Volume 12: Livestock Farming
2. Key features of UK agriculture
The European Union and CAP
CAP regimes for beef and dairy farming

2.13 One objective of the EU was to foster trade in agricultural produce between Member States. The removal of barriers to trade and the progressive harmonisation of legislation encouraged trade to develop. By the time BSE emerged, the UKhad built up a significant trade in beef and dairy products with the EU. In 1986, ¹ 68 per cent of total beef exports of 211,000 tonnes (dead carcass weight [dcw]) was to the EU. By 1995, beef exports had increased to 325,000 tonnes dcw - worth£500 million - of which 77 per cent was to the EU. ²

2.14 EU membership also, through the CAP, influenced farmers' decisions on what to produce and the type and numbers of livestock to keep. The CAP supported EU agriculture in two ways: through commodity support measures and through measures to improve agricultural structures, including improvements in efficiency and environmental management. The aim of assistance to agriculture under the CAP, prior to the 1992 reforms, was to safeguard the level of producers' returns by supporting market prices at predetermined levels.

2.15 A number of devices were used. When prices of the main commodities, principally cereals, beef, butter and skimmed milk powder, fell below levels predetermined by the EU, the intervention authorities (the Intervention Board in the UK) bought the goods and stored them for later resale. Beef was frozen before storage in the Board's intervention stores, and stored carcasses could be held for a considerable time before disposal. Intervention stocks were exported or disposed of within the EU, if this could be done without disrupting internal markets. Exports to non-EU countries, either from the market or from intervention stocks, attracted export refunds to meet the gap between EU and world prices. Imports from outside the EU were subject to levies to ensure that they did not undercut the EU'ssupport price. ³

2.16 By removing the discipline of market forces, the CAP support regime tended to encourage surplus production and the cost of support was heavy for the taxpayer. ⁴ A series of initiatives was taken to try to redress this imbalance, a cause espoused by the UK Government as a main plank of its European policy. In 1989 and again in 1992 the CAP was reformed in an effort to control agricultural surpluses and thereby reduce the cost of support to the taxpayer. The strategy behind the reforms was to shift support from end prices towards direct income support(see paragraphs 2.19-2.21 for discussion of how the beef regime was changed). ⁵

CAP regimes for beef and dairy farming

Assistance to beef production

2.17 Besides the general support mechanisms of intervention, export refunds and import tariffs, the EU provided two schemes to help maintain the incomes ofbeef producers:

1. the Suckler Cow Premium Scheme (SCP), under Council Regulation (EEC)805/68, which paid subsidies on suckler cows forming part of a breeding herd for rearing calves for beef production. Payment was made per cow using EU funds. Claims were limited by individual producer quotas and stocking density limits; and
2. the Beef Special Premium Scheme, introduced in most Member States in 1987, and fully funded by the EU. It was payable on male cattle only, and could be claimed twice for each animal, after 8 months of age and again after 21 months; this scheme replaced the Beef Variable Premium Scheme, which ended in1989/90.

2.18 In addition, since 1976 the UK had provided the Hill Livestock Compensatory Allowance (HLCA) scheme as a support measure for farmers in less favoured upland areas (ie, where land quality was poor), to ensure the continuation of farming, maintenance of the population, and conservation of the countrysidein these areas. The allowance was paid on cows that primarily produced calves for beef production, subject to stocking density limits. The EU funded 25 per cent of this scheme. ⁶

2.19 Major changes to the CAP beef regime came into effect in April 1989, including a new ceiling for sales of beef into intervention, extension of the Beef Special Premium, and an increase in the rate of the Suckler Cow Premium. ⁷ The changes reflected the view that 'the intervention system is designed to offer support to the market when it is needed, but not to create intervention as a market in its own right to which operators have unlimited access'. ⁸

2.20 The further round of CAP reforms in 1992 introduced changes to the beef regime - in particular a cut in support prices by 15 per cent over three years, new restrictions on access to intervention, and further increases in the Beef Special Premium and Suckler Cow Premium. Both premiums continued to be increased gradually up to 1996, to compensate producers for reductions in intervention support. However, eligibility specifications and controls, in the form of quotas at producer level or obligations to 'set-aside' land (ie, to take it out of production), were placed on producers receiving payments under these various arable and livestock schemes, so as to limit overall government expenditure on them.

2.21 The Ministry of Agriculture, Fisheries and Food (MAFF) commissioned an evaluation of the Beef Special Premium Scheme and the Suckler Cow Premium Scheme in 1995. The evaluation concluded that while the schemes had indeed supported and increased the incomes of beef producers, overall the production control measures contained within them had not been successful. ⁹

Controls on milk production

2.22 Milk was one of the products covered by CAP support arrangements. In 1984 the EU introduced milk quotas with the aim of curbing milk production, which in the previous ten years had increased by about 2 per cent per year. The quota base for each Member State for the first year was deliveries to dairies plus direct sales in calendar year 1981 plus 1 per cent. So long as this limit was observed on the total output in each Member State, each country could choose an actual base year between 1981 and 1983, or an average of these years, if preferred.

2.23 Farmers reacted to the quota system by lowering the level of yield per cow through reductions in the amount of concentrates fed, as shown in Table 2.1, and/or cow numbers. Reductions in cow numbers were achieved through cuts within individual herds, but also through producers leaving the industry. MAFF financed a UK outgoers scheme, which by 1985 had already paid 1,600 producers to leave the industry. Furthermore, since quotas acquired financial and trade value, smaller producers who might already have been struggling could sell their quota to larger producers and leave the industry. As at 1985, about 400 producers had left the industry without using the support available under the outgoers scheme. ¹⁰

Table 2.1: Concentrate input (kg per cow)

Year	kg per cow
1983	1,735
1984	1,820
1985	1,375
1986	1,500
Source: Milkminder data

2.24 The milk quotas were initially scheduled to run for five years to redress the imbalance between output and consumption. In 1988 they were extended for a further three years, and in 1992 for another year. From 1 April 1993, the quota system was extended for a further seven years. ¹¹