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SPEECH/ 09/455

Mariann Fischer Boel

Member of the European Commission
Responsible for Agriculture and Rural Development

The future of sheep production in Europe

Figures and graphics available in PDF and WORD PROCESSED

Sheepmeat Forum for Producers and Industry

Brussels, 7 October 2009

[Ladies and gentlemen],

First of all, let me thank all the organisers of this forum for putting together such as valuable event, and for inviting me to join you.

It’s good to see participants from distant parts of the globe – though when I talk to our friends from the southern hemisphere (as I had the pleasure of doing this morning), I actually feel as if I were talking to my next-door neighbours!

As part of the preparation for today’s forum, I received a letter which said that the sheepmeat sector faced “challenging times”.

I’m tempted to say that I can’t remember a time which farmers didn’t describe as “challenging”! And don’t get me started on how often I’m hearing that word at the moment (though some people are using slightly stronger language.....)!

But if the claim is often repeated in the farm sector – well, that's because it’s often true. We deal with certain challenges on one day; then new ones come along the next, and we have to deal with those too.

This is certainly the case for the sheepmeat sector.

In the European Union, I get the strong impression that the sector feels very much under pressure at the moment.

Sheepmeat consumption is falling. In 1997, in the European Union of 15 Member States, consumers ate about 3.6 kilograms per head. Last year, it was 2.4 kilograms – and this is part of a long-term decline.

Production also appears to be weakening. The reduction was especially surprising from 2007 to 2008: a fall of 7 per cent.

And of course, the flock is shrinking, as it has been for many years.

At the same time, some sheep farmers are certainly feeling the pinch financially: I’ve seen cases at first hand where money was obviously in short supply – not just for investment, but even for basic daily needs.

And perhaps it’s also worrying for the sector to hear people talk more and more about climate change – a problem to which agriculture contributes, just like most other economic sectors.

So the sector is feeling the pressure of challenges around it. Can anything be done?

At this point I would like to quote a philosopher who said:

“The greatest challenge – (there’s that word again) – to any thinker is to state the problem in a way that will allow a solution.”

So how should we state our problem in this case?

I think we can divide it into two parts.

The first is what I will call the “market aspect”. I’ll call the second the “public aspect”.

So, let’s start with the “market aspect”.

The fact is that if we want to keep on producing sheepmeat, we have to find buyers. I’m not telling you anything you don’t know! But the point is worth repeating.

If we want the sector to stay in good health, we have to try to stop the slow decline in consumption – and if possible, turn it around.

Of course, it’s easy for me to say this. But in any case, I say it with a certain confidence, for one good reason: I think lamb is delicious!

We’re not talking about a basic, uninspiring commodity. We’re talking about a product full of nutrition and taste that can be prepared in all sorts of ways. I simply can’t believe that some determined and creative promotion campaigns wouldn’t make a difference to consumption figures!

That ought to be true in the markets of Europe, Oceania and North America; and I would hope that it would also be true in other large parts of the world over time – as the global population grows and gets a taste for eating more meat.

It's true that, in various countries, lamb has a low profile compared to other meats for the time being. But this doesn’t mean that things have to stay that way! My own experience of people around the world is that new things can catch on fast – if they’re presented in the right way, and if people can afford them. The long-term rise in global incomes should be helpful from this point of view.

These comments are not just theoretical: I understand that some of our colleagues here today have been involved in very successful campaigns for boosting consumer demand on domestic and global markets.

I’m the European Union Agriculture Commissioner, so if I talk about promotion, people usually then ask me about European funding for promotion.

As many of you know, it does exist – for products which carry a European or national quality label (this category includes organic schemes).

I’m told that the Commission simply doesn’t get many requests for funding to promote lamb. So perhaps there are possibilities here.

But this is an international forum, and we don’t need to limit ourselves to thinking about all-European initiatives.

Would it be possible for players in the sheepmeat sector from around the world to team up for purposes of promotion? It’s not my place to actively recommend this – but it’s an obvious question to ask.

Of course, the sector’s success in the marketplace doesn’t only depend on consumption levels.

For one thing, the health of the flock is of vital importance. Sadly, in the European Union, more than once over the last decade we've been reminded of the serous impact that disease can have.

The good news is that our systems for stopping the spread of disease in its tracks are much more robust than they used to be. And I'm glad to see that we seem to have Bluetongue virus more or less under control following recent vaccination programmes.

Other factors influencing the sheepmeat sector's success in the marketplace include the structure of the sector, and investment in equipment and skills.

With regard to structure, I'm certainly not saying that we want to take away any sense of independence from those many sheep farmers who have inherited their farm down a long line of generations, and who want to do things "their way".

But in some cases, where long-term profits really aren't looking good, perhaps there would be room for a little more co-operation.

Also, like any other sector, this one can benefit from investment – whether in physical capital or human capital. And I should add at this point that the European Union's rural development policy offers funding in this area, for the sake of raising competitiveness.

Now let me move on to the second part of my comments – the "public aspect" of sheep farming.

It would be a very serious mistake to underestimate this aspect.

By economic value, sheep farming makes up a relatively small portion of the European farm sector.

But the fact remains that, in a number of European countries, there are very large stretches of landscape where the main inhabitants that you meet are sheep! And of course, that's true many times over in various other parts of the world, as I have just experienced during my visit to Patagonia in Chile.

These sheep are the guardians of the landscape – for good or for ill.

I don't say "for good or for ill" to be provocative.

In so many cases, the impact of sheep farming is overwhelmingly positive – even essential. Sheep maintain much-valued grasslands which we simply couldn't maintain in other ways. This is important for biodiversity and for the natural beauty of the countryside – and of course grasslands are also important carbon sinks.

On the other hand, the world of sheep farming is not entirely a "picture postcard" world. There is such a thing as overstocking – which can damage the environment. And no, we can't simply ignore the fact that all livestock farming produces greenhouse gases.

These issues are all issues of public goods and public problems to which the marketplace is at least partially blind. So of course we need to turn to public policy to develop the good aspects of sheep farming and limit those which are less positive.

Of course, those parts of the Common Agricultural Policy (CAP) which are relevant to sheep farming have evolved over the years.

We used to make direct payments to sheep farmers which were 100 per cent dependent on production. A report published in 2006 suggests that these payments may have encouraged overstocking in some areas.

Now, following the CAP reform of 2003 and the Health Check of last year, most direct payments are "decoupled" from production. It was agreed to allow a 50 per cent coupling rate for the sheep premium, for those Member States that wanted it.

This was a compromise: there's a broad consensus that decoupling is a good thing for a number of reasons, but we were also concerned that a quick and complete switch to decoupling could be too much of a shock for the sheep sector.

In addition to this basic partially coupled payment, Member States have the option of redirecting extra funding from their direct payment envelope to the sheep sector, under the so-called "Article 68" of our direct payments system.

And under our rural development policy, there are a lot of options for supporting sheep farmers. I've already mentioned support for investment. Then there are payments to farmers in Less Favoured Areas (LFAs) – very important in this context, given that 80 per cent of the European Union's sheep are found in LFAs. Finally, many sheep farmers also have access to various agri-environmental schemes.

The explicit aim of LFA payments is to keep farming in place in areas where farming is essential for the environment. Agri-environmental payments aim to maximise the environmental benefits brought by farming.

In other words, both kinds of payment are clearly public payments for public goods.

Support through direct payments under the "first pillar" of the CAP is not explicitly aimed at providing public goods, but probably makes a contribution in many cases.

The key question is: In what way will this policy mix change in the future, when we've finished our debate of how the CAP should look after 2013?

I can't give you a full answer to that question today, because the discussions on the future of the CAP still have a lot of kilometres to cover. But I'm very confident on one or two points.

For me, it is inconceivable that the environmental aspects of farming will get less attention after 2013 – and it's very likely that they will get more attention than they do now.

This is very much the direction in which the public mood is pointing.

Therefore, even if the European Union does not try to directly influence the sheepmeat market, we must continue to use public money to pay for the public goods and services provided by environmentally responsible sheep farming.

If those sheep disappear, the public goods will disappear as well – with potentially serious consequences.

I imagine that, at least to some extent, we will still use the logic of using public money to cover the extra costs which are incurred by environmentally beneficial farming, as well as the income foregone.

Of course, I say this without prejudging the outcome of current discussions: the approach of covering income foregone and costs incurred is not the only possible approach.

But however we support the provision of public goods, in my personal view we must do so with payments which are sufficiently well targeted – directed at the right areas, and set at the right level.

Using schemes to make small, widely distributed payments that have little real impact may not be the best use of public money.

How does climate change fit into all of this?

In the case of extensive sheep farming, I suppose there's not so very much that we can do to limit the sheep's impact on our climate. But we should look into this carefully. This is one of many areas where international co-operation in the sector could be very helpful.

In any case, we have to balance the sheep sector's greenhouse gas emissions against the good things it can do for us: there's no question of seeing our wonderful sheep rather like old, polluting cars that should head for the scrapheap!

A final point: like other farmers, sheep farmers may need help to adapt to the effects of climate change. Funding for this is already available through the rural development budget, and it will almost certainly be there in future as well.

It's time to conclude.

Is the sheepmeat sector facing "challenging times"? Yes. The challenge of sustainability – in all its senses – is considerable.

But we can advance on several fronts – in terms of marketing, investment, restructuring, and the right kind of public support for the environmental aspects of sheep farming.

Facing a challenge is not the same thing as facing inevitable disaster. With the right help, the sector can rise to the occasion!

Thank you.

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