Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation amending Regulation (EEC) No 2759/75 on the common organisation of the market in pigmeat'
Date: 2000-09-20
Institutions: European Economic and Social Committee
Subjects: EU programme, common organisation of markets, farmers' income, insurance, pigmeat, producer organisation

C 367/40

EN

Official Journal of the European Communities

20.12.2000

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation
amending Regulation (EEC) No 2759/75 on the common organisation of the market in pigmeat’

(2000/C 367/12)

On 27 April 2000 the Council decided to consult the Economic and Social Committee, under Articles 43
and 198 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 6 September 2000. The
rapporteur was Mr Bastian.

At its 375th plenary session held on 20 and 21 September 2000 (meeting of 20 September) the Economic
and Social Committee adopted the following opinion by 64 votes to seven, with four abstentions.

1.

Introduction

The European Union market in pigmeat is cyclical,
1.1.
alternating between periods in which pig prices are satisfactory
and the market is in balance, and periods of very low prices
and surplus supply. However, the Committee recognises that
this cycle has changed, with the emergence of longer, more
intense recession periods. The reason for this shift is the
growing specialisation among pigmeat producers in a bid to
become more efficient and more competitive. Such specialis-
ation makes it impossible for producers to adapt to market
requirements as they did during past recessions, since their
income is derived solely from pig-related activities. It is thus
much more difficult for Community pigmeat production to
adjust to the needs of the market, even when prices are very
low. Moreover, the scale of the recession may be exacerbated
by unforeseen circumstances such as health-related incidents
or the sudden closure of export markets.

— the Russian crisis of August 1998 in which the temporary
non-convertibility of the rouble led to the suspension for
a time of European exports of pigmeat and processed
products to that country.

1.3.
Recessions such as these endanger the cash flow of
many producers, particularly the most vulnerable such as
recent
investors and young people starting out. Clear
structural changes are thus discernible in the pigmeat sector,
and these have been accelerated by the latest recession. They
involve a concentration of production, ever dwindling
numbers of pig farmers and the disappearance of
the
smallest pig farms. The most vulnerable pig farms are also
in which
being absorbed by large
producers become ‘employees’ of agro-industry and lose
both their identity and their autonomy.

‘industrial’ groups

2.

The European Commission proposal

1.2.
The recent unprecedented recession that has hit EU pig
farmers is a good illustration of this intensification of the cycle.
Production prices in the Community dropped by an average
27 % in 1998, and by a further 6 % the following year,
touching new depths and falling well short of production
costs. The recession was so exceptionally long and sharp
because of the following factors, which compounded the
known implications of the ‘natural’ pigmeat cycle:

The Commission proposal amending Regulation
2.1.
the
(EEC) No 2759/75 on the common organisation of
in pigmeat provides for the establishment of a
market
regulatory fund to stabilise
incomes of pigmeat
the
producers. The proposal comes in response to the severe
recession which hit the pigmeat sector in 1998/1999. The
Commission has thus recognised that, over the past few years,
periods of recession have been lengthening, endangering pig
farmers’ cash flow situation.

— the impact of the 1997 swine fever epidemics, which,

although now over, still remain a threat;

The main components of the proposal are the fol-

2.2.
lowing:

— overproduction in Europe and across the world as a result
of increased specialisation and production capacities in
the European Union and the United States;

— Member States will be authorised to establish regulatory
funds in their territory. Participation by pig farmers,
producer groups or collective bodies will be on a
voluntary basis and for a period of not less than five
years;

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— the regulatory funds will be financed by the pig farmers
themselves, on the basis of a levy paid in respect of
each fattening pig. Member States may grant degressive
launching aid. In order to obtain the resources needed to
operate their regulatory fund, the funds may seek loans
from banks and public or private institutions on market
terms;

which complements current market management arrange-
ments in the pigmeat CMO. However, the Committee considers
that the proposed regulation does not go far enough to meet
that target and that it is desirable to broaden its scope to
include other crisis management measures and to draw, among
other things, on established practice in some non-EU countries
(USA, Canada) such as the income insurance schemes currently
under discussion in the WTO negotiations.

— the regulatory mechanism will have two components: a
levy threshold, triggering the collection by the funds of
an amount in respect of each fattening pig, and a payment
threshold, triggering the grant of an amount in respect of
each pig farmer. The thresholds will be set taking into
account the market price for standard quality slaughtered
pigs in the Member State concerned, the production costs
in that country, the financial situation of the fund and the
position of pigmeat within the Community;

— the regulatory funds may adjust the amounts granted in
respect of each fattening pig and the number of eligible
pigs per farmer in the light, in particular, of the size and
structure of the pig farms in the Member State concerned.
The levy may also be adjusted;

— where a fund must start a payment period without the
necessary financial resources being available, the Member
State concerned may grant it an interest-free loan. The
loan must be reimbursed by the fund in full. Where a
regulatory fund has sufficient financial resources, it may
suspend collection of the levy temporarily;

— upon becoming a member of a fund, the pig farmers
must give an undertaking not to increase the number of
their fattening places during their period of membership.
However, where market prospects permit, Member States
may be authorised by the Commission to derogate from
that requirement.

3. General comments

3.1.
The Committee takes note of the Commission’s pro-
posed regulation, the purpose of which is to authorise Member
States to establish regulatory funds in the pigmeat sector. The
is a first step towards
Committee feels that this proposal
putting additional
instruments in place for use in market
management and to support producers’ income in times of
recession. The proposal also opens up the debate in a
sector which has seen no real development in the common
organisation of the market since it was set up.

The Committee understands that the Commission’s
3.2.
aim is to help producers cope with ever sharper recessions in
the pigmeat sector through a scheme to stabilise their income

3.3.
Action cannot be restricted to pig farmers alone. The
European Union must act to boost the draft regulation’s
the arrangements for setting up
effectiveness. Moreover,
regulatory funds must
involve no risk of renationalising
the CAP and distorting competition among Member States
(depending on whether or not a Member State is party to the
regulatory fund). The Committee therefore proposes greater
EU involvement via co-financing of the regulatory funds with
producers.

4.

Specific comments

4.1.
The Committee welcomes the proposed regulation
insofar as it fosters solidarity among pigmeat producers by
helping the weakest and authorising adjustments in the
amounts granted to take account of pig-farm size and structure,
for instance by assisting young people starting out. However,
the Committee wonders what producers really stand to gain
in such a fund as opposed to using
from taking part
the options already at their disposal, i.e. personal savings,
equalisation funds set up by some producer associations,
bridging loans from banks to safeguard liquidity etc. It is
difficult to see the advantages to be gained by pig farmers
under the current proposals, particularly since they alone are
responsible for financing the regulatory funds and, moreover,
must commit themselves not to increase production for five
years.

The Committee recognises that one of

4.2.
the Com-
mission’s objectives in bringing forward this proposal is to
control the Community’s pigmeat production in order to
mitigate the scale of recessions in the pigmeat sector. However,
as the Committee would stress, there is a risk that competition
among producers may be distorted by the requirement for pig
farmers taking part in a regulatory fund not to increase their
production for five years. It may be that the most vulnerable
farms will be the first to express an interest in taking part in a
regulatory fund. This would mean that only the largest and
most competitive pig farms would be able to increase their
production capacities. The Committee feels that effective
supply management is impossible unless a large number of (or
even all) producers take part in a regulatory fund in the main
European production areas. Hence, when setting up the
regulatory funds, incentives — such as a Community contri-
bution — must be devised to encourage producers to take
part.

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Even an improved version of the Commission pro-
4.3.
posal, while providing for stability in producers’
income,
would offer no quicker way out of a recession. The Committee
therefore asks the Commission to bring forward an additional
proposal for tools to cut production in the case of serious
recession in the pigmeat sector, as defined in the context of
the Management Committee for Pigmeat. It would be up to
each Member State to select the appropriate tools which would
be applied within a Community framework. Each country
would be required to produce results and some pig farmers
could be asked to make a more substantial effort
(e.g.
those who have increased production most since a particular
reference date and whose farm holding exceeds a certain size).

4.4.
Livestock breeders are generally the first to be hit by
recessions. Hence, they should not be excluded from the
regulatory funds. Levy and payment thresholds can also be set
in line with piglet prices.

5.

Towards a more coherent Community policy for the
pigmeat sector

5.1.
Community policy on pigmeat must develop so that it
is better able to respond to sector-specific challenges. The
Committee would like to set out these three challenges in
greater detail.

A key economic sector

Jobs and spatial planning

The Committee notes that pigmeat production is a
5.1.5.
key source of employment at every stage (animal
feed,
production, services, slaughtering/cutting, meat preparation
and salting). A study conducted in France has shown that for
every one job on the production side, 2,5 jobs are generated
across the sector (2).

5.1.6.
As with all agricultural production, pig farming plays
an important role in spatial planning and rural land use. The
Committee asks that the wide range of rearing methods be
recognised and fostered, taking due account of specific local
conditions.

5.1.7.
For this reason, Community policy in the pigmeat
sector must, in the Committee’s view, work not only to keep
production high, but also to maintain a large pool of producers
and help renew the generations.

What citizens and consumers expect

Community pigmeat production must meet citizen
5.1.8.
and consumer expectations. Many of these are environment-
related,
livestock effluents,
animal welfare, animal nutrition, food safety, health protection
and product quality.

including the management of

5.1.1.
The European Union pigmeat sector is dynamic and
competitive. In 1999, the EU exported almost 1,5 million
tonnes of pigmeat to non-member countries, making it the
world’s largest exporter. At the same time,
import levels
remain very low, at less than 65 000 tonnes in 1999.

5.1.9.
Community policy in the pigmeat sector must enable
producers to meet these expectations by striking a proper
balance with economic issues. For it is important to take
account of constraints arising from international competition
in order not to undermine the EU pigmeat sector.

5.1.2.
The Community’s pigmeat sector also constitutes a
sizeable industry, comprising 11 % of the EU’s final agricultural
production.

5.1.3.
One of the main challenges for Community policy
on pigmeat therefore is to safeguard this key economic sector
in the face of tough international competition.

5.1.4.
The Committee would emphasise that pigmeat pro-
duction is also a key economic sector in the CEEC which have
applied to join the EU, particularly Poland, Hungary and the
Czech Republic (1).

(1) In 1999, these three countries’ combined pigmeat production was

3,3 million tonnes, or 18 % of that of the EU 15.

5.2.
The management tools available under the pigmeat
CMO (refunds, private storage) help maintain a competitive
Community pigmeat sector which is able to export. These
tools should therefore be retained and defended in the WTO
negotiations. It must be said, however, that deploying these
tools to the full during the last recession in 1998/99 was not
enough to prevent the collapse of pig prices across all EU
production areas to levels unprecedented in any earlier crisis.
This shows just how difficult it is to maintain profitable prices
using only traditional market management tools.

(2) This is the estimated number of pigmeat-sector jobs in 1997,
calculated in September 1999 by the Pork Technical Institute
(Institut technique du porc). It covers jobs in animal feed, production,
producer groups, other services, slaughtering/cutting, meat prep-
aration and salting. It excludes other farm suppliers and the entire
distribution side.

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5.3.
For this reason, current Community policy is not
consistent with the challenges facing the Community pigmeat
sector outlined above. To better meet these challenges, the
Committee would ask the European institutions (i) to continue
to consider both the changes required to Community pigmeat
policy and the need for appropriate funding to this end and
to encourage and promote debate with the relevant
(ii)
rec-
occupational groups. Furthermore,
ommends that participation in any Community scheme should
be tied to greater respect for animal welfare, while at the same
time avoiding distortions of competition.

the Committee

5.4.
In the pigmeat sector, the Committee would also ask
the Commission to explore the possibility of using bodies
such as producer associations to set in place operational
programmes which already exist
in other sectors. These
operational programmes — co-financed by the EU — would
bring in a raft of new measures to manage the pigmeat market
and support producers (promotion of pigmeat products,
income insurance etc.), as well as programmes to boost quality

and improve traceability in order to meet the demands of the
European consumer.

5.5.
The Committee does not feel that Community policy
in the pigmeat sector can be based solely on competitiveness,
which inevitably carries with it a downward spiral of pro-
duction costs and prices. Such a policy would run counter to
the European model of multifunctional agriculture which
meets European consumer requirements. In this regard, the
Committee would refer to its 1999 opinion on a policy to
consolidate the European agricultural model (1).

5.6.
The Committee hopes that the Commission will press
ahead with its work in the pigmeat sector by broadening the
debate on certain issues raised in this opinion,
including
income insurance, the environment, the role of production
associations and the establishment of a pigmeat market
observatory.

(1) OJ C 368, 20.12.1999.

Brussels, 20 September 2000.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI