`Lightweight' EU pig, poultry regimes evaluated

Agra Europe Weekly, Friday April 28 2006

The EU regimes for pigs and poultry have relatively little impact on producers' incomes and could be seen to be of questionable overall economic benefit, according to a newly-published evaluation study.

The report, carried out on behalf of the European Commission by Agra CEAS Consulting, shows that export subsidies have played only a minor role in providing welfare benefits to producers, although import tariffs have been much more important in regulating the markets for pigmeat, poultrymeat and eggs.

The Common Market Organisation (CMOs) for the three products in question are `lightweight' in nature, with domestic market support limited principally to aid for private storage for pigmeat.

Incomes higher - but volatile

The evaluation nevertheless showed that the CMO measures have been effective in maintaining incomes at levels higher than would otherwise have been the case.

In the middle of the evaluation period (1995-97), the model results suggest that incomes were 6.0% higher in the pigmeat sector, 20.4% higher in the poultrymeat sector and 29.1% higher in the egg sector than they would otherwise have been in the absence of export refunds and import tariffs.

But income volatility in the three sectors is significant - particularly in the pig sector – which, the evaluation report suggested, indicates that the CMO “has not fully achieved the [fundamental CAP] objective of stabilising markets, thereby stabilising incomes.”

The evidence merely suggests that without intervention, the cyclical income lows could have been greater, the report said.

Export subsidy “deadweight”

Although Agra CEAS agree that export subsidies have been important in maintaining levels of exports, the consultants nevertheless detected a significant amount of “deadweight” – i.e. subsidies paid to support exports which may well have occurred anyway even in the absence of such aids.

On the other hand, for some sub-sectors, e.g. frozen whole birds, a market presence “might not be maintained without the refund.”

In fact, the bulk of expenditure in the poultry sector currently goes to support export refunds from France (primarily Brittany) to maintain the export of whole frozen birds to the Middle East.

Meanwhile, in comments which will be seen as particularly relevant in light of current WTO discussions over market access, the report states that import tariffs play a more significant role in the overall market support programme, particularly for pigmeat and poultrymeat.

In the poultrymeat sector, the removal of import protection (and export refunds) over the review period would have resulted in the EU moving from being a net exporter to being a substantial net importer of poultrymeat (of up to some 1.5 million tonnes in the early 1990s).

But the picture for pigmeat is made less clear than it might otherwise be, the report suggests, by the fact that the “the pigmeat sector benefits substantially from the presence of sanitary restrictions on imports.”

Price reporting systems

Meanwhile, the report also raises the question of how relevant the CMO regimes are in terms of the actual functioning of the market.

There are perceived to be difficulties in establishing whether the prices reported to the Commission are adequately representing the market situation, as most trade is taking place under contract and therefore bypassing the conventional markets for which prices are reported to the Commission.

Evaluation of the Common Market Organisations (CMOs) for Pigmeat, Poultrymeat and Eggs (Final report, November 2005) can be found on the European Commission website at http://europa.eu.int/comm/agriculture/eval/reports/pig_poultry_egg/index_en.htm

For more information please contact Clifford Biggs in the Wye office.

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