I am pleased to have this opportunity of setting out the background to the EU calf processing scheme and other measures geared towards restoring balance to the Community beef market. Since the eruption of the BSE crisis last March the beef industry in the EU has undergone a very difficult period. Apart from its effect on cattle prices and producers' incomes, the crisis has substantial long-term implications for the beef sector. Unfortunately, consumer confidence in beef has been seriously undermined and while there has been a significant recovery in the consumption of beef in recent months, beef consumption is unlikely ever to return to pre-BSE levels.
The EU Commission and the Council of Ministers for Agriculture recognised at an early stage that the BSE crisis had created a new permanent surplus in the EU and that the surplus had to be removed in order to restore the beef market to balance. The reality facing the beef market was that the GATT limits on subsidised exports prevented the EU from exporting the new beef surplus to third countries. These limits are set to fall from 1.19 million tonnes this year to 820,000 tonnes by 2000. The EU simply had no choice but to reduce beef production to the new lower level of beef consumption and, with this in mind, the Commission submitted proposals to the Council in August for a reform of the beef regime and the Council adopted these proposals in amended form at the end of October.
The main elements of the reform package were as follows: first, the introduction of a single premium for bulls, the objective of which is to curtail the growth of beef production. As bull production in Ireland represents only about 1 per cent of production, the impact of this measure here will be negligible; second, measures to encourage extensive production systems. The increased payments for producers whose stocking densities are under one livestock unit per hectare will benefit some 66,000 producers to the tune of an extra £15 million; third, the temporary reduction in member states' quotas for the beef premium and the freezing of unused suckler cow quota rights over the next two years. These measures will have little or no impact on producers as our production base is fully protected; fourth, an increase in the intervention ceilings above those agreed under the CAP reform agreement of 1992 in order to cope with surplus production pending the impact of the measures aimed at reducing beef production and fifth, member states would be obliged to introduce either an early marketing premium for veal calves or to implement the calf processing premium for the period 1 December 1997 to 30 November 1998. The intention is that the combination of these measures will reduce by one million the number of calves available for beef production, thereby reducing beef production by 350,000 tonnes per annum.
With regard to the calf processing scheme, I wish to point out that the scheme is not voluntary. A voluntary calf processing scheme was agreed as part of the 1992 CAP reform measures. No member state exercised this option until the BSE crisis of 1996 when the UK, France and Portugal introduced the scheme, under which 425,000 male dairy calves were slaughtered.
Under the reform measures which were agreed last October, member states are now obliged to introduce either the early marketing premium scheme for veal calves or the calf processing scheme. The UK, Ireland, Portugal and France have introduced the calf processing scheme, with France introducing both schemes. The other member states will operate the early marketing premium scheme.
Given that we do not have a veal production system in Ireland, we have no option but to introduce the calf processing scheme. A total of nine EU export licensed meat premises have been selected here as processing centres. These were selected on geographical criteria to minimise haulage distances for calves and ensure that the highest welfare and hygiene conditions apply to its operation. A processing premium of ECU 120 is payable on male dairy breed calves and ECU 150 on beef breed calves which are less than 20 days old. The premium will be paid only on animals which are in a fit and healthy condition on presentation and are processed in conformity with the terms and conditions of the scheme.
The number of calves processed under the scheme in Ireland to date is 770 out of an EU total of 300,000. The number of calves entering the scheme will be determined by the price of calves relative to the value of the premium. As calf prices in Ireland are traditionally higher than in the EU, it follows that only the poorer quality calves from the dairy herd are likely to be attracted. This is borne out by the fact that virtually all the calves slaughtered to date were dairy breeds.
The calf processing scheme and the early marketing premium scheme are monitored closely by the EU Commission. In the Presidency compromise under which these measure were agreed last October, the Commission was asked to come forward with a report by June on the effectiveness of the schemes. Based on this report the Council has committed itself to reviewing the schemes. This review will also examine the contribution made by each member state in order to ensure a fair balance of supply control across the Community and to avoid any possible trade distortion.
I recognise that the removal of young bull calves represents a loss in future premium income and in output to the national economy. However, these losses must be measured against the losses that would arise if no action was taken to restore market balance. It is in the long-term interest of beef producers in Ireland that balance is restored to the EU market and Ireland must be seen to make a reasonable contribution to this effort.
The Dáil adjourned at 11.10 p.m. until 10.30 a.m. on Wednesday, 19 February 1997.
