There is growing concern that agriculture will be the main loser in two large free-trade deals currently being negotiated by the EU. Negotiations with the US in the Transatlantic Trade and Investment Partnership (TTIP), and with Mercosur - a block of five South American countries including Brazil and Argentina - look set to remove or reduce tariffs on agricultural products like poultry, pork and beef.
The EU wants freer access to Mercosur countries for its manufactured goods and in return will welcome lower-priced meat imports for its 500m consumers.
The American continent grows vast quantities of cheap grain that allows it to undercut EU pig and poultry meat. That same cheap grain, in conjunction with the continent's vast grasslands, also allows it to produce high-quality, cheap beef. The Mercosur bloc is already a major exporter of farm produce to the EU, with 86 per cent of our beef imports and 70 per cent of our poultry meat coming from these countries.
At a recent meeting of EU Farm Ministers in Luxembourg, as many as 20 of them warned the EU Commission against making an offer on agriculture that includes sensitive agricultural products in the free trade talks with Mercosur. Studies show the EU farming sector risks losing in excess of 7bn Euros from such a deal.
Most at risk is the fragile Scottish beef industry, with a mere 425, 000 beef cows compared with Brazil's 212m, Argentina's 52m, Paraguay's 14.5m, and Uruguay's 11.6m.
More worrying is the capacity for both the US and the Mercosur bloc to increase production when given price incentives as a result of better trade deals, that could be concluded this year. Indeed there is a suggestion that the EU is about to show its hand and make an offer.
Central to that deal will be a new import quota of tariff-free beef for the Mercosur bloc, with a figure of 78,000 tonnes suggested.
That isn't a lot of beef, until you remember that exporting countries tend to market "bits" of a carcase rather than whole ones. Carcase are butchered so that expensive cuts like fillets and sirloins are despatched to lucrative EU markets, poorer quality cuts to the likes of Russia, while offal may end up in China. The challenge that leaves for the importing nation is the extent to which those "bits of carcase" destabilise the value of a home-produced, entire carcase.
Nobody really knows what the outcome will be, but it has been estimated that the loss of revenue to the EU beef industry will range from 7.6 per cent to 18 per cent in the worst case scenario, and is likely to be of the order of 3bn Euros.
Scotland is unusual in Europe as it has a high proportion of beef cows in its national herd. Seventy per cent of Scotland's cows are beef breeds, while 30 per cent are dairy cows, compared with the rest of the rest of the EU that has on average only 34 per cent beef cows. Only Spain and Portugal come close to Scotland with 69.4 per cent and 66.4 per cent respectively, while the figure for the whole of the UK is 44.3 per cent.
The significance of the proportion of beef cows in the overall EU herd is that most European beef is produced as a by-product of the milking herd, and much of that is finished as bull beef. Little wonder Scotch Beef produced from specialist beef cows has commanded significant premiums in the past. Indeed, at times, Scotch Beef has been among the most expensive in the world.
Sadly, Scottish breeders exported Aberdeen Angus and Hereford cattle to the Americas where they thrive and produce high-quality beef. Worse than that, those countries, particularly the Mercosur Bloc, can produce their beef so much cheaper than ours.
Scotland's total cattle herd peaked in 1974 at 2.675m head, but has steadily declined ever since to 1.806m - a drop of 32.5 per cent. Fundamentally, the problem is that the Scottish climate makes us uncompetitive. Our longer winters, that can last for seven months in some parts, and our heavy rainfall has forced many to house their cattle during the winter in expensive buildings. On top of that we have to make expensive fodder like silage to feed them.
Compare that to the likes of Brazil where cattle graze out-of-doors all year round and are then finished on cheap grain in feed lots.
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