THE PROBLEMS
(i) Beef imports
The appreciation of sterling which has had the effect of
reducing to the UK the price of beef from France Eire and Holland
by 12 per cent, 14 per cent and 14 per cent respectively, has
stimulated increased imports, with the Wesh beef sector being
adversely affected. Between January and August 1997, imports of
beef from other EU member states increased by 63 per cent (Appendix
A). Imports from Eire, which are giving rise to so much concern,
rose during this period by 78 per cent, increasing from 17,588
tonnes to 31,384 tonnes. Imports from Third Countries were down
marginally (-6 per cent), leaving a net import position of beef
supplies of +23 per cent. Given that the ban on UK beef exports
is continuing, which, under normal trading conditions, would have
taken about 25 per cent of domestic supplies off the home market,
the supply consequences become very apparent.
(ii) Sheep exports
The Welsh sheep sector is heavily reliant on the export market.
The strength of the £ has undermined the competitivity of
domestic sheep exports, particularly to other Member States. Total
mutton and lamb exports this year between January and October
were 14.9 per cent below the level for the same period in 1997
(Appendix B).
(iii) Trade in dairy products
The strength of the £ has resulted in similar trading
difficulties for milk producers on the milk product markets.
(iv) BSE
The closure of the export market for British beef supplies
has exacerbated a difficult supply position, particularly given
the increasing attractiveness of the dometic market for imports.
The difficulties have not, however, been confined to the beef
sector, and manufacturers of domestically-produced dairy products
have had difficulty in maintaining market share due to scientifically
unfounded concern over the safety of home-produced dairy products.
The closure of the export market impacted particularly badly on
the export market for veal calves derived primarily from the dairy
herd.
Both the beef and dairy sectors have been badly hit by decisions
to reduce the basic level of compensation under the Over Thirty
Months Scheme, and a combination of basic rate cuts in tandem
with Green currency revaluations has cut the ceiling on support
under this scheme from £513 when initially introduced to
just £311.
(v) Market realisations
Agri-monetary changes and their impact on imports/exports,
in tandem with BSE, have resulted in reduced market realisations.
Cattle prices in Wales in November 1997, at 90.87 p/kg, were 26.9
per cent below market realisations in November 1995 (Appendix
C) (1996 figures were distorted by BSE). Lamb prices in Wales,
by November 1997, had fallen to 13 per cent below levels prevailing
in November 1996 (Appendix D), and farm-gate milk prices in October
1997, at 20.72ppl, were 19 per cent below 1996 levels (Annex E).
Whilst in previous years there has been an element of cross-subsidisation
by one sector for another, which has enabled mixed enterprise
farms to get by, this year the three main enterprise types have
witnessed a dramatic fall in market returns.
(vi) Input costs
Set against significantly poorer returns for beef, lamb and
milk have been increased input costs over and above those which
would "normally" be associated with agricultural production.
The removal of the rendering subsidy, the absorption of SRM inspection
costs, the costs of the cattle movement database, and double-tagging
(Appendix F) all look set to be foisted on an industry struggling
to remain viable. These additional costs will amount to an increase
in the cattle cost structure of around £38.00 per head and
of around £3.00 per head on sheep.
(vii) Support/compensatory measures
A reference has been made to the effect of the strength of
the £ on trading conditions. Because of the sharp appreciation
of Sterling, the Green £ has had to be revalued on no less
than six occasions since June 1996. In January 1997, SAPS, BSP
and SCP payments were all reduced by 5.4 per cent due to the application
of a revised Green rate, to which the UK industry was supposed
to be locked into until 1999. a further 3-4 per cent cut is imminent
as from January 1998 if, as currently looks the case, the value
of Sterling breaches the prescribed leeway of 11.5 per cent.
Intervention support has been reduced by 18.8 per cent. A
raft of measures designed to mitigate the consequences of BSE
have not been renewed despite weaker market realisations for much
of 1997, than prevailed in 1996 (Appendix G).
(viii) Green £ compensation
It is a matter of profound concern to the FUW that successive
UK Governments have failed to pursue resources available to compensate
for the adverse consequences of Green currency revaluation and
which have been set aside by the EU for the UK. A compensation
fund of £980 million is available to the UK,50 per cent of
which could be sourced with "top-up". The Fontainbleu
Agreement, under which the UK Government would have to contribute
71p for every £1.00 sourced, is inhibiting uptake. All other
member states which have had to revalue their Green currencies
have taken up compensation available, and thus UK farmers have
again been left at a competitive disadvantage in a so-called "single
market".
(ix) Consistency of EU standards
There is concern that the products being imported into the
UK, and particularly beef, are not conforming to the stringent
and high standards required of home-produced beef. Since inspection
at ports would run counter to the terms of the operation of the
EU single market, it becomes the responsibility of the importing
company to ensure that the regulations are complied with. Whilst
current legislation requires that all beef sold for human consumpton
be under 30 months of age, it does not forbid entry of such product.
In de-boned form, particularly, it would be difficult to establish
the age of such meat.
CONCLUSION
The difficulties facing the Welsh livestock and milk sectors
are irrefutable. These difficulties lie outwith the industry's
ability to redress them and, as such, the FUW believes that the
Government, if it wishes to retain a viable agricultutral industry
in Wales, and upon which the wider the wide rural economy and
the maintenance of the countryside is dependent, must recognise
these difficulties and take suitable action to prevent the irrevocable
damage that will otherwise ensue. This assistance should take
the form of agri-monetary compensation, reasonable compensation
for the consequences of BSE measures imposed by Government on
the industry, and support for Wales' hill and upland areas. Unless
assistance is forthcoming in the short-term, the future of the
industry in the longer-term will be severely jeopardised.
15 December 1997
