89 of
the Treaty apply to the products covered by it. Analo-
gous provisions are laid down by Article 24 of Council
Regulation (EEC) No 805/68 of the Council of 27 June
1968 on the common organisation of the market in
beef and veal (5). The measures concerned are therefore
covered by the rules laid down in Articles 87 to 89 of
the Treaty, subject to any contrary provisions in the
regulations governing the common organisations of the
market.

(55)

that

The Irish authorities have confirmed in the framework
of aid N 605/98 (6)
the fodder losses incurred
exceeded the minimum intensity of normally 30 %,
reduced to 20 % in the case of the less favoured areas, in
comparison with an average year (calculated on the basis
of average production in the three years preceding the
year in which the damage took place).

NN 23/99 — EWE SUPPLEMENTARY MEASURE

Existence of aid (Article 87(1) of the Treaty)

(56)

The Commission considers that the measure in question
clearly constitutes aid within the meaning of Article
87(1) of the Treaty. The payments in question were
made by the Irish authorities directly to sheep slaughter
plants in Ireland. However, those slaughterhouses are

(5) OJ L 165, 16.7.1968, p. 8.
(6) Aid N 605/98 was authorised by letter SG(98)D/11410 of 8

December 1998.

not the primary economic beneficiaries of the aid as the
payments were granted in return for the service of
killing, processing and handling of the animals which
the Irish authorities wished to dispose of. The measure
benefits the producers of ewes who have no normal
market outlets for their animals and who would incur
costs if they had to continue feeding them, or arrange
for the slaughter of the animals at their own expense. By
virtue of the measure, sheep which otherwise did not
have a sufficient commercial value can be put to the
market at competitive prices.

(57)

Therefore the measure concerning the slaughter and
disposal of over 100 000 ewes may threaten to distort
the competition on the relevant market as it confers a
gratuitous advantage on the beneficiaries. Such a unilat-
eral measure by a Member State in a market which,
according to the Irish authorities themselves, was seri-
ously depressed and which, on the other hand, is highly
integrated at Community level, and where substantial
intra-Community trade takes place, must be considered
to affect trading conditions among Member States. In
their comments to the Commission, the Irish authorities
themselves recognise that the Irish livestock sector, in
particular
the sheep and cattle sectors are highly
dependent on exports to other Member States, with as
much of 75 % of production being exported.

(58)

The prohibition in Article 87(1) of the Treaty is followed
by exceptions in Article 87 paragraphs 2 and 3.

Article 87(2) of the Treaty

(59)

The exceptions in Article 87(2)(a) (aid of a social char-
acter granted to individual consumers) and Article
87(2)(c) (aid to compensate for the economic disadva-
tages of the division of Germany) are manifestly inap-
plicable to the present case.

(60) Under Article 87(2)(b) of the Treaty, aid to make good
the damage caused by natural disasters and exceptional
occurrences is compatible with the common market. In
contrast to the case of the measures to compensate for
fodder losses,
in their notification and in their subse-
quent comments, the Irish authorities have not specifi-
cally invoked Article 87(2)(b) as the basis for the ewe
premium. Indeed, in their written comments the Irish
authorities explain that a number of factors coincided in
the autumn and winter of 1998 which brought to a
crisis the situation of the sheep producers, in particular
the shortage of grazing due to bad weather conditions
leading to under-nourishment of livestock, the welfare

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6.12.2000

that

and environmental risks resulting from large-scale star-
vation of animals and the fact
the traditional
channel for the disposal of cull ewes had been squeezed
out by the depressed market situation. At the same time,
the costs of slaughter and disposal of the animals were
increased as a result of the need to treat the carcasses as
specified risk material. The slaughterhouses were there-
fore unwilling to assume the cost of slaughter and
disposal of animals which were considered unfit for
human consumption. In addition to these factors, which
are explicitly cited by the Irish authorities, the Commis-
sion is aware, from the information provided by the
Irish authorities in connection with other aid files, that
there is a problem of the long-term over-grazing of
the six counties
sheep in the commonage areas of
concerned which have caused the Irish authorities to
propose additional aid measures to reduce stocking
densities.

(61)

In these circumstances the Commission considers that it
is not possible to establish a sufficiently direct causal
link between the adverse event, excessive rainfall, and
the aid to dispose of excess numbers of cull ewes in
order to permit the application of Article 87(2)(b) in the
present case. Moreover,
this difficulty appears to be
recognised by the Irish authorities since they themselves
suggest that the compatibility of this measure with the
Treaty should be assessed on the basis of Article
87(3)(c).

Article 87(3)(c) of the Treaty

(62) Under Article 87(3)(c) of the Treaty, aid to facilitate the
development of certain economic activities or of certain
economic areas, where such aid does not adversely affect
trading conditions to an extent contrary to the common
interest, may, by way of derogation, be considered to be
compatible with the common market.

(63)

In its decision to open the procedure, the Commission
doubted that the present measure could be considered to
bring about structural improvements in the beneficiaries'
holdings thereby facilitating the development of
the
sector as a whole. In reply, the Irish authorities have
provided extensive information about the background to
the measure which makes it possible to resolve these
doubts.

(64)

In their initial submission, the Irish authorities mainly
advanced four arguments to justify the measure: (a) the
measure was necessary due to the depressed state of the
market, (b) it was justified on animal welfare grounds, (c)
it was necessary on environmental grounds, and (d) it

was necessary to offset the additional costs resulting
from the need to dispose of specified risk material. In
opening the procedure, the Commission doubted that
arguments related to the general state of the market or
arguments related to the costs of specified risk material
could be invoked to justify the aid. It also invited the
Irish authorities to provide additional
information on
the welfare and environmental aspects of the aid.

(65)

(66)

(67)

The Irish authorities explain that in a normal year, sheep
producers cull between 20 % and 25 % of their animals,
and that a good quality ewe will yield a return of an
average of IEP 30,23 (7) of which IEP 17,60 will be paid
to the producer and IEP 12,63 will cover the slaughter,
handling and boning costs of the plant. The costs of
slaughtering and disposing of poor grade animals which
cannot be used to obtain meat for human consumption
will be met by the plant as part of its normal operating
costs.

In the autumn of 1998, the number of animals needing
to be culled was unusually high (30 %). Moreover, the
quality of cull ewes was exceptionally poor. This is
confirmed by the fact
the 111 000 animals
that of
selected for culling under the scheme, 76 000 were
immediately condemned as unfit for human consump-
tion. The remaining 35 000 yielded an average of just
4 kg of meat which commanded a price of IEP 0,90/kg,
yielding just IEP 3,60 per animal as opposed to costs of
IEP 12,63. Thus the plants were not willing to accept
cull ewes. Those figures clearly show that premiums of
IEP 3 and IEP 10 per animal
slaughtered cannot
possibly exceed the losses incurred by the farmers, who
are to be considered as the true beneficiaries of the
measure.

In this situation, the producers would have turned the
animals out to over-winter on the commonages. In view
of the poor quality of the grazing, and the poor condi-
tion of
the animals themselves, a large number of
animals would simply have starved. In this context, the
Irish authorities explain that
the high numbers of
animals condemned as unfit for consumption at the
slaughter plants can also been taken as an indicator of
the very poor survival prospects for the animals. The
prospect of large-scale starvation of animals was unac-
ceptable from a welfare point of view. The potential
presence of large numbers of decaying fallen livestock
scattered across the countryside in the six counties
concerned was also considered unacceptable from an
the animals
environmental point of view. Moreover,
would have inflicted further long-term damage on what
grazing did remain.

(7) Based on a return of 9,3 kg of usable meat at a wholesaler price of

IEP 3,25/kg.

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L 305/19

(68)

(69)

the Commission
those explanations,
In the light of
accepts that the primary objective of the measure was to
minimise environmental damage resulting from over-
grazing and the presence of large numbers of fallen
livestock on the land. The aid covered the extra costs
which the farmers should have incurred (but would
probably have been unwilling to incur) in disposing of
excess numbers of unwanted livestock.
therefore
appears reasonable to assimilate the measure to an aid
for the disposal of waste. In accordance with point 3.4
of the Commission's Guidelines on State aid for environ-
mental protection (8) which were applicable to the agri-
cultural sector at the time when the aid was granted, aid
for the collection, recovery and treatment of agricultural
waste will be considered by the Commission on a case
by case basis. However, since the acceptance of such aid
implies derogating from the ‘polluter pays’ principle, it
may be permitted only in specific and well
justified
cases.

It

In the present case it appears that the aid has a clear
incentive effect, and there is a counterpart from the
producers who agree to the slaughter of 30 % of their
ewes, some of which might otherwise survive the winter.
From the standpoint of the farmers, the aid is limited to
the free disposal of the animals. No payment is made in
return for
the livestock. These factors encouraged
farmers to dispose of the worst quality stock with the
least prospects for survival, which contributes towards
the realisation of the objectives of the aid and at the
same time tends to minimise any adverse effect on
competition. Moreover, the aid produces durable bene-
fits both for the sector and, by avoiding environmental
problems, for the wider community. Given that the aid
is granted on a one-off basis to resolve a specific envir-
onmental problem which resulted from a very unusual
combination of events and with the additional issue of
animal welfare at stake (which distinguishes this case
from other, nonagricultural sectors), the Commission
considers that
is justifiable to derogate from the
‘polluter pays’ principle in this case.

it

(70)

The Commission and the Member State concerned are
continuing their efforts to obtain a permanent reduction
of stocking densities in the overgrazed areas. Supple-
mentary measure A of the co-financed Rural Environ-
ment Protection Scheme (REPS), and certain measures
under the proposed State aided Natura 2000 scheme
both aim at a reduction of stocking densities that will
prevent environmental degradation and allow the vege-
tation to recover from damage by overgrazing. The Irish
authorities have
to exclude
farmers who refuse to enter into one of these schemes
from Community support for compensatory allowances
in the less-favoured areas under Council Regulation (EC)
1257/99 of 17 May 1999 on support for rural develop-

committed themselves

from the European Agricultural Guidance and
ment
Guarantee Fund (EAGGF) and amending and repealing
certain Regulations (9). Article 9, second paragraph, of
Regulation (EC) No 2467/98 provides the necessary legal
basis for this type of measure. This approach will
prevent a return to the stocking densities that existed
prior
the ewe premium
submeasure.

to the implementation of

(71) However, before applying the derogation provided for in
Article 87(3)(c) it is also necessary to verify that the aid
has not adversely affected trading conditions to an
extent contrary to the common interest, in particular by
verifying that the aid does not contravene the regula-
tions governing the common organisation of the market
in sheepmeat and goatmeat.

(72) Under Article 9 of Regulation (EC) No 2467/98, the
Member States may apply appropriate environmental
protection measures on the basis of the specific situation
of the land used for the production of sheep eligible for
benefit under the premium scheme. For the reasons
given in recitals 67 and 68, the Commission considers
the measure is an appropriate environmental
that
protection measure which falls within the scope of this
derogation from the rules of the common organisation
of
the market. This conclusion is reinforced by the
limited geographical scope of the measure, which is
confined to the six counties of Ireland suffering the
worst environmental problems.

(73)

In its decision to open the procedure, the Commission
also expressed concern that meat obtained from boner
ewes was sold on for human consumption. However the
Irish authorities have explained that this decision was
taken with the sole objective of reducing the budgetary
costs of the measure. Moreover, they have explained that
the total quantity of meat originating from the ewes
under
the scheme was about 150 tonnes, which
accounts for 0,177 % of Irish sheepmeat production.
The Irish authorities have also submitted Irish weekly
average prices for lamb over the last four years which do
not show any effect of the measure, as prices remained
depressed throughout the whole period from September
1998 to mid-February 1999. In the light of those facts,
the Commission considers that any resulting interference
in the mechanisms of the common organisation of the
market was minimal, and can be accepted, having regard
to the environmental objectives of the measure.

(74)

For those reasons the Commission concludes that the
payment of aid under the ewe supplementary measure
may benefit from the derogation provided for in Article
87(3)(c) of the Treaty, and may therefore be considered
compatible with the common market.

(8) OJ C 72, 10.3.1994, p. 3.

(9) OJ L 160, 26.6.1999, p. 80.

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(75) All cases where Member States propose to grant aid to
cull excess livestock have to be examined on a case-by-
case basis, having regard to the environmental and
welfare justifications for the measure and the compati-
bility of the measure with the common organisation of
the market concerned and Article 87 of the Treaty.

(76)

(77)

(78)

NN 79/99 — SCHEME OF ASSISTANCE FOR WINTER
FODDER LOSSES

Existence of aid (Article 87(1) of the Treaty)

The Commission considers that the three submeasures
in question clearly constitute aid within the meaning of
Article 87(1) of the Treaty. Payments were made by the
Irish authorities to sheep and suckler-cow farmers to
alleviate the hardship caused by the fodder production
deficit. The aid is selective, and confers an advantage on
those farmers who have been unable to harvest sufficient
fodder for their winter requirements. Furthermore, the
aid is granted in sectors which are highly integrated at
Community level, being subject to the provisions of the
common organisations of the market. Furthermore, as
much as 75 % of Irish lamb production and 90 % of
Irish beef production is exported, a substantial propor-
tion to the other Member States.

New beneficiaries

Article 87(2)(b) of the Treaty

In its decision to open the procedure, while acknowl-
edging that the aid appeared to qualify for the exemp-
tion under Article 87(2)(b),
the Commission raised
concerns that the award of aid to intensive producers,
who normally buy in fodder, even in good years, could
result in a possible risk of overcompensation of this
category of beneficiaries.

In their letter of 3 September 1999, the Irish authorities
stressed that the recipients of aid are all engaged in
extensive production, with cattle and sheep being grazed
on their holdings for most of the calendar year. This
the Commission
assurance removes the concerns of
about a possible overcompensation of loss of fodder
harvest which might have taken place if intensive cattle
and sheep producers were among the beneficiaries.
Consequently the fodder situation of these new benefi-
ciaries can be assimilated to the situation of the benefi-
ciaries in respect of which an identical aid measure was
approved under N 605/98. As the measure falls within
the scope of the derogation provided for by Article
87(2)(b) of the Treaty, it is compatible with the common
market.

Top-up payments to beneficiaries under N 605/98

Article 87(2)(b) of the Treaty

(79)

The concerns raised by the Commission in its decision
to open the procedure related to the risk of overcom-
pensation in respect of suckler-cow farmers with an
average farm size. The additional data submitted by the
Irish authorities are sufficiently conclusive to exclude the
risk of overcompensation.

(80) As the maximum aid payable covers not more than
65 % of the loss incurred in the case of a 20 % fodder
production deficit on a farm of 12 suckler-cows and
their offspring normally present on the farm, it can be
the risk of overcompensation of dairy
assumed that
farmers who maintain less offspring on their farm still
will be very limited. Verification of the data provided by
the
the maximum
indicates
premium would be sufficient to compensate for a 20 %
loss where 18,75 LU are kept. In the event of a 50 %
fodder production deficit,
the maximum premium
covers the losses incurred with exactly 7,5 LU.

Irish authorities

that

(81)

(82)

(83)

(84)

The risk of overcompensation is again reduced if due
account is taken of the arguments that were put forward
in relation to the fodder quality. They indicate that
indeed the losses in all cases largely exceeded 20 %.

in regard of this residual risk,

Lastly,
in line with its
assessment under State aid N 605/98, the Commission
considers that it would be disproportionate to expect the
Irish authorities to undertake the individual processing
of thousands of applications, each involving relatively
small sums of money, to identify a relatively limited
number of cases of limited possible overcompensation

For those reasons the top-up payments to beneficiaries
under N 605/98, having been payable to suckler-cow
producers and small dairy farmers, qualify for the excep-
tion under Article 87(2)(b) of
the Treaty and are
compatible with the common market.

The Special Fodder Hardship Fund

Article 87(2)(b) of the Treaty

the

amount of

to the measure

Pursuant
fodder
(roughage) available on the farm must be certified by a
Teagasc advisor as being less than 50 % of that necessary
to adequately maintain livestock until turn-out to grass
(taken as 15 April). It therefore appears that assistance
could be granted to any farmer who could prove that his
cattle were suffering or were likely to suffer malnutrition
due to a shortage of fodder independently of the reason
for this.

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L 305/21

(85) As

the aid scheme was

launched to alleviate the
consequences of losses of winter fodder, following a
survey in January from which it appeared that farmers in
general were suffering from fodder shortages,
it was
technically impossible to determine ex post what the
degree of the fodder production deficit on each indi-
vidual farm had been. The method used to calculate the
probable deficit incurred by the farmers, as presented in
the letter of 13 October 1999, seems to be a logical
approach for a tentative ex post calculation.

(86)

In its decision on the first winter fodder aid (N 605/98)
the Commission recognised that in schemes involving
the payment of relatively small amounts of aid to large
numbers of beneficiaries the individual calculation of
losses incurred could result in disproportionate
actual
administrative
expenses. The Commission therefore
accepted that compensation could be calculated on the
basis of average losses, provided that the risk of signifi-
cant overcompensation could be excluded. In view of
the explanations provided by the Irish authorities, and
the fact that compensation is limited to a proportion of
actual
losses incurred, the Commission considers that
the present measure excludes the risk of significant over-
compensation at the level of the individual farmer.

(87)

in winter

In the case at hand, evidence is provided that the average
losses
fodder production on the farms
concerned exceeded the 20 % threshold needed to
conclude that the weather conditions at the origin of the
deficit qualify as ‘exceptional’. The evidence is based
both on the general survey carried out by Teagasc in
August 1998 and on the findings made by Teagasc at its
visit to each individual applicant in March 1999.

(88)

For the above reasons the Special Fodder Hardship Fund
would qualify for the exception under Article 87(2)(b) of
the Treaty.

(89)

VI. CONCLUSION

The Commission finds that Ireland has unlawfully imple-
mented the ewe supplementary measure and the scheme
of assistance for winter fodder losses contrary to Article
for the reasons set out
the Treaty. However,
88 of
above, the Commission finds that;

— the scheme of assistance for winter fodder losses falls
within the scope of the derogation provided for by
Article 87(2)(b) of
therefore
compatible with the common market,

the Treaty and is

— the payment of aid under the ewe supplementary
measure may benefit from the derogation provided
for in Article 87(3)(c) of the Treaty, and may there-
fore be considered compatible with the common
market,

HAS ADOPTED THIS DECISION:

Article 1

The aid scheme of assistance for winter fodder losses which
Ireland implemented in the autumn of 1998 is compatible with
the common market.

Article 2

The aid scheme implemented by Ireland under the ewe supple-
mentary measure is compatible with the common market.

This Decision is addressed to Ireland.

Article 3

Done at Brussels, 30 May 2000.

For the Commission

Franz FISCHLER

Member of the Commission