THE LEGISLATIVE PROPOSALS OF THE HEALTH CHECK OF THE COMMON AGRICULTURAL POLICY: AREAS FOR FINE- TUNING BY THE EUROPEAN MEAT INDUSTRY!

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1 EUROPEAN LIVESTOCK AND MEAT TRADING UNION / EUROPÄISCHE VIEH- UND FLEISCHHANDELSUNION 1 "The Health Check is all about freeing our farmers to meet growing demand and respond quickly to what the market is telling them. It also aims to simplify, streamline and modernise the CAP and give our farmers the tools to handle the new challenges they face, such as climate change." Mariann Fischer Boel, Commissioner for Agriculture and Rural Development O/REF: UECBV-N EN-REV.1 28 May 2008 THE LEGISLATIVE PROPOSALS OF THE HEALTH CHECK OF THE COMMON AGRICULTURAL POLICY: AREAS FOR FINE- TUNING BY THE EUROPEAN MEAT INDUSTRY! 1

2 2 EXECUTIVE SUMMARY: Impact of the CAP Health Check proposals for the European Meat Industry Single Payment Scheme: Removal of the remaining coupled payments and shift to the Single Payment Scheme, with the exception of suckler cow, goat and sheep premia, but full decoupling for Slaughter Premium for young and adult animals and the Special beef premium in two steps (50% decoupled in % in 2011 and 100% decoupled in 2012 and onwards). Changes from historical to regional payments and other options for a flatter rate system. New right of refusal of payment introduced to businesses and companies with limited agricultural activity. Cross Compliance will be simplified by withdrawing irrelevant standards. New requirements will be added to retain the environmental benefits of set-aside and improve water management. Broadening of the scope and extended financing of Article 69 (now Article 68) for measures to address disadvantaged farmers in certain regions specialising in diary, beef and sheep and goat meat production. A mutual fund for crises linked to animal diseases can be introduced. Abolition of energy crop premium. A reduction of the feed vs. fuel impact? Abolition of set-aside. More space for animal feed production? Market Measures: Phasing out of milk quotas by 1% a year and revision clause by Abolishment of the intervention scheme for pig meat. Full tendering in the beef sector where the price is below the trigger price of 1560 per t. For skimmed milk powder feeding stuff, support will be optional and only applicable when the market situations require it. New Challenges & Rural Development: CAP addresses new and ongoing challenges: climate change, bioenergy, water scarcity, biodiversity through more funding via additional, progressive modulation. Farmers & companies investing in extensification of livestock or biogas production from animal waste (on farm and local production) can attract EU subsidies. 2

3 3 TABLE OF CONTENT INTRODUCTION... 4 MAIN CONCLUSIONS OF THE IMPACT ASSESSMENT Key Objectives of the CAP Health Check... 5 PART 1 Single Payment Scheme... 5 FLATTER PAYMENT RATES PER ENTITLEMENT... 5 PARTIAL DECOUPLING... 6 EXCLUSION OF PAYMENTS TO CERTAIN COMPANIES AND FIRMS... 7 ARTICLE 69 AND THE MEAT SECTOR... 7 MODULATION TO BECOME PROGRESSIVE... 7 CROSS COMPLIANCE: WATER & ENVIRONMENT (SET ASIDE)... 8 ABOLISHMENT OF THE ENGERY CROP SCHEME... 8 PART 2 Market Mechanisms... 9 ABOLISHMENT OF PIG MEAT INTERVENTION & TENDERING FOR BEEF SECTOR... 9 ABOLISHION OF SET ASIDE: MORE ANIMAL FEED IN THE EU?... 9 TRANSITION TO END THE MILK QUOTA: MORE MILK THAN SUCKLER COWS?... 9 OPTIONAL INTERVENTION AID FOR SKIMMED MILK POWDER FEEDING STUFF... 9 PART 3 New Challenges and Rural Development Policy CONCLUSION ANNEX 1 PROVISIONS RELATED TO THE EUROPEAN MEAT SECTOR IN THE LEGISLATIVE PROPOSALS OF THE CAP HEALTH CHECK ANNEX 2 Statutory management requirements referred in the regulation ANNEX 3 LEGISLATIVE PROPOSAL FOR MARKET INSTRUMENTS ANNEX 4 New Challenges and Rural Development ANNEX 5 CAP expenditure and reform path

4 4 INTRODUCTION The European Commission presented new legislative proposals on the CAP Health Check on 20 th -21 st May 2008 to assess the experience of the 2003 CAP reform and to introduce adjustments, allowing it to better respond to present market opportunities and face new challenges. As such, an Impact Assessment (IA) was carried out to analyse the impact of potential changes in the CAP, examining many options and suggestions. Public consultation with stakeholders was organised. The European Commission now hopes to reach political agreement at the Council meeting in October and to receive the opinion of the European Parliament followed by the adoption of the legal proposals by November. The publication of the new legislation is foreseen before the end of the French EU Presidency in The three basic Regulations of the CAP concerned are: Regulation (EC) No 1782/2003 which covers all issues related to the core of farm support today, the Single Payment Scheme (SPS). Regulation (EC) No 1234/2007 which covers issues related to the Single Common Market Organisation (scmo). Regulation (EC) No 1698/2005 which covers issues related to Rural Development (RD) Policy. This note sums up the main proposals in three parts (SPS, Market Mechanisms and New Challenges & Rural Development) and assesses the relevance for the European Meat sector. The proposed changes relevant to the beef, pork and sheep/goat meat sectors are analysed, where some fine-tuning could still be useful. A conclusion sums up the main proposed changes and provides some further food-for-thought. As a reference, the detailed legislative provisions are annexed hereto. The entire legislative proposals can be found on the website of the DG Agriculture and Rural Development: MAIN CONCLUSIONS OF THE IMPACT ASSESSMENT (IA) The Impact Assessment concluded that continuing present policies would significantly limit the responsiveness of CAP to new challenges and its contribution to the key agendas of climate change, renewable energy, water management and biodiversity. As for the Single Payment Scheme, the gradual expansion of decoupling to more sectors (including the beef sectors) render the need to allow Member States to consider adjustments in their SPS model towards a flatter rate for payments. Further decoupling, according to the Commission, could significantly enhance market orientation of the CAP, but in some sectors decoupling may create the need for transitional measures (beef) in order to address economic concerns. Some solutions could be addressed through a revision of Article 69 and through transitional periods. For some beef and sheep meat, the possibility of partial decoupling will remain. Revising the scope of cross compliance would contribute to easing the administrative burden as well as addressing new challenges that were not so present in In terms of agricultural markets, the phasing out of milk quotas and removal of set-aside will allow the farmers to better respond to market situations. Finally, the Impact Assessment shows that the present tool kit of measures available under RD programmes is sufficient to address the EU s new challenges. Additional financing should be provided through progressive modulation. READ THE TEXT: 4

5 5 3 Key Objectives of the CAP Health Check 1. Make the Single Payment Scheme more effective, efficient and simple 2. Adapt market instruments to foster market orientation 3. Respond to new and ongoing challenges (climate change, bio-energy, water scarcity, biodiversity) PART 1 Single Payment Scheme FLATTER PAYMENT RATES PER ENTITLEMENT The introduction of the SPS made decoupled farm support the central element of the 2003 CAP reform. The legal reference is Regulation (EC) No 1782/2003 which covers all issues related to the core of farm support today, the Single Payment Scheme (SPS). Reminder: in implementing the SPS, Member States could opt for three basic models: historic model: In this model payment entitlements are based on individual historic reference amounts per farmer. This is currently applied by Austria, Belgium, Ireland, Italy, Portugal, Scotland, Wales (all introduced in 2005), France, Greece, the Netherlands, Spain (all 2006). regional model: In this model flat rate payment entitlements are based on amounts received by farmers in a region in the reference period. Introduced by Malta and Slovenia in hybrid model: A mix of the two approaches, either static or in a dynamic fashion : Static: Denmark, Luxembourg, Sweden, UK -Northern Ireland- (all 2005); Dynamic: Germany, UK England- (both 2005), Finland (2006). Proposal: In the Health Check the Commission is proposing to allow Member States to adjust their SPS model by moving gradually towards flatter payment rates per entitlement. There are three options: OPTION 1: Review possibility of payment entitlements (under the historic implementation model) according to Article 46. OPTION 2: Change from historical model to regional model according to Articles OPTION 3: Approximation of the value of payment entitlements according to Article 49. 5

6 6 PARTIAL DECOUPLING In 2003 CAP reform, some Member States considered that full decoupling could lead to several risks such as the abandonment of production, the lack of raw material supply for processing industries, or to social and environmental problems in areas with few economic alternatives. This was the reason why currently Member States may retain a part of the payments coupled, i.e.: Suckler Cow Premium (up to 100%), the Special beef premium (up to 75%), the Slaughter Premium (up to 40% for adult cattle and 100% for calves) and sheep and goats (up to 50%). The overall current situation for meat production in the EU 15 is described in the following table: The Impact Assessment of the CAP Health Check concluded that four years later the biggest impact of full decoupling would still be in the sectors of suckler cows and sheep and goat meat production. However, in other beef production systems, the impact would not be so significant. Proposal: Consequently, an exception of full decoupling is done with suckler cows, sheep and goat meat premia, where Member States can maintain the coupled support (as it exists currently) [Articles (1) see below]. However, for slaughter premium for young animals, slaughter premium for adult animals and Special Beef Premium, full decoupling is foreseen in two steps (50% decoupled in 2010, 50% decoupled in 2011 and 100% decoupled in 2012 and onwards) [Art. 55 (2)]. The new graph would look like this in 2012, effectively being reduced to two categories, where decoupled support is still allowed: In 2012 LIVESTOCK: Coupled support max BE North BE South DK DE EL ES FR IT NL AT PT SL FI SE Sheep and goat 50% 50% 50% 50% 50% 50% 50% 50% Slaughter (calves) Beef option 1 Suckler cow 100 % 100 % 100 % 100 % 100 % 100 % 100 % And slaughter (adults) Beef option 2 slaughter (adults) Or special male bovine 6

7 7 EXCLUSION OF PAYMENTS TO CERTAIN COMPANIES AND FIRMS The current provisions do not allow Member States to exclude some recipients to receive payments. Proposal: In order to prevent income support to be allocated to companies and firms whose business purpose is not or only marginally targeted to exercising agricultural activity, this exclusion will be introduced. ARTICLE 69 AND THE MEAT SECTOR Currently, Member States may retain by sector 10 percent of their national budget ceilings for direct payments for environmental measures or improving quality and marketing of products in that sector. Originally it was designed to facilitate transition towards decoupling. Proposal: The article is to be broadened and made more flexible. Measures to address disadvantages for farmers in certain regions specialising in the diary, beef and sheep meat sectors are covered. There will also be support for some risk management measures -crop insurance schemes for natural disasters and mutual funds for animal diseases. MODULATION TO BECOME PROGRESSIVE Modulation is a means of budgetary transfer by which a percentage reduction is applied to farmer direct payments (Pillar I) and the budgetary resources released are reassigned to rural development (Pillar II) measures. With the 2003 Reform, compulsory modulation for all EU-15 Member states was agreed, starting in 2005 with a rate of 3% and increasing to 4% in 2006 and to 5% from 2007 onwards. A EUR franchise was also introduced, below which no reduction of direct payments is applied. PROPOSAL: The RD policy is seen as a possibility to deal with the new challenges that the EU Agricultural sector faces (see below). It is thus proposed to increase compulsory modulation based on a progressive element. The principles: All new receipts from modulation stay within the Member State that generates them. In EU-15, basic modulation, applying to all payments above (effectively introducing De Minimis ), increases by 2% annually from 2009 until it reaches an additional 8% in A progressive element is introduced, based on different thresholds of payments, thereby addressing equity issues relating to individual producers limits. The Commission proposes to increase the modulation rate to a total of 13 % by Additional cuts would be made for bigger farms (an extra 3 percent for farms receiving more than 100,000 a year, 6 percent for those receiving more than 200,000 and 9 percent for those receiving more than 300,000). In other words, for farms receiving less than 5000, modulation will be unchanged. For those receiving more than , more than 1/5 of their aid will be transferred to Rural Development. This new system for the financial management of direct aids effectively establishes net global ceilings per Member State. 7

8 8 The amount in brackets in the graph below represents the total amount of modulation: Thresholds to % 0 +2% 0 +2% to % +2% (7%) +4% (9%) +6% (11%) +8% (13%) to % +5% (10%) +7% (12%) +9% (14%) +11% (16%) to % (13%) +10% (15%) +12% (17%) +14% (19%) +3% Above % (16%) +13% (18%) +15% (20%) +17% (22%) EU-10 becomes also eligible for modulation in 2012, with a basic rate of 3% (instead of 13%). Bulgaria and Romania are exempted, in relation to the phasing-in of direct payments. CROSS COMPLIANCE: WATER & ENVIRONMENT (SET ASIDE) Cross compliance is a mechanism that links full support under the first pillar of the CAP to the compliance of farmers with rules relating to basic standards for environment, food safety, animal and plant health and animal welfare amongst standards PROPOSAL: Withdrawal of certain requirements that are considered not relevant or linked to farmer responsibility. Addition of requirements on GAEC (Good Agricultural Environmental Conditions) that retain the environmental benefits from set-aside and address issues of water management. ABOLISHMENT OF THE ENGERY CROP SCHEME An aid of 45 her hectare for energy crops is given for the production of biofuels and electric and thermal energy produced from biomass. It is proposed to abolish this energy crop scheme based on current very strong demand for bio-energy. 8

9 9 PART 2 Market Mechanisms The second Regulation (EC) which will be amended in the Health Check is No 1234/2007, which covers issues related to the Single Common Market Organisation (scmo). ABOLISHMENT OF PIG MEAT INTERVENTION & TENDERING FOR BEEF SECTOR The Commission believes that market supply control should be turned into a real safety net or farmers, so current provisions on public intervention should be simplified and harmonised by using the tendering method. For pig meat, taking into account current and expected market conditions, it is proposed to abolish intervention. For the beef sector, full tendering is introduced where the price is below the trigger price ( 1560/t). ABOLITION OF SET ASIDE: MORE ANIMAL FEED IN THE EU? Based on the market outlook situation and the implementation of SPS, it is proposed to abolish set-aside as an instrument of supply control. This could potentially free space for more animal feed production in the EU. TRANSITION TO END THE MILK QUOTA: MORE MILK THAN SUCKLER COWS? Milk quotas are set at Member State level until 2014/15. To ensure a soft landing, an increase of quota by 1% annually from 2009 to 2013 is proposed. There will be a review clause, asking for a report to be drawn up before 30 June OPTIONAL INTERVENTION AID FOR SKIMMED MILK POWDER FEEDING STUFF For skimmed milk powder feeding stuff, the current situation foresees an obligatory aid for skimmed milk powder used for animal feed. This intervention aid was to provide an alternative to intervention or export with high refunds. In the context of the dairy reform the obligatory element of this aid has become obsolete. It has therefore been proposed to make such a support optional for the Commission to decide if it should be applied when the market situations require it. 9

10 10 PART 3 New Challenges and Rural Development Policy Currently, all farmers receiving more than 5,000 in direct aid have their payments reduced by 5 percent and the money is transferred into the Rural Development (RD) budget. However, the Health Check proposals identified a number of new, and ongoing, challenges facing the CAP (such as climate change, bio-energy, water management and biodiversity) and consider RD to be a key instrument to deal with these challenges. Since the ceiling for the overall CAP budget is fixed until 2013, additional funding for rural development can only be realised through an increase in compulsory modulation. PROPOSAL: The funding obtained through progressive modulation (see above) could be used by Member States to reinforce programmes in the fields of climate change, renewable energy, water management and biodiversity. Under the newly funded Rural Development policy: Investments under axis 1 can be targeted towards energy, water and other input saving machinery and equipment and to production of (feed stocks for) renewable energy for on and off farm use. Under axis 2 the agri-environment measures and the forestry measures can be used in particular for biodiversity, water management and climate change mitigation actions. Under axis 3 and 4 local scale renewable energy projects can be supported. In this context it is to be mentioned that the 7 th Research Framework Programme can contribute to addressing the new challenges and provide valuable support to innovations in the farming sector and to policy targeting. 10

11 11 CONCLUSION First conclusions on the CAP Health Check can be illustrated by looking at the direct or indirect impact of the proposals on Europe s Meat Industry. As for the direct impact, the abolition of the pig meat intervention scheme is certainly unwanted although possibly expected. The introduction of a full tendering scheme for beef is a new element and its impact needs to be evaluated by the stakeholders concerned. Naturally, of further worry is the move towards full decoupling for the slaughter premium for young and adult animals until Nonetheless, the fact that coupled support for suckler cows, sheep and goats remains, the fact that Article 69 would be broadened to potentially include farmers specialised in meat production in some regions as well as the mutual funds for animal diseases are positive developments for the European Meat Industry. What about the indirect impact of the legislative proposals? Obviously, the impact on farmers income through changes in the SPS system might impact upon their planning and future production choices. In this context, the potential for abandonment of future European livestock production needs to be assessed. Likewise, the idea of progressive modulation will further reduce direct aid for farmers. As the same time, it is not to be forgotten that progressive modulation contains certain positive elements for meat producing farmers. More financial incentives could be given to produce meat energy and environmentally friendly. As such, farmers and companies engaging in extensification of livestock (e.g. in the reduction of stocking density and by increasing grazing opportunities) can attract European subsidies. Finally, some other proposed changes are noteworthy. Could there be a new possible competition from milk quota abolition: milk vs. suckler cows? Does the abolition of set-aside free space for animal feed production? Does the abolition of the energy crop premium help to reduce the feed vs. fuel debate? Taking all the foregoing into consideration, the initial conclusion to be drawn is that the challenges that these legislative proposals presented by the European Commission through the CAP Health Check represent do not seem to cause major disruption to livestock breeding and meat production across Europe Nonetheless, some fine tuning may still be needed for the CAP to be fit in the 21 st century. 11

12 12 ANNEX 1 PROVISIONS RELATED TO THE EUROPEAN MEAT SECTOR IN THE LEGISLATIVE PROPOSALS OF THE CAP HEALTH CHECK Proposal for a COUNCIL REGULATION establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers (30) Regulation (EC) No 1782/2003, while introducing a decoupled single payment scheme allowed Member States to exclude certain payments from that scheme. At the same time Article 64(3) of that Regulation provided for the revision of the options provided for in Sections 2 and 3 of Chapter 5 of its Title III, in the light of market and structural developments. An analysis of the relevant experience shows that decoupling introduces flexibility in the choice of producers, enabling them to take their production decisions on the basis of profitability and market response. This is particularly the case for the arable crops, hops and seeds sectors, and to a certain extent, also the beef sector. Therefore, the partially coupled payments in these sectors should be integrated into the single payment scheme. In order for farmers in the beef sector to gradually adjust to the new support arrangements provision should be made for a phasing-in of the integration of the special premium for male animals and the slaughter premium. This Regulation establishments: [ ] (d) TITLE I SCOPE AND DEFINITIONS Article 1 Scope support schemes for farmers producing sheep meat and goat meat and beef and veal; SECTION 2 PARTIAL IMPLEMENTATION Article 53 General provisions 1. Any Member State having excluded the sheep and goat and beef payments from the single payment scheme under the conditions of Articles 67 and 68 of Regulation (EC) No 1782/2003 may decide by 1 August 2009 to continue to apply the single payment scheme from 2010 under the conditions laid down in this section and in conformity with the decision taken under Article 64(1) of Regulation (EC) No 1782/2003. However, Member States may decide to set the part of the component of their national ceiling to be used for additional payments to farmers in accordance with Article 55(1) of this Regulation at a rate lower than that decided under Article 64(1) of Regulation (EC) No 1782/ According to the choice made by each Member State, the Commission shall fix, in accordance with the procedure referred to in Article 128(2) a ceiling for each of the direct payments referred to, respectively, in Articles 54, 55 and

13 13 This ceiling shall be equal to the component of each type of direct payment in the national ceilings referred to in Article 41, multiplied by the percentages of reduction applied by Member States in accordance with Articles 54, 55 and 56. The total amount of the fixed ceilings shall be deducted from the national ceilings referred to in Article 41 in accordance with the procedure referred to in Article 128(2). Article 54 Sheep and goat payments Member States may retain up to 50% of the component of national ceilings referred to in Article 41 corresponding to the sheep and goat payments listed in Annex VI to Regulation (EC) No 1782/2003 and shall make, on a yearly basis, an additional payment to farmers. The additional payment shall be granted to farmers rearing sheep and goats, under conditions provided for in Section 7 of Chapter 1 of Title IV of this Regulation and within the ceiling fixed in accordance with Article 53(2). Article 55 Beef and veal payments 1. Member States that in accordance with Article 68(2)(a)(i) of Regulation (EC) No 1782/2003 retained all or part of the component of national ceilings referred to in Article 41 of this Regulation corresponding to the suckler cow premium referred to in Annex VI to Regulation (EC) No 1782/2003 shall make, on a yearly basis, an additional payment to farmers. The additional payment shall be granted for maintaining suckler cows under the conditions provided for in Section 8 of Chapter 1 of Title IV of this Regulation and within the ceiling fixed in accordance with Article 54(2). 2. In 2010 and 2011, Member States that in accordance with Article 68(1), 68(2)(a)(ii) or 68(2)(b) of Regulation (EC) No 1782/2003 retained all or part of the national ceilings referred to in Article 41 of this Regulation corresponding to the slaughtering premium for calves, the slaughtering premium for animals other than for calves or the special male premium may make an additional payment to farmer. The additional payments shall be granted on slaughtering of calves, on slaughtering of bovine animals other than calves and for holding male bovine animals, under the conditions provided for in Section 8 of Chapter 1 of Title IV. The additional payment shall be made at 50% of the level applied under Article 68 of Regulation (EC) No 1782/2003 and within the limit fixed in accordance with Article 53(2) of this Regulation. CHAPTER 5 SPECIFIC SUPPORT Article 68 General rules 1. Member States may decide by 1 August 2009 at the latest to use from 2010 up to 10% of their national ceilings referred to in Article 41 to grant support to farmers: (a) for: (i) (ii) (iii) specific types of farming which are important for the protection or enhancement of the environment, for improving the quality of agricultural products, or for improving the marketing of agricultural products, 13

14 14 [ ] (b) to address specific disadvantages affecting farmers in the dairy, beef, sheep and goat meat and rice sectors in economically vulnerable or environmentally sensitive areas, (e) mutual funds for animal and plant diseases in accordance with the conditions set out in Article 70. SECTION 7 SHEEP AND GOAT PREMIUMS Article 88 Scope of application In case of application of Article 54, Member States shall grant, on a yearly basis, premiums or additional payments to farmers rearing sheep and goats under the conditions provided for in this section save as otherwise provided. Article 89 Definitions For the purposes of this section the following definitions shall apply: (a) "ewe" shall mean any female of the ovine species having lambed at least once or aged at least one year; (b) "she-goat" shall mean any female of the caprine species having kidded at least once or aged at least one year. Article 90 Ewe and goat premium 1. A farmer keeping ewes on his holding may qualify, on application for a premium for maintaining ewes (ewe premium). 2. A farmer keeping she-goats on his holding may qualify, on application for a premium for maintaining she-goats (goat premium). This premium shall be granted to farmers in specific areas where the production meets the following two criteria: (a) (b) goat rearing is mainly directed towards the production of goatmeat; goat and sheep rearing techniques are similar in nature. A list of such areas shall be established following the procedure referred to in Article 128(2). 3. The ewe premium and the goat premium shall be granted in the form of an annual payment per eligible animal per calendar year and per farmer within the limits of individual ceilings. The minimum number of animals in respect of which an application for a premium is lodged shall be determined by the Member State. This minimum shall not be less than 10 or greater than

15 15 4. Per ewe, the amount of the premium shall be EUR 21. However for farmers marketing sheep's milk or products based on sheep's milk the premium per ewe shall be EUR 6,8. 5. Per she-goat the amount of the premium shall be EUR 6,8. Article 91 Supplementary premium 1. A supplementary premium shall be paid to farmers in areas where sheep and goat production constitutes a traditional activity or contributes significantly to the rural economy. Member States shall define these areas. In any event the supplementary premium shall only be granted to a farmer whose holding has at least 50% of its area used for agriculture situated in less-favoured areas defined pursuant to Regulation (EC) No 1257/ The supplementary premium shall also be granted to a farmer practising transhumance provided that: (a) (b) at least 90% of the animals for which the premium is applied are grazed for at least 90 consecutive days in an eligible area established in accordance with paragraph 1, and the seat of the holding is situated in a well-defined geographical area for which it has been established by the Member State that transhumance is a traditional practice of sheep and/or goat rearing and that these animal movements are necessary owing to the absence of forage in sufficient quantity during the transhumance period. 3. The amount of the supplementary premium shall be set at EUR 7 per ewe and per she-goat. The supplementary premium shall be granted under the same conditions as those laid down for the grant of the ewe and goat premium. Article 92 Common rules on premiums 1. Premiums shall be paid to recipient farmers on the basis of the number of ewes and/or she-goats kept on their holding over a minimum period to be determined in accordance with the procedure referred to in Article 128(2). 2. To qualify for the premiums an animal shall be identified and registered in accordance with Regulation (EC) No 21/2004. Article 93 Individual limits 1. On 1 January 2009 the individual ceiling per farmer referred to in Article 90(3), shall be equal to the number of premium rights which he held on 31 December 2008 in accordance with the relevant Community rules. 2. Member States shall take the necessary measures to ensure that the sum of premium rights on their territory does not exceed the national ceilings set out in 15

16 16 paragraph 4 and that the national reserves referred to in Article 96 may be maintained. After the end of the period of application of the single area payment scheme in accordance with Article 111 and where Article 54 is applied, the allocation of the individual ceilings to producers and the setting up of the national reserve referred to in Article 95 shall take place no later than the end of the first year of the application of the single payment scheme. 3. Premium rights, which have been withdrawn pursuant to the measure taken pursuant to paragraph 2 shall be cancelled. 16

17 17 4. The following ceilings shall apply: Member State Rights (x 1000) Bulgaria 2 058,483 Czech Republic 66,733 Denmark 104 Estonia 48 Spain France Cyprus 472,401 Latvia 18,437 Lithuania 17,304 Hungary Poland 335,88 Portugal Romania 5 880,620 Slovenia 84,909 Slovakia 305,756 Finland 80 Total ,523 Article 94 Transfer of premium rights 1. When a farmer sells or otherwise transfers his holding, he may transfer all his premium rights to the person who takes over his holding. 2. A farmer may also transfer, in whole or in part, his rights to other farmers without transferring his holding. In the case of a transfer of rights without transfer of the holding, a part of the premium rights transferred, not exceeding 15%, shall be surrendered, without compensation to the national reserve of the Member State where his holding is situated for redistribution free of charge. Member States may acquire premium rights from farmers who agree, on a voluntary basis, to surrender their rights, in whole or in part. In this case payments for the acquisition of such rights may be made to such farmers from national budgets. By way of derogation from paragraph 1 and in duly justified circumstances, Member States may provide that in the case of a sale or other transfer of the holding, the transfer of rights is carried out by the intermediary of the national reserve. 17

18 18 3. Member States may take the necessary measures to avoid premium rights being moved away from sensitive zones or regions where sheep production is especially important for the local economy. 4. Member States may authorise, before a date that they shall determine, temporary transfers of that part of the premium rights, which are not intended to be used by the farmer who holds them. Article 95 National reserve 1. Each Member State shall maintain a national reserve of premium rights. 2. Any premium rights withdrawn pursuant to Article 94(2) or other Community provisions shall be added to the national reserve. 3. Member States may allocate premium rights to farmers, within the limits of their national reserves. When making the allocation they shall give precedence in particular to newcomers, young farmers or other priority farmers. Article 96 Ceilings The sum of the amounts of each premium claimed shall not exceed the limit of the ceiling, fixed by the Commission pursuant to Article 53(2). When the total amount of aid claimed exceeds the fixed ceiling, the aid per farmer shall be reduced proportionately in that year. SECTION 8 BEEF AND VEAL PAYMENTS Article 97 Scope of application In case of application of Article 55, Member States shall grant, under the conditions set out in this section, save as otherwise provided, the additional payment or payments chosen by the Member State concerned according to that article. For the purposes of this section: (a) Article 98 Definitions "region" shall mean a Member State or a region within a Member State, at the option of the Member State concerned, (b) (c) (d) "bull" shall mean an uncastrated male bovine animal, "steer" shall mean a castrated male bovine animal, "suckler" cow shall mean a cow belonging to a meat breed or born of a cross with a meat breed, and belonging to a herd intended for rearing calves for meat production, 18

19 19 (e) "heifer" shall mean a female bovine animal from the age of eight months which has not yet calved. Article 99 Special premium 1. A farmer holding male bovine animals on his holding may qualify, on application, for a special premium. It shall be granted in the form of an annual premium per calendar year and per holding within the limits of regional ceilings for not more than 90 animals for each of the age brackets referred to in paragraph The special premium shall be granted no more than: (a) (b) once in the life of each bull from the age of nine months, or twice in the life of each steer: (i) (ii) the first time at the age of nine months, the second time after it has reached the age of 21 months. 3. To qualify for the special premium: (a) (b) any animal covered by an application shall be held by the farmer for fattening for a period to be determined, each animal shall be covered until slaughter or until export by an animal passport referred to in Article 6 of Regulation (EC) No 1760/2000 of the European Parliament and of the Council containing all relevant information on its premium status or, if not available, an equivalent administrative document. 4. When in a given region the total number of bulls from the age of nine months and of steers from nine months to 20 months of age, for which an application has been made and which satisfy the conditions for granting the special premium exceeds the regional ceiling referred to in paragraph 8, the number of all eligible animals under paragraph 2(a) and (b) per farmer for the year in question shall be reduced proportionately. Within the meaning of this Article, "regional ceiling" shall mean the number of animals entitled to benefit, in a region and per calendar year, from the special premium. 19

20 20 5. By way of derogation from paragraphs 1 and 4, Member States may: (a) (b) on the basis of objective criteria that are part of a rural development policy and only on the condition that they take into account environmental as well as employment aspects, change or waive the headage limit of 90 animals per holding and age bracket, and, where exercising this power, decide to apply paragraph 4 in such a way as to reach the level of reductions required to comply with the applicable regional ceiling, without applying such reductions to small farmers who, in respect of the year in question, did not submit special premium applications for more than a minimum number of animals determined by the Member State concerned. 6. Member States may decide to grant the special premium at the time of slaughter. In this case, for bulls the age criterion referred to in paragraph 2(a) shall be replaced by a minimum carcass weight of 185 kg. The premium shall be paid or passed back to the farmers. 7. The amount of the special premium shall be set at: (a) (b) EUR 210 per eligible bull; EUR 150 per eligible steer and age bracket. 8. The following regional ceilings shall apply: Member State Regional ceiling Bulgaria Czech Republic Denmark Germany Estonia Cyprus Latvia Lithuania Poland Romania Slovenia Slovakia Finland Sweden

21 21 Article 100 Suckler cow premium 1. A farmer keeping suckler cows on his holding may qualify, on application, for a premium for maintaining suckler cows (suckler cow premium). It shall be granted in the form of an annual premium per calendar year and per farmer within the limits of individual ceilings. 2. The suckler cow premium shall be granted to any farmer: (a) not supplying milk or milk products from his farm for 12 months from the day on which the application is lodged; The supply of milk or milk products directly from the holding to the consumer shall not, however, prevent grant of the premium, (b) supplying milk or milk products whose total individual quota as referred to in Article 67 of Regulation (EC) No 1234/2007 does not exceed kg. However Member States may decide on the basis of objective and not discriminatory criteria, which they determine, to change or waive the quantitative limit, provided that the farmer keeps, for at least six consecutive months from the day on which the application is lodged a number of suckler cows at least equal to 60% and of heifers at most equal to 40% of the number for which the premium was requested. For the purposes of determining the number of eligible animals under points (a) and (b) of the first paragraph, whether cows belong to a suckler herd or to a dairy herd shall be established on the basis of the beneficiary's individual quota for milk available on the holding on 31 March of the calendar year concerned, expressed in tonnes and the average milk yield. 3. The farmers' entitlement to the premium shall be limited by the application of an individual ceiling as defined in Article Per eligible animal, the amount of the premium shall be set at EUR Member States may grant an additional national suckler cow premium, up to a maximum of EUR 50 per animal, provided that no discrimination is caused between stockfarmers in the Member State concerned. In respect of holdings located in a region as defined in Articles 5 and 8 of Council Regulation (EC) No 1083/2006 1, the first EUR 24,15 per animal of this additional premium shall be financed by the EAFRD. 1 OJ L 210, , as amended by Regulation (EC) No 1989/

22 22 In respect of holdings located throughout the territory of a Member State, if in the Member State concerned the cattle population has a high proportion of suckler cows, representing at least 30% of the total number of cows, and if at least 30% of male bovine animals slaughtered belong to conformation classes S and E, the EAFRD shall finance the additional premium in total. Any overshoot of these percentages is established on the basis of the average of the two years preceding that for which the premium is granted. 6. For the purposes of this Article, only heifers belonging to a meat breed or born of a cross with a meat breed and belonging to a herd intended for rearing calves for meat production shall be taken into account. Article 101 Individual ceiling for suckler cow 1. An aid shall be granted to each farmer of suckler cows within the limit of the individual ceilings which have been established in application of Article 126(2) of Regulation (EC) No 1782/ Member States shall take the necessary measures to ensure that the sum of premium rights on their territory does not exceed the national ceilings set out in paragraph 5 and that the national reserves referred to in Article 103 may be maintained. After the end of the period of application of the single area payment scheme in accordance with Article 111 and where Article 55(1) is applied, the allocation of the individual ceilings to producers and the setting up of the national reserve referred to in Article 103 shall take place no later than the end of the first year of the application of the single payment scheme. 3. Where the adjustment referred to in paragraph 2 requires a reduction of individual ceilings held by farmers, it shall be carried out without compensatory payment and decided on the basis of objective criteria, including, in particular: (a) (b) (c) the rate at which farmers have used their individual ceilings during the three reference years prior to the year 2000, the implementation of an investment or extensification programme in the beef and veal sector, particular natural circumstances or the application of penalties, resulting in a non-payment or a reduced payment of the premium for at least one reference year, (d) additional exceptional circumstances having the effect that the payments made for at least one reference year do not correspond to the actual situation as established during the previous years. 4. Premium rights which have been withdrawn pursuant to the measure provided for in paragraph 2 shall be abolished. 22

23 23 5. The following national ceilings shall apply: Member State National ceiling Belgium Bulgaria Czech Republic Estonia Spain France Cyprus 500 Latvia Lithuania Hungary Malta 454 Austria Poland Portugal Romania Slovenia Slovakia United Kingdom Article 102 Transfer of suckler cow premium rights 1. When a farmer sells or otherwise transfers his holding, he may transfer all his suckler cow premium rights to the person who takes over his holding. He may also transfer, in whole or in part, his rights to other farmers without transferring his holding. In the case of transfer of premium rights without transfer of the holding a part of the transferred rights, which shall not exceed 15%, shall be returned without compensatory payment to the national reserve of the Member State where the holding is situated for redistribution free of charge. 2. The Member States: (a) shall take the necessary measures to prevent premium rights being transferred outside sensitive areas or regions where beef and veal production is particularly important for the local economy; (b) may provide either that the transfer of rights without transfer of the holding is carried out directly between farmers or that it is carried out through the intermediary of the national reserve. 23

24 24 3. Member States may authorise, before a date to be determined, temporary transfers of part of the premium rights which are not intended to be used by the farmer who holds them. Article 103 National reserve of suckler cow premium rights 1. Each Member State shall maintain a national reserve of suckler cow premium rights. 2. Any premium rights withdrawn pursuant to second subparagraph of paragraph 1 of Article 102 or other Community provisions shall be added to the national reserve, without prejudice to Article 101(4). 3. The Member States shall use their national reserves for allocating, within the limits of those reserves, premium rights in particular to newcomers, young farmers and other priority farmers. Article 104 Heifers 1. By way of derogation from Article 100(3) of this Regulation, Member States where more than 60% of suckler cows and heifers are kept in mountain areas within the meaning of Article 50 of Regulation (EC) No 1698/2005 may decide to manage the granting of the suckler cow premium for heifers separately from that for suckler cows within the limits of a separate national ceiling to be set up by the Member State concerned. Such separate national ceiling shall not exceed 40% of the national ceiling of the Member State concerned set out in Article 101(5). That national ceiling shall be reduced by an amount equal to the separate national ceiling. When in a Member State exercising the power provided for in this paragraph, the total number of heifers, for which an application has been made, and which satisfy the conditions for granting the suckler cow premium, exceeds the separate national ceiling, the number of eligible heifers per farmer for the year in question shall be reduced proportionately. 2. For the purpose of this Article, only heifers belonging to a meat breed or born of a cross with a meat breed shall be taken into account. Article 105 Slaughter premium 1. A farmer keeping bovine animals on his holding may qualify, on application, for a slaughter premium. It shall be granted on slaughter of eligible animals or their export to a third country and within national ceilings to be determined. The following shall be eligible for the slaughter premium: (a) (b) bulls, steers, cows and heifers from the age of eight months, calves of more than one and less than eight months old and of carcass weight up to 185 kg, 24

25 25 The animals listed in the second subparagraph shall be eligible for the slaughter premium provided they have been held by the farmer for a period to be determined. 2. The amount of the premium shall be set at: (a) (b) EUR 80 per eligible animal as specified under paragraph 1(a); EUR 50 per eligible animal as specified under paragraph 1(b). 3. The national ceilings referred to in paragraph 1 shall be established per Member State and separately for both groups of animals as specified in (a) and (b) of the second subparagraph thereof. Each ceiling shall be equal to the number of animals of each of these two groups which in 1995 were slaughtered in the Member State concerned to which are added those animals exported to third countries, according to Eurostat data or any other published official statistical information for that year accepted by the Commission. For the new Member States the national ceilings shall be those contained in the following table. Bulls, steers, cows and heifers Calves more than 1 and less than 8 months old and of carcass weight up to 185 kg Bulgaria Czech Republic Estonia Cyprus Latvia Lithuania Hungary Malta Poland Romania Slovenia Slovakia When in a given Member State the total number of animals, for which an application has been made in respect of one of the two groups of animals specified in point (a) or (b) of the second subparagraph of paragraph 1, and which satisfy the conditions for granting the slaughter premium exceeds the national ceiling laid down for that group, the number of all eligible animals under that group per farmer for the year in question shall be reduced proportionately. 25

26 26 Article 106 Common rules on premiums To qualify for direct payments under this section, an animal shall be identified and registered in accordance with Regulation (EC) No 1760/2000. Nevertheless, an animal shall be deemed as eligible to the payment where the information on previous movements of animals laid down in the second indent of Article 7(1) of Regulation (EC) No 1760/2000 has been reported to the competent authority at the time of the beginning of the retention period of the animal. Article 107 Ceilings The sum of the amounts of each direct payment claimed under this section shall not exceed the ceiling fixed by the Commission in accordance with Article 53(2). When the total amount of aid claimed exceeds the fixed ceiling, the aid per farmer shall be reduced proportionately in that year. Article 108 Substances prohibited under Directive 96/22/EC 1. Where residues of substances prohibited under Council Directive 96/22/EC 2, or residues of substances authorised under the aforementioned act but used illegally, are detected pursuant to the relevant provisions of Council Directive 96/23/EC 3, in an animal belonging to the bovine herd of a farmer, or where a non-authorised substance or product, or a substance or product authorised under Directive 96/22/EC but held illegally is found on the farmer's holding in any form, the farmer shall be excluded, for the calendar year of that discovery, from receiving the amounts provided for under this section. In the event of a repeated infringement, the length of the exclusion period may, according to the seriousness of the offence, be extended to five years as from the year in which the repeated infringement was discovered. 2. In the event of obstruction on the part of the owner or holder of the animals when inspections are being carried out and when the samples are being taken which are necessary for the application if national residue-monitoring plans or when the investigations and checks provided for under Directive 96/23/EC are being carried out, the penalties provided for in paragraph 1 of this Article shall apply. 2 3 OJ L 125, , p. 3. OJ L 125, , p

27 27 ANNEX 2 Statutory management requirements referred in the regulation Public and animal health Identification and registration of animals 6. Council Directive 92/102/EEC of 27 November 1992 on identification and registration of animals (OJ L 355, , p. 32) 7. Regulation (EC) No 1760/2000 of the European Parliament and of the Council of 17 July 2000 establishing a system for the identification and registration of bovine animals and regarding the labelling of beef and beef products and repealing Council Regulation (EC) No 820/97 (OJ L 204, , p. 1) 8. Council Regulation (EC) No 21/2004 of 17 December 2003 establishing a system for the identification and registration of ovine and caprine animals and amending Regulation (EC) No 1782/2003 and Directives 92/102/EEC and 64/432/EEC (OJ L 5, , p. 8). Articles 3, 4 and 5 Articles 4 and 7 Articles 3, 4 and 5 B. Public, animal and plant health 11. Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety (OJ L 31, , p. 1) 12. Regulation (EC) No 999/2001 of the European Parliament and of the Council of 22 May 2001 laying down rules for the prevention, control and eradication of certain transmissible spongiform encephalopathies (OJ L 147, , p. 1) Articles 14, 15, 17(1), 18, 19 and 20 Articles 7, 11, 12, 13 and 15 Notification of diseases 13. Council Directive 85/511/EEC of 18 November 1985 introducing Community measures for the control of foot-andmouth disease (OJ L 315, , p. 11) 14. Council Directive 92/119/EEC of 17 December 1992 introducing general Community measures for the control of certain animal diseases and specific measures relating to swine vesicular disease (OJ L 62, , p. 69) 15. Council Directive 2000/75/EC of 20 November 2000 laying down specific provisions for the control and eradication of bluetongue (OJ L 327, , p. 74) Article 3 Article 3 Article 3 C. Animal welfare 16. Council Directive 91/629/EEC of 19 November 1991 laying down minimum standards for the protection of calves (OJ L 340, , p. 28) Articles 3 and 4 27

28 Council Directive 91/630/EEC of 19 November 1991 laying down minimum standards for the protection of pigs (OJ L 340, , p. 33) 18. Council Directive 98/58/EC of 20 July 1998 concerning the protection of animals kept for farming purposes (OJ L 221, , p. 23) Articles 3 and 4(1) Article 4 28

29 29 ANNEX 3 LEGISLATIVE PROPOSAL FOR MARKET INSTRUMENTS Proposal for a COUNCIL REGULATION on modifications to the common agricultural policy by amending Regulations (EC) No 320/2006, (EC) No 1234/2007, (EC) No 3/2008 and (EC) No [ ]/2008 (5) Pigmeat production and consumption are projected to increase over the medium term, though at a slower pace than in the past decade, due to the competition from poultry meat and higher feed prices. Pig prices are expected to remain significantly above the intervention price. Buying into intervention has not been used for many years for pigmeat and in the light of the market situation and its perspectives, should be abolished. (18) The provisions on exceptional market support measures related to animal diseases are to be dealt with in a horizontal provision on risk management, and so should be deleted from Regulation (EC) No 1234/2007. Article 11 Public intervention periods Public intervention shall be available: [ ] (c) for beef and veal, throughout any marketing year; Article 12 Opening of public intervention 1. During the periods referred to in Article 11, public intervention (b) shall be opened for beef by the Commission, without the assistance of the Committee referred to in Article 195(1), if the average market price for beef over a representative period in a Member State or in a region of a Member State recorded on the basis of the Community scale for the classification of carcasses provided for in Article 42(1) is below EUR 1560/tonne. 3. Public intervention for beef, referred to in point (b) of paragraph 1, shall be closed by the Commission, without the assistance of the Committee referred to in Article 195(1), if, over a representative period, the conditions provided for in that point are no longer fulfilled 29

30 30 Article 18 Intervention prices 1. The intervention prices and the quantities accepted for intervention for the products referred to in Article 10(a), (d), (e) and (f) shall be determined by the Commission by means of tendering procedures. In special circumstances, tendering procedures may be restricted to, or the intervention prices and the quantities accepted for intervention may be fixed per, Member State or per region of a Member State on the basis of recorded average market prices. 2. The intervention price determined in accordance with paragraph 1 shall not be higher: (b) for beef, than the average market price recorded in a Member State or a region of a Member State increased by an amount to be determined by the Commission on the basis of objective criteria; Article 99 Aid for skimmed milk and skimmed milk powder for use as feedingstuffs 1. When surpluses of milk products build up or are likely to occur creating or likely to create a serious imbalance in the market, the Commission may decide that aid shall be granted for Community-produced skimmed milk and skimmed-milk powder intended for use as feedingstuffs, according to conditions and product standards to be determined by the Commission The aid may be fixed in advance or by means of tendering procedures. For the purposes of this Article, buttermilk and buttermilk powder shall be regarded as skimmed milk and skimmed-milk powder. 2. Aid amounts shall be fixed by the Commission taking into account the reference price fixed in point (e)(ii) of Article 8(1) for skimmed-milk powder, and the development of the market situation as regards skimmed milk and skimmed-milk powder. 30

31 31 ANNEX 4 New Challenges and Rural Development Indicative types of operations of relevance to the meat industry which could be funded under the Proposal for a COUNCIL REGULATION amending Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) Priority: Climate change Types of operations Articles and measures Improvement of energy efficiency Article 26: Modernisation of agricultural holdings Potential effects Reduction of carbon dioxide (CO 2 ) emissions by saving energy. Extensification of livestock (for ex. reduction stocking density, increase grazing) Article 39: Agrienvironment payments Reduction of methane (CH 4 ). Priority: Renewable energies Types of operations Articles and measures Biogas production anaerobic digestion plants using animal waste (on farm and local production) Installations/infrastructure renewable energy using biomass for Article 26: Modernisation of agricultural holdings Article 53: Diversification into non-agricultural activities Article 53: Diversification into non-agricultural activities Article 54: Support for business creation and development Article 56: Basic services for the economy and rural population Potential effects Substitution of fossil fuel; reduction of methane (CH 4 ) Substitution of fossil fuels. 31

32 32 ANNEX 5 CAP expenditure and reform path 32