SECTEUR PUBLIC FÉVRIER 2008

Parlement européen

Étude sur l’avenir du secteur ovin et caprin en Europe

Annexes du rapport final

En coopération avec l’Institut de l’élevage

1 1 LISTE DES EXPERTS NATIONAUX CONSULTÉS...... 3

2 QUESTIONNAIRE SOUMIS AUX EXPERTS : NATIONAL EXPERTS CONSULTATION...... 4

3 LISTE DES PERSONNES RENCONTRÉES/INTERVIEWÉES...... 7

4 MONOGRAPHIES NATIONALES...... 12

2 1 Liste des experts nationaux consultés

Experts nationaux ayant contribué à l’étude et participé au séminaire sur l’avenir du secteur:

Stuart Ashworth Royaume-Uni Quality Meat Scotland

Ioannis Grèce Agricultural Hadjigeorgiou University of Athens Silvia Paolini Italie Agrya srl

Alicia Langreo Espagne Anne Mottet, Institut de Philippe Chotteau l’élevage

Padraig Brennan Irlande Bord Bia (Irish food board)

Experts nationaux ayant contribué à l’étude : § Agenţia Naţională pentru ameliorare şi reproducţie în zootehnie - Roumanie. § The Hungarian (and ) industry and its approach to future, Sándor Kukovics, András Jávor and Hajnalka Madai - Hongrie.

3 2 Questionnaire soumis aux experts : National Experts Consultation

Please find below information about the way we plan to lead the experts group and the guidelines they will have to prepare with a view to the workshop in Paris in January 2008. Experts will be asked: To have 4 or 5 interviews (either face-to-face Targets: interviews or phone interviews) • Cooperatives / industry • Producer groups • National authorities • Inter-branch organisations • Retailers • Consumers organisations

To write an expert report Around 15-20 pages Using the topics below With a particular focus on national specificities

To participate in a one-day workshop Comparison and discussion among experts - About their analyses, particularly the effect of the CAP reform and their expert opinion on commercial structures - About recommendations to the decision maker : testing different scenarios with different European policies/ alternative instruments The following topics may help the experts as a framework for their interviews:

1 Quantitative analyses – specificities of the national context How has the sheep and goat farmers’ income evolved since the implementation of the Common Market Organisation, since Agenda 2000, since the 2003 CAP reform? What is the sheep farmers’ income compared with other production? What are their weaknesses (labour, costs, productivity…?) How do the environmental scheme and the Less Favoured Areas scheme work? What do they represent for sheep and goat farmers compared to the Single Farm Payment? What is the distribution of the profit margin between the different links of the chain (producers, industry, retail)? Estimation of number of people involved in sheep production in the country in every link of the chain, if possible Marketing indicators: • Number of commercial structures • Production volume (meat and dairy) • Market share (meat and dairy) Characteristics of commercial structures: regional, national or European market. Are there any transnational enterprises? Do they sell carcasses, cuts, ready meals? Is there any national support for lamb/cheese promotion?

4 What is the national labelling policy ? (lamb and cheese)

2 Farmers’ strategies – To adapt to total or partial decoupling of the ewe premium – To improve productivity (key drivers: costs, labour, investments, technical progress…) – To adapt to changing sanitary context (of which vaccination, animal transportation…) – To adapt to Consumer demand: quality, certifications of origin… – To adapt to Cross-compliance – To adapt to Article 69 implementation (5% in Italy, 5% in Greece) – To adapt to animal welfare requirements (of which, animal transportation)

3 Processors’/abattoirs’/commercial structures’ strategies – To adapt to Reducing production volumes – To drive production in terms of quality (carcasses weight, fat and conformation, seasonality… but also to prevent domestic slaughterings) – To adapt to consumer demand: quality, certifications of origin, product’s practicability. – To adapt to changing sanitary context and EU regulations – To reduce International competition

4 Retailers’ strategies – To adapt to reducing production volumes. More imported lamb? Totally removing lamb from the shelves? – To adapt to consumer demand? – To promote lamb

5 Prospect – Do you see any possible change in production’s orientation? – What could be the consequences of a decrease in customs duties and an increase of tariff quotas (scenario). What could be proposed as new instruments in WTO negotiations (sensitive products, other instruments…) – What could be the consequences of a possible total decoupling (meat and dairy) • On production volumes and types • On productivity – What could be the benefits/ drawbacks of electronic identification?

6 Recommendations – What can be done to limit the effect of international competition/ to make EU sheep meat production more competitive towards third countries? What can be done to stop the probable decrease of the flocks ?

At production level:

5 • Direct payments to farmers – is it still realistic in the new CAP context? How could we find a way / change existing instruments to release money to the sector? A new Article 69 (from intra to inter sectors). What could be the criteria to drive the regulation towards sheep farming? Re-orientation towards Second Pillar support: agri-environmental schemes considering the high environmental and social value of sheep farming systems in Europe, support to breeds on the decline… New Less Favoured Areas schemes. In the context of a new definition of the LFA… A new instruments…? • Support to improving productivity At processing level: • Support to research and technological innovation on meat / dairy products At retailing level: • Support to product promotion, information and communication • Stricter labelling policy, support to PGI At all levels: • Support to an improved organisation of the sector

6 3 Liste des personnes rencontrées/interviewées

n Au niveau communautaire Organisation Personne rencontrée DG SANCO / Unité D : Santé et Bien-être animal ovins et Dr Alberto LADDOMADA caprins Dr Kai-Uwe SPRENGER Dr Alf-Eckbert FUSSEL Dr MARIN DG AGRI / Unité D4 : promotion des produits agricoles Monsieur Michele Ottati (Chef d’unité) et Monsieur Angel Falder-Huerta

DG AGRI Responsables aides directes Monsieur Roland Feral DG AGRI Monsieur Jean-Bernard Benhaiem Direction E.I - Programmes de développement rural I Responsable PDRN

Parlementaire Commission Agriculture Madame Bernadette Bourzai (PSE) Vice-présidente de la Commission Parlementaire Commission Agriculture Monsieur Neil Parish (PPE) Président de la Commission

n France La filière ovins viande Nom de la personne Fonction François Vannier, président de Limovin (Limousin) Arnaud Raymond directeur des Bergers du Nord-Est Paul Bony président de Copagno (Auvergne) Daniel Causse, directeur de la SODEM (PC) Alain Basquin, directeur achats boucherie Champion (groupe Carrefour) Hervé Destrel, Jean-Paul Mauve, industriels adhérents FNICGV Louis Rozé et Xavier Macquet Nicolas Douzain, FNICGV Claude Lapeere, directeur achats boucherie groupe Auchan Bernard Martin, Serge Préveraut, Bureau de la Fédération Nationale Ovine Frédéric Noizet Emmanuel Coste, Interbev ovins et COPA UECBV, Commission viande ovine, avec les délégations des différents pays Mark Topplif, MLC Chris Lloyd EBLEX

Président de Euromontana

7

La filière ovins lait ANXOLABEHERE Jean-Michel (Président Chambre d’Agriculture 64) CACHENAUD Arnaud (Président collège des producteurs de l’Interprofession 64) GLANDIERES Robert (Président FRSEB, 12) LAGRIFFOUL Gilles (animateur du CNBL, 31) PINELLI Jean-Marc (animateur ILOOC, Interprofession Corse, 20) POINEAU Francis (ex-responsable de l’ELB, 64) RICHARD Anne (Directrice Economie & Qualité CNIEL, 75) VERDAGUER Marie (Secrétaire Générale Confédération de , 12) ZURCHER Thierry (Directeur de la Société des Caves de Roquefort, 12)

La filière caprins BLANCHARD Frédéric (fromager fermier, 38, Vice-président de la FNEC) CHARPENTIER Patrick (éleveur, 79, Président coopérative GLAC) SALINGARDES Jacky (éleveur, 12, président de la FNEC et de l’interprofession caprine ANICAP) VERNEAU Dominique (Responsable relations éleveurs de la laiterie TRIBALLAT Rians, 18, représentant des industriels à l’interprofession caprine ANICAP)

Les problématiques spécifiquement sanitaires CHARTIER Christophe (vétérinaire, AFSSAA Niort, 79) DE CREMOUX Renée (vétérinaire, responsable des dossier hygiène et qualité du lait de petits ruminants à l’Institut de l’Elevage, 81) PETIT Hervé (vétérinaire, responsable des ovins caprins à la FNGDSB, 75) TOURATIER Anne (vétérinaire, responsable des ovins caprins à la FNGDSB, 75) Prévus (en fonction du temps disponible) : PEPIN Michel, AFSSAA Lyon, ex AESA TOUTAIN Pierre-Louis, Président de la Commission AMM vétérinaire française n Italie Name Organisation Position Location Professor Giuseppe Animal Production Director of Animal Sassari (Sardegna). Pulina Department of Faculty Production Department of Agricolture in and technical support University of Sassari. (expertise) for regional (Sardegna) policy makers in sheep and goat sector Doctor Anna Nudda Department of Faculty (expert in nutraceutic) of Agricolture in University of Sassari Doctor Pier Giacomo Rassu (expert in sheep and goat productive and distributive chain)

8 Doctor Battacone (expert in sheep and goat health and demography).

Professor Bruno Ronchi. Animal Production Professor in sheep and Viterbo. Department of Faculty goat production and

of Agricolture in expertise for provincial University of Tuscia. (Viterbo) policy makers in sheep and goat sector Dr. G. Petrucci MiPAAF (Italian Board Referent for cattle and Roma for Agriculture) – sheep policies

Animal Production Sector Domenico Giontella Cooperativa Zootecnica agronomist, technical Viterbo. Viterbese. support for cooperative’s quality program on production. Expert in sheep milk quality, milk analysis, milking machine management Claudio Federici Ismea expert in meat Roma production for Ismea; responsible expert for Italy in the European Forecast Working Group of the Advisory Group on “Sheep and Goat meat” Stefano Pezzati Cooperativa Agricola Il President, expert in Mugello (Firenze, Forteto (cooperative cheese marketing and Toscana) dairy producing and sheep milk quality, exporting Pecorino active part in regional sheep cheese) meetings with policy makers for agreements on sheep milk price) Dr. Giampaolo Tardella UNAPOC (National President Roma Union of Sheep and Goat Producers) Dr. Alessandro Ceci ASL Roma B Veterinary, expert in Roma health issues, sanitary controls and animal welfare concerning sheep and .

Dr. Piero Camilli ILCO (Manifacture Owner. Acquapendente Industry of Sheep and (Viterbo) Goat Meat)

Espagne

9 n Grèce Name Organisation Position Address (city, region) G. Zervas Agricultural University of Professor - Researcher Athens, Attiki Athens D. Papavasiliou Technological Institute of Epirus Teacher - Researcher Arta, Epirus K. Tsiboukas Agricultural University of Professor - Researcher Athens, Attiki Athens F. Vallerand University of Thessaly Researcher and consultant Volos, Thessaly A. Papatheodorou Ministry of Rural Development Head of Department on Athens, Attiki and Food Sheep and Goats P. Sotiriou Ministry of Rural Development Head of Department on Milk Athens, Attiki and Food and milk products I. Kasiouras Ministry of Rural Development Head of Department on Meat Athens, Attiki and Food and meat products E. Anyfantakis National Dairy Commitee Head of the Committee – Athens, Attiki Emeritus Professor M. Tziotzios Farmers Union S&G farmers representative Larisa, Thessaly S. Sokos PASEGES (farmers Researcher - Consultant Athens, Attiki organization) n Royaume-Uni Organisations consulted National Sheep Association National Farmers Union England and Wales National Farmers Union Scotland National Farmers Union Wales British Meat Processors Association International Meat Traders Association Scottish Meat Wholesalers Association Waitrose Supermarkets European Forum on Nature Conservation and Pastrolism. Quality Meat Scotland HCC Meat and Livestock Commission Livestock and Meat Commission

n Irlande Organisations consulted Producer Organisations Irish Farmers Association Mr Kevin Kinsella Mr Henry Burns

10 Irish Cattle & Sheep Farmers Association Mr Mervyn Sunderland Meat Processors Meat Industry Ireland Mr Cormac Healy Irish Country Meats Mr Joe Hyland Kepak Mr Joe Walsh State Organisations Department of Agriculture, Fisheries & Food Mr Shay Fogarty Mr Ignatius Byrne Mr Oliver Molloy Teagasc Mr Bernard Smyth Mr Michael McHugh Retailers Super Valu Ms Sinead O’Connell

11 4 Monographies nationales

12 Institut de l’Elevage

The Future of the sheep and goat meat sector in Europe A French perspective

Report summary Anne MOTTET, Philippe CHOTTEAU

Monday 28th January 2008 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon • The flocks – 6,46 millions ewes (-12% /2000), of which 1,61 are milked (=) – 0,86 millions goats (+1,5%)

1000 heads Ewes 10 000

9 000

8 000

7 000

6 000 1980 1985 1990 1995 2000 2005

GEB - Institut de l'Elevage from SCEES January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon

Ewes Density in 2000 Less Favoured areas

•Meat ewes •Dairy ewes

January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon • The sheep meat farms –74 000 sheep farms in 2007 (-21%), 68 000 meat (-21%)

–Average flock size is small –Sheep farmers are older

No of ewes No of farms x 1 000 % of farmers 40 20 000 3 000 18 000 30 2000 2 500 16 000 2006 20 14 000 2 000 12 000 10 10 000 1 500 0 8 000 <35 years old 35 to 49 50 to 59 >60 years old 6 000 1 000 4 000 500 % of ewes 2 000 50 0 0 40 2000 1-9 10-19 20-49 50-99 100-199200-499 >500 30 2006 20 10 0 January08 <35 years old 35 to 49 50 to 59 >60 years old 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon • The sheep meat farms – Incomes are lower than in other sectors Cash flow available for the family per type of production (€/AWU) Crops

Mixed dairy All Mixed cattle

Cattle finisher Specialised cattle Mixed sheep and public supports are lower Dairy sheep Specialised dairy Total subsidies per type of production Goat (€/AWU) Mixed dairy Specialised sheep Mixed cattle

0 2000 4000 6000 80001000012000140001S600pecia0lised18 c0a0tt0le 20000 Crops Cattle finisher Mixed sheep Specialised sheep All

Dairy sheep Specialised dairy Goat

GEB-Institut de l’Elevage from FADN 2006 January080 5000 10000 15000 20000 25000 30000 35000 40000 45000 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon

North Imports ++ from UK and IE Local lambs are heavy (16-19 kg), grass fed in the West, indoor + cereals in the East «GrasslandCroissant» Auvergne+Limousin Exports heavy lambs to North, Indoor lamb, grass fed14-18 kg 16-19 kg grass fed High quality Breeds: Vendean, Suffolk, Texel, Charolais Flock decreasing ++ (conversion to cattle)

Quercy Exports Label Rouge lambs 17kg South-East Exports 1/3 light to Spain Imports 3/4 of its consumption, mainly from other French areas P. Basque Local lambs are light (13-18 kg), Light lambs from dairy flock hardy breeds, and marketed in Jan- 8-9 kg, Nov to Apr Feb (indoor) 2/3 exported to Spain Pyrenees Roquefort Light lambs from hardy breeds à Italy January08 Light/heavy lambs from dairy flock Heavy lambs (crossed) local Novto Apr Imports from Roquefort 1/3 exported to Spain 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon

Other Forage Gross variable cost Producted concentrate Purchased concentrate €/kg 3.00

2.50

0.65 0.65 2.00 0.67 0.47 0.45 1.50 0.24 0.18 0.52

1.00 0.20

1.20 1.22 0.50 0.85

0.00 Indoors Mixed Grass

January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon

Other fixed €/kg Fixed cost Finance 4.50 Housing Machinery 4.00 0.73 Land 0.75 Labour 3.50 0.75 0.21 0.30 0.34 3.00 0.28 0.43 2.50 0.62 1.32 2.00 1.53 1.50 1.27 0.72 1.00 0.61 0.42 0.50 0.95 0.50 0.53 0.00 Indoors Mixed Grass

January08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm ((mmeaeat)t) ••TThehe mmeaeatt iindundussttryry ––6161 pprroodduucceerrss ggrrooupsups,, 1122 770000 ffaarrmmeerrss ((1199%)%),, 33 mmiilllilioonsns eewweses àà 5353%% ooff sshheeeepp mmeaeatt pprrooducducttiionon ––IImmppoorrtteerrss--pprrococeessossorrss ((PPaarriiss aanndd NNoorrtthh)),, MMuullttii--sspepecciieses ggrrooupsups iinn conconttrraacctt wwiitthh rreettaaiilleerrss ((WWesestt)),, MMuullttii--ssppeecciieses ggrroouuppss iinn rreeggiioonanall aarreeasas ooff pprroodducuctitioonn,, spespecciiaalliisseded ababaattttooiirrss,, wwhhoolleessaalleerrs.s. ––LLaammbb iiss sstitillll mmaaiinnllyy sosolldd asas cacarrccasasssesesbubutt rreettaailil ppacackkss aarree dedevevellopopiingngbbeeccaauussee ooff rreettaailileerrss ddeemmaanndd ((iimmppoorrtteerrss--pprrococ.. anandd ggrrooupsups iinn ccoonnttrracactt wwiitthh rreettaailileerrs)s) PPrrooccesesssoorrss ooffttenen ccuutt iimmpoporrtteedd cacarrccasassseses bbeeccaauusese ttheheyy aarree chcheeaapperer ––1155%% ooff tthehe llaammbsbs aarree cceerrtitiffiieded ((LLaabebell RRoouugege aanndd PPGGI)I)

January08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm ((mmeaeat)t)

••TThehe rerettaaililersers ––MMaarrkkeett sshhaarree ooff bubuttccheherrss iiss iincncrreeaassiingng((2211%)%) aandnd mmuullttiippllee rreettaaiilleerrss decdecrreeaassiingng ((7733%)%) bbeeccauaussee ssaalleses decdecrreeaasese mmoorree iinn mmuullttiipplele PPrriicceses aarree 3300%% hhiiggheherr iinn bubuttcchheerr sshhoopsps

––FFrreennchch llaammbb iiss ooffttenen ttopop qquuaalliityty wwheherreeasas iimmppoorrtteded ((EEUU)) iiss ssttananddaarrdd (r(raatthheerr iinn NNoorrtthheerrnn FFrranancce)e) VVaallueue llaammbb iiss mmaaiinnllyy NZNZ FFrreennchch hhiigghh qquuaalliittyy llaammbb iiss 1515%% mmoorree eexxppeennssiivvee tthanhan ssttaannddaarrdd iimmppoorrtteded iinn tthehe sshheellvveses ((avaveerrageage 26260000 ssupupeermrmaarrkekettss iinn 22000066,, AACCNNiieellsseen)n)

January08 RROQOQUEUEFFOORRTT aarreaea

Lacaune breed + PDO cheese: Roquefort + Pérail

January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon • The sheep dairy farms of which on- of which on- Ewe French Dairy farm cheese farm Production area Farms makers Production processed number number million l/yearmillion l/year ROQUEFORT 2 200 a few 179 # PYRENNEES Atl. 2 100 300 56 8 CORSE 400 150 10 3

Ewe French Dairy Agr. of which Farm dairy n.lambs Production area Area grassland n. ewes prod. Milk per ewe sold ha % head l/year l/year head ROQUEFORT 69 98% 348 88 000 254 400 PYRENNEES Atl. 24 95% 260 27 000 100 195 CORSE 30 96% 279 35 000 129 n.a.

January08 AATLTL.. PYRENNEESPYRENNEES aarreaea:: MMaannecechh && BBaascscoo--BBééaarrnnaaiissee bbrreeeeddss,, PPDDOO cchheeeesseeOOssssaauu IIrraatyty

January08 CCOORSRSIICACA:: CCoorrssiicaca bbrreeeed,d, PPDDOO ««BrBroocccciiuu»»,, vvaarrioiouuss ttipiipicacall cchheeeseseess wwiitthouhoutt

PPGIGI

January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon • The sheep dairy farms – Incomes pretty poor considering heavy work

Cash flow available for the family per type of production (€/AWU) Crops

Mixed dairy All Mixed cattle

Cattle finisher Specialised cattle and public supports are low Mixed sheep

Dairy sheep Specialised dairy Total subsidies per type of production Goat (€/AWU) Mixed dairy Specialised sheep Mixed cattle

0 2000 4000 6000 80001000012000140001S600pecia0lised18 c0a0tt0le 20000 Crops Cattle finisher Mixed sheep Specialised sheep All

Dairy sheep Specialised dairy Goat

GEB-Institut de l’Elevage from FADN 2006 January080 5000 10000 15000 20000 25000 30000 35000 40000 45000 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon • The sheep dairy farms – Fixed costs > 50% total costs 1800 1600

. 1400

s 1200 e

r 45% t Charges i

l 1000 35% 0 opérationnelles

0 800 0 1 / 600 € Charges de 400 55% 65% structure 200 0 Pyrénées- Rayon de Atlantiques Roquefort Pyrénées- Rayon de €/l - Milk price usually do not Atlantiques Roquefort cover costs (2006 reference) Total Costs 1,43 € 1,13 €

Milk price paid 0,94 € 0,84 € to farmers

January08 Source: Réseau de référence OPTISUD, Rayon de Roquefort Observatoire économique filière ovine laitière des Pyrénées-Atlantiques 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm ((sshheeeepp mmililk)k) Ewe milk cheeses: Ewe cheese prod. in 2006 •69% in Roquefort Half is Roquefort PDO, exportedin 150 45 40 countries (maturemarketin F) 35 30 t But all the milk comply with crude 0 25 Others 0 0 processing sanitary constraints 20 PDO 1 15 Otherproducts: Salad cheese (ex 10 féta), Pecora, Pérail, milk powder… 5 0 7 compagnies, 1 verydominating Roquefort Pyrénées Corse Other leader (Sociétédes Caves -Lactalis) Atl. •Pyrénées Atlantiques: •: 32% in Ossau Iraty 20 compagnies (2 bigs), 150 farmers Other in «», ex. (Bongrain) 10% milk processed from outside (Roquefort, ) 20% of milk processed is bought from outside (Roquefort, Spain) A lot of sales outside the island (on the «continent») 8 compagnies, 300 farmers January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon

January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon

• The goat farms 5 600 goat farms in France in 2006 (-50% in 10 years)

60% 50%

40% Goats in 2000 % farms 30% % goats 20% 10%

0% 10 to 49 head50 to 99 head 100 to 199 >200 head head

Goat farms structure % farms % goats <35 years old 11% 14% 35 to 54 years old 70% 73% >55 years old 20% 13%

January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon • The goat farms – Incomes are among lowest

Cash flow available for the family per type of production (€/AWU) Crops

Mixed dairy All Mixed cattle

Cattle finisher Specialised cattle and public supports at the bottom Mixed sheep

Dairy sheep Specialised dairy Total subsidies per type of production Goat (€/AWU) Mixed dairy Specialised sheep Mixed cattle

0 2000 4000 6000 80001000012000140001S600pecia0lised18 c0a0tt0le 20000 Crops Cattle finisher Mixed sheep Specialised sheep All

Dairy sheep Specialised dairy Goat

GEB-Institut de l’Elevage from FADN 2006 January080 5000 10000 15000 20000 25000 30000 35000 40000 45000 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm (g(gooaatt mmililk)k)

Goat milk collected & on farm processed in 2006:576 Mios l Collection: 73% On-Farm Proc: 27% Cheeseproduction: 104 000 tons Of which 18 000 on farms Of which 6 300 in PGI (12 «AOC»)

Millions de litres 600 000 500 000 Increase imported goat milk share/ 400 000 Import industrial collection: 17% in 2006 300 000 Collecte 200 000

100 000 4 major processing groups: 67% of 0 000 French collection (2 coops, 2 others) 1997199819992000200120022003200420052006 January08 48 other processing co. 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm (g(gooaatt mmililk)k)

Good trend for goat milk price during the recent years (after the industry«self –production restriction agreement»in 2000)

But facing much higher costs of production

French Goat cheese market expansion : +30% 2006/1996 for direct sales (mainly in SM) 15% of French consumption in food service + exports of #11 000 t (10% prod.)

January08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon

January08 33.. 20032003 CACAPP RReefoforrmm eeffffeecctsts • Flock and number of sheep/goat farms – The ewe premium is 50% decoupled in France since 2006 but it strengthened the flock decreasing trend (-2,8% dec 2006) – Less culling in 2007 than in 2006 and 2005 – Less favoured areas are even more concerned

x1 000 t. 400 350 300 Consumption • Production and trade 250 200 150 –France imports half of its meat 100 Production 50 consumption 0 1966 1971 1976 1981 1986 1991 1996 2001 2006 –French deficit may start to GEB - Institut de l'Elevage from SCEES and Douanes grow again –Consumption is decreasing because of lack of availability

January08 44.. WWeakeaknnessesesses aanndd ddiiffffiiccuullttiieses iinn tthhee secsecttoror

– Insufficient farmers income + heavy work demand à competition with other sectors anddecreasing production – High production costs (fixed notably) and no real improvement More generally: Lack of technical progress – Long distances between farms and abattoirs in some areas and high costs for maintaining abattoirs in other areas – Lack of butchers in processing plants and retailers – Decreasing consumption with high retail price compared to other meats – Challenging sanitary context – Predators (wolves in the Alps and bears in the Pyrenees) discourage farmers

January08 55.. RRececoommmmeendndaattiioonnss --UUppssttrreeamam • Farming – Give improved support to farmers from 1st pillar à Slaughtering premium? Grassland premium? à How to do so with the EU budget? Article 69?

– Support technical progress through farmers trainingand extension services in order to improve market returns (costs control, higher productivity and better sanitary control)

– Facilitate permits to market for vet medecines More generally: stimulate R&D in sanitary issues

– Support farmers investments (facilities and young farmers establishment) – Strengthen sd pillar, particularly LFA schemes

January08 66.. RRececoommmmeendndaattiioonnss --DDoowwnnssttrreameam

• Industry and processing (and transport) – Support research and development of new meat products (egcuts rather than carcasses) – Support meat industry organisation à organise commercial structure /offer and /abattoirs à organise production in isolated areas /collection (create fattening structures?) – Support educational programs for butchers – Support milk collection in mountain areas • Retailing – Support promotional campaign for lamb/cheese consumption (lamb has never benefited from such budgets) – Mandatory origin labelling? Possible EU labelling… Label meat type of process (fresh/chilled/frozen) – Support local markets/on-farm sales (mainly cheese)

January08 SSttrroongng ssttaatteemmeentntss ffoorr MMEP:EP:

• Sheep & goat farmers income is among the lowest of all sectors with less public support and very heavy work • EU sheep meat self-sufficiency is decreasing (78%). Objective = 80% à keep enough ewes • Sheep farming is strongly linked to land in terms of environment, economic development in rural areas and landscapes • Sheep farming benefits from a good image for public

January08 SHEEP AND GOAT FARMING IN GREECE

General issues

At the accession of Greece to the E.U., in 1981, there were 8,316,000 sheep and 4,623,000 goats, which were farmed in 217,810 and 323,630 farms respectively. In the following years until 2001, sheep and goats populations increased slightly (about 10% for sheep and 20% for goats, see Figure 1), but the respective farms were reduced sharply (about 42% for sheep and 50% for goats, see Figure 1), due to specialization and reorganization of the sector.

milked Females Farms X 1 000 000 EVOLUTIONS since 1961 8 X 1450000 419,4 7 387,6 400

6 350 300 5 265,5 276,5 250 4 221,0 234,7 200 3 159,1 157,3 138,3 150 2 121,6 128,6 100

1 50

0 0 1961 1971 1981 1991 1996 2001 sheep females goat females sheep farms goat farms

Figure 1. Evolution of the sheep and goat farms in the period 1961-2001 and of the respective animal heads.

Today more than 14 millions heads (9 M sheep et 5.3 M goats) are farmed in about 120 000 farms (with more than 10 heads) which account for 14 % of the Greek farms. Small ruminants represent 80.3 % of the country’s Ruminant Livestock Units and an 88.5 % of the respective milking females (LU).

This sector of the Greek Agriculture presents two peculiarities on the European level: 1. All the sheep and goats are dairy animals, where in 2004, milk has contributed a 62.2 % and a 56.8 % towards the value of the sheep and goat production respectively. 2. The national production of cow milk is lower (41 %) than the small ruminants milk (59%), which brings Greece in a unique position in the developed world (a fortiori in the EU). Moreover, the small ruminants contribute a 66.4 % towards the red meat produced.

The populations of sheep and goats are evenly distributed within the country and their distribution is well associated with the distribution of the rangeland areas utilized by these animals (Table 1). Although a substantial reduction to the number of the nomadic and home fed animals is observed in the recent years and the flocks tend to be kept sedentary, the nutrition of the animals is largely based on the use of the available rough grazing lands which represent a large proportion (39,6%) of the total country land area. Most of this rough grazing area, around 83%, is located in mountainous and semi-mountainous regions and more than half of these (57,5%) are “communal pastures”, this meaning state owned pastures, which are managed through the local councils.

TABLE 1. Proportional distribution of sheep and goats to the various Greek regions as compared with the respective available rangeland areas.

REGION Rangeland area Sheep (%) Goats (%) (%) Sterea Ellas and Evia 19.01 17.64 18.37 Peloponissos 15.68 15.28 17.94 Ionian islands 2.08 1.41 2.73 Epirus 9.25 9.31 5.98 Thessalia 10.25 16.51 12.02 Makedonia 22.71 15.63 20.39 Thrace 4.75 4.11 5.44 Aegean islands 8.36 5.76 6.64 Crete 7.91 14.35 10.49 Total 100 100 100 Source: Ministry of Agriculture, Greece.

MILKED FEMALES IN LARGE UNITS Large Unit

1.200.000 Dairy cows Dairy sheep Dairy goats

1.000.000

800.000

600.000

400.000

200.000

0 1961 1971 1981 1991 2000 2004

Figure 2. Evolution of milking sheep and goat numbers (in livestock units) and the respective figures for cows, in the period 1961-2001.

Although sheep and goats in Greece are mainly of dairy type these animals are highly variable in their morphology, body size, milking capacity, prolificacy, carcass composition and growth rate. Nevertheless, these animals have a strong constitution and a notable adaptability to the harsh environmental conditions. The amount of milk produced per animal and year differs between breeds, showing a considerable variation, therefore ranging between 50 to 250 kg for sheep and 100 to 370 kg for goats. The amount of milk produced is actually a function of the daily produced milk and the lactation length both of which vary between breeds. The more productive dairy breeds have a longer lactation period, which ranges between 200 - 230 days, while the average lactation length is between 150 and 180 days.

Categorization into intensive or extensive systems, in the following typology, is mainly considering intensity of forage system (i.e. ha of main fodder area per animal). At this point it should be stressed that this is not always associated with increased animal productivity while it is well known that intensive systems can make ample use of grassland (for hay, silage etc). a) Home fed: A small number of sheep and/or goats of highly productive breeds are kept indoors and bred intensively. The animals are fed large quantities of grains and by-products and limited amounts of forages and they usually perform above the average. b) Intensive: This is mainly a system applied in lowlands, where sheep/goat units are of small to medium size (30-200 heads). The animals belong to high producing breeds or local breeds upgraded by cross-breeding and their performance is good. These animals are normally housed and they usually graze for some hours daily on pastures adjoining the unit and then fed supplements of concentrates and hay. Sheep energy requirements, in this system, are estimated to be covered by 50% through grazing and 50% from supplementary feeding (of which 40% concentrates and 10% roughage), whereas the respective values for goats are 70% through grazing and 30% from concentrates. c) Extensive with or without transhumance: This system is applied on the LFA’s and the animal flocks vary in size (200-600 heads) consisting of local breeds whose performance is not always satisfactory. Sheep and goats graze throughout the year but herbage intake is sufficient to meet the nutritional requirements of these animals only for 3-5 months (March - April to June - July). On annual basis in this system, it is estimated that concentrates, roughage and grazing contributed 35 %, 25 % and 40 % respectively towards sheep total energy requirements and 15 %, 5 % and 80 % respectively for goats.

It is estimated that 10% of the S+G in Greece, rely almost exclusively on grazing, 80% are fed a varying proportion of harvested feeds and a 10% are kept almost exclusively indoors. Another typology classifies S+G heads according to the system applied in farming: Nomadic (5%), semi-extensive (50%), semi-intensive (30%) and home fed (15%). However it appears that a typology based on the farm invested capital or the invested labour per animal is a more pragmatic approach in categorizing the huge variety of S+G farming cases.

Utilization of the local forage resources (grazing land use) is variable within the country being associated with the geographical regions, in the Northern parts of the country some 65% of the milk producing animal’s nutritional requirements are covered through grazing, on a year period basis, but this proportion falls to 45% in Central Greece and bellow 30% in many of the islands. However, the grazing of S+G follows a declining trend in recent years since more farmers indulge into the convenience of housing their animals in facilities near their home towns and villages, offering harvested feeds and grazing in fenced fields and in the common land nearby, rather than herding their animals away from their home towns and over the rough terrain of Greek mountains.

EVOLUTION OF MILK PRICES Euros corrected base 2000 1,20

1,00

0,80

0,60

0,40

0,20 Sheep Goat Cow

0,00 1980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004

Figure 3. Milk prices in Greece of sheep, goat and cows, being corrected on basis of the year 2000 values.

In Greece the principal economic indicator in the agricultural sector is the “Family income” which is derived from Land, Labour and Capital invested. S+G farming in Greece is a labour intensive agricultural production, since S+G farmers are often landless and their farms comprise low invested capital. These farmers rely mostly in family work (which is provided in long daily hours) and in the low cost external resources (like the communal grazing lands). Labour constraints are very important in determining the size of the farm and they are by far seconded by the available land. Since sheep milk has an attractive market price (Figure 3), sheep production is oriented to this direction, where there is an opportunity for the poor farmer to transform personal labour into a very modest income. Goat farming is a different story, where although goat milk has a noticeably lower price than sheep milk, goats are much more adapted in utilizing the low cost indigenous vegetation (therefore using a higher proportion in their diet than sheep) and the goat-kid meat has a better value in market than lamb meat. In these differences stands the viability of goat farms.

Although in the decades after the 50’s, sheep and goat population and production increased gradually there appears no clear effect (on this sector) of either Greece entering the then EEC in 1981 or at the subsequent CAP reforms. This trend is interpreted as resulting from the need of an appreciable number of people to find employment in an agricultural sector, which could operate on small investments and it is often the last option of production. In this view, the prevailing system of S+G farming is traditional in principle and the know-how of S+G breeding is transferred either within the family or the local community who are well aware of the local resources. Needless to say that this trend also reflects the low impact, which the CAP financial support had on S+G farm incomes.

SPATIAL LOCALISATION OF FARMS AND SHEEP-GOAT FLOCKS

100%

90%

35,7% 80% 38,5% 50,1% 50,5% 70% 59,2% Mountain 68,7% 60%

% 50% LFAs 40,7% 33,8% 40% 26,9% 25,6% 30% 22,0% 11,8% Lowland 20% 27,7% 23,6% 23,0% 23,9% 10% 18,9% 19,5%

0% all types of farm AA Farm with sheep Ewes Farm with goat Goat mothers Greek Agriculture SHEEP GOAT

The importance of sheep and goat sector for the Greek Agricultural Economy.

The following table demonstrates the relative position in Greek Agriculture of the sheep and goat sector (gross values are in mio Euros). It can be noticed that sheep and goat farming contributes about one third (33%) to the Gross Animal Production value (last column) or about 8% to the Gross Agricultural Production value (second before last column). The contribution of subsidies to the gross value of sheep and goat production is somehow variable, but an estimate according to FADN data is about 20% for the sheep farms and 25% for the goat farms.

Gross value of Gross value of Gross value of Gross value of agricultural plant production animal production Sheep and Goat % % % % Year production (subsidies incl) (subsidies incl) production (2)/(1) (3)/(1) (4)/(1) (4)/(3) (1) (2) (3) (4)

2000 11207.60 8177.9 2709.0 853.4 72.97 24.17 7.61 31.50 2001 11389.52 8195.5 2769.9 812.3 71.96 24.32 7.13 29.33 2002 11396.94 8222.3 2768.8 949.7 72.14 24.29 8.33 34.30 2003 11418.66 8198.8 2815.4 961.1 71.80 24.66 8.42 34.14 2004 12106.16 8769.4 2925.1 971.0 72.44 24.16 8.02 33.20

Source: National Statistics Service of Greece (NSSG, 2001-2005)

Sheep and goat Policy issues in Greece

• Since the 1st of January 2006 the Council Regulation 1782/2003 is in force in Greece, through the Ministerial Decision 267518/31-3-2005. According to this Decision, a comprehensive subsidy is paid to sheep and goat farmers, which is calculated on the basis of the unitary 2002 headage payment and the farmer’s payment rights (calculated as the average of three years). This scheme has replaced all previous sheep and goat subsidies. • Payment rights are calculated for each applicant farmer (for this subsidy) and then need to be verified before finalization. However, the rights not in use or those of farmers unwilling to continue farming, are deposited in the National Reserve, where they can be redistributed to new farmers. • The new subsidy scheme is fully decoupled from production, but farmers have to: a) maintain in farm at least 50% of the animals generating the subsidy rights, when farmer has “specific rights” (i.e. dissociated from land) or b) respect a 0.2 L.U./ha stocking density when farmer has “land rights” (i.e rights are associated with farm land). • Total budget for this subsidy scheme is forecasted for Greece at 250 mio Euro, but a 5% deduction is planned (about 12.5 mio Euro) for actions on milk quality improvement (under article 69 of the Reg. 1782/2003). • Sheep and goat farmers are eligible for “Compensatory payments” when residing in an LFA area and subside mainly on an agricultural income. • Additional “agrienvironmental measures” which apply to sheep and goat farming are those of a) “Organic Animal Farming” supporting eligible farmers through 35.4 Euro/female, b) “Extensification initiative” for the reduction of grazing pressure in a given area, supporting farmers with variable amounts ranging between 30.5 and 66.5 Euro/head/year (where applicable), depending on the action of either adding new land to the farm or reducing flock size and c) supporting “Indigenous farm-animal breeds” with amounts of 29 Euro/head/year (where applicable). • Sheep and goat farmers have to comply to “Good Environmental Practice guidelines” according to Ministerial Decision 568/125347/20-1-2004 as amended by 639/140920/25-11-2005, which require among other things the respect of grazing densities varying as follows: a) small islands 0.1-1.0 LU/ha, b) large islands (Crete & Evoia) 0.1-1.4 LU/ha, c) mainland Greece 0.3-1.4 LU/ha.

Identification situation.

• Animal identification has been in force according to Reg. 21/2004 through the Ministerial Decision 263493/2004. According to this all sheep and goats, in a farm, of an age greater than six months have to have ear tags with a unique number. Animals of a younger age have to bear common tags when exiting farm for fattening or for slaughtering. Farmers are obliged to keep records of the animals in farm and their individual numbers. • Data on animal identification are collected and maintained by the regional (Prefecture) Veterinary authorities and fed to an online system where Central Government authorities or other authorized persons have access. Sheep and goat identification project is progressing well, but not yet completed due to inherent difficulties of geographical isolation and organization of the system. Characterisation of production systems A standard sheep and goat typology has been used, but it was understood that it can not be totally satisfactory in describing the variety of systems. Therefore it was proposed that the typology should consider invested capital in farm, which is strongly associated positively with the intensity of farming and in turn it is linked with environmental problems. Some characteristic elements of the different systems appear bellow.

Milk-sheep As it has been already mentioned sheep are kept in Greece mainly for milk production that is transformed into quality cheese products. Sheep milk has an attractive price all over the country and is transformed into cheese by a range of industries (varying greatly in size). However, it is interesting to note that sheep-milk price is relatively uniform all over the country and within the year irrespectively of production system, milk quality and milk availability. There is an effort by farmers that milk sheep are lambing early in the season (November- December) so that a longer milking period is achieved, since when temperatures are rising (summer) milk production is rapidly declining. For the same purpose lambs are weaned early and slaughtered when lamb-meat prices are favourable.

Milk-goats Most of the goats in Greece are bred in pastoral systems feeding on the natural ligneous vegetation. Goats are bred either alone or in mixture with sheep and their milk is mainly mixed with that of sheep for cheese production. Since goat milk is not a hot commodity (half the price of sheep-milk) there are very few intensive goat farms using intensive forage systems or harvested feeds only. Recently there has been a marketing effort to promote goat- cheese or other products based on goat-milk. The, once or twice daily, milking of sheep and goats is making necessary that the flocks do not roam long distances and always return at the end of the day to the milking point.

Meat sheep and goats Both sheep and goat farms in Greece are basing their income on meat selling too. Since the production of meat is highly seasonal, so it is the consumption where market demands and market prices vary greatly within a year. Therefore farmers aim to sell S+G meat when prices are the highest, irrespectively of optimum carcass weight and conformation. A small proportion of farmers are breeding sheep and/or goats only for meat production. These are extensive farmers who make use of the available natural resources and the policies in force, in order to earn a profit. For this reason they need to have large flocks and subsequently they need to secure large areas for grazing their animals.

Current S+G farming systems in Greece can be characterised as traditional since farmers have never being formally trained for this profession. The present farmers have evolved by starting with traditional practises and adopting some new elements whenever other fellows in the area were successful in these. Extension services in Greece failed to upgrade the S+G sector because it was treated as a low potential one in comparison to other crops. Individuals failing to reach a high social profile are involved into the farming of S+G and the State supported the sector basically with the aim to maintain some population in the remote LFA’s. S+G farmers are often using informal networks for selling their products in order to obtain a more decent income and this is more frequent for meat selling.

Environmental impact analysis Sheep and goat production effects a) Water issues

Almost all experts agree that sheep and goat farming do not represent a problem per se for water pollution (nitrogen, pesticides, pathogen microbes etc). However, on a second look the production of feedstuffs for this sector is sometimes associated with water pollution. Moreover, the artisanal cheese making industry is in several occasions responsible for pollution of water courses. A further problem (related to water) is appearing as a result of overgrazing, where the compaction of soil results in small infiltration of water into soil leading to surface flow (with the risk of erosion) and poor enrichment of underground water reservoirs. b) Soil erosion, overgrazing In Greece, overgrazing and the subsequent soil erosion is an important environmental issue dealing with systems using grassland (thus, the majority of them). It is not identified as a problem over the whole Greek territory since there are large areas which are undergrazed or totally abandoned and those at a moderate distance from villages and towns which are overutilized. The situations where undergrazing or abandonement of land is applied, leads to either encroachment by sclerophyllus vegetation (poor in diversity), or in some cases with monotonous forest vegetation (e.g. pine forests) and in fewer cases with species rich forests. The land which is overgrazed is subject to erosion (both water and wind erosion), since the surface plant cover is removed and the soil surface is exposed: to sun heating (leading to dryness), to wind transportation of particles and to increased speed of the water flowing. All these factors are therefore contributing to soil erosion. c) Natural risks prevention: fires, avalanches. The role of grazing sheep and goat to fight against fires is well recognised through scientists and by environmental managers (national parks etc), where mixed sheep and goats flocks are more effective to clear of brushwood. However, in Greece the general public still believes these animals are a threat for natural vegetation and some people use this popular belief to preach against S+G farming. Moreover, the existence of S+G flocks in an area is associated (under the Greek practises) with the continuous human presence in the area and the subsequent mild management of the land (some tree thinning, anti-erosion constructions, early fire extinction etc). d) Biodiversity/landscape Sheep and goat farming is recognised to prevent landscapes from closing (shrub encroachment). This effect not only is associated with a reduced biodiversity but also is presenting a high risk of wild fires in the Mediterranean areas. Some practices can be designed by experts to adapt to vegetation reproduction. Communal rangelands are in most cases poorly managed by the local councils by allowing a non-differentiating stocking density, although in the past there were skilful oral agreements for the management of these lands. In very few cases there are contracts between farmers and environmental managers for grazing in protected areas.

Sheep and goat farming allow the maintenance of some areas, even in intensive regions, where there are lands that are not possible to intensify. Except for intensive sheep and goat production, there is always a degree of grazing during at least a period of the year. This moderate grazing is supporting flora diversity and most pastoral systems are positively linked with biodiversity because they exercise rather low stocking densities and no fertilisation of grazed land. Nevertheless, the interaction of herbivores with the grazed ecosystem has variable outcomes, since the competition of mammalian herbivores with their small rivals (like insects) can result in the extinction of the latter or their proliferation.

The presence of wolves, bears, foxes and other predators in the areas where S+G are farmed is often controversial, but the current agri-environmental programmes are offering attractive compensation e) What if S+G dissapeared On this question the responses on environmental issues are variable. One uniform reply is that the existing diversity in the farmed genetic material will be lost. Other replies depend on the particularities of each area. For example in the lowland areas near towns and villages there is ample human presence which is ensuring that landscape will be maintained or upgraded with the use of machinery and other means. Other areas are likely to evolve higher level vegetation, but most of the interviewees agree that in most cases like the remote mountainous areas disappearance of S+G farming will result in area depopulating rapidly despite some often claimed alternative activities like tourism. Depopulation of these areas is expected to result in landscape degradation and intensification of environmental problems in civil areas.

Economic and Policy analysis The analysis differentiates different periods of policy context.

1981-1992 As mentioned before the S+G sector in Greece appears to follow an individual evolution through time (at least the animal numbers), mostly unaffected by EU CMO’s. Therefore both sheep and goat numbers remained stable, despite Greece entering the EU in 1981, but the number of farms and the heads per farm changed dramatically. S+G farm numbers almost halved between 1961 and 1981 as a result of specialization and thereafter decreased further since EEC subsidies were applied to >10 reproductive female flocks. Few years after Greece joined EU the National policies for developing the animal production sector ceased. Of those policies the most important for S+G sector was the subsidization of cereals. Headage payment and premium for breeding in the LFA’s had basically been implemented in this period. However, milk and meat prices increased gradually as a result of the demand increasing.

1992-2001 The stabilization of rights, both at national and individual levels brought instability in the sector since farmers kept more animals in order to press for higher quotas. Crops subsidies further affected most sheep and goat farming systems, since cereal prices decreased and concentrate feed costs decreased thus leading farmers to use them more. At the beginning of this period “milk war” broke out, which was the result of large enterprises offered high prices for milk with the aim to control the sector. As a result cheese was overstocked and in the following years milk prices fell sharply, to return gradually at the former levels.

2001-2005 The same trends as before continued in this period.

2005-Today The application of Reg. 1782/2003 brought a new era in the sector. Full decoupling has been decided for the S+G sector, which is expected to lead to positive impacts since it will favour the replacement of specialised crops systems by mixed systems with extensive grassland in the regions where cereals/crops are not profitable per se. S+G farmers who used grazing land in the historic records, have to maintain them in good condition by grazing at a density of 1.4 heads per hectare, while the landless ones have to maintain at least 50% of their animals. Since the subsidies received by S+G farmers comprise a small fraction of their Farm Family Income, it is foreseen that the sector will not be affected seriously. Actually what has been observed, in the first two years of applying the new system, is a small decline which is considered as non systematic. However, the former system and the partial decoupling option (if it was opted) would have mean a high administration work-load for the responsible services.

Nevetheless, a different threat is present for the sector, which comes from the sudden increase in feed prices (concentrates and forages). Since, the majority of farmers have been accustomed into using harvested feeds, for part of their nutrition, the cost of feeding their animals have been considerably increased without a respective change in product prices.

Cross compliance implementation is not expected to set lots of new constraints for farmers (not even nitrate directive for intensive systems), except for animal identification new rules. Nevertheless, this could lead to breeding disappearance in farming systems combining a small flock with crops since this profession is harsh and not very many young people are willing to follow. Concentration of animals on specialised systems (or very large flocks) is likely to happen and is currently the subject of discussions.

The future of the sector appears relatively promising since it is associated with products of deep cultural roots for Greeks and with products of quality character for the visitors of Greece. However, the new rules of the CAP need to be thoroughly studied by the farmers (or their advisors) in order to avoid income loss. A good balance between traditional characteristics and new social demands should be obtained for the sector succeeding to exist.

Identification The responsible services to implement this Regulation at the Hellenic Ministry of Rural Development and Food are the veterinary ones. On a prefectural level (NUTS3) responsible are the Directions of Veterinary Services.

Historical background In Greece, sheep and goat identification has not been compulsory. It was only applied on the animals involved in programmes of genetic amelioration and for this purpose eartags of identification were used and movements were registered. Nowadays, the implementation of sheep and goat identification Regulation (EU Regulation 21 of 2004) is very variable through the country, unlike that for bovines. This is the result of both administrative problems, since the contractor for this task failed to comply with the requirements, and practical problems, since animals are often with small ears and their grazing through sclerophyllus vegetation results in the eartags falling. The linkage of animals registered with land used is relatively easy since the milking animals are not moving over long distances.

Related Literature

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Thanopoulos, R., Vlahos, G. and Louloudis, L. (1999). Differentiation between mountain livestock production systems: the impact of social and environmental factors. In: (eds S.M. Williams and I. A. Wright) European Livestock Policy Evaluation Network: Proceedings of two international workshops. Macaulay Land Use Research Institute, Aberdeen, UK.

Zervas, G., (1998). Quantifying and optimizing grazing regimes in Greek mountain systems. Journal of Applied Ecology, 35, Pages 983-986.

Giourga, H., Margaris, N.S., Vokou, D. (1998). Effects of grazing pressure on succession process and productivity of old fields on Mediterranean islands. Environmental Management, 22 (4), Pages 589-596.

Thanopoulos R. (1997) The transformation of Greek grasslands under the impact of socio- economic factors. Proc. of the XVIII International Grassland Congress, Manitoba, Canada.

Kosmas, C., Yassoglou, N., Danalatos, N., Karavitis, Ch., Gerontidis, St., and Mizara, A., (1996). “Lesvos: Land degradation and desertification”. In: Mediterranean Desertification and Land Use-MEDALUS III, first annual report, contract: ENV$-CT95-0119, (Project2: Target Areas).

Margaris, N., (1987). Desertification in the Aegean Islands. Ekistics, n° 323/324, pp. 132-136.

Yassoglou N., (1987). “Desertification in Greece”. Communication au séminaire : Strategy to Combat Desertification in Mediterranean Europe, Valencia, Spain.

Arianoutsou-Faraggitaki, M. (1985): Desertification by overgrazing in Greece: The case of Lesvos island. Arid Environment Journal, 9, Pages 237-242.

A. Stefanakis, M. Volanis, P. Zoiopoulos and I. Hadjigeorgiou, (2007): Assessing the potential benefits of technical intervention in evolving the semi-intensive dairy-sheep farms in Crete. Small Ruminant Research, 72 (1): 66-72.

M. Volanis, A. Stefanakis, I. Hadjigeorgiou and P. Zoiopoulos, (2007): Supporting the extensive dairy sheep smallholders of the semi-arid region of Crete through technical intervention. Tropical Animal Health and Production, 39 (5): 325 - 334. Agricultural University of Athens

The Future of the sheep and goat sector (meat & milk) in Europe A Greek perspective

Report summary Ioannis Hadjigeorgiou

Monday 28th January 2008 11.. SSpecpecifiificciittiieses ooff tthehe nanatitionaonall conconttexextt ––pprroducoductitionon

••TThhee pprriinncciipapall eeccoonnoommiicc iindndiiccaattoorr iinn tthhee GGrreeeekk aaggrriiccuullttuurree iiss tthehe ““FFaarrmm FFaammililyy iinnccoommee””,, dederriivveded ffrroomm LaLanndd,, LLabouabourr anandd CCapapiittaall iinnvveesstteded.. ••SS++GG ffaarrmmiinngg,, iinn GGrreeeeccee,, iiss pprriimmaarriillyy aa llabouabourr iinnttenenssiivvee aaggrriiccuullttuurraall pprroduoduccttiionon.. SS++GG ffaarrmmeerrss aarree ooftftenen llandandlleessss aandnd ttheheiirr ffaarrmmss ccoommpprriissee llooww iinnvveesstteded ccapapiittaall,, rreellyyiinngg mmoossttllyy iinn ffaammililyy wwoorrkk andand iinn tthhee llooww ccoosstt eexxtteerrnanall rreessoouurrcceess ((lilikkee tthehe ccoommmmunaunall ggrraazziinngg llaannddss)).. LLaaboubourr ccoonnssttrraaiinnttss aarree vveerryy iimmpoporrttaanntt iinn dedetteerrmmiinniingng tthehe ssiizzee ooff tthhee SS++GG ffaarrmm aandnd ttheheyy aarree ffaarr sseeccononddeded bbyy tthhee aavvaaililababllee llandand..AAvveerraaggee ssiizzee ffoorr ssheepheep anandd ggoaoatt fflloockscks iiss 6868 anandd 3838 heheaaddss rreesspepeccttiivveelly.y.

January08 11.. SSpecpecifiificciittiieses ooff tthehe nanatitionaonall conconttexextt ––wwoorrkk iinvesnvestteded

January08 January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––lliivvesesttoockck ununiittss ddaatata

January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––rruummininaanntt fflloockck ddaatata

MILKED FEMALES IN LARGE UNITS Large Unit

1.200.000 Dairy cows Dairy sheep Dairy goats

1.000.000

800.000

600.000

400.000

200.000

0 1961 1971 1981 1991 2000 2004

January08 January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––SS++GG fflolockck ddaatata

SPATIAL LOCALISATION OF FARMS AND SHEEP-GOAT FLOCKS

100%

90%

35,7% 80% 38,5% 50,1% 50,5% 70% 59,2% Mountain 68,7% 60%

% 50% LFAs 40,7% 33,8% 40% 26,9% 25,6% 30% 22,0% 11,8% Lowland 20% 27,7% 23,6% 23,0% 23,9% 10% 18,9% 19,5%

0% all types of farm AA Farm with sheep Ewes Farm with goat Goat mothers Greek Agriculture SHEEP GOAT

January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––SS++GG fflolockck ddaatata

milked Females EVOLUTIONS since 1961 Farms 8 X 1 000 000 X 1450000 419,4 7 387,6 400

6 350 300 5 276,5 265,5 250 234,7 4 221,0 200 3 159,1 157,3 138,3 150 2 121,6 128,6 100

1 50

0 0 1961 1971 1981 1991 1996 2001 sheep females goat females sheep farms goat farms

January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––ggooaatt fflloockck ddaatata

3300,0,0

2020,0,0

1100,0,0

00,0,0

--1010,0,0

--2020,0,0

--3300,0,0

--4400,0,0

--5050,0,0

e c e a c ia r a n ia h r o n iaa T h d o n i y T d o n lly dd kee o a s n k dd ssa u s a n aa ee s ir u ss a M kk e s ir dd iaa l M aa h e pp n s n i a l M T h EE la n a s o n trra t M T s la llla s d o n t s t I s E l a s d n e s I E llla ee kee ee e nn a E l ss a k C W iaa e a E ee aa a C W n i rre aa nn ikk M o n tee e nn ttti ss t M IIo t rre o t dd s t SS tee p o AA nn ss a s tt S t lo p laa dd a ss S e lo s l nn tee EE ee tt e IIs laa e t ss PP n s l r e WW aa a n IIs C r E e a n C E e a n gg e a ee g e A g h A ee t h AA rrt h oo tth NN uu oo SS

GGoaoatt ffaarrmmss ((%% cchanhanggee 19919999//11991)991) GGoaoatt heheaaddss ((%% cchhangangee 11999999//1919991)1)

January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––sshheeeepp fflolockck ddaatata

4040,0,0

3300,0,0

2020,0,0

1100,0,0

00,0,0

--1100,0,0

--2200,0,0

--3300,0,0 --4400,0,0

e c e a c iaa rra n i hh o n iaa T d o n i y d T e d o n lly n d k e d o saa ss a n a k e d s s ruu a M a k e e s iir ss ia l M a k h e pp dd n ia a l a h E nn s o n r a MM TT E laa la s d o ttr stt s l llla s d nn s IIs E la s e kee ee ee n E llla s e a k CC W ia n aa EE e s a W n ia ree a n e kaa MM o n e r e a n n tiik s tt IIo tte r e o n ttt d s ss S e r p o A n d aa t S tte o p A a n ss E sst SS llo lla dd e E e t ee Iss nn tte e sst P I laa ee WW aa P nn Issl rr EE aa I CC ee nn gg aa ee ee A gg h A ee rtth AA o r h o tth NN uu oo SS

SShheeeepp farfarmmss ((%% cchhaangngee 11999999//1199991)1) SShheeeepp heheaaddss ((%% cchhaannggee 11999999//1919991)1)

January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––ggooaatt fflloockck ddaatata

GGooaattss ((%%cchahanngege GGooaattss ((nnuummbeberrs)s) 19199999//1919991)1) SSiizzee ccllaassss FFaarrmsms HHeaeadsds FFaarrmsms HHeeaadsds

11 –– 44 5858..884343 113366..771515 --4545,2,2 --4422,9,9 55 –– 99 2424..228989 115533..558686 --3232,6,6 --3322,3,3 1010 –– 2929 2626..118686 441177..009595 --1313,9,9 --1111,2,2 3030 –– 4949 66..882828 225522..003030 11,7,7 33,2,2 5050 –– 6969 33..667676 221100..119595 11,8,8 33,1,1 7070 –– 9999 33..118585 225588..771818 --66,8,8 --66,1,1 110000 –– 119999 77..002323 998822..334343 --77,8,8 --77,0,0 220000 aanndd oovverer 88..222121 22..991166..551919 88,2,2 1188,0,0

TToottalal 113838..22551155..332277..220101 --3131,8,8 22,7,7

January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––sshheeeepp fflolockck ddaatata

SSheepheep ((%%cchanhanggee SSheepheep ((nunummbeberrs)s) 19991999//1991)1991) SSiizzee ccllassass FFaarrmsms HHeadseads FFaarrmsms HHeadseads

11 –– 44 1616..693693 4411..412412 --4343,2,2 --4242,4,4 55 –– 99 1313..591591 8888..135135 --3030,7,7 --2929,5,5 1010 –– 2929 3434..992992 660505..095095 --2020,4,4 --1818,2,2 3030 –– 4949 1515..393393 557575..960960 --1414,2,2 --1212,8,8 5050 –– 6969 99..907907 556868..339339 --1515,6,6 --1414,7,7 7070 –– 9999 99..165165 774848..776776 --1212,2,2 --1111,1,1 100100 –– 199199 1717..12123322..336655..144144 --66,7,7 --44,6,6 202000 andand oovverer 1111..687687 33..775599..807807 2727,9,9 4040,1,1

ToTottalal 128128..55551188..775522..668668 --1919,9,9 55,8,8

January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––SS++GG fflolockck ddaatata

••aa)) HHoommee ffeded ((1515%%):): AA ssmmaallll nunummbeberr ooff SS++GG ((hhiighghllyy pprroduoducicingng bbrreeeeddss)) peperr hohollddiingng aarree kkepeptt iinnddoooorrss ffoorr mmililkk pprroduoduccttiionon aandnd bbrreded iinntteennsisivveellyy.. AAnniimmaallss aarree ffeded llaarrgege qquuaannttiittiieess ooff ccononccenenttrraatteess aandnd lilimmiitteded aammounounttss ooff rroughaoughagge.e. ••bb)) IInnttenensisivvee aanndd sseemmii--iinntteennssiivvee ((3535%%):): ssyysstteemmss appapplliieedd iinn lloowwllaandndss ffoorr mmiillkk pprroduoduccttiionon.. SS++GG ununiittss aarree uussuauallllyy ooff mmedediiuumm ssizizee ((abouaboutt 220000heheaaddss)).. AAnniimmaallss bebellongong ttoo hhiighgh peperrffoorrmmananccee bbrreedeedss anandd tthheeyy aarree nonorrmmaallllyy houhousseded,, wwhhiillee tthheeyy ggrraazzee ddaaiillyy ffoorr sshohorrtt houhourrss neanearr tthhee ffaarrmm ananddtthenhen ffeedd iinnddoooorrss ccononccenenttrraatteess aanndd hhaayy.. TThehe rreeccenentt ttrreenndd aafftteerr tthehe CCAAPP rreeffoorrmm iinnvvoollvveess tthehe eexxppanansisionon ooff tthhiiss ttyyppee wwiitthh mmodeoderrnn ffaacciliilittiieess ssuucchh aass pprropeoperr houhousisingng,, mmililkk paparrllouourr,, eettc.c. ••cc)) EExxttenenssiivvee wwiitthh oorr wwiitthhououtt ttrranansshuhummananccee ((5050%)%):: tthehe ssyysstteemm iiss appapplliieded onon tthehe LLFFA’A’ss ffoorr mmililkk andand mmeaeatt pprroduoduccttiionon aandnd tthhee aanniimmaall fflloocckkss vvaarryy iinn ssiizzee ((100100--600600 heheaaddss)) ccononssiissttiingng ooff llooccaall bbrreeededss wwhhoossee pprroodduuccttiivviittyy iiss nnoott aallwwaayyss ssaattiissffaaccttoorryy.. SS++GG ggrraazzee tthhrrouougghouhoutt tthhee yyeeaarr bubutt heherrbabaggee iinnttaakkee iiss ssuuffffiicciienentt ttoo mmeeeett ttheheiirr nunuttrriittiioonanall rreqequuiirreemmenenttss ononllyy ffoorr 33--55 mmonontthhss ((MaMarrcchh --AApprriill ttoo JJuunnee --JJuullyy)).. OOnn aannunnuaall bbaassiiss,, iitt iiss eessttiimmaatteded tthahatt ccononccenenttrraatteess,, rroughoughaagege aandnd ggrraazziingng ccoonnttrriibubuttee,, iinn tthhiiss ssyysstteemm,, 2525 %%,, 1515 %% aanndd 6060 %% rreesspepeccttiivveellyy ttoowwaarrddss ssheheepep ttoottaall eenenerrggyy rreqequuiirreemmenenttss andand 1155 %%,, 55%% aanndd 8080 %% rreesspepeccttiivveellyy ffoorr goagoatts.s. January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––ggrarazziinnggss ddaatata

Distribution of Communal and Private grazings over the Greek regions.

0,14

0,12

0,1

0,08

0,06

0,04

0,02

0 E C W T E I W E P A N S C h o a e e p n e a e tt o o re s n s e ir ia s s lo ik rt u t t tr t ss u t t p a h th e M a M a s n S S o A a l l I t te n A k M a y s e r n e e e a k la r e e g g d k e n e a s e e o e d d a e a a n d o s E E n n i o n l ll I a n ia la a s Is a i s s la la n a n n d d d T s s h ra ce

Communal grazings Private grazings January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––SS++GG pprrododuuccttioionn ddaatata

YEAR Milked Goat Goat milk AVERAGE AVERAGE GROSS VALUE HEADS PRODUCTION PRODUCTION WEIGHTED OF (x000 tons) (kg/head) PRICE PRODUCTION (Euros/kg) (x000 Euros) 2002 3952865 441900 112 0,53 234207 2003 4060980 445800 110 0,53 236274 2004 3939141 470308 119 0,54 253966

YEAR Milked Ewe Ewe milk AVERAGE AVERAGE GROSS VALUE HEADS PRODUCTION PRODUCTION WEIGHTED OF (x000 tons) (kg/head) PRICE PRODUCTION (Euros/kg) (x000 Euros) 2002 6768002 677000 100 0,81 548370 2003 7090799 695400 98 0,83 577182 2004 7053736 703319 100 0,85 597821,15

YEAR GOAT Goat meat AVERAGE AVERAGE GROSS VALUE Carcasses PRODUCTION PRODUCTION WEIGHTED OF (x000 tons) (kg/head) PRICE PRODUCTION (Euros/kg) (x000 Euros) 2002 4373791 43217 9,88 4,61 199230 2003 4184319 41668 9,96 4,28 178339 2004 4188216 41415 9,89 4,61 190923

YEAR SHEEP Sheep meat AVERAGE AVERAGE GROSS VALUE Carcasses PRODUCTION PRODUCTION WEIGHTED OF (x000 tons) (kg/head) PRICE PRODUCTION (Euros/kg) (x000 Euros) 2002 7357780 79832 10,85 4,32 344874 2003 7158561 78212 10,93 4,41 344915 2004 7117425 78287 11,00 4,53 354640 January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––SS++GG mmiillkk pprriicesces

EVOLUTION OF MILK PRICES Euros corrected base 2000 1,20

1,00

0,80

0,60

0,40

0,20 Sheep Goat Cow

0,00 1980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004

January08 1.1. SSppececiiffiicciittiieess ooff tthhee nnaattiioonnaall ccoonnttexextt –– meameatt pprrooduduccttiionon aanndd ccononssuummppttionion

PPrrooduduccttiionon CoConnssuummppttiionon SSeellff ssuuffffiicciieenncycy Year 2006 11000000 tt 10001000 tt %% SS++GG MMeateat 114400114400 129460129460 8888..33 %% BBeeeeff MMeateat 6069060690 190350190350 3131..99 %% PoPorrkk MMeateat 122800122800 327000327000 3737..55 %% PoPouullttrryy MMeateat 153650153650 192950192950 7979..66 %% TToottaall MMeeatat 451540451540 840000840000 5353..77 %%

kgkg ppeerr ppeerrssonon kkgg ppeerr ppeerrssonon SS++GG MMeateat 1010.4.4 1111.8.8 BBeeeeff MMeateat 55.5.5 1717.3.3 PoPorrkk MMeateat 1111.2.2 2929.7.7 PoPouullttrryy MMeateat 1313.9.9 1717.5.5 TToottaall MMeeatat 4141.1.1 7676.4.4 January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––mmeeaatt aauuttararcciaia

SELF SUFFICENCY OF GREECE IN MEAT %

95,0

94 88 85,0 86 86

75,0 74

65,0

61 55,0

45,0 poultry sheep & goat

35,0 pork beef 25,0 1961 1971 1981 1991 1996 2006 January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––SS++GG meameatt pprriicesces

Evolution of meat prices (prices in drachmas deflated since 1971).

60,0

50,0

40,0

30,0

20,0

10,0

Sheep meat Beef meat Goat meat Pig meat Poultry meat

0,0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 January08 1.1. SSppececiiffiicciittiieess ooff tthhee nnaattiioonnaall ccoonnttexextt –– FFarmarm FFamamiillyy IInnccoomeme ooff S+S+GG ffarmsarms

FFaarrmm FFaammiillyy iinnccoommee iinn EEuurrooss ffoorr ddiiffffeerreenntt ttyyppeses ooff ffaarrmmss iinn GGrreeceeece ((FFAADNDN ddaattaa ddeeffllaatteedd oonn 22005005 pprriicesces).).

2255000000,,0000

2200000000,,0000

1155000000,,0000

1100000000,,0000

55000000,,0000

00,,0000 11999090 11999191 11992992 11999393 11999494 11999595 11999696 11999797 11999898 11999999 22000000 22000101 22000202

SShheepeep ffaarrmsms GGooaatt ffaarrmsms TToottaall ooff ffaarrmsms January08 1.1. SSppececiiffiicciittiieess ooff tthhee nnaattiioonnaall ccoonnttexextt –– %% ssuubbssiididieses ffoorr S+S+GG ffarmsarms

Subsidies contribution (%) to Farm Family income for different types of Greek farms (FADN data). 70

60

50

40

30

20

10

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Sheep farms Goat farms Total of farms January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––ggooaatt ffarmsarms

SShhaarree ooff ddiiffffeerreenntt pprroodduuccttss ttoo tthhee iinnccoommee ooff aa ttyyppiicacall ggooaatt ffaarrm.m.

100100,0,0

8080,0,0

6060,0,0

4040,0,0

2020,0,0

00,0,0 19901990 19911991 11999292 19931993 19941994 19951995 19961996 19971997 19981998 19991999 20002000 20012001 20022002

MMiillkk vvaluealue MMeeaatt vvalalueue MMiisscc.. pprroodd.. vvaaluelue January08 11.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––sshheeeepp ffarmsarms

SShhaarree ooff ddiiffffeerreenntt pprrooduduccttss ttoo tthhee iinnccoommee ooff aa ttyyppiicacall sshheeeepp ffaarrm.m.

1100%00%

80%80%

60%60%

40%40%

20%20%

0%0% 19901990 19199191 11992992 11999393 11994994 11999595 11999696 19199797 11999898 19199999 22000000 20012001 22002002

MMililkk vvaallueue MMeeaatt vvalalueue MMiiscsc.. pprroodd.. vvaluealue January08 22.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––ddoownwnssttreamream ••TThehe ttranranssfforormmaattiioonn iindundussttryry ––SS+G+G mmiillkk pprroodduuccttiioonn iiss mmaaiinnllyy ttrransansffoorrmmeedd iinnttoo chcheeeesesses aandnd seseccoonndadarriillyy iinnttoo yyogogoouurrttss ++ oottheherrs.s. ––SS+G+G mmiillkk iiss pprrococeesssseded bbyy 660000 pprriivvaattee dadaiirryy ffacacttoorriieess andand 660000 aarrttiissananaall wwoorrkskshhooppss,, wwheherrebebyy tthehe pprrooduducceerr ggrroouuppss aandnd ccoooopeperraattiivveses aarree ooff llooww iimmppoorrttaanncece.. OOnn--ffaarrmm pprroodduuccttiioonn ffoorr SS+G+G chcheeeesseses aandnd oottheherr pprroodducucttss iiss esesttiimmaatteedd aatt 11//55 ooff ttoottaall pprroodducuctition.on. ––DDaaiirryy pprrooccesesssoorrss//ccoommmmeerrcciiaall ssttrrucucttuurreses aarree mmososttllyy ooppeerraatitingng rreeggiioonnaallllyy ((capcapaacciittyy llessess tthhaann 11000000 ttoonsns ooff mmililkk//yyeeaar)r),, bubutt 33--44 fifirrmmss aarree oopeperraattiinngg nnaattiiononaallyy aanndd ttrransansnnaatitioonanalllly.y. ––SS+G+G mmeaeatt iiss pprroodduucceded aatt tthehe 220000--225500 ssllaaugughhtteer-r-hhouousesses aandnd ssoolldd asas cacarrccaasssseses aanndd cucuttss bbyy aa llaarrggee nnuummbeberr ooff acacttoorrs.s. ––MMosostt iimmppoorrttanantt ttyypespes ooff SS+G+G pprrododuuccttss aarree aa vvaarriieettyy ooff ccheheeseseess seseccoonnddeedd bbyy cacarrcacasssesses,, mmeaeatt cucuttss,, yyogouogourrttss aandnd oottheherr mmililkk pprrooducducttss).). ––TThehe pprrooducducttiioonn ooff hhiighgh ququaalliittyy pprrododuuccttss ((PPDDO,O, PPGIGI eettcc)) iiss tthehe mmaaiinn aaiimm ooff tthehe iinndusdusttrry.y.

January08 22.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt –– ttrarannssffoormarmattioionn inindudussttryry

CCaatteegogorriieess ooff cchheeesesee pprroodduucecedd iinn GGrreeececee ((x0x00000 ttoonnss)) aandnd iinn rreellaattiioonn ttoo mmiillkk ssoouurrcce.e.

120120

100100

8080

6060

4040

2020

00 SSoofftt cchheeeesseses SSeemmi-i-hhaarrdd cchheeeesseses HHaarrdd cchheeeesseses

SS++GG mmilkilk CCooww mmilkilk January08 January08 22.. SSppeecciiffiicciittiieses ooff tthhee nnaattioionnaall ccoonnttexextt ––ddoownwnssttreamream

••TThehe rerettaaililersers ––AAbbououtt 5500%% ooff tthehe cchheeeessee pprrooduducceded iiss ssoolldd tthhrroouughgh rreettaailileerrss cchhaaiinsns ((susuppeerr--mmeerrkekettss)) eeiitthheerr pprreepapacckkeedd oorr nonot.t. HHoowweevveerr,, conconssiidederraabbllee qquuananttiittiieess ooff ccheheeseese aarree aallsoso ssoolldd tthhrrououghgh ssppeecciiaalliizezedd shshoopsps,, ssmmaallll ggrroocceerriieses aandnd ddiirrecectt ffrroomm ffaarrmm.. ––TThehe sshaharree ooff bbuuttcchheerrss iinn sseelllliinngg SS+G+G rraaww mmeaeatt iiss ddoommiinnanantt aandnd mmuullttiippllee rreettaaiilleerrss aarree ffoolllloowwiinngg aatt ddiissttananccee,, bubutt llaarrggee ququaannttiititieses aarree aallsoso ssoolldd asas ccooookedked mmeeaatt tthhrroouughgh GGrreeeekk ttaavveerrnnasas ((pprreeppaarriingng ttrradadiititioonnaall ddiisshheses).). ––BBrraannddiinngg ssttrraattegegyy iiss iimmppoorrttanantt iinn aachchiieevviingng aandnd mmaaiinnttaaiinniingng aa gogoodod mmaarrkkeett sshhaarree iinn cchheeeesesses ((ggeeogogrraapphhiiccaall oorriiggiinn aanndd tthehe bbrraandnd nanammee aarree ddeeffiinniingng ccononsusummeerrss pprreeffeerreencnceess)) ttheherreeffoorree ddiiffffeerrenencceses ooff upup ttoo 8800%% iinn sasammee cchheeeessee ttyypepe pprriicceess eexxiisst.t. ––SSiimmiillaarr ccononsusummeerr pprreeffeerreencnceess dodo rreesusulltt iinn ddooubublleedd pprriicceses ffoorr llooccaall SS+G+G mmeaeatt asas ccoommppaarreded ttoo tthehe iimmppoorrtteded oone.ne.

January08 33.. WWeaknesseseaknesses anandd ddiffiifficucullttiieses iinn tthehe ssececttoror

• Low social life integration for S+G farmers • Low formal education credits for farmers • Low productivity and use of the natural grazings • Vague and contradicting policies on the sector • High prices for important farm inputs • High fragmentation of the farm land • High diversity of farm types and resources • High seasonality in production and consumption

January08 44.. 20032003 CACAPP RReeffoorrmm eeffffecectsts • Flock and number of sheep/goat farms – The Council Regulation 1782/2003 became in force in Greece, through the Ministerial Decision 267518/31-3-2005.The new subsidy scheme is fully decoupled from production, but farmers have to: a) maintain in farm at least 50% of the animals generating the subsidy rights (when farmer has “specific rights”), or b) respect a 0.2 L.U./ha stocking density when “land rights”exist. – S+G farms have also to comply to “Good Environmental Practice guidelines”, which require among other things the respect of grazing densities varying as follows: a) small islands 0.1-1.0 LU/ha, b) large islands 0.1-1.4 LU/ha, c) mainland Greece 0.3-1.4 LU/ha. – Although no clear effects of the new CAP exist, it is expected to stabilize a 10-20% reduction in S+G heads (most prominently evidenced on mountainous LFA areas). • Production and trade – Increase in S+G milk production is expected due to the lowland farmers shifting from other agricultural production towards intensive S+G farming using idle land for feeds production. January08 55.. RRececoommmmeendndaattiioonnss ––uuppssttrreeamam

• Farming – Support infrastructures in rural areas –Support use of local resources –Support technical guidance to farmers – Support farmers income (moderately) – Support the purchase of appropriate genetic material –Support sanitary measures and status of flocks

January08 55.. RRececoommmmeendndaattiioonnss ––dodowwnnssttrreameam

••IInndduussttrryy aanndd pprroocceessssiinngg ––RReevviissee rruulleess anandd rreegguullaattiiononss oonn mmililkk ttrrananssffoorrmmaattiionon ––SSuppoupporrtt ffoorr qquaualilittyy pprroduoducctsts ––SSuppoupporrtt ffoorr rreesseaearrcchh oonn tteecchnohnollooggiieses ••RReettaaiilliinngg ––SSuppoupporrtt oonn pprreemmiiuumm lilineness cceerrttiiffiiccaattiionon ––SSuppoupporrtt oonn mmaarrkkeett rreesseaearrchch ––SSuppoupporrtt oonn pprroodduucctt iinnnnoovvaattiionon ––SSuppoupporrtt oonn sseeccuurriinngg tthhee mmaarrkkeetsts

January08 THE HUNGARIAN SHEEP (AND GOAT) INDUSTRY AND ITS APPROACH TO FUTURE

MADE FOR THE

„NATIONAL EXPERTS CONSULTATION”

TO THE EVALUATION OF THE FUTURE OF EUROPEAN SHEEP SECTOR

MADE BY:

SÁNDOR KUKOVICS

ANDRÁS JÁVOR

AND

HAJNALKA MADAI

9. FEBRUARY 2008.

1 I. The national characteristics

1. The national flock and herd

The sheep industry in Hungary is giving about 2 % of the total animal production, while their share reached only 1% within the total agricultural production. According to the latest summarisation there were 1 106 362 ewes in the country and they were kept on 7 343 sheep farms (Table 1.). More than 500 farms disappeared during the last couple of years.

Most of the farms had limited number of heads. The average flock size was 156 heads in the middle of September 2007. More than half of the farms had less than 100 heads (55.99% - 4491 farms) on which less than 16% of the sheep were kept (15.58% - 172 304 heads). More than half of the ewes kept on farms with 101-500 heads (49.41% - 546 713 heads) representing 32.92% of the farms. Only limited ratio of farms had more than 1 000 heads of ewes (1.14% of farms - 13.84 % of ewes). The farms with 501-1 000 heads of ewes were representing 4.78% of sheep farms and had 21.17% of the ewes kept in the country.

The total number of sheep was 1 185 000 heads at the end of November last year, which had a decreasing tendency since 2005 (1 430 000 heads). The number of sheep was increasing during the last two years before 2004 (1 340 000 heads) as there were quite high expectations following the time being EU member. This tendency was followed in 2005, but since than a consequence of a kind of disappointment the number of sheep and ewes had a reducing tendency (Table 2).

Table 1 Distribution of number of flocks and ewes according to the flock sizes

Flock size No. of farms Ratio within the Number of ewes Ratio within the categories total sheep kept total number of (heads) farms % ewes % 0-9 380 5.17 1 958 0.18 10-20 1 199 16.33 17 792 1.61 21-50 1 672 22.77 59 280 5.36 51-100 1 240 16.89 93 274 8.43 101-500 2 417 32.92 546 713 49.41 501-1000 351 4.78 234 169 21.17 Above 1000 84 1.14 153 176 13.84 Altogether 7 343 100.00 1 106 362 100.00 Resource: Hungarian Sheep Breeders Association, 2007

The goat sector is much smaller, less than 10% of the sheep sector (Table 2). There are about 6 500 goat keepers in the country (some 4-500 ones disappeared during the last three years), and the 80% of them keep less than 10 heads. A big part of these animals are run on some 4 000 sheep farms.

Most of the sheep and goats kept in the East regions of the country followed by the South- middle region. The least animals were kept in the West and South-West regions.

Dominant part (above 80%) of the sheep bred are belonging to Merino type of breed, and the ratio of indigenous sheep breeds are limited (five breeds, about 45 000 heads). The others are

2 belonging to various kinds of meat breeds. The number of milk sheep is limited now, and a good number of Merino ewes are also milked. In the case of goats 10% of the animals have exotic origins (Saanen, Alpine, Boer, Anglo- Nubian), and the dominant part of the animals are belonging to Hungarian breeds. The profitability level is dominantly low to medium, the high profit level is not really known in the sheep and goat sectors, however, there are some good farms as well.

2. The production characteristics

The main product of the sheep industry is the meat (dominantly lamb). The wool has very limited role in the sector giving only 2-3% of the total income per ewe. The number of ewes utilised for milk production has seriously decreased since 2004, the present number is less than 65 000 heads. Its number declined by 30% over the last three years.

The sheep sector is producing lamb for foreign markets (nearly 90%), and the dominant part of the lambs are going to Italy. Only some ten thousand lambs sold for Greek market, and the ratios of other countries are quite limited. Most of the lambs are sold as live animals as the specialised sheep slaughterhouses (2) were closed down by the new Italian owners in the beginning of this decade. At present, there are some small sheep slaughterhouses operating in the country, but they are supplying mainly the domestic market, limited quantity of the lambs carcasses sold for export.

The main characteristics of the meat production and the development of export – import data are summarised in the Table 2.

A big number of the sheep (mainly the cull ewes) are slaughtered on the farms for breeders’ consumption. The regional small abattoirs were closed at the beginning of this decade as a part of preparation for EU membership. The average meat production trait of the ewes is pure. The annual meat yield is less than 7.5 kg meat per ewe. The lambs are sold on a low body weight, and the average exporting weight has been around 20-21 kg-s over the last 5 years. The average reproduction rate of the ewes is low (which is originated mainly from the Merino breed) and also the meat quality is needed improvement.

There were 11 wool processing companies at the beginning of the 1990’s from which none of them is operating nowadays – all of them were closed. An only one factory is running (in Italian hands) for making pre-processing (dominantly washing) of the wool, but it is handling limited part of the annual production. Some 3.5 to 4.0 thousand tonnes of raw wool produced annually, and the dominant parts of it sold for foreign markets in bales. Considering its quality the dominant part if it is Merino kind, but it is just medium-fine, the average fibre diameter around 24-26 microns. Because of the perishable keeping technology the clean wool yield has been declining, and the ratio of course wool has got an increasing tendency. The average estimated buying up price was 0.7-0.8 €/kg was in 2007. Most of the wool processing is a hand manufacturing like apart from the only one plant producing woollen band after washing the raw wool. The income from selling wool is less than 2-3% of the total amount revenue per sheep. The buying up, sorting and baling of raw wool is made by 10 companies with country wide or regional networks.

3

Table 2. The changes of main characteristics in Hungarian small ruminant production

2000 2001 2002 2003 2004 2005 2006 2007 (f) 2008 (f) Number of goats 87 000 90 000 86 000 80 000 78 000 78 000 72 000 69 000 67 000 Number of does 53 000 55 000 55 000 48 000 48 000 47 000 46 000 38 000 38 000 Number of sheep 1 234 000 1 264 000 1 212 000 1 292 000 1 340 000 1 430 000 1 362 500 1 285 000 1 280 000 Number of ewes and ewe lambs for breeding 1 004 000 1 068 000 1 001 000 1 024 000 1 218 000 1 164 000 1 135 000 1 106 362 1 100 000 Gross indigenous production (1 000 tons) 10.922 9.937 10.523 9.776 10.105 10.689 9.275 7.835 7.935 Imports of live animals 1 (000 tons) 1.965 2.613 1.705 1.200 0.517 0.705 2.132 0.42 0.400 Export of live animals (1 000 tons) 7.480 8.436 9.001 7.539 7.908 8.461 8.453 5.626 5.700 Export of live animals (heads) 892 098 859 832 863 195 760 299 748 995 826 835 834 163 600 000 600 000 Import of meat (1 000 tons) 0.231 0.115 0.192 0.147 0.158 0.116 0.065 0.120 0.110 Export of meat 1 000 tons) 1.289 0.422 0.322 0.482 0.495 0.161 0.000 0.135 0.125 Consumption (kg/head) 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.26 0.26 Population (1 000 head) 10 043 10 200 10 174 10 117 10.080 10.076 10.064 10.053 10.050 Self sufficiency (%) 432 516 386 230 376 359 304 300 300 Prices of heavy lambs above 13.1 kg (100 kg cwt) 379 477 443 446 395 499,1 483 435 430 Price of light lambs =>13.0 kg (100 kg cwt) 499 541 555 563 519 568 535 520 515 Resource: Made by Sándor Kukovics for the meetings of „EU Forecast Group for Sheep Meat and Goat Meat”, between 2004-2007; Based on the data of Hungarian Sheep Products’ Council, Hungarian Sheep Breeders’ Association, Hungarian Goat Breeders’ Association, Central Statistical Office (KSH), Budapest, and Research Institute for Agricultural Economy and Informatics

4 Only limited number of milk processing factories (processing sheep milk as well) is running nowadays from those ones operating at the beginning of 1990’s. Several new ones started during the last decade, and few of them were closed already. After the serious reduction a gradual increase started in the second half of the 1990’ in the sheep milk production, and up to the beginning of 2004, and the increase reached the 35% (but the total quantity of the milk produced under control was only a little bit above 1.5 million litres). One of the backgrounds of this increase was the subsidy given to the farmers producing first class quality (hygienic and health) sheep milk, which was controlled officially once in every ten days.

Considering and referring to the EU membership on the 1st of May 2004 this subsidy was closed down at the beginning of 2004. It has a strong negative impact on sheep milk production. The milk prices declined and several other negative effects reached the sector. Nowadays about 800 thousand litres of milk produced and processed after buying up under official quality control. There are 3 medium and two smaller size milk processing companies producing various sheep milk products (cheeses, yoghurt, and kefir). Some on farm milk processing activities could be found on less than 10 farms.

The goat milk sector was characterised by on farm processing and selling until the years of 1990’s. Some new professional milk processing units started at the second half of that decade. Most of the goat farmers were producing without official health control, which was started to change in the year 2000. In order to control the goat milk production (from the quality side) a special subsidy was given for the production of first class quality goat milk. An increasing number of goat farms entered to the “white zone” processing and market and worked under hygienic and health official control.

The estimated goat milk production could reach the 12-15 million litres (4-5 years ago and today) annually, and the production and processing of 2.5 million litres were under control in the years 2003. The abovementioned subsidy was closed down at the beginning of 2004 (referring the EU regulations) and most of the goat milk production has gone back to “black side”. Nowadays, less than 900 thousand litres of goat milk are produced, bought up, and processed under hygienic and health official control.

Three medium and 6 small size goat milk processing plants are functioning officially and several ones working as on farm milk processors and selling their own products. But most of the last ones are working without hygienic and health control.

3. The owner ship of land

Because of the consequences of enormous mistakes made in reorganisation and privatisation a lot of farms are functioning without their own lands for forage production. About 40-45% of the sheep farms are working with rented lands, and also buy concentrates from other (mostly crop producing) farms. This situation is very much similar in the goat sector; however, the size of lands belonging to one farm is much smaller. Because the regulations and the present ownership situation most of the sheep farmers are not able to buy any lands (grass and / or arable). As the consequences of high renting costs and the dramatic increase of feeding costs during the last year, the number of those people who are giving up sheep (and goat) farming is having a rather increasing tendency. In Hungary, the 50-55% of the subsidies given based on the size of lands is going to the owners of the land and avoids the people who really cultivate them and keep / breed animals on them.

4. The pasture and grazing lands

There are about 1.1 million ha grazing and pasture lands in the country, however, about the half of it is utilised by animals, dominantly by sheep. The other part of it is waiting for a kind of exploitation, hopefully with domestic animals in the future, otherwise it will be disappeared as grass or pasture land. These are very close towards to it.

The land protecting programmes (environmental programs) not requesting the necessary animal density on these grass lands are definitely damaging these ones. According to our observations the consequences of the missing animals (using, grazing, treading and fertilizing of it) are as follows:

- within two years the plant composition of the given land has changed, and the bushes and scrubs are coming out; - the insect fauna has also changed within this period, - number of small mammals has declined as they loosing their life conditions, - the net conditions of the native birds have changed, and most of them go away, - the predator birds should be fed artificially, as they have not enough other birds, - double or three times more efforts and costs are needed to take back the domestic animals to the land from where disappeared once, if it is any possibility to put them back again, at all.

Based on our observations and results the environment protection and the animal breeding are not in synchronous. On those lands where the number of grazing sheep is less than the ones kept in the time when the environment to be protected was emerged is slowly deteriorated.

5. The subsidies utilised in sheep and goat farming

5. 1. The sheep premium

At the time of joining EU (01. 05. 2004) the number of sheep and goats were determined as the upper level of animals which could be subsidized. According to this determination the sheep and goat farmers could get subsidy for keeping animals after 1 146 000 heads of sheep and goats. Beside of it € 1 211 510 additional subsidy could be used in the sector.

Because of the fact that Hungary was not mentioned in the regulation of 2307/2003 (EC) as the region where the goat keeping could be subsidized, the abovementioned number could be considered only for sheep premium. It could have been very good news for sheep farmers, but the premium offered for them was only the 25% of the amount given to the farmers in EU-15 countries. So, these people become disappointed very much, however, the amount of premium has been gradually increasing since than. Even today, the subsidy level reached the 50% comparing to the situation in EU-15. The new member states could have the right to ad 30% support from their own budget for their sheep farmers. So, the difference is still 20% with the national additional subsidy.

Nowadays, the sheep farmers could get their sheep premium in two separate parts: the half of it comes based on the number of heads, and the other half is received based on the size of the land. The national 30% are given to them above it.

6 In last year, the amount of subsidy per head (ewe above one year of age) was 1600 HUF (about € 6.15; 1 € = 260 HUF), and in the case of milked ewes this amount was 1200 HUF (about € 4.65; 1 € = 260 HUF). Those sheep farmers kept sheep on LFA regions could get extra 1200 HUF per ewe (about € 4.65; 1 € = 260 HUF) as well, but the number of sheep could be involved in this subsidy was not much as 300 000 heads. In order to decline the subsidy disadvantage of Hungarian sheep farmers “de minimis” support was given to them: 650 HUF (about € 2.5) per head, annually.

The main conditions to get these amounts were as follows (the same as in other member states of EU): the minimum number of animals was 10 heads; the animals should be kept on the farm for minimum 100 days after the subsidy was applied and the application was accepted.

5. 2. The goat premium

There is a special case valid for goat subsidies: no subsidy / premium could be given for goat keeping in the country. The areas where the goat keeping could be subsidized in the EU were determined by the 2307/2003 (EC) Commission Regulation (amending the Regulation (EC) No. 2550/2001). In this regulation only the regions of EU-15 was considered, and no further negotiations have been kept on this subject after the EU-10 (and than EU-12) become the members of the Community. From the Hungarian side we tried to initiate a kind of change in this situation but the Commission has refused (could not be partner) to make any step forward in this subject. It is a regulation made before the accession of new member states and expected to be accepted by the new member states, however, it is quite disadvantageous for these states. Many pure people are keeping goats on least favourable regions of these new member states, and they do not have the right to get premium for goat keeping. It is against the basic regulations of the EU.

In the EC Regulation 2307/2003 mainly the mountain regions of the more developed countries (like Germany, Austria, France), or the dominant part of the countries (like Spain, or Italy), or the whole countries (like Portugal and Greece) were determined as the regions where premium could be given for goat keeping.

Since 2004 (EU-10) and 2007 (Romania and Bulgaria) new regions joined EU and the classification of LFA-s lands need to be revised. There are mountain regions in Poland, Czech Republic, Slovakia, Slovenia, and a little bit in Hungary, as well; but the LFA-lands not necessarily fit to the mountain areas in the case of Hungary. Most goats are kept in the hilly and the lowland areas of Hungary, where poor soil and unfavourable production conditions are dominating. These people dealing with goat keeping are handicapped comparing to those ones live in the regions named in the abovementioned regulations.

In order to get some subsidy at all, “de minimis” subsidy was given to goat farmers after limited number of goats (2006 and 2007). This subsidy was offered after 15 000 heads of does above one year of age in 2007. No other subsidy was given for goat keeping.

5. 3. Other subsidies connecting to sheep farming

7 There was a big problem to solve the placement of dead bodies of sheep and cost a lot for farmers but it seems it will have good solution within a national program in 2008.

In order to meet the EU demands and regulations extra subsidy could be applied for improving animal welfare conditions, but it seems to be rather complicated and slowly to get.

Within the National Rural Development Programs (NVT) and the Agar-Environment Economy (AKG) Programmes limited resources are given to sheep. The indigenous sheep keeping subsidy is mainly concentrating on Hortobágyi Racka sheep breed, and consist of € 20,59 €/head. The ecological animal keeping measures (could be € 18.82/head subsidy), unfortunately, could not be started yet. The grass economy development programmes are mainly concentrating on new grass planting and re-cultivating, but no animals are really required to utilise them. In the Natura-2000 program the lands which are involved have already indicated, but not many resources are available for this, and not much money was given for sheep from it.

II. Marketing indicators

The Hungarian sheep industry is producing dominantly for foreign consumers. Nearly 90% of the lamb production is mainly going to Italian, and the smaller part to Greek markets. Only limited % of lambs sold to Austrian, German and other consumers. The milk production is rather low (only one tenth of the production of 20 years ago). The sheep milk products produced dominantly for domestic market, however, some ratio of it was also sold for export (20-25% to USA as cheese, and some yoghurt and kefir to Germany and Austria). The wool produced was sold for abroad as raw material apart from some % washed and pre- processed in one company. Only 8-10% of the kids borne sold for export from the country, mainly to Italy and Greece, the main part is consumed by the domestic market, dominantly the goat farmers themselves and their next door people. The goat milk products are targeting the domestic markets, however, some tonnes of cheeses sold for the Italian markets, and some tonnes of instant (Hungarian patent) milk powder to Far East.

o Number of commercial structures

There are 28 trading companies who are exporting lambs (and kids) for other countries, dominantly within the EU. These companies are national ones, some of them are regional, but a good number of them has got Italian background as well (mostly in secret). A couple of companies with direct foreign ownership are functioning in the lamb trading industry. Real transnational company is not working here. The lambs are sold as live animals, only a couple of thousands of them transported as carcasses.

8 Limited number of slaughterhouses is functioning in the country, the big specialised sheep abattoirs bought by Italians and closed. One medium size and some smaller other regional slaughterhouses having the right to handle and slaughter sheep. These are national firms.

Only one company is functioning as wool processing firm, and 10 companies are buying up, handling and (mainly) exporting the wool produced annually. Except the one firm washing and pre-processing wool which is in Italian hands, the others are national companies.

Some twelve milk processing companies producing sheep and goat milk products (all kind) and several on-farm milk processing units are working and selling farm products. All of them are national and some of them regional firms.

o Production volume

The meat production volume was summarised in Table 2. There are 16 000 tonnes of sheep meat production in the country. On an average 800 – 830 thousands heads of live lambs (including 8-10 thousands of kinds) sold for export. The annual wool production is 3.5-4.0 thousand tonnes. The officially controlled sheep and goat milk production is rather limited now (as shown above in I. point).

o Market share

The Hungarian lamb industry giving a special quality and consists of 2 % of the Italian lamb market and consumption. No significant sheep or goat meat is arrived to the country.

The wool produced sold mainly to EU and partly to the Independent Countries Association. Some sheep and a little bit of goat milk products are imported to the country, but a bigger part of it seems to be imitations.

III : Bilan

During the last couple of years some changes have gone through the sheep and goat industries: • The sheep farmers received much less subsidy than expected (however, the present one is a little bit higher than the previous one before 2004), and their disadvantages to sheep farmers in EU-15 still very high. • The 40-45% sheep farmers are working on rented lands, and not be able to buy lands for grazing, forage production and crop farming (for concentrate production). • The renting costs have been gradually increased, and the subsidies given based on the size of land go to the land owners who have no connections to agriculture. • The profitability of sheep and goat farming is pretty low, the “average profit is negative”, only limited number of farms could realize positive results in sheep production. The subsidy received on the base of land is improving the situation but the level of profitability is this around zero. The determining product is the lamb, the wool value could not cover the shearing costs properly, and the milk production is utilised only on the limited number of farms. That means only one real product remained in

9 the sheep industry. For goat farming the situation is worse, because only 10% of kids could be sold for export, the others are mainly consumed by the farmers, do not reach the real market. The milk production is dominantly consumed on farms; only limited part of it (which is under official hygienic and health control) could get to the domestic and foreign market. The shortage of subsidy here is even worse than in sheep sector. • For the lamb production there is one dominating market (the Italian one) remained and the other ones (Greece, Germany, Austria, ..etc.) have only much less importance. • The quantity of products (lamb meat) is not enough to supply other markets at the same time. • There is no replacement for shepherd, the people working in sheep production is getting to be older and older. • The average flock size is small (156 heads of ewes), and the minimum necessary size for covering the production costs is above 300. In goat sector, where milk production is concerned for market (selling milk and milk product) the minimum necessary herd size is above 50 producing does (and their progenies). • The feed (forages and concentrates) prices are following the energy prices and more and more difficult to cover these costs from income.

3.1. The farmers’ strategies for adaptation

3.1.1. Reducing flock size

The national flock size will be reducing unavoidable during the next couple of years. Many farmers will give up sheep production (hopefully mostly the owners of smaller flocks), and a good number of other farmers will reduce the flock size because of increasing costs and decreasing lamb prices. Several farmers should keep their sheep for 5 years period because of entering one of the programmes (like using LFA lands, or ecology land utilisation, etc.). As the period has gone, big part of these ewes (sheep) will be disappeared. Apart of these, there are shepherds who will have some sheep for ever – because of tradition.

3.1.2. Changing sanitary context

The situation is reasonable on the Hungarian sheep farms. The sanitary program and system has several unnecessary elements, which are too expensive. Special question is the scrapie. The EU regulation for destroying this disease would be acceptable, but the system used could not reach its aim because of its a-typical variety. The compulsory breeding program against scrapie is not valid in this situation. The regulation is needed to be revised again. Luckily, the Blue tong problem has not reached the country, but has to be prepared to be able to handle the problem when it comes. One thing is sure; it should be solved on the EU level as a whole. In the case of goat sector the CAEV (caprines arthritis encephalitis virus) creates problems which are seems to be smaller ones, but still significant. Unfortunately, it is somehow receives less attention, however, this infection spread from West part of EU towards the Eastern member states, where this kind of disease was unknown ten years ago.

10 Fortunately, the BSE has not touched the country yet.

3.1.3. International competition

The Hungarian lambs are handicapped with the present level of subsidies comparing to the lambs borne in EU-15 (especially in Spain, e.g.). There is another competition with the very low price of Romanian lambs (however, their quality is still poor). The sheep meat from Australia and New-Zealand makes an increasing competition on the Italian and Greece markets, but its effect is still low on the Hungarian lamb market and price.

From our point of view two things have to be mentioned. The first is the behaviour of some Italian importers which make an impression that they might be in a price cartel against our producers and traders. The second is what was happened in Greece before the last Eastern: they could close their border in front of the Hungarian lambs without any real consequence. It should not be happen within the EU between two member states without serious reason (e.g. animal health problem), and the EU regulation should not allow it! Or there is no equal rights given to the new member states than that of the older ones?

3.1.4. Consumer demand: quality, certifications of origin, carcass weight increase…

The average quality is depending on the breed bred dominantly in Hungary. The quality of Merino sheep is different from the one in meat sheep breeds. The present market adjusts the lambs a little bit, no special (higher) price for better quality lambs (however, the Italian prices are mainly higher than the ones in Greece, but not always). The certificate of origin became more and more important in the case of bio/eco quality lambs, but in the case of others it is still not important enough. Apart of these there are farm producing much better quality lambs than others. In the case of milk product the certification of origin has mainly solved. For the Hungarian sheep industry there is nothing to do with increasing carcass weight nowadays, because the average exporting weight of the lambs is 21 kg. Beside of it, there is no interest for the farmer to fat the lambs and increase the carcass weight because the elevated feed prices made the fattening for higher body weight un-profitable.

3.1.5. Total or partial decoupling of the ewe premium

I personally (Sándor Kukovics) declared in a meeting of Forecast Group on Sheep Meat and Goat Meat (Brussels), that this kind of simplification of subsidies would be a big mistake. As the number of sheep would not be determined to get the certain amount of subsidy the sheep number would be reduced within a short period in the same regions (or farms), and there would be lands without animals. It would create decrease in sheep meat supply in the EU, and would increase the necessity of import. This elevated import would have a negative impact on lamb prices and made another negative effect on profitability of sheep farming and sheep number. It would destroy a lot of jobs, and there would not be animals to cultivate and handle the countryside and hillsides and the mountains. The representative of the Commission said that I saw on a wrong way, and anyway, it was much easy to handle the shortage of sheep meat than the over production. Answering my question that there were already 20% shortage

11 of sheep and goat meat in the EU he said “it was not so important”. No more comment on this. Put this information ahead the most probable result of total decoupling of ewe premium will be a very high reduction in sheep number. It would not be unimaginable that the size of national flock would go back to around 800 thousand ewes within a couple of years.

The situation could be improved if the minimum number of sheep to be kept per ha will be above 0.3 big animal unit average (depending on the quality of the land ranging from 0.2-1.0 big animal unit per ha).

As I have mentioned above, the 50-55% of subsidy given based on the size of land go to the land owners not to the land users. At the same time, 40-45% of sheep farmers working on rented lands. So, the total decoupling would and will take the money out (almost totally) from the sheep industry! It gives the agricultural subsidy to the non rural people for nothing!

In the case of partial (maximum and minimum 50%) decoupling the situation is better; it helps to keep the sheep on the pastures and on the lands.

3.1.6. Article 69 implementation (5% in Italy, 5% in Greece)

This article was borne before the EU-10 became member of the EU and quite difficult to consider its regulations. According to our opinion, the whole CAP reform made in 2003 should be revised totally concerning also the interests of the new member states. They are handicapped from the implementation of article 69 point of view as well! The grant of similar additional national subsidy is strongly limited as the national 30% additional subsidy takes away the possible resources.

3.1.7. Other impacts and tools

- reduction of costs The biggest part of the farms are functioning on so low level of costs that there is no reserve to be utilised. The almost only way to reduce the specific cost is the increase of flock size, but in many cases it is not possible for other reasons. - increasing production efficiency It would be a good solution but many farmers are held back by the tradition. - changing breed, production system It would be a good solution but many farmers are held back by the tradition. - getting and renting more lands There are very limited possibilities to do this under the present circumstances. - developing better trader relationships Bigger part of the sheep farmers are in a kind of forced situation concerning lamb selling. Much less problem is with selling milk for processing companies. - getting better prices for better quality of lambs There is no special price for better quality lambs. At the same time the Italian importers act like companies in price cartel against Hungarian sheep producers and traders. - national labelling, geographical certificate of origin It is a not solved problem, however, proposals and solutions have been worked out several years ago, but trading companies blocked the process. - need of national subsidy (above the present one)

12 It seems it is not avoidable in order to reach the same level of competitiveness than it is given in the EU-15 member states. Apart from the ewe premium the national subsidy in order to help to cover the increasing animal health costs (sharing costs with EU in the case of BSE, scrapie, Blue tong, and CAEV) should be given concerning other animal health checks (like milk and meat hygienic support, etc.). - getting better and more effective subsidy for environment protecting Unfortunately, most of the subsidies utilised at present are not really good and effective ones. There are strong and big shortage of harmonies among the environment protecting programs and animal keeping / breeding. The most important impact has been forgotten in these programmes: the environment could not be protected on an expected level without the necessary animal density on that particular land. Without it or the restriction of use of them, the environment to be protected will be disappeared. Most of the lands to be protected would not have been emerged without these animal pressures. So, these regulations and subsidies should be revised as a whole.

3.2. Adaptation strategies of processors’/abattoirs’/commercial structures

3.2.1. Reducing production volumes

Unfortunately, the cleanest picture could be found in the case of abattoirs: there are not enough animals to slaughter as the 95% of lambs leave the country as live animals. They are slaughtering cattle and or putting new products (kitchen ready) to the market.

The processing firms have less milk (sheep and goats as well) than that the market needs, so they have started to get milk from new areas and / or try to convince producers to milk production and sell milk for them.

As the number of commercial structures has not changed and they want to be remain in the business the only one possibility for them to work on a low interest rate. At the same time the lambs with worse quality are also sold by them, one way or another.

3.2.2. New sanitary context

Those milk processing plants and slaughterhouses which are still stand could meet every demand of EU regulations (even the most serious ones). There are no problems on these fields, but one thing has to be mentioned: the hygienic and administrative expectations are much higher in the case of Hungarian processing companies than that of the ones used in the case of the firms in EU-15. It is a strong disadvantage for us.

3.2.3. International competition The international competition could be observed on the Hungarian market in the case of sheep milk product, as too much imitation has been importing from Slovakia. The regulation differences should be eliminated. At present the Hungarian processors have to meet stronger requirements than the Slovakian ones. In the case of lamb (and kid) meat the Hungarian lamb exporters could meet the international competition on the Italian and Greek market. Here the meat arrived from New-Zealand is the strongest competitor, but the cheap Romanian and Bulgarian sheep meat also cause problems.

13 Unfortunately, these effects have negative impacts on prices, however, the quality of the latter ones much weaker than that of the Hungarian ones.

3.2.4. Consumer demand: quality, certifications of origin, product’s practicability The consumers’ demands are followed and served exactly in the case of milk products. Every officially registered processing firm has its own products with certificates of origin, and good quality. These products are frequently in the national wide competitions, and also presented in international exhibitions in EU-15 countries as well.

In the case of lambs the certificate of origin has not been so important up to now, however, several proposals were developed already, but the commercial firms blocked to make it. The lamb quality is depending on the Merino breed, and sometimes it would need some improvements. The bigger improvement will wait until the live animal export is still going on.

3.2.5. What is the distribution of the profit margin between the different links of the chain (producers, industry, retail)?

According to the sheep producers the sheep farming is dominantly the activity with loss and at the same time the traders in lamb market business could have 5-10 % steady income. The slaughterhouses also have only limited profit margin (around 15-20%), and the dominant part of the profit (more than 65-70%) is remaining with the trade (wholesalers and retailers).

In the milk production the picture is not really different. Here the 15% remain with the producers, 15-20% is the ratio of the processing companies, and 65-70% is belonging to the trades (wholesalers and retailers).

3.2.6. How has the sheep and goat farmers’ income evolved since the implementation of the Common Market Organisation, since the Agenda 2000, since the 2003 CAP reform?

The production costs have been increasing during the last ten especially in the last three years but the buying up prices did no change much. The income of those farmers who are not involve in environment protecting program the deficit could reach the € 4-12 annually per ewe. It means that without the other 50% of the subsidy (received based on the size of land) the loss would be completely intolerantable. Considering the average results the profitability of sheep farming has been continuously decreasing.

4. Prospect

4.1. Change in production orientation

In the case of Hungary there is not much possibility to change the production orientation, because of our lamb production is not enough even to the Italian market, however, a small part is going to Greece, and a little bit to Austria and Germany. The farmers could not really turn to the beef production because of the number of beef cattle is low, and a couple of years are needed to make this change, and more money is needed to invest for beef cattle production.

14 The gene preservation could also be one of the solutions, but the number of animals belonging to the indigenous breeds are rather limited (less than 50 000 heads).

4.2. Consequences of a decrease in customs duties and an increase of tariff quotas (scenario)

The most possible consequences would be the further decrease in the national sheep flocks, a lot of people will leave the sector, and these people will ask for money and job in the cities. Parallel with this thousands ha-s of grassland will remain alone and started to turn back to wild. No one will look after the countryside. No one will cultivate the increasing size of grasslands, hillsides and mountains. The environment protection plans would fail.

4.3. Consequences of a possible total decoupling

The direct impact of total decoupling will be the intensive reduction in sheep number, and intensive increase of the size of uncultivated lands, and big number of labour will leave the sector. It would be useful for some disappointed sheep farmers they would not need to keep sheep, just collect the subsidy, but their number is small.

o On production volumes and types

The most possible consequence would be the reduction in production volumes, and in the number of sheep kept. The change in production type would not be so serious in Hungary than that has happened in Greece and Italy, where the milk production started to be more important again. Its background are the increasing demand for milk product and the better changing rate between € and $ USA. In Hungary, the meat production will remain dominating. One interesting result of subsidy given based on size of land was that many sheep farmer have given up the sheep milking.

The other thing is the crop farming become stronger and sometimes more profitable, but there will not be enough animals to feed.

o On productivity

In the case of the sheep keeping would be obligatory on the given grassland there could be two possibilities. The first one is (in the case of low obligatory number of sheep to be kept) in poor production conditions no change could be expected in productivity. In the second case, where and when the production conditions are better the number of animals might be reduced but their productivity would be increased. At the same time those parts of the land which have poorer conditions will have animal density on them only on papers which will not be real one.

15 4.4.What can be done to limit the effect of international competition?

The first thing to be done is to demand the same animal health and individual identification as well as traceability from those countries who are exporting sheep and goat meat to the EU than that of expected from the farmers working and living within the EU. Nowadays there are some doubts about it. The second thing is that the EU must protect its market and its producers. During the WTO negotiations the sheep meat should be handled as sensitive product. More than 600 000 jobs and families are depending on the being of sheep industry in the EU:

The other thing to think over is the possible determination of minimum price of sheep meat. That means the imported sheep (and goat) meat should have only 10% lower price than that of functioning on the given regions of EU.

The one of the most important thing is that the consumers should be convinced that the European products are the best ones from the food safety and the traceability point of view.

4.5.What can be done to stop the probable decrease of the flocks resulting from a possible total decoupling?

First of all one should establish that the disadvantages of the sheep farmers in the new member states has to be changed. It could have two solutions. The one is that the subsidy level of the sheep farmers of these countries would reach the same level than that of the others in EU-15 countries from 2009. It seems to have problem to get this level so quickly. The other one is that the increase of subsidy would be double in the EU-10 member states concerning sheep farming. It is a better solution which could be accepted more easily. It means instead of 10% the increase would be 20% annually from 2009 and the subsidy would reach the same level as in EU-15 in 2011.

The second thing to think of it is the necessary revise of the premium for goat keeping in the certain regions of EU-15, and gives this possibility to those goat farmers live in the new member states. As the dominant part of the goats are kept in LFA regions of these countries no reason could be accepted why goat keeping is supported in the original lands of EU-15 and not supported in the new member states.

The third thing to think it over is the giving subsidy for the owners of grasslands without keeping any domestic animals on those lands. It is against the environment, and environment protecting and direct support to the people living in towns and doing nothing about rural area and countryside. It means that this kind of subsidy does not go to agriculture but goes to industrial cities. It is a big mistake against rural regions and people and at the same time completely misleads the EU people when talking about the high amount of support giving to the agriculture.

So, the subsidy for grassland utilisation could be given only in the case of certain animal density on the land (0.3 big animal unit at least, 0.3-1.0 unit depends on the quality of the land). Serious level of animal density should be applied in the environment protecting programmes as well.

16 o Direct payments to farmers – is it still realistic in the new CAP context?

Providing the fact that the new CAP reform is needed a complete revise as it was developed before the EU-10 and than the other two new member states joined the EU the direct payment to farmers is still realistic, however, the system should be more strict: direct payment for something. As I have mentioned before the only one possibility to rescue the European sheep industry is to revise the supporting (subsidy) system.

o Support to improving productivity

The one of the most important problems of sheep industry is the low productivity. It is valid for the prolificacy, the meat production capacity and partly the meat quality and in the new member states of EU-12, the milk quality and quantity as well. The wool production unluckily is not an important group of traits any more.

The only one effective tool to be in a good position in the international competition is the increase of productivity. According to the lowest estimation the sheep producer who could increase the productivity of his/her flock by 8% annually during the next 4 years might receive extra 15% subsidy over this period. After finishing this period the level of extra support could remain 5% provided if the productivity would remain on the same level as it happened in the last year of the period. This extra 5% could remain for another four years before finish.

This kind of support could be a very good tool to increase the productivity and keep the sheep (and goat) meat production on a very good level in the international competition. It helps the farmers to use the best available rams and technology and use reasonable feeding regimes.

o Stricter labelling policy, support to PGI

In order to distinct the European lambs (and kids) from imported ones a new labelling policy should be developed. A European label need to be introduced and stick to all lambs (kids) and meat cuts produced and qualified within the EU member countries. Its costs should be cover from EU budget (100%).

o Support to an improved organisation of the sector

Special support is suggested to give to improve the organisations of the sector. These ones have become weak in Hungary (and also in other new member states). Especially, the producers’ organisations are far from the necessary level of works. Special roles should be given the master of the regional farmers’ organisations, like the Sheep Products’ Council, which is a forum of producers, processing companies and traders and the representatives of consumers. A kind of regular (annual) support is suggested to give to the organisation like Sheep Products’ Council over a kind of 4 years period to be able to build up a strong forum and representative works and activities (about €10 000/year). In order to help the sheep farmers’ organisations to be stronger a declining support (started to 100 % of functioning

17 costs which goes to zero during 4 years with 25% decrease in every year) suggested giving them based on an application system.

o Support to product promotion, information and communication

Regarding product promotion one of the biggest problems is that only limited resources are available for doing this kind of work. The sector itself has just small amount of money to be able to spend on this. However, there is a possibility to apply EU co-sharing support to cover the costs of product promotion, information and communication, a country like Hungary does not have enough own resources (nor the other members of EU-12) and the resources of Hungarian producers/traders/processors also to small. So, they are not able to put together the 50% (20% state and 30% producer) of the total costs needed to get this kind of activity with expected results. So, for the next 3-4 years the member states of EU-12 should be offered extra support to make national and international product promotion work. The suggested level of this extra support could be 20% of the total costs of the activity. It means, the EU co- sharing would give the 50 + 20 %, and the given country should cover the remaining 30%, up to 2012, since when the ratio of 50-50 % might be returning again in co-sharing.

The intensive product promotion could be almost the only one and useful tool to increase the domestic consumption of sheep (and goat) meat. The intensive product promotion along with further information and communication could not be avoided in increasing the domestic consumption of sheep and goat milk products, either.

o Support to research on meat / dairy products

In Hungary most of the people know the mutton and some of them have heard about the rousted lamb, but that is all they learned. We have just finished a research project developing sheep meat products on pasture using indigenous and exotic breeds of sheep. These new products were quite popular during the tasting test in a regional agricultural exhibition, which means the consumers would be interested in to buy this kind of products, and fit these ones to their life (however, these are more expensive ones than other kind of meats). In order to develop good new and possible not too expensive sheep (and goat) meat products some support should be granted for research work.

In the case of so called functional milk products (sheep and goat milk) also needed some support for research work to develop new products. These products are missing from the market at present, but there is not enough money in the sector to develop them. These kinds of products could be one of the key factors to induce people to consume more sheep and goat milk products. So, the support for research on developing new dairy products will also be useful.

The other possible and necessary research field would be the effect of climate warming on the sheep sector.

18 o Support to technological innovation: new non-clothing uses of wool and hides

According to my opinion there could be possible use of wool and hides in motorcar building, in wall carpets and furniture. The wool could also be used in temperature isolation of house buildings, and in highway buildings as well. Unfortunately, these latter one utilisations are not really popular and known. Considering the fact that there is a little bit of over production and something should be done with the extra quantity of the wool and hide this kind of support for innovation might be supported.

o Re-orientation towards Second Pillar support: agri-environmental schemes, support to breeds on the decline…

First of all the agri-environmental schemes use less animals than would be necessary to reach the expected results. (Apart of it half of the grass lands have no domestic animals on them.) Secondly, these programmes mainly concentrate on plant production.

The support to breed those (dominantly indigenous) breeds which has declining size of population could be a kind of solution for a limited number of farms.

The information and data summarised above were collected form

- two abattoirs, - five milk processing companies, - two commercial structures (the others could not answer the survey), and - twenty producing firms.

19

Developments & Issues in the Irish Sheepmeat Sector

Submission to European Parliament Study

Draft Report

January 2008 Table of Contents

Background to Irish Sheepmeat Sector...... 2

Impact of CAP Reform...... 2

Developments in Irish Sheep Farming...... 3

Industry Developments...... 9

Irish Retail Market for Lamb...... 12

Issues facing Irish Sheepmeat Sector...... 13

Recommendations for the sheepmeat sector...... 15

1 Background to Irish Sheepmeat Sector

The sheep sector faces a number of significant challenges to retain an economically viable industry at both producer and processor level given the difficulties over recent years in securing improved returns from the marketplace and a policy environment that hasn’t recognised the unique nature of sheep production. The sector is now at a crossroads where a sustained period of enhanced returns and a clear EU policy are necessary to secure the future of an industry that historically has been of vital importance to the rural economy in many parts of the country. A drop of over 1.6 million head in the Irish breeding flock since 1998 with 600,000 of this occurring since 2005 following the decoupling of farm payments, has left the sector in danger of losing critical scale throughout the year unless signification action is taken. Of all livestock sectors in Ireland, sheep perhaps represent the most extensive and traditional form of farming that deliver a high quality, natural product using farming systems that nurture the local environment. The Irish sector operates in an EU market that has been gradually moving into a greater deficit supply balance. Currently, the market is less than 80 per cent self sufficient, resulting in 300,000 tonnes of sheepmeat imports annually. However, competition from other meats and the price position of imported product has led to a situation where prices across Europe have stagnated. To overcome this, significant efforts are needed to highlight the natural attributes of EU lamb to consumers across Europe. Irish sheepmeat production represents six per cent of total EU output, which compares to eight per cent as recently as 1998. Despite this, the Irish industry remains the largest net exporter of sheepmeat in the EU, accounting for almost one fifth of intra-EU trade. Annual output is valued at some €200 million. The key export destination for Irish sheepmeat continues to be France, which in 2007 accounted for 55 per cent of total shipments. However, the Irish industry has also been proactively diversifying its market portfolio to increasingly include the United Kingdom and Northern European markets. This development has been helped by the steady rise in the proportion of export volumes that are in cut form. In 2007, it is estimated that 30 per cent of Irish exports were in cut form compared to 13 per cent as recently as 2000. There is a strong need for action to secure the future of the European sheepmeat sector. The current study being undertaken is both opportune and timely. It provides a real opportunity for a detailed debate on what needs to be done to ensure that a secure future exists for one of Europe’s most traditional farming sectors.

Impact of CAP Reform Since Agenda 2000, the sheep industry has moved into decline across Europe, reflecting a lack of a policy specific for the sector. Following the 2003 CAP reform, Ireland opted for a fully decoupled system in terms of direct payments to producers from the beginning of 2005. This resulted in producers examining the profitability of their enterprise excluding the single farm payment.

2 With lamb prices currently running below the levels prevailing prior to the introduction of decoupled farm payments, there has been a reduction in both sheep numbers and the number of flocks in Ireland. Some of the key trends since the end of 2004 include: • 20% fall in the Irish breeding flock • Drop of 2,000 in the number of sheep producers • Net production down by 8% - It was insulated to some extent by increased supplies of ewe lambs and cull ewes being processed. However, 2007 saw a drop of seven per cent in production levels with a further four per cent fall anticipated in 2008. • Export volumes running 11% lower

To date there has yet to be any clear signs of a definite levelling off in the size of the sheep flock. The following chart highlights two possible scenarios for the future evolution of Irish sheepmeat production. These scenarios are a) the rate of decline evident in recent years largely continues and b) that the fall in the breeding flock eases to less than one per cent annually.

Irish Sheepmeat Production Scenario’s to 2013 (‘000 tonnes cwe)

80

70 -13,000 tonnes

-24,000 tonnes 60

50 High 40 Low 30

20

10

0 2005 2006 2007 2008 2009 2010 2011 2012 2013

Since 2005, Irish output has declined by over eight per cent with the full impact of lower ewe numbers being offset to some extent by higher ewe and ewe lamb disposals. Which of above scenarios turn out to be most accurate will be largely determined by the level of policy support received by the sector in the short term as well as the medium term market returns achievable from the marketplace.

Developments in Irish Sheep Farming The Irish sheep flock has undergone significant structural changes since the turn of the decade both in terms of absolute size and the number of producers actively involved in the sector.

3 As the following chart highlights, the number of sheep in Ireland as in other Member States has declined considerably since the introduction of decoupled farm payments in 2005, reflecting the ongoing weak profitability, labour issues and the policy environment in which the sector is operating. Irish Breeding Ewe Flock, June 1996 to 2007 (‘000 head)

5000 Decoupled payments 4000

3000

2000

1000

0 199619971998199920002001200220032004200520062007

Source: CSO Since the year 1998, the Irish breeding ewe flock has declined by over 35 per cent or 1.6 million head leaving the flock below three million head for the first time since the mid 1980s.

Number of producers in decline As the size of the flock has declined there has also been a considerable decline in the number of producers involved in sheep farming. Figures available from the Department of Agriculture, Fisheries and Food show that the number of producers involved in sheep farming has dropped from over 50,000 in the mid 1990s to less than 35,000 in 2006. Figures from the Central Statistics Office show that in 2005 only 16,000 were “specialist sheep producers” with the remainder keeping sheep as part of a mixed enterprise. No. of Producers with Sheep (‘000)

60

50 52 40

30 35 37 35

20

10

0 1995 2004 2005 2006

Source: Department of Agriculture, Fisheries & Food

4 The age profile of “specialist” sheep producers is increasing in Ireland. Figures from the Central Statistics Office for 2005 show that only one quarter of producers are under 44 years of age while a similar percentage are 65 years or over. With declining income levels for sheep producers and the availability of alternative employment, it has become a significant challenge to retain younger producers in sheep farming. Age profile of “Specialist” sheep producers, 2005

< 35 9% >= 65 26% 35 - 44 17%

55 - 64 45 - 54 24% 24%

Source: CSO CSO figures available for “specialist” producers show that almost 60 per cent have some level of off farm income.

Average size of flock While the number of producers has declined, the average size of flock in Ireland has also declined. This has a negative impact on the potential for the industry to improve efficiencies, particularly given the high proportion of producers now involved in sheep farming on a part time basis. The average size of sheep flock in Ireland in the mid 1990s stood at around 100. This figure increased to 113 in 2004. However, since the introduction of decoupled farm payments the average flock size has fallen back to 102. Average Irish Flock Size (head)

120

113 100 110 108 102 101 80

60

40 1995 2003 2004 2005 2006

Source: Department of Agriculture, Fisheries & Food

5 The structure of the Irish flock remains quite traditional. In 2005, one third of Irish sheep were on farms of less than 100 animals while only 10 per cent were on farms with more than 500 sheep. The relatively small scale of producers can make it more difficult to achieve efficiency gains in terms of output. Distribution of Breeding Ewe Numbers by Size of Flock, 2005

500+ < 50 10% 12%

50-99 200-499 21% 29%

100-199 28%

Source: CSO This is further highlighted when you examine the distribution of flocks by size. Figures for 2006 show that 44 per cent of flocks had fewer than 50 sheep. On the other hand, only two per cent consisted of more than 500 animals. Distribution of Flocks by Size, 2006 (%)

> 500 200 - 499 2% 10%

100 - 199 < 50 20% 44%

50 - 99 24%

Source: Department of Agriculture, Fisheries & Food

The regional breakdown of Irish sheep numbers shows a high proportion of animals in western counties. One third of total Irish sheep numbers are in three counties, namely Galway, Mayo and Donegal. The historical focus of sheep production within different parts of the country remains a strong driver of the national distribution of the sheep flock. This results in a significant proportion of the flock being in parts of the country where a much of the land is deemed to be less favourable.

6 Irish Sheep Numbers by County, 2006 (head)

Source: Department of Agriculture, Fisheries & Food

Typical Production Systems Irish sheepmeat output largely consists of lowland production. Lowland production is typically split into two principal systems, namely early and mid season flocks. There also continues to be a considerable level of hill farming in Ireland with lambs finished at lighter weights.

Early Lamb System • Lambs being born in December/January • Lambs finished Mid March to end of May • Lambs finished on a combination of grass and feed concentrates. • It is estimated that this system represents over 15% of annual production.

Mid Season lamb System • Lambs mostly born during the February to April period • Lambs finished off grass from early summer. • Principal type of lamb production in Ireland, representing up to 80% of total output.

Hill Lamb System • Lambs born April • Finished from late August onwards • Hill lamb production accounts for around 4% of Irish output • The majority of this product is exported to Southern Europe.

7

Technical Performance of Different Systems The following table drawn from 2006 National Farm Survey results and industry information gives a general indication of the average technical performance of the different lamb systems in Ireland:

Early Lamb Mid Season Hill Lamb

Lambing % 131 135 96

Weaning % 123 125 88

Carcase Weights (Kg) 19 - 21 19 – 21 12-13

Financial Performance of Different Systems The financial performance of sheepmeat production in Ireland over recent years has been under pressure from a combination of a gradual decline in producer prices for lamb and an ongoing rise in production and regulatory costs.

8 The following table highlights the trends in the gross margin of different sheep systems in the National Farm Survey over the last number of years: Gross Margin - €/Ewe

System 2004 2006 2007(e)

Early Lamb 83 46 50

Mid Season 71 42 45

Hill - Blackface 33 4 4

Source: Teagasc National Farm Survey As can be seen from the table, all systems have seen a decline in gross margin levels in the last three years. When overhead costs are included it results in producers relying on the single farm payment, and in the case of hill lamb it is subsidising the enterprise.

Irish Lamb Price Developments Irish lamb prices have undergone a period of decline since 2001 when the reduced presence of UK lamb on export markets due to foot and mouth boosted demand levels. While prices in 2007 showed a modest rise of two per cent at €3.54/kg they remained 26c/kg below the levels prevailing in 2002. This has resulted in increased pressure on incomes over that period. Irish lamb prices, 2001 to date (c/kg dw excl. VAT)

500

400

300

200

100

0 2001 2002 2003 2004 2005 2006 2007

Industry Developments The Irish sheepmeat processing sector continues to evolve with an increasing focus evident within the sector on market diversification and increasing the level of boneless exports. The decline in sheep numbers over recent years has seen a drop in supplies at export approved meat plants from 3.5 million head in 2000 to just over 2.9 million head in 2007. This has resulted

9 in issues in terms of excess capacity at processor level, which to date have been partly overcome by increased value added activities being undertaken. Processing is relatively concentrated with the top four processors accounting for around 85 per cent of total output. Processing typically tends to be located in parts of the country where significant sheep numbers are within a reasonably short distance. The changes evident in the Irish sheepmeat sector over recent years are highlighted in the following balance sheet for the sector:

Irish Sheepmeat Balance Sheet, 1996 to 2007

Key developments in the Irish supply balance since 2000 include: • GIP production down by almost 15% • Export volumes 11% lower • Consumption has stabilised after a period of sharp decline • Irish market now accounts for 30% of total output • Imports account for just 4% of total availability

Irish sheepmeat production remains somewhat seasonal in nature given the lower costs of production evident from finishing lambs off grass. In 2007, over 60 per cent of sheep disposals occurred in the May to October period.

Monthly distribution of Irish sheep supplies (head)

400,000

300,000

200,000

100,000

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10 Increasing co-ordination has been evident among producers in recent year through discussion groups. In many cases, such groups have led the way in terms of improving breeding, on farm efficiencies and technical performance. Further development of these initiatives provides a good template for the improvement of on farm efficiencies and productivity levels.

Export composition changing The move by all major retailers in Ireland to centralised packing of lamb has facilitated a significant development within the industry in this direction. This trend has also emerged strongly in the composition of exports. In 2007, it is estimated that 30 per cent of Irish sheepmeat exports were in cut form, which compares to 13 per cent as recently as 2000. While this trade initially consisted of mutton it has extended in recent years to include significant volumes of lamb. The following chart highlights the developments evident in the composition of Irish sheepmeat exports since 2000: Composition of Irish sheepmeat exports (%)

100 2000 80 2007(e)

60

40

20

0 Chilled Sides Chilled/Frozen Other chilled/frozen Boneless Bone-in

France remains the principal destination for Irish sheepmeat exports, accounting for approximately 55 per cent of total shipments in 2007. In recent years, the UK and Northern Europe have also emerged as increasingly important markets for Irish lamb. On the other hand markets for Irish hill lamb in Southern Europe have been difficult with shipments falling over recent years. Distribution of Irish Sheepmeat Exports, 2007 (‘000 Tonnes cwe)

30

25

20

15

10

5

0 France UK Northern Belgium Germany Southern Europe Europe

11 Irish Retail Market for Lamb The Irish market continues to grow in importance for the Irish sheepmeat sector. It now accounts for 30 per cent of total Irish output. The Irish retail market for lamb has performed strongly over the last two years with TNS data for 2007 showing a rise of 11 per cent in the value of household purchases of lamb. This growth was driven by a three per cent rise in volume while average prices were some eight per cent higher. The principal driver behind this growth has been an increase in the proportion of households buying lamb with a corresponding rise in the frequency of purchase. There has been a slight fall in the volume bought per trip. Most of the growth in sales has been evident in chops. In terms of retail sales, multiple retailers and symbol groups account for almost 80 per cent of the total with the other 20 per cent accounted for by butchers and other outlets. Butchers have been gradually losing share of sales over recent years. All major retailers in Ireland have increasingly segmented their product offering to reflect evolving consumer requirements. This has typically taken the form of premium offerings emerging while to a lesser extent economy lines have also been introduced. Increasingly lamb cuts are being marinated or seasoned to offer consumers a more convenient meal option. The price difference between economy and premium can be in the region of 60 per cent depending on the product in question. Increasingly, promotional activity at retail level whether through Bord Bia or retailers themselves is focusing on marketing lamb to younger consumer through highlighting its versatility and providing cooking ideas for fast convenient meal options using lamb. Traditionally lamb sales at retail level in Ireland have been heavily weighted towards older consumers.

12 Issues facing Irish Sheepmeat Sector The Irish sheepmeat sector is facing broadly similar issues to other EU member states in terms of the future challenges facing the industry. However, significant potential exists to maintain a viable sheep sector in Ireland and the EU provided a number of key issues are adequately addressed. Some of the principal issues to emerge during a series of interviews with producers, processors, retailers and state organisations were as follows:

• Price developments This was identified as one of the critical issues facing the sheep sector at producer level in that it is leading to a lack of confidence at producer level that the industry will offer an economically viable income over the medium term. The key driver of producer confidence is the price received for lambs. Prices in 2007 were some 26c/kg below those prevailing in 2002. A relative small rise in the retail price of lamb could make a significant difference to the profitability of the sector. • Rising production costs While price levels have been showing little movement, production costs continue to rise. This is largely due to rising costs in terms of fuel, electricity and animal feed. As a result, many producers in Ireland are using the single farm payment to subsidise their enterprise. This is particularly the case for hill lamb producers. This doesn’t provide a sustainable platform for the production base. • Decline in sheep numbers Breeding ewe numbers have fallen by 20 per cent since 2004. This has led to excess capacity in the processing sector for much of the year. This issue is further highlighted by the seasonal peak in Irish sheep supplies. Also, the fact that the average size of flock in Ireland has declined in recent years makes it more difficult to optimise efficiency at producer level. This trend needs to be reversed in order to maintain a critical scale throughout the year and ensure no further expertise is lost from the sector. • Competition from non-EU lamb Irish exporters are facing increased competition on export markets, particularly from New Zealand and to a lesser extent Australia on a more consistent basis throughout the year. In the case of New Zealand, increasing volumes of chilled lamb on the market at times of the year when Irish export volumes are growing in many ways sets the tone for prices throughout the year. The seasonality of chilled imports from non-EU suppliers is highlighted by the fact that over 40 per cent of shipments from New Zealand take place during the February to April period. The limited range of cuts supplied by New Zealand means that shipments often have a disproportionate impact on the market. With the increasing regulatory costs facing EU producers and processors, it is important to ensure that similar requirements are placed on imported product.

13 Also, there are some concerns in New Zealand about the future production levels there. If New Zealand production declined, it could provide some issues in terms of security of supply for the European market given the volumes currently being shipped. • EU consumer demand EU consumer demand for lamb continues to decline gradually, which is impacting on import demand in key markets. While the EU market is only around 80 per cent self sufficient, weaker consumer demand and the competitive price of non-EU lamb has meant that at times of peak supply on the market, prices have tended to come under strong pressure. In order to deliver market returns that will maintain a viable EU sheep sector, a sustained turnaround in demand for lamb is required. • Impact of CAP Reforms The traditional focus of CAP reform has been to adjust over production in key product areas. To this end it has been successful with the EU beef market for example going from a situation of being over 110 per cent self sufficient 10 years ago to being only around 95 per cent self sufficient in 2008. However, many of the instruments used to achieve these changes have negatively impacted on the sheep sector, for example the extensification payments system during the 2000 to 2005 period. A major issue highlighted be stakeholders interviewed in terms of CAP reform from a sheep perspective is that it has at times failed to recognise the uniqueness and diverse nature of European sheepmeat production. • Environmental/Social Issues The loss of producers and sheep numbers has the potential to create significant issues in terms of environmental impact for areas where sheep are important in maintaining a vibrant eco system. Sheep farming has a strong tradition of being an important source of employment and income for the local economy in many rural parts of Ireland. Also, in many areas there are few alternative land uses available to producers. To maintain sheep production in these areas requires enhanced flexibility in terms of support payments and environmental initiatives. • Electronic tagging There is concern within the Irish industry that the introduction of compulsory electronic tagging from 2009 will place significant additional costs on producers without delivering any improvements in terms of traceability or market prices. This is particularly the case given the fact that Ireland introduced a comprehensive sheep identification system in 2001. Also, the industry has questioned if non-EU suppliers will be required to fulfil requirements in terms of electronic tagging. • Product innovation One of the principal challenges facing the processing sector is the need to develop new product and packaging concepts that will prompt consumers to buy lamb on a more frequent basis. However, investment in product development can be expensive, particularly for a sector operating on tight margins.

14 Recommendations for the sheepmeat sector During the course of interviews carried out with relevant stakeholders, a number of suggestions were made with regard to measures that could enhance the future prospects for the sector. Dividing these suggestions received into different parts of the supply chain provides the following list:

Marketing • EU Labelling Given the growing level of competition faced by European producers from non-EU lamb, there appears to be a clear consensus that a drive to actively label EU lamb is necessary to build consumer awareness of the origin of the lamb they are buying. The development of an EU designation label for lamb would be a useful tool in this process. Such a label could work in conjunction with national labelling and promotional initiatives and is seen as a critical requirement in creating and building a preference for EU lamb. Through an education campaign it could allow EU consumers to know that when they see such a label that they can be sure of the traceability of the product and that it has been produced to exacting quality standards. This is based on the use of common regulations in relation to farm, processing, welfare and environmental standards across the community. An EU label could also provide a platform for educating consumers on the uniqueness and diversity of European sheepmeat production in terms of the variation across seasons and the extensive nature of production. • EU Promotion of Lamb In conjunction with the development of an EU label for sheepmeat, it is seen as critical that the weakening consumer demand for lamb is addressed aggressively. To this end, the development of a generic European lamb promotional campaign is seen as vital. As with the label, this campaign could dovetail with existing and planned national promotional activities. The basis of such a campaign would be to highlight the unique nature of sheepmeat production, the traditions associated with it and the extensive form that production takes. Any campaign should seek to premiumise sheepmeat in the minds of target consumers and make lamb the meat of choice for consumers when they feel like treating themselves. Considerable EU funding would be required in order for this campaign to take place at the level required over the sustained period of time, which will be necessary to influence consumer purchasing behaviour in relation to lamb. • Support for product innovation While sheepmeat is generally perceived as a traditional meat, there is a strong need to offer a wider range of product options to younger consumers in order to encourage them to purchase. With the industry currently operating on tight margins, further incentives are necessary to ensure that that product and packaging developments form an important part of activities for processors.

15

Trade/Policy • WTO The growing role played by imports in the EU sheepmeat market means that any changes in terms of WTO and market access could have significant implications for the European industry. The seasonality and limited range of cuts supplied to the EU market by major suppliers means that they have a disproportionate impact on the market and in many cases influence prices received by EU producers at critical times of the year. The industry is of the view that the starting point for imports coming into the EU should be that suppliers fulfil exactly the same standards as European producers in terms of traceability and other regulatory issues & standards. The nature of lamb supplies coming from the Southern Hemisphere means that their peak supplies coming into Europe at the time of their lowest production costs coincide with the period when EU production costs are at their highest. This makes it very difficult for EU producers to compete and can set the tone of the market. There is a consistent view that these issues need to be addressed within the framework of any new WTO deal. Also, it is seen as critical that options in relation to sensitive product status, safeguard clauses and other tools are left open in order to provide potential for market management. There is a strong view that there is a need to challenge any further quota concessions and the management of quotas in the context of any WTO deal. • CAP Changes While promotional activities offer the best potential for securing the long term future of the sheep sector, the decline in sheep numbers and lack of producer confidence needs to be addressed in the short term in order to prevent the loss of critical scale to the industry. Recent rounds of CAP reforms have in some ways merely grouped sheep in with cattle without recognising the distinct differences between the two production systems. There is broad consensus of the need for a clear policy response in order to boost producer confidence that the sector offers them a viable enterprise for the future. This requires EU policy to strongly recognise the unique nature of sheep farming and the need for a tailored package of support that can actively assist in stemming the decline that has been evident in the European sheep flock in recent years.

Production • Technical Support As mentioned earlier, recent years has seen a strong emergence of groups of producers that aim to help improve the efficiency of on farm production. The industry feels that this is something that needs to be encouraged further. To do this will require increased incentives for peer groups and monitor farms to be set up and developed with a view to actively working to improve on farm operations.

16 The main area that needs to be addressed is in terms of productivity, namely o Lambing rates o Breeding practices o Conformation and carcase quality Improvements in these areas are important in terms maintaining critical scale and ensuring that the quality and efficiency of output is optimised. • On farm investment Given the increased level of part time sheep farming evident, initiatives that promote investments in labour saving techniques are important to help producers develop the efficiency of their farming system. By offering incentives in this regard, it is likely to encourage more part time farmers to continue with sheep production. • Environmental Incentives The extensive nature of sheepmeat production means that it lends itself to protecting the local environment. To ensure this continues, stakeholders suggested that increased flexibility in terms of payments is encouraged through EU programmes. Increased incentives in this area could play a key role in maintaining sheep farmers in many parts of the country. The role played by sheep farming in more rural parts of the country also need to be recognised and taken into account when new policies are being developed. This is particularly the case in areas were hill sheep farming takes place. • Electronic tagging Given the concerns regarding the introduction of compulsory electronic tagging from 2009, it is recommended that a thorough cost/benefit analysis of the proposed identification system is undertaken. The focus of this analysis should be in terms of costs involved, the source of funding for such a programme, whether it should be compulsory or voluntary and its potential to provide any additional benefits to existing systems already in place in member states such as Ireland.

There is a strong need for action to secure the future of the European sheepmeat sector. The current study being undertaken is both opportune and timely. It provides a real opportunity for a detailed debate on what needs to be done to ensure that a secure future exists for one of Europe’s most traditional farming sectors.

17 The Future of the sheep and goat meat sector in Europe An Irish perspective

Report summary Padraig Brennan

Monday 28th January 2008 OOuutlitlinene

••RecReceentnt dedevveellopopmmenenttss inin IriIrisshh sshheeeepp sseectctoror

••ImpaImpacctt ooff CACAPP ReReffoormrm

••IssuIssueess ffaacincingg SSeectorctor

••IndInduuststrryy RRecomecommmeenndatidatioonsns

January 08 BBackgackgrroundound

••SiSiggnniiffiiccanantt cchahallllenenggeess aahheadead ••IrIriisshh fflloocckk hahass dedecclilinedned bbyy 11..66mm headhead ssiinnccee 19981998 ••DDananggeerr ooff lloossiinngg ccrriittiiccaall scscaalele ••EUEU mmaarrkkeett ononllyy 8080%% sseellff ssuuffffiicciienentt,, bbuutt pprriicceess hahavvee ssttaaggnanatteded ••SSeeccttoorr iiss aatt aa ccrroossssrroadoadss,, rreeqquuiirriingng ––AA ssuussttaaiinedned peperriiodod ooff eenhnhaanncceedd rreettuurrnnss,, andand ––AA polpoliiccyy tthhaatt rreeccooggninisseess ununiiqquuee nanattuurree ooff ssheheeepp pprroodduuccttiioonn

••HHoowweevveerr,, ssttiillll popotteenntitiaall ttoo pprroovviiddee aa vviiaabbllee ffuuttuurree ttoo pprrooduducceersrs

••RReeqquuiirreses aa seserriiousous dedebabattee ooff tthehe iissssuueses

January 08 ReceRecenntt ddeveveellooppmmeennttss iinn IIrriisshh sshheeeepp secsecttoror

Monday 28th January 2008 IIrriishsh BBrreedeediingng EEwwee FFllockock (‘(‘000000 head)head)

5000 Decoupled payments 4000

3000

2000

1000

0 199619971998199920002001200220032004200520062007

• Numbers down by 1.6m or 35% since 1998 • A drop of 20% in size of flock since decoupling • Breeding flock below 3 million for first time since mid 1980’s

January 08 NNuummbeberr ooff flflocksocks

Number of producers (‘000)

60

50 52 40

30 35 37 35

20

10

0 1995 2004 2005 2006

••CCuurrrrenenttllyy 3355,,000000 fflloocckkss,, 1616,,000000 ooff wwhhiicchh aarree ““sspepeciciaalliisstt ssheep”heep” ••AAgege PPrrooffiillee iinnccrreaeasisingng ––25%25% uundenderr 4444yyrrss && 2255%% 6565yyrrss oorr oovverer ••OOvveerr 6060%% ooff ““ssppeecciiaalliisstt””pprroodduceucerrss aarree ppaarrtt ttiimeme

January 08 AAveverrageage ssiizzee ooff flfloockck

Average Size of Flock (head)

120

113 100 110 108 102 101 80

60

40 1995 2003 2004 2005 2006

••IInnccrreaeasseded upup ttoo 20200404 ••HHoowweevveerr,, hahass dedecliclinedned ssiinnccee dedeccoouupplilingng iinn 22005005 ••MaMakkeess eeffffiicciienenccyy ggaaiinnss mmoorree ddiiffffiiccuultlt

January 08 DDiissttrriibubutitionon ooff FFllocksocks byby SSiizzee,, 20052005 ((%)%)

> 500 200 - 499 2% 10%

100 - 199 < 50 20% 44%

50 - 99 24%

••11//33 ooff sshheeeepp inin fflloocckkss ooff lleessss tthanhan 110000 sshheeepep,, onlonlyy 110%0% inin fflloocckkss ooff oovveerr 550000 ••44%44% ooff ffllooccksks hahavvee lleessss tthhanan 5500 sshheepeep ••FFaarrmmiingng ssttrruuccttuurree rreemmaiainnss ttrraadidittiioonalnal

January 08 RRegegiionaonall DDiissttrriibubuttiionon ooff SSheepheep FFllockock,, 20062006

••HHiissttoorriiccaall ffooccuuss ooff sshheepeep ffaarrmmiingng rreemmaaiinsns ••HHighigh pprropooporrttioionn ooff sshheeepep onon ““lleessss ffaavvouourraableble””llaandnd January 08 TypTypiicacall PPrroducoductitionon SSysystteemsms

EEaarrllyy LLaambmb ••LaLammbbss bbeeiingng bornborn iinn DDeecceemmberber//JJaanuarnuaryy ••LaLammbbss ffiinniisshedhed MMiidd MMararcchh ttoo endend ooff MMayay ••LaLammbbss ffiinniisshedhed oonn aa ccoommbbiinnaattiionon ooff gragrassss andand ffeeeedd ccoonnccenenttraratteess.. ••ItIt iiss eessttiimmaatteded tthahatt tthhiiss ssyysstteemm rereppreressenenttss oovverer 1515%% ooff annuaannuall prodproduuccttiioon.n. MMiidd SSeeaassoonn LLaambmb ••LaLammbbss mmoossttllyy bornborn durduriingng tthhee FFeebbruarruaryy ttoo AAprprilil perperiiodod ••LaLammbbss ffiinniisshedhed ooffff gragrassss ffroromm earearllyy ssuummmmerer.. ••PPrriinncciipapall ttyypepe ooff llaammbb prodproduuccttiioonn iinn IIrerellandand,, reprerepressenenttiingng upup ttoo8800%% ooff ttoottaall ououttpuput.t. HHillill LLaambmb ••LaLammbbss bornborn AAprprilil ••FFiinniisshedhed ffrroomm llaattee AAuguguusstt ononwwarardsds ••HHililll llaammbb produproduccttiionon aaccccouounnttss fforor aaroundround 44%% ooff IIrriisshh ououttpuputt ••TThehe mmaajjororiittyy ooff tthhiiss produproducctt iiss eexxporportteded ttoo SSoouutthernhern EEurope.urope.

January 08 TechnTechniicacall PPeerrffoorrmmaancence ooff DDiffiffeerrenentt SSyysstteemsms

Early Lamb Mid Season Hill Lamb

Lambing % 131 135 96

Weaning % 123 125 88

Carcase Weights (Kg) 19 -21 19 –21 12-13

January 08 GGrrossoss MMaarrggiinn --€€//EEwewe

System 2004 2006 2007(e) Early Lamb 83 46 50

Mid Season 71 42 45

Hill -Blackface 33 4 4

••RRiissiinngg oovveerrhheadead ccoossttss aaffffeeccttiinngg pprroodduuccttioionn ccoosststs ••SSingingllee ffaarrmm ppaayymmenentt pprroovviiddiningg ininccoomeme ••SSFFPP ssuubbssiididissiningg hhiillll llaammbb ssyysstteemsms

January 08 LaLammbb PPrriicece DDeveevellooppmmenentsts

Irish lamb prices, 2001 to date (c/kg dw excl. VAT)

500

400

300

200

100

0 2001 2002 2003 2004 2005 2006 2007

••MModeodesstt rriissee inin 20200707 ••HHoowweevveerr,, rreemmainain 2266cc//kkgg lolowweerr tthanhan 20200022 lleevvelsels

January 08 IIrriishsh ououttpuputt ffaalllilingng bubutt rreemmaaiinsns llaarrgesgestt nenett expoexporrtteerr iinn EUEU

KKeeyy ddeevveellopmopmeentntss ssiinncece 2000:2000: ••GGIIPP pprrododuuccttiionon ddoowwnn bbyy alalmmoosstt 15%15% ••EExxpoporrtt vvoluolummeess 1111%% lolowwerer ••CCononssuummppttionion hhaass ssttababiilliisseded aafftteerr aa ppeerriioodd ooff sshhaarrpp ddeecclilinnee ••IIrriisshh mmaarrkkeett nonoww aaccccouounnttss ffoorr 30%30% ooff ttoottalal ououttpputut ••IImmpoporrttss aaccccouounntt ffoorr jjuusstt 44%% ooff ttoottalal aavvaiaillababiililityty January 08 CCoommpospositiitionon ooff IIrriisshh EExpoxporrttss CChanghangiingng

Composition of Irish Sheepmeat Exports (%)

100 2000 80 2007(e) 60

40

20

0 Chilled Sides Chilled/Frozen Other Boneless chilled/frozen Bone-in

January 08 MMaarrkekett ddiivveerrssiiffiicacattiionon concontitinuesnues bbuutt FFrranceance accounaccounttss ffoorr 5555%% ooff ttoottalal

Distribution of Irish Sheepmeat Exports (‘000 tonnes cwe)

30

25

20

15

10

5

0 France UK Northern Belgium Germany Southern Europe Europe

January 08 IIrriishsh MMaarrkekett nonoww aacccouncounttss ffoorr 3030%% ooff oouuttputput

•• GGrroowwiingng iinn iimpomporrttaanncece Distribution of Retail Lamb Sales (%)

•• VVaalluuee ofof rreettaailil sasalleess 1111%% hhiighgheerr BBuuttcchheerrss iinn 20072007 && ootthheerr ououttlleetsts ––VVoluolummeess ++3%3% 20%20% ––AAvveerrageage pprriiccee ++8%8%

•• MMaarrkekett seseggmemennttiingng

•• InInccrreaeasseedd pprroommoottioionnaall ffooccuuss onon yyoungoungeerr ccononssuumemersrs MMuullttiippllee RReettaaiilleersrs 80%80%

January 08 IImmppacactt ooff CACAPP ReReffoormrm

Monday 28th January 2008 IImmpacpactt ooff CACAPP RReeffoormrm

••SSiinnccee AAggeendanda 20200000,, ababssenenccee ooff aa sspepecciiffiicc popolliiccyy ffoorr ssheepheep sseeccttoror

••IIrreellaanndd ffuullllyy ddeeccououpplleded iinn 22005005

••TTrrendendss ssiinnccee tthenhen iinnclclude:ude:

––20%20% ffallall inin IIrriisshh bbrreeedediingng fflloockck

––DDrropop ooff 22,,000000 iinn nnuummbbeerr ooff pprrooduducceersrs

––NNeett pprroodduuccttioionn dodowwnn bbyy 8%8%

––EExxpoporrtt vvoluolummeess 1111%% lolowwerer

January 08 PPoottenentitiaall SScenacenarriiooss ffoorr FuFuttuurree pprroducoducttiionon

Irish Sheepmeat Production Scenario’s to 2013 (‘000 tonnes cwe)

80

70 -13,000 tonnes -24,000 60 tonnes

50 High

40 Low 30

20

10

0 2005 2006 2007 2008 2009 2010 2011 2012 2013

January 08 IIssssuueses ffaacciinngg tthhee sseeccttoror

Monday 28th January 2008 IIssuesssues ffacaciingng SSececttoror

••PPrriiccee ddeevveellopopmmenentsts ––CCrrititiiccaall ffaaccttoorr dedetteerrmmiinniingng pprrooducduceerr ccononfifidendencece ••RRiissiingng pprroduoduccttiionon ccoosststs ––OOveverrhheeaadd ccoossttss cconontitinuenue ttoo rriisese ––PPrroodduucceerr uussiingng SSiinnggllee FFaarrmm PPayaymmenentt ttoo ooffffsseett tthhisis ••DDeeclcliinnee iinn ssheheeepp nunummbebersrs ––FFlloockck dodowwnn 2200%% ssiinnccee 22000404 ––LLeeavaviinngg eexxcceessss ccapaapaccitityy iinn sseeccttoror ••CCoommpepettiittiioonn ffrroomm nonnon--EEUU llaambmb ––LLiimmititeded nnuummbbeerr ooff ccuuttss andand sseeasasonaonall iinn nnaattuurere ––CCanan sseett tthhee ttoonnee ffoorr mmaarrkkeett pprriicesces ––SSeeccuurritityy ooff ssuppuppllyy iissssuesues ••WWeaeakkeneniingng ccononssuummeerr ddeemmandand ffoorr llaambmb ––NNoo ssttrrongong flfloooorr ttoo pprriiccee lleveevelsls ––IImmpapacctitingng oonn iimmpoporrtt dedemmaandnd

January 08 IIssuesssues ffacaciingng SSececttoror

••IImmpapacctt ooff CCAPAP RReeffoorrmsms ––TTrradaditiitioonnaall ffooccuuss ooff CCAPAP hhaass bbeeenen ttoo aaddjjuusstt oveoverr pprrooduducctitionon ––SShheeeepp ooftfteenn ggrroouupepedd wwitithh ccaattlettle ––LaLackck ooff sspepeccififiicc popoliliccyy ffoorr ssheheeepp tthahatt rreeccooggnniisseess iittss ununiiqquuee && ddiiveverrssee nanattuurere ••EEnnvviirrononmmenenttaall//SSoociciaall iissssuueses ––LoLossss ooff ssheheeepp nnuummbbeerrss mmaajjoorr iissssueue iinn hhillill aarreaseas ––AAllssoo,, ssheepheep pprrovoviiddee ssttrrongong sosouurrccee ooff eemmppllooyymmeenntt && iinnccoommee iinn rruurraall aarreaseas ––OOftftenen ffeeww aaltlteerrnanatitivvee llaanndd uusseess aavvaaililabablele ••EElleeccttrrononiicc ttaaggggiingng ––PPootteenntitiaall ttoo aadddd ssiigngnifiificcanantt ccoosststs ––BBeenenefitfits?s? ––SSiimmililaarr rrequequiirreemmeennttss onon nononn--EEUU ssuppupplilieerrs?s? ••PPrroduoducctt iinnnnoovvaattiionon ––IInndduussttrryy neneeeddss ttoo iinnnnoovavattee iinn tteerrmmss ooff pprroduoduccttss && papackckagagiingng

January 08 RecRecoommmmeennddaattiionsons

Monday 28th January 2008 MMaarrkeketitingng//PPrroommoottiionon

••DDeevveellopopmmenentt ooff EEUU llaabbeell ––CCllearear ccoonnssenenssuuss ooff needneed ttoo bubuiilldd aawwarenearenessss ooff ororiiggiinn ooff llaambmb ––WWoorrkk iinn ccononjjuunnccttiionon wwiitthh nanattiionaonall iinniittiiaattiivveses ––AAssssiisstt iinn ccreareattiinngg && bubuililddiingng aa preprefferenerenccee fforor EEUU llaambmb ––UUssee ttoo edueduccaattee ccoonnssuummeerrss onon ddiivvererssiittyy && ununiiquenqueneessss ooff EEUU llaambmb

••EEUU PPrroommototiionon ooff LaLambmb ––NNeedeed ttoo aggreaggressssiivveellyy addraddreessss wweaeakkeneniingng ccoonnssuummerer ddeemmandand ––GGenereneriicc EEUU prproommoottiionaonall ffundund reqrequuiiredred ––HHiighghliligghhtt ununiiququee nanattureure,, ttradradiittiionon aandnd iittss enenvviiroronnmmenenttaallllyy ffrriienenddllyy ffoorrmm ooff produproduccttiionon ––HHeellpp prpreemmiiuumimissee llaammbb iinn miminnddss ooff ccononssuummersers ––RRequequiirere ccoonnssiiderabderabllee EEUU ffundundiinngg oovverer aa ssuussttaaiinedned perperiiodod

••SSuupppoporrtt ffoorr PPrroduoducctt IInnnnoovvaattiionon

January 08 TTrradeade//PPoolilicycy

••WWTOTO ––SSeeaassoonnaalitlityy && lilimmititeded rrangeange ooff ccuuttss iimmpoporrtteded ––SSttaarrtitingng ppooiinntt iiss ttoo enenssuurree eeququiivvaallenenccyy ooff ssttananddaarrdsds ––AAnyny WWTTOO deadeall nneeeeddss tto:o: ••RReettaaiinn opoptitioonnss iinn tteerrmmss ooff ssenenssiittiiveve pprrooduducctt ssttaattuuss,, ssaaffeguaeguarrdd ccllauaussee eetctc ••CChahalllleennggee aanyny ffuurrtthheerr qquuoottaa ccooncnceessssiionsons ••EExxaammiinnee mmaannagageemmeenntt ooff qquouottasas ••CCAAPP CChahanngesges ––PPooliliccyy cchahanngegess ccanan hhaavvee iimmmmeeddiiaattee iimmpapactct ––UUrrgengentt neneeded ffoorr aa popoliliccyy tthahatt rreeccooggnniisseess nanattuurree ooff ssheheeepp sseeccttoror ––TTaaililoorreded papackckaaggee tthhaatt ccanan aacctitivveellyy aassssiisstt iinn sstteemmmmiingng dedecclilinene iinnEEUU flfloockck ––HHeaealtlthh CCheheckck ooffffeerrss popottenentitiaall ffoorr ddeebabatete

January 08 FaFarrmmiingng

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January 08 «The future of sheep and goat sector in Europe» N° IP/B/AGRI/IC/2007-043 National Experts Consultation ITALY

1. Quantitative analyses – specification of the national conext

1.1 Statistical sources

Statistical sources on Italian sheep and goat sector are not so reliable as the one existing for others animal production. The lack of reliable statistical data is one of the main weak points of the sector, not allowing a serious and effective investigative work at National level from part of research world. Nowadays, the only official source is the National Statistical Institute (ISTAT) whose data are referred to: – number of ovine animals reared in Italy. This kind of data comes from the number of sheep and goats present in a sample of 8.770 farms at the 1st December of every year. This information is used to update the data collected during National Census Survey (every 10 years, the last in 2000) and its periodic updates on Italian farms’ structure (the last in 2005). Is relevant to note that the National Census in 2000 have to be considered not reliable for ovines, as the data too much differs from the average flock in the previous and following years. This is directly related at the methodology used in the Census survey, and at difficulties interviewsrs had in reaching shepherds in the fields and to have information from them (there’s also to consider the hight level of work irregularity in this sector - not regular workers, not regular immigrants - that reduce people interview popensity) – Number and cathegories of animals slaughtered every month, their live and death weight.

In 2006 born the National Register for Sheep and Goat, like the one operative for bovines. This Register is updated with data coming from periodic checks made by the Public Veterinary Health Service directly in the herds and in the slaughters; the IZS (Zooprophilactic Institute) located in Teramo is the depositary of this National Data Base (BDN). Even if still not fully reliable, it is supposed to become 100% operative during 2008. Actually is only reliable for Sardegna (the main Italian Region for ovine production). In the near future the National Register will be a key item for sheep and goat’s sector analisys in the future.

National Breeder Association own data on sheep and goat registered on Pedigree Registers, but this not allow to know how many hybrid sheep and goat are reared in Italy. Associations (National, Regional and Provincial) have a lot of data on functional controls and on milk analysys. The main problem related at Association’s world, is the heavy “political pollution” of the decision makers inside the association, that place before political goals at real interest for the sector. Luckily this complaint is more related at the national vertices of these Association that at local offices, whose work is more concrete and useful, especially in the regions where sheep and goat sector is a key sector for local economy.

ISMEA (National Institute for Agricultural Market Services) collect data on market prices of agricultural products, with also reference at live sheep and goats and derivated products. It owns market information at production, processing and consumption level and produce market analisys on the bases of ISTAT data.

1.2 General Scenario

In order to specify the national context of Italian sheep and goat sector, it is foundamental to note that: – the role of sheep and goat sector is marginal in the economy of Italy; – the sector is focused on milk production; – meat production (light lamb) is merely the by-product of milk ewes; – goat sector is even more marginal than sheep sector; – sheep and goat production method is still extensive and poorely integrated with agricultural production: often shepherd is not a farmer (intended as agricultural entrepreneur); This characterization of Italian sheep and goat production heavely differs from the Northern Europe production panorama, but also differs from the production of others Mediterranean Region such as France and Spain, where lamb production is much more relevant than in Italy. Sheep and goat production involves around 96.000 holdings: representings 5,6% of Italian farms; using 17% of utilised agricultural area (UAA) and employing 5,5% of agricultural labour forces. Like the main part (98%) of Italian farms, typical sheep and goats herds are sole holders holdings (96% on total). Herds are mainly located in less favoures areas, where sheep and goat herd still represents the only possible economical activity. The strong bond sheep and goat sector have with territory and landscape such as the high prevalence of this herd in less favoured areas, can be confirmed by the analysis of the ratio between total agricultural area (TAA) and utilised agricultural area (UAA). While the average of Italian farms have a 71% of UAA/TAA, that’s a 29% of tare (not productive surface); sheep and goat farms have an incidence of 48% of UAA/TAA, that means that over 50% of surfaces used for sheep and goat herd are tare. During the years, and as a consequence of EU policy and CAP adaptation, Italian sheep and goat flock experimented a relevant concentration that is now going on the basis of market influence. While until 2000 the reply at the question “how many ewes are necessary to grant the shepherd revenue and survival” was “150-200 ewes”, nowadays the reply at the same question is “at least 350 ewes”. This have been the consequence of fluctuation of origin milk price in a period of increasing production costs, but also the direct effect of adaptation at new EU rules concerning hygiene and processing of agricultural products. The necessity to have hygienic structures, like buildings for milk conservation, refrigerated tank and milking machines, cheese rooms, caused: – giving up of little producers that couldn’t charge these relevant costs. In the past, a common revenue comes from the self production of cheese sold on local market, but new rules didn’t allow the shepherd to process his milk into cheese like in the past (new buildings and structures were necessary); – flock concentration: more sheep/goats was necessary in order to amortize increased costs; – new input to sheep and goat cheese industrial manufacturing and the born of cooperatives collecting member’s milk in order to sold it to industries or directly transform it into cheese. Fig. 1 - Sheep and goat flock evolution

Sheep flock evolution Goat flock evolution 12.000 180.000 1.600 100.000 160.000 1.400 90.000 10.000 80.000 140.000 1.200 8.000 120.000 70.000 1.000 60.000 100.000 6.000 800 50.000 80.000 40.000 Sheep total 600 Total of the goat population 4.000 60.000 30.000 40.000 400 Goats which have already kidded and goats mated 2.000 Ewes and ewe-lambs put to the ram 20.000 200

s 20.000

s 10.000

d Total sheep herds s

d Total goats herds s a d a d r

e 0 0 0 0 r e e h e * h * 0 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 0 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 h 0 h 0 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 . 0 0 . 0 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 n 0 0 n 0 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 0 2 2

Source: Istat *The data of 2000 is not comparable with the previous years

1.3 Economic data on sheep and goat’s meat and milk production

During last decade, sheep and goat meat production stabilized, reaching an average level of 62.000 tons/years after MTR (against an average of 72.000 tons in the period 1998-2000 and 63.000 in the period 2001-2003); while collected sheep and goat milk increased, reaching an average of 554.000 tons after MTR (against 475.000 tons in 1998-2000 and 531.000 tons in 2001-2003). Fig. 2 - Evolution of sheep and goat meat and milk

Yearly slaughtering by species Milk production (collected milk) by species 90,0 600,0 80,0 500,0 70,0 60,0 400,0 50,0 300,0 40,0 30,0 200,0 20,0 100,0 10,0 0,0 0,0 s s n 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 n 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 o o t t

0 0

0 Goat meat Sheep meat 0 Goat’s milk Ewe's milk 0 0 Source: Istat

Meat

Italian sheep’s meat production concerns mainly light lamb slaughterings, that represent about 80% on number of slaughtered animals and about 65% of sheep meat produced. The same ratio exist for the less relevant goat’s meat production, where kids’ slaughterings accounts for the 86% in number and for the 67% in death weigth on total Italian goat’s slaughterings.

Fig. 3 - Yearly sheep and goat’s slaughtering by category (000 heads slaughtered)

Yearly sheep's slaughtering by cathegory Yearly goat's slaughtering by cathegoriy 8.000 600 7.000 500 6.000 400 5.000 4.000 300

3.000 200 2.000 100 1.000 0 0 s s

d 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 d a a e e h h

0 Lambs (light) Lambs (heavy) Ewes and rams 0 0 Kids Goats and billy goats 0 0 0 Source: Istat Related at meat production, in 2001 has been approved the IGP status at “Agnello di Sardegna IGP”: light lamb reared in Sardegna; a similar production from Lazio “Abbacchio Romano IGP” is now waiting for IGP approvation.

Fig. 4 - Yearly sheep and goat’s slaughtering by category (000 tons death weight)

Yearly sheep's slaughtering by cathegory Yearly goat's slaughtering by cathegoriy 80.000 4.500 70.000 4.000 60.000 3.500 50.000 3.000 40.000 2.500 2.000 30.000 1.500 20.000 1.000 ) ) t t

h 10.000 h 500 g g i i e e

w 0 w 0

h h t t a a

e 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 e 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 d d ( (

s s

n Lambs (light) Lambs (heavy) Ewes and rams n Kids Goats and billy goats o o t t Source: Istat Sheep and goat’s meat production is heavily related to seasonality, with 2 seasonal peaks: the highest during Christmas period and the second during Easter period. Traditionally sheep and goat’s meat consumption is concentrated during these festivities. Fig. 5 - Seasonality in sheep meat production (lambs and sheep’s slaughterings, n. heads)

Effect of season in lambs' slaughtering Effect of season in ewe's slaughtering 2.000.000 100.000 1.800.000 1.600.000 80.000 2003 2004 2005 2006 2007 1.400.000 1.200.000 60.000 1.000.000 800.000 40.000 600.000 400.000 20.000 200.000 2003 2004 2005 2006 2007 0 s

s 0 d d a a

e gen feb mar apr mag giu lug ago set ott nov dic

e gen feb mar apr mag giu lug ago set ott nov dic h h Source: Istat Tab. 1 - Yearly sheep and goat slaughtering by cathegory (heads and death weight)

Number 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 000 heads Lambs (light) 5.507 5.347 5.330 5.158 5.044 5.022 4.924 5.339 5.148 5.360 Lambs (heavy) 1.087 1.063 1.105 1.030 894 708 677 653 661 605 Ewes and rams 1.058 1.005 955 810 675 617 704 620 680 605 Sheep total 7.652 7.415 7.390 6.997 6.614 6.348 6.304 6.612 6.489 6.570 Kids 318 289 312 324 395 500 346 361 302 291 Goats and billy goats 136 102 112 99 98 87 69 54 58 38 Goats total 453 391 424 423 494 587 414 415 360 329 Sheep and goat total 8.105 7.806 7.814 7.420 7.107 6.935 6.719 7.027 6.849 6.899

Weight 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 death weight (tons) Lambs (light) 35.581 34.291 35.282 34.766 36.555 36.479 35.330 38.623 36.966 38.897 Lambs (heavy) 14.372 14.234 14.146 13.541 11.412 9.191 8.692 8.374 8.240 7.492 Ewes and rams 21.618 21.250 20.166 17.057 13.679 12.724 14.057 12.368 13.383 12.511 Sheep total 71.57169.77569.59465.36561.64658.39458.08059.36458.58858.899 Kids 1.869 1.687 1.785 1.959 2.287 2.912 2.254 2.385 1.866 1.786 Goats and billy goats 2.353 1.802 2.060 1.728 1.764 1.552 1.241 1.098 1.097 753 Goats total 4.222 3.489 3.845 3.687 4.051 4.464 3.496 3.483 2.963 2.539 Sheep and goat total 75.79373.26473.43969.05165.69862.85861.57562.84761.55161.438 Fig. 6 - Sheep meat price evolution

For slaughter sheep average price (euro/kg live weight) 5,00

4,00

3,00

2,00

1,00

light lamb heavy lamb ewe 0,00 g

k Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan / o r '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 u e Source: Ismea Here’s shown sheep and goat sector balance sheet, showing recent years’ changing in sector production. Increase in 2007 meat production is due to increased lamb slaughterings (direct effect of 2006’s stock increase), higher culling of Italian sheep and increased import of live sheep for slaughter (from Spain and France) with higher yield (as heavier) than Italian ones. Tab. 2 - Sheep and goat meat supply balance sheet (thousands of ton)

1999 2000 2001 2002 2003 2004 2005 2006 2007* 2008* var. '07/06var. '08/07

a Slaughterings 73,3 69,1 65,7 62,9 61,6 62,8 61,6 61,4 63,9 57,3 4,0% -10,3%

B Gross indigenous production (B = a-c+d) 50,6 47,3 44,6 39,7 36,1 38,8 37,4 37,7 36,8 26,9 -2,5% -26,9% c Imports "live animals" 22,7 21,8 21,2 23,5 25,8 24,8 25,1 24,6 27,2 30,5 10,7% 11,8%

d Exports "live animals" 0,0 0,1 0,1 0,3 0,3 0,8 0,9 0,9 0,2 0,1 -82,0% -67,5% e Imports "meat" 23,5 25,0 28,1 25,0 25,8 24,2 28,8 31,3 27,6 30,5 -11,9% 10,7%

F Total resources (F = a+e) 96,8 94,0 93,8 87,9 87,4 87,1 90,4 92,7 91,4 87,8 -1,4% -4,0% g Exports "meat" 2,7 2,5 2,0 1,1 0,7 1,0 1,2 1,4 1,7 2,5 20,9% 44,3%

H Domestic uses (H = F-g) 94,1 91,5 91,8 86,8 86,7 86,0 89,1 91,3 89,7 85,4 -1,7% -4,9% I Consumption (I = a+e-g) 94,1 91,5 91,8 86,8 86,7 86,0 89,1 91,3 89,7 85,4 -1,7% -4,9%

L Per capita consumption (L = I/m) 1,6 1,6 1,6 1,5 1,5 1,5 1,5 1,5 1,5 1,4 -2,1% -5,2% m Population (000 inhab.) 57.680 5 7.844 56.996 57.157 5 7.605 58.175 5 8.607 58.941 59.250 5 9.427 0,5% 0,3%

N Self sufficiency rate (N = B/I)*100 54% 52% 49% 46% 42% 45% 42% 41% 41% 32% -0,8% -23,1% * forecast Source: Ismea The increased slaughtering (of Italian and foreign animals) caused a reduction of meat imports. Forecast for 2008 – whose reliability will depend on cereals market trend and land availability – shown a decrease in meat production (due to better prices for ewe’s milk and increased export for Pecorino, that made breeders to maintain and increase their flock) and an increase in imports (live animals as well as meat). In the same time, consumption will decrease because of high cost of ovine meat and low cost of others kind of meat (recover of poultry consumption). Milk

After the lamb weaning (generally at 30 days, where it takes about 11% of produced milk) the ewe begins to be milked. About 69% of the milk collected by Italian ewes is transformed into cheese by industries or cooperative organizations. Another 17% is used for in-farm cheese production to be directly sold, while the remaining part (such as 4%) is used for self consumption. Only ½ of milk produced by goats is collected by industry, as there’s an higher incidence (38%) of in- farm production of cheese to be directly sold by farmer. Both kid consumption and milk sold fresh in farm take the 6% of produced milk. Fig. 7 - Ewe’s and goat’s milk destination

Ewe's milk % destination Goat's milk destination 100% 100% 90% 90% 80% 80% 43 45 45 47 47 50 50 70% 70% 65 69 69 68 69 69 69 60% 60% 2 50% 50% 1 40% 40% 37 37 30% 30% 45 43 43 38 38 20% 23 19 19 18 17 17 17 20% 5 6 10% 2 3 3 3 10% 4 4 1 6 6 4 1 1 1 1 s 11 12 12 11 11 11 10 s 6 7 7 10 10 n 0% n 0% 6 6 o o t t

0 0

0 2000 2001 2002 2003 2004 2005 2006 0 2000 2001 2002 2003 2004 2005 2006 0 0

n n o o Consumed by lambs Self consumption Sold fresh on farm Consumed by kids Self consumption Sold fresh on farm % Sold manufactured on farm Collected by cheese industry % Sold manufactured on farm Collected by cheese industry Source: Ismea Tab. 3 - Destination of ewe’s and goat’s milk production 2000 2001 2002 2003 2004 2005 2006 Ewe's milk production (000 tons) Collected by cheese industry 448,4 485,1 486,5 496,0 519,8 488,6 500,3 Sold manufactured on farm 1,4 0,9 138,0 128,3 128,3 120,6 123,5 Sold fresh on farm 158,6 137,1 1,0 17,3 24,3 22,9 23,4 Self consumption 1,0 1,0 0,9 0,9 0,9 0,9 0,9 Consumed by lambs 77,0 81,5 82,0 82,0 82,0 77,1 72,5 Total 686,4 705,6 708,4 724,6 755,4 710,1 720,7

Goat's milk production (000 tons) Collected by cheese industry 40,6 41,2 41,8 49,0 50,0 52,0 52,5 Sold manufactured on farm 2,0 0,7 40,0 39,0 39,0 39,4 39,8 Sold fresh on farm 43,0 39,3 3,4 5,3 6,2 6,2 6,3 Self consumption 3,4 3,4 0,7 0,6 0,6 0,6 0,6 Consumed by kids 6,0 6,2 6,3 11,0 11,0 6,1 6,2 Total 95,0 90,8 92,2 104,9 106,7 104,3 105,3

Ewe's and goats' milk production (000 tons) Collected by cheese industry 489,0 526,3 528,3 545,0 569,8 540,6 552,9 Sold manufactured on farm 3,4 1,6 178,0 167,3 167,3 160,0 163,3 Sold fresh on farm 201,6 176,4 4,4 22,6 30,5 29,1 29,7 Self consumption 4,4 4,4 1,6 1,5 1,5 1,5 1,5 Consumed by lambs/kids 83,0 87,7 88,3 93,0 93,0 83,2 78,6 Total production 781,4 796,4 800,6 829,4 862,1 814,4 826,0 Source: Ismea Ewe’s milk is used for producing a lot of traditional cheese generally called “Pecorino” and strictly linked at land specificities. In 2007 on a total of 32 DOP cheese, there were 8 DOP cheese from ewe’s milk, and 8 DOP cheese form mixed milk (from cow/ewe/goat). Another milk related DOP production is the “ Romana”, made from ewe’s milk serum. The main DOP ovine cheese remain the “Pecorino Romano”, a highly export oriented product that actually needs a product innovation marketing action. Tab. 4 - Ewe's DOP cheese production (tons)

2000 2001 2002 2003 2004 2005 2006 Pecorino romano 33.65035.40732.00331.00238.13923.85524.460 Pecorino sardo 360 600 1.200 1.420 1.580 1.600 1.800 Pecorino siciliano 735 0 0 11 14 13 9 Pecorino toscano 1.664 1.666 1.877 1.343 1.880 1.869 1.965 Fiore Sardo 350 375 400 600 370 400 301 Canestrato Pugliese 62 105 60 37 126 30 61 Source: Ismea Average breeder income Due to the different typologies of sheep and goat herds existing in Italy, it is very difficult to estimate the average breeder income. Anyway, everybody working in this field can clearly affirm that shepherd’s income is one of the lowest of agricultural works and, whereas the farm can show a revenue, the shepherd’s work remain frequently unpaid. Main aspects concerning average milk ewe’s farm turnover are: – considering the payment for shepherd’s work, average income (milk + lambs + ewes no longer to be used for breeding) doesn’t cover production costs; – public subsidies are essentials for maintaining profitability (reducing total production costs, even if with great variability from a region to another); – management loss are typically covered by under-payment of shepherd’s (and his family) work. In the table below are shown the result of a recent shepherd’s income estimation published by Ismea (National Institute for Agricultural Market Services) on the bases of economic data collected by Regional Producers Association of Sardegna. This recent analysis focused on profitability of sheep and goat farm, make it clear that, without subsides, the average Italian sheep and goat farm would have no income. Tab. 5 - Turnover frame in average semi-intensive sheep rearing (280 milked ewes; feeding surface of 64ha; 187/ewes working unit)

euro/year % GSP euro/head aRevenue from milk sold 22.743 75 81 bRevenue from animas sold 7.574 25 27 c Others revenues 175 1 1 dGross seleable product (a+b+c) 30.492 100 109 eCalculated costs1 12.566 41 45 f Farm capitals' payment2 2.697 9 10 gInterest on advances3 157 1 1 hWork remuneration 17.456 57 62 i Others implicit costs (f+g+h) 20.310 67 73 l Total cost (e+i) 32.876 108 117 mPremiums and subsidies 6.553 21 23 nNet income (d-e+m) 24.479 80 87 oEntrepreneurial income (d+m-l) 4.169 14 15

1 - Inputs' cost at market prices + taxes and fees 2 - Interest on capital goods (equipment and livestock) 3 - Interest on advance capital (with a 3 months average anticipation period)

Source: Ismea on Regional Producers Association of Sardegna's data Public subsidies (CAP and rural development founds, as well as regional subsidies) have been and are foundamental for the profitability of the large part of sheep and goat herds. Furthermore, sheep and goat farm’s Income, strictly depends on milk market price that highly differs from region of origin. Fortunately ewe’s milk price generally increased in 2007, thanking to new agreements on milk price that agreeded on a price of 0,80 euro/liter in (0,775 in 2005 and 2006) and 0,78 euro/liter in Lazio and Umbria (against 0,61-0,62 during 2006. New agreement for 2008 coul reach 0,82 euro/liter). Sardegna remain the region with lowest prices (because of the big offer and difficult bonding with the rest of Italy), but increasing thanking to new strategies of selling milk at cheese factory in others italian region. Good results abroad for “Pecorino Romano” (with record price of 8 $/kg in USA against 3,5 $/kg in 2006, even if a desfavourable euro/$ exchange rate) also suggest an increase in Sardegna ewe’s milk price. In 2005 ewe’s milk in Sardegna was paid 0,56 euro/liter; now – thanking to higher demand – some producers are paid 0,78 euro/liter but there still not exist a general agreement on prices, that in the average doesn’t reach 0,65 euro/liter. Fig. 8 - Ewe’s milk price evolution

Ewe's milk average price (euro/liter) 0,85

0,80

0,75

0,70

0,65

0,60

0,55 market price (VAT included) estimated production cost 0,50 r e t

i Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan l / o r '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 u e

Source: Ismea To understand the difficult in sheep herd rentability is important to note that the average production cost for 1 litre ewe’s milk has been estimated (year 2005) in 0,70 - 0,72 euro/litre (with highest point of 0,76 euro/litre depending on use of concentrates): that’s really near the best market price. Producer’s associations states that the right market price to make nowdays rentable ewe’s rearing should be 1,00 euro/liter, and this because of recent increase (+30-35%) in production costs related at: feedstuffs, energy, renting of agricultural land. More recents analysis on production cost state that during 2008 (after the increase in rental price for forage lands) production cost will be at least 0,85 euro/liter ewe’s milk. Tab. 6 - Production costs’ estimation in an average semi-intensive sheep rearing in Sardegna

Technical information U.M. Breeding ewes heads 280 Feeding surface1 ha 64 Ewes/ working unit heads 187 per lactation milk production liters/ewe 200 average daily yeald liters/ewe 0,8 feed consumption/liter milk kg 0,8 feed consumption/ewe kg/year 97 Shepherd's costs composition euro/year % total cost euro/head Variable costs 10.494 32 38 Feedstuffs purchase 3.476 11 12 Machinery2 2.363 7 8 Various costs 2.179 7 8 Forage production 1.577 5 6 Agricultural workers wages 455 1,4 1,6 Veterinay expenses 276 0,8 1 Renting of agricultural land 168 0,5 0,6 Others costs and expenses 2.072 6,3 7,4 Building's amortization 168 0,5 0,6 Taxes and fees 1.904 5,8 6,8 Total of costs 12.566 38,2 44,9 Farm capitals' remuneration3 2.697 8,2 9,6 Interest on advances4 157 0,5 0,6 Work remuneration 17.456 53,1 62,3 Total Cost 32.876 100 117,4 Premiums and subsidies 6.553 19,9 23,4 Estimated cost for producing 1 liter milk 0,70 - 0,72 euro 1 Owned or rented surface; because of difficult to quantify, public land use is not considered 2 amortization, maintenance, fuels 3 Interest on capital goods (equipment and livestock) 4 Interest on advance capital (with a 3 months average anticipation period) Source: Ismea on Regional Producers Association of Sardegna's data Production value During 2006 sheep and goat production value at farm gate (milk + meat) totalized 673,6 million euro, that only represents 1,5% on whole agricultural value (at basic price production), and less of 5% on animal production value. After the high production value decrease observed in 2004 (-12%) and 2005 (-15%); 2006 showed a +1,5%, consequence of new milk price agreements. Estimation for 2007 expects a stability on 2006 data. Fig. 9 - Value of sheep and goat production (output at basic prices, current value, 000 euro)

Production value at basic price 900.000 800.000 700.000 600.000 500.000 Sheep & goat MILK 400.000 300.000 200.000 100.000 Sheep & goat MEAT - o 0 2 4 6 8 0 2 4 6 r 9 9 9 9 9 0 0 0 0 u 9 9 9 9 9 0 0 0 0 e 1 1 1 1 1 2 2 2 2

0 0 0

Source: Istat The value related at meat production (farm gate value for sheep and goat to slaughter) has been estimated in 225,4 million euro, while the value of sheep and goat milk production has been estimated in 448,2 million euro. It’s evident that the main part of the shepherd revenue is related at milk production, while the light lamb (that represent more than 60% of ovine meat production at farm gate) is more a cost than a revenue1, as the yield of 1 kg of feed converted in milk is double than if converted in meat. For this reason meat is economically valorized only by the others steps of the commercial chain (slaughters, retailers). Ismea estimates that Italian sheep and goat (milk + meat) industry’s turnover only accounts for the 0,9% on total agroalimentary industry income. At industrial level, the income related at sheep and goat milk industry is about 469 million euro; while sheep and goat meat income is about 452 million euro. Distribution of the profit margin between different links of the chain Throughout the distributive chain the role of producer, processor and retailer are very different between meat and cheese. In the passage between production and industry, lamb value increase by 73,5% while, in case lamb were slaughtered in farm by producers and directly sold to final consumer, its value would increase of 72%. From industry to consumer table, lamb’s value increase of an additional 32%. In 2007 on 9,00 euro paid by consumer for 1 kg of lamb meat, producer’s quota (for live lamb) accounted for 43%, meat industry quota (that assumes cost for collecting lambs, slaughter and processing it into meat) for 40% for slaughters, and distributors/retailers’ quota for 17%.

1 The high tax of new born mortality (even 20%) confirm how lamb is not considered by shepherd a valuable production Tab. 7 - Average price level troughout lamb meat and ewe's milk distributive chain (euro/kg death weight for meat; euro/kg for cheese)

2001200220032004200520062007 Var % In farm Producer processing Live light lamb1 3,78 3,62 3,68 3,70 3,79 4,10 3,90 - Slaughtered light lamb 6,52 6,24 6,34 6,38 6,53 7,07 6,73 72,5 * Ewe's milk2 0,82 0,78 0,78 0,73 0,65 0,73 0,73 - Ewe's milk3 3,60 3,45 3,45 3,20 2,85 3,17 3,18 - Industry/ Industry Production Carne fresca di agnello 5,84 5,68 6,20 6,48 6,99 7,36 7,51 73,5 Pecorino 5,95 6,20 6,01 5,41 6,08 6,01 6,81 85,6 Consumer/ Consumer Industry Carne fresca di agnello 8,25 8,39 8,45 8,86 8,77 9,26 9,00 32,4 Pecorino 8,93 9,64 9,81 9,84 9,6510,3110,50 61,8 1 Euro/kg live weight at farm gate (slaughter's yield 58%) 2 Euro/liter VAT included 3 Euro/5 kg (VAT excluded) ewe's milk, that's the quantity necessary for producing 1 kg Pecorino's cheese (processing yield 20% weight/weight) * Difference between solding of slaughtered lamb against life lamb Source: elaboration on data Ismea Milk quantity needed for producing 1kg ewe’s milk cheese (about 5 kg milk), increase its value of 85,6% from producer to cheese processing industry, becoming Pecorino cheese. Adding another +62% value this cheese arrive on consumer’s table. In 2007, on 10,50 euros paid by consumer gor 1 kg Pecorino, 30% went to producer, and 35% both to cheese industry and distributior/retailers. Fig. 10 - Incidence of production and wholesale price on final consumer price of lamb and ewe's cheese

Light lamb "Pecorino" cheese 100% 100% 20% 21% 17% 29% 32% 27% 27% 80% 33% 36% 35% 80% 39% 45% 37% 42% 60% 37% 35% 40% 25% 25% 30% 31% 60% 26% 29% 26% 34% 35% 40% , 40% , 22% 28% 46% 20% 43% 43% 42% 43% 44% 43% 20% 40% 36% 35% 32% 29% 31% 30% 0% 0% 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 Producer Industry Consumer (Distribution margin) Producer Industry Consumer (Distribution margin) Source: elaboration on data Ismea

Fig. 11 – Sheep and goat chain composition in 2005 (000 tons)

Herds (with sheep 78.595) (with goats 31.320 )

Ewe and goat's milk 695 28% In farm 72% slaughter In farm 24% processing Total available milk goat's milk import 160 705 10 26% In farm produced 76% Slaughter industry Imports live nimals cheese (1.573.389 heads) 21

Cheese industry 71% 2% 25% 2% Light lambs 370 95% dairy and milk cheese in farm dairy cooperative Heavy lambs 81 collectors sheep and goat's meat industry dairy 616 Ewes 133 5% Rams 3

Kids 19 mixed milk cheese 18% 15 ewe and goat's milk Goats 11 cheese 81 77% ewe's milk cheese % 62

5% of wich 6 Dop goat's milk cheese (36%) 4

DISTRIBUTION

50% 82% 14% 5% 36% 3%

RETAIL HORECA EXPORT

94% 6%

MD TD 53% 47% Milk Meat Source: Ismea 1.4 CAP Influence on sheep and goat sector

After CAP reform and decoupling of premiums, in Italy a lot of land previously invested at cereals, become available for forage production, and used as grassland for sheep and goat grazing. During 2005-2007, the average rental cost for 1ha of grazing surface was around 300 euro/ha, against the previous average price of 500 euro/ha. It’s relevant to note that, in the central region of Italy is common for shepherds to rent 50% of used grassland. Thanking to this high disponibility of feeding surfaces, the expected decrease in Italian flock didn’t happened (was only observed a decrease in use of grains for feeding ewes) but, due to raising cereals’ market price from august 2007, 2008 expectation are for a new rise in land rental price, with less disponibility of grazing surfaces and increase in feedstuff price. This will give new uncertainty at sheep flock evolution, making it dependants on milk/cheese market trends. Article 69 payment (5% in Italy) had no impact on sheep and goat sector, as granted an annual premium of less than 2 euro/head. More relevant, even if depending on regions, the sum of farmer’s subsides (CAP+Rural Development+Less Favoured Areas+Operative Regionals Plans), granting around 20 – 30 euro/head. It’s relevant to consider one aspect of public subsidies, related at aids for machinery and equipments (Rural development aid) that, giving contribution for up to 75% of the purchase expenses for milking machines and up to 40% for tractors, highly encouraged oversizing of agricultural machinery, without calculating the related management cost (energy, fuels). Running into indebtment for paying anticipations and management costs compromitted a lot of sheep farms. Other kinds of subsides resulted much more useful. Is the instance of premiums for animal welfare, allowing the shepherd to have useful money for taking care of his animals. The premium of 19 euro/head is calculated in order to cover the average cost for 100 kg/head of feeding stuffs yearly consumed: the first cost cutted in the event of lowering milk prices2. To earn this money shepherds have to attend specific classes on animal welfare and accept periodic controls by regional breeders association. For sheep and goat rearing, cross compliance concerns: animal health, animal welfare, soil fertility. Risks for soil fertility doesn’t come from manure but from grazing activity of little rumiants, that can cause soil desertification (as observed in Sardegna as a consequence of subsidies for organic production). A risk come from the use of common land as grazing surface. In order to maintain the «grazing right» shepherd make graze sheep and goats on it even if no necessary, causing a dangerous over grazing. The risk for animal health and welfare is due to increasing sheep number/working unit, highly increased in last years. In such way almost all of working time is dedicated at milking ewes, with few seconds/each and consequent no care for the single animal. This cause problem in welfare and health inside the farm, and not only during transport as commonly supposed and how widely ruled in UE. Especially on this aspect, cross compliance influence will strictly depend on the effectiveness of farm check, that have no to remain bureocrathic. Is relevant to remind that welfare highly impact on flock productivity, if this become clear for shepherd (stating right price for milk), welfare will not be only an additional due.

2 Farmers’ strategies

Lowering costs: here are the first challenges The main weaknesses of sheep and goat farmer’s income concerns high cost for production on respect at output value (milk and meat). These costs are related to land, labour, feeds, production losses (veterinary expenses), oversized equipment and machinery. – land availability: in some Central Italy regions up to 50% of grazing grounds used for sheep and goat rearing is not owned by the shepherd, but is rented or common land. The cost of land to rent in strictly dependant of cereals market and of agro-energy market. – labour: besides the problem of under-remuneration of shepherd work (also related at the difficulties to have generational change), has also to be considered the high incidence of not legal workers, mainly immigrants. This high incidents of immigrants worker can be explained by the increased number of sheep in the herds that - as the optimal ratio would be 200 ewes/working unit - make it necessary for the shepherd to have an aid, but as cheapest as possible. This kind of workers (that remain only “for a while” - an average of 1 year - in the herd, then going to work typically in building industry) mainly coming from Eastern Europe, do not allow to make a quality work with the flock. They don’t speak Italian, are marginalised by society, don’t care so much for ewe’s health and welfare. – Know-how: a new problem depending on disappearing of ancient shepherd and increasing incidence of precarious workers. Nowadays shepherd gained multitasking abilities but losing specific ones. For instance, being able to open a bank account or to fulfil application form for CAP subsides, but being no more able to detect sanitary problems in his ewes (also because over 250 ewes/working unit is impossible to treat them as individuals, and a lot of breeders have more than 400 ewes) or to know how many ram to put with his ewes. – forages and feeds: main feeding resource still remain use of grassland, while feeding strategies should shift towards management of forage lands in order to obtain quality forages

2 As a reply at ewe’s milk price crisis in 2003, breeders cutted the ewe’s ration but, in this way, ewe’s produced milk using their own body reserves, with a lot of sanitary disorders (quality, fertility,…) (fresh or after silage), with right nutritional value, like happens in cow management. Use of feeds (concentrates) is increasing but still in a primitive way, as grains are given whole to ewes. Use of feeds is recommended by feed-industry selling agents that, obviously, only need to sold their products; – production losses for sanitary problems: even if losses for sanitary problems are generally attributed at blue tongue and TSE problems, recent analysis quantify economic losses coming from ewe’s intra-mammary infection. Clinical and subclinical mastitis means a loss of about 7% of yearly milk production and an economic loss estimated in 12,5 euro/head (data estimated on a 500 ewe’s flock with 3% incidence of clinical mastitis and 20% incidence of subclinical mastitis). Mastitis prevention strategies, would means a real saving in production costs and an increase in shepherd income. – Selling finished products directly to consumer: is a strategy taken by little farmers in less favoured areas and have reason to be in touristy places. More difficult for bigger herds, with too many ewes to milk in order to leave enough time for processing milk. (in a flock of 450 ewes are necessary more than 4 hours twice a day for milking, there’s no time for processing milk without additional workers). Another challenge for shepherd is the adaptation at sanitary context, from hygiene and vaccination, to animal transport and identification. As seen before, hygienic requirements imposed by UE caused increasing costs, abandon by old or little producers and, consequently, flock concentration. Now the hygienic rules ask the producer to be responsible for animal health and products’ quality, meaning new management abilities for shepherd and new efforts to complain law, that will probably need an institutional aid to give technical support, also considering the bureaucratic charge (forms,…) involved in every hygienic/sanitary aspect. Damages from vaccination seems to be an old problem, as at last payment for production losses caused by blue tongue vaccination are now paid before doing vaccination and no more after long time like in the past, meaning heavy losses for producers. This simple expedient (used with success in Sardegna) allow to do vaccination without discontented as in the past. Is not the same for sheep and goat identification, as breeders oppose to auricular marks, as sheep and goats heavily damages ears during grazing activities. The best way for identification would be ruminal transponder, but is still too expensive, with an actual charge for breeders of 3-5 euro/head, that should be an economic incentive for becoming sustainable in the actual market scenario. Another way could be recovery and recycle of transponders after animals’ slaughtering (with lowering of cost at about 2 euro/head), but this system have to be better studied, in order to avoid troubles and frauds.

Adaptation to consumer demand in terms of quality and origin take different ways from meat to milk. For meat, 2 IGP (1 to be approved) have been created in the main sheep production regions, but still have no a big market share because of lack of logistic organization and marketing communication. It would be interesting to give at sheep meat the same traceability system of bovine meat as, actually, Italian consumer only see on labels “slaughtered in Italy”, assuming that the animal also born in Italy. Even in Sardinia, the main Italian sheep producer, imported lambs from Eastern Europe and then slaughtered in Italy are often labelled as “slaughtered in Sardinia”, that sounds to consumer in a very similar way at “reared in Sardinia”. A more complete labelling system is the previous statement needed for creating a local market for sheep and goat meat and to perceive quality. In milk production quality is a complex question as, in the actual market scenario: shepherd has any economic convenience in preferring quality to quantity. Ewe’s milk market still have a really “archaic” organization. Indeed, while every agricultural product purchased by processing industry is paid not only “at quantity” but also considering its processing yield (for instance , ), the same don’t happen in ewe’s milk industry where for long time the main assumption by industrial part have been “if I don’t pay for quality, I can pay all ewe’s milk as being of the worst quality, maintaining low purchase prices”. Fortunately now cooperatives and some industrial (especially in Toscana) begin to think in terms of quality of milk, even if more related at de-seasoning of production, in order to have milk also during the July September period. Looking at virtuous experience of some cheese industry, in new agreements on ewe’s milk price have been introduced additional premiums (as well as penalties for low quality milk) for de-seasoned milk, for good processing yield milk (content in casein and fat), for hygiene of milk (somatic cells and bacteria charge). Concerning de-seasoning of production, it will be easily introduced if remunerated as, in order to have production, is fundamental to have forages obtained by irrigation (from July till September) or by silage: in both cases an additional cost for breeders, actually not paid by milk price. Improving hygienic quality of milk would allow production of fresh ovine cheese, that meet consumer interest (for next years is estimated a doubling of fresh cheese consumer demand). Nowadays the high bacterial charge of ewe’s milk do not allow large production of crude milk cheese (as Fiore Sardo), and this is the main reason Sardinia’s produce much more heated milk cheese (Pecorino Romano). Some dairies are doing a good work on hygienic parameters for ewe’s milk, throughout technical assistance at producers in order to lower bacterial charge and somatic cells account.

3 Processors’/abattoirs’/commercial structures’ strategies

Italian sheep and goat meat industry is not very developed, with only one big slaughter dedicated at sheep meat production, with transnational experience and marketing organization (from slaughters to sheep meat preparations and distribution). Only 36% of Italian slaughters process ovine meat, and only 9% is specialized in ovine meat production; the large part of them have only local (provincial/regional) experience and sold carcasses to distribution. The main problems industry have to face are the seasoned and the fragmented production, as well as lack of uniformity. The main solution at these problems is to buy abroad live animals or meat (self sufficiency rate is well under 50%), also because the higher demand of sheep meat is related at Christmas, Easter but also at summer period, when Italian production is too low to satisfy demand. The problem to face domestic slaughtering exist, but is decreasing because of increased attention at sanitary problems from part of veterinary authorities. Really different the panorama for milk industry, highly export oriented but also highly diversified from little artisanal industries pursuing a “quality strategy”, selling products at traditional retailers or Ho.Re.Ca.; to big industries, selling cheese to modern distribution (hyper and supermarkets) and abroad, pursuing a “quantity strategy”. Main problem milk processors have to face are: cost for milk collection (fragmented production but to be collected even once a day), lack of product differentiation, seasoned production. The main strategy taken by medium sized processors, pursuing more quality than quantity, is technical support, in a really simple way: periodic check of milking machine, suggest to buy milk tank to store 3 day milk (highly reducing collecting costs), paying milk at quality (hygienic and yield). Bigger industries strategies are connected at marketing innovation of product (little sized or portioned cheese) or innovation of process (freezing milk to face seasonality in production, or vacuum preservation for cheese). Integration between production and processors in Italy is a solution much more attended by goat sector than by sheep.

Case Hystory: Amalattea - Galydhà Italian goat milk sector produces something like 100 million liter goat milk/year; 1/3 coming from Sardena. This lack of attention at goat sector is the direct consequence of some laws dated 1920, forbidding goats to graze on large part of

Italian land. This because goat feeding habit destroyed “macchia Mediterranea” and others kinds of thipycal Italian vegetation impeding land woodening. As a consequence, nowdays goats herd is considered a “niche” activity and fresh goat milk is only produced using UHT technology.

In this panorama borns and opearte Amalattea Group, an Italian society involved in production and distribution of UHT goat milk and goat milk products (cheese, , biscuits). Amalattea, whose President is Mr. Maurizio Sperati, owns about 40 herds of milk goats (Saanen) in Sardegna and about 20 in Lazio.

More that Amalattea hystory, is relevant to analyze the philosopy and marketing strategies of this Group, that’s the sector leader, gaining market share through innovative technologies and products. Amalattea’s approach to goat’s milk production is really new and innovating for Italian sheep and goat sector. It comes from:

- the study of consumer’s demand for natural and healty products;

- hight investments in research, communication and innovation (f.i. involvmento of medical/scientific opinion leaders, as to become testimonial for Amalattea’s products, meetings,seminars );

- high attention on milk quality (traceability and quality system).

All these investments were necessary to face the main challenges Amalattea met, that concerned:

- the lack of the culture of fresh goat milk consumption in Italy;

- the lack of goat milk production;

- the lack of quality in goat milk produced (a lot of little herds, really difficult to control and with higher milk collection costs);

- the seasonality of production (production concentrated in 6-7 months)

Recently in Amalattea Group also entered Galydhà, the second main actor of Italian goat’s milk panorama, located in

Sardegna and leader in goat’s milk manufactoring with production of goat’s milk chees, yogurt, butter and icecream.

2007 closed with a +32% in 2007 income. During 2008, Galydhà will be supposed to transform 4,5 million liter of goat’s milk, against 1,5 million liter used during 2007 (a new dairy of 2.700 m2 has been recently opened for a total investments of 5 million euro).

4 Retailers’ strategies Imported lamb cover a relevant quota of consumed meat and is generally sold by modern distribution than from butcher’s shops, that – in main producing regions - still maintain a bond with shepherds. The main strategy used to incentivate sheep and goat meat consumption is promotion using “special offer” in key commercial periods. Also lay out strategies are used for incentivating consumer interset, even if more for cheese than for meat.

5 Prospect

Production’s orientation will strictly depends on ewe’s milk market price that will be the real force that could allow the shift from archaic stock rising to modern agricultural enterprise. Liberalization’s impact should not be too heavy for Italian sheep and goat sector, because, even if Italy imports more than 50% of consumed sheep and goat meat, is highly export oriented in cheese. More relevant but still difficult to quantify, could be the impact of liberalization of cow milk quota. As the higher production could slow down ewe’s milk price. Total decoupling effect will be the market orientation of production and, as well seen from August 2007, high competition for land use with wheat/cereals and with agroenergy production.

6 Recommendations

Interviews with Italian sheep and goat sector’s expertises, have shown some possible actions to improve sector’s survival possibilities, that look at both market and rural development problems. Throughout right remuneration (and this is clearly a market problem) for milk production and, consequently, for shepherd work, a lot of problems would have solution. Higher payments for land to rent wouldn’t be problems, young people would accept to become shepherd, immigrants workers should consider to stay in the herd rather then in building industry. To reach right remuneration, it would be necessary to find an agreement between producers, cheese manufacture industry and distribution. Looking at recent events, it seems to be effective the strategies taken by Coldiretti (main Italian agricultural trade union) in Sardegna, that obtained an increase in milk price by agreements between local producers and processors located in others regions. It’s relevant to note that agreements to be effective have to be based on 3 legs: price, quality and promotion.. Even if money could solve a lot of problems, it is also necessary to work on social thematics (and this is more a rural development problem) as the shepherd figure still pay for the negative heritage, being considered ignorant, poor, not modern. It is necessary to renew the image of stock raising, but using a modern key. First is necessary to pursue social integration, then technical know-how. A first step could be an educational program to make new generation (childrens) met shepherd’s world, story, tradition but also his economic and social role, as well as his dignity. As cheese is commonly used in school refectories, and dietary educational programs are made in a lot of schools, why not to introduce shepherd in such activity?. Know-how problems (rural development): it is necessary to “take back” shepherd to the ewes and not to the contest. Nowadays he knows the best ways to fasten his work, but not how to grant his flock welfare. Contrarily at recent past, modern shepherds work on the “average flock” and no more on the single head. Thanking to the relevant impact ewe’s herd have in Sardinia, this region is now planning a project of “shepherd’s know how divulgation” throughout Television. This media allows also to reach not regulars immigrants (that could not attend courses) and villages difficult to reach; the use of images and a really practical approach will allow everybody, and immigrants in particular, to understand the lessons: “how to stop and take an ewe”; “the right way for milking ewes”, “how to work a forage land”, and so on…New EU law on hygiene of foods (giving to farmers a lot of new responsibilities) could be the incentive to begin an effective technical support on herd’s management, in order to prevent risks, and to obtain the maximum quality. Know-how topics also concerns the shift from shepherd to agricultural entrepreneur (forage management, silage production techniques,…) Reduce bureaucracy pressure (rural development + market). It’s impossible for an “average shepherd” to follow his ewes and also the forms necessary, for instance, for moving lambs to slaughterhouse. But he also have forms for identification, forms for vaccination, form for TSE eradication, and so on. Frequently he has to cover 30 km to take each form and again 30 km to give it back. This reduce work productivity. Reduce economical impact (rural development + market) of hygienic-sanitary UE policy. The action taken by Sardinia in the last blue tongue vaccination gave good results, with a simple expedient: reimburse production losses at the moment of vaccination (on the basis of expected loss) and not after long time like in the past. The same problem verified for ovine TSE eradication plan that caused a strange “ewe’s dematerialization”: no more ewe’s arrived in the slaughterhouses. This because if veterinary authorities found an ovine TSE positive ewe, all the flock of provenience had to be killed, with a long delay for reimbursement. The fear to have such a damage, lead breeders to make simply disappear culled ewes (whose market value was around 20 euro, against the value of the whole flock: 100-150 euro ewe, 500 euro ram), with no result for ovine TSE eradication and for hygienic – sanitary goals. Incentivate sheep and goat identification by ruminal transponder, to make it available for breeders at lower cost (rural development + market). Technical support (rural development + market) has to be made by technician with no “clashing interests” as, nowadays; the only technical assistance is made by feed-industry selling agents (to sold concentrates), private veterinaries (to sold drugs), machinery-industry selling agents (to sold machinery). An institutional but effective technical support would be the right item (for instance Sanitary Local Units personnel could charge of this task, as he already is between the external person that physically go in the farms in order to make sanitary checks). Now, with risk rank declassment for ovine TSE, veterinary authorities doesn’t so hardly strike shepherd’s flocks. Bibliography ASSOLATTE (2006), Industria Lattiero Casearia Italiana Rapporto 2005, Assemblea Assolatte Milano, 14 giugno 2006, Editoriale il Mondo del Latte. ASSO.NA.PA, L’allevatore di Ovini e Caprini, annate varie. ARA SARDEGNA, L’allevatore sardo, bimestrale di informazione zootecnica, annate varie. COMMISSIONE EUROPEA, HEALTH & CONSUMER PROTECTION DIRECTORATE – GENERAL (2005), Report on the monitoring and testing of ruminants for the presence of transmissible spongiform encephalopathy (TSE) in the EU in 2005. COMMISSIONE EUROPEA, Il settore delle carni nell’Unione Europea (2006/C 263/01), 2004, Direzione Generale dell’Agricoltura CORTE DEI CONTI EUROPEA, Relazione Annuale sull’Esercizio Finanziario 2005. DE LUCA G. (2004), L’allevamento della capra, Edagricole. EURO ANNUARIO CARNE 2006, ed. Pubblicità Italia. FOIS N., LIGIOS S., MOLLE G., SITIZIA M., DECANDIA M., SANNA L. (1999), Dairy Sheep Farming in Sardinian Irrigated Lowlands, Zaragoza: CIHEAM-IAMZ, 1999. p. 219-222. FOIS N., RASSU S.P.G., LIGIOS S., NUDDA A., PULINA G. (1999), La destagionalizzazione della produzione di latte ovino, L’Informatore Agrario 25, 1999. INEA, Le Politiche Agricole dell’Unione Europea, Rapporti 2000, 2001/02, 2002/03, 2004/05, Osservatorio sulle Politiche Agricole dell’Unione Europea INEA, Annuario dell’Agricoltura Italiana, annate varie. INFORMATORE ZOOTECNICO, annate varie, Il Sole 24 Ore Edagricole. INSTITUT DE L’ÉLEVAGE (2006), 2005: L’année économique ovine, Le dossier Économie del l’Élevage n. 356 avril 2006. INSTITUT DE L’ÉLEVAGE (2006), 2005: L’année économique caprine, Le dossier Économie del l’Élevage n. 355 mars 2006. INSTITUT DE L’ÉLEVAGE (2004), Réforme del la PAC et production laitière: scénarios d’évolution à l’horizon 2010-2012, Le dossier Économie del l’Élevage n. 340 novembre 2004. INSTITUT DE L’ÉLEVAGE (2003), Réforme del la PAC, Le compromis de Luxembourg du 26 juin 2003, Le dossier Économie del l’Élevage n. 329 novembre 2003. ISMEA (2006), Allevamento ovicaprino – Report economico finanziario. ISMEA (2005), I prodotti agroalimentari protetti in Italia, le tendenze della produzione e del mercato e la situazione a livello comunitario. LIGIOS S., CARTA A., BITTI P.L., TUVERI I., Description des systèmes d'élevage caprin en Sardaigne et évaluation des stratégies d'amélioration génétique, Zaragoza: CIHEAM-IAMZ, 2004. p. 97-104 MEAT AND LIVESTOCK COMMISSION, International Meat Market Review, dicembre 2005 n. 38; giugno 2006 n. 39. MILANELLO S. (2006), Destagionalizzare: difficile ma non impossibile, Il Latte ottobre 2006. NATALE A., SANNA S.R., OPPIA P., CARTA A., LIGIOS S. (1999), Economic significance of some productive traits in Sarda sheep farmng systems, FAO/CIHEAM Cooperative Research Network on Sheep and Goats. Animal Resources Sub-Network Meeting, Zaragoza, 18-20 November 1999. PASTORE E. (2005), L’allevamento voino nella montagna veneta: tradizione e innovazione. Veneto Agricoltura e Università degli Studi di Padova. 2005. RANA A. (2006), Per i formaggi ovini evoluzione all’insegna della stazionarietà, Il Latte ottobre 2006.

Web bibliography Asso.Na.Pa. – Associazione Nazionale della Pastorizia: www.assonapa.it AIA: Associazione Italiana Allevatori: http://www.aia.it/ Associazione Regionale Allevatori della Sardegna: http://www.ara.sardegna.it/ Eurostat: http://epp.eurostat.ec.europa.eu/ ISTAT: http://www.istat.it/ ISMEA: http://www.ismea.it Istituto Zooprofilattico Sperimentale dell'Abruzzo e del Molise "G. Caporale" http://www.anagit.izs.it/ Istituto Zooprofilattico Sperimentale della Lombardia ed Emilia Romagna: http://www.bs.izs.it/ Istituto Zooprofilattico Sperimentale del Piemonte, e Valle d’Aosta: http://www.izsto.it/INDEX.htm Istituto Zootecnico e Caseario per la Sardegna: http://www.sitos.regione.sardegna.it/izcs/ Ministero delle Politiche Agricole Alimentari e Forestali: http://www.politicheagricole.it/ Ministero della Salute: http://www.ministerosalute.it/ Regione Autonoma della Sardegna: http://www.regione.sardegna.it/ Unione Europea: http://europa.eu Università degli Studi di Sassari, Facoltà di Agraria, Dipartimento di Scienze Zootecniche: http://www.uniss.it/dipartimenti/dip_zootecnica/main.htm

Agryasrl

The Future of the sheep and goat meat sector in Europe An Italian perspective

Report summary Silvia Paolini

Monday 28th January 2008 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt ––

Sheep total pprrododuuccttiionon ((11//4)4) Sheep & goat flock evolution Ewes and ewe-lambs put to the ram 12.000 Goat total 180.000 Stability: +0,2% Total sheep herds Total goats herds 160.000 –The flock 10.000 •8,2 millionsheep Decrease: -4% 140.000 •89% milkingewes 8.000 120.000 •+1% (after CAP MTR) 100.000 •950.000 goats 6.000 80.000 4.000 60.000 40.000 –Sheep& 2.000 20.000 s d s a 0 0 d Goatfarms e r * e h 0 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 h 0 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 . 0 0 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 n 2 •74.880 sheepherds 0 (-7% in 10 years) Stability: +0,8% •30.960 goatherds Decrease: -5% -0,2% (-9% in 10 years) (after CAP MTR)

•Represents5,6% of Italianfarms, and use17% of nationalutilisedagriculturalarea

January08 11.. SSpecpecifiificciittiieses ooff tthehe nanatitionaonall conconttexextt ––pprroducoductitionon ((22//4)4) -- SSheeheepp&& GGoaoattffaarmsrms • Typically sole holder holdings (98% on total). • Mainly located in less favoured areas (an average of 52% of sheep & goats’farms surface is not productive land). • Sheep farmers represents 5,5% of agricultural labour force. • 80% of owners have an average age of over 45 years; but 34% is over 65 years. • 3 typical productive systems: all focused on milk production: ü Sardinian: medium extensive, an average of 280 sheep on surfaces between 30–100 ha, good presence of rearing structures, feeding system based ongrassland and integrated by grain depending on milk market price. Concerns 46% of national flock. ü Central Italy: medium extensive, an average of 200 sheep on 20 –50 ha (high incidence of rented grasslands), good presence of rearing structures, feeding system based on grassland with grain integration. Concerns 23% of national flock. ü South Italy: extensive, an average of 60 –100 sheep on 5-10 ha, feeding system based on pasture on common land and transhumance. Concerns 25% of national flock. Sheep flock: regional distribution Goat flock: regional distribution Lazio Calabria Puglia Piemonte 4% 3% 3% Others Campania 5% Others 11% Sardegna 3% Puglia 10% 24% 5% Abruzzo Sardegna 4% Campania 46% Basilicata 5% Calabria 4% Sicilia January08 Lombardia 16% 13% Toscana 6% Sicilia 7% Basilicata Lazio 10% 10% 11% 11.. SSpecpecifiificciittiieses ooff tthehe nanatitionaonall conconttexextt ––pprroducoductitionon ((33//4)4) --SSheeheepp&& GGoaoattffaarmsrms ••AAvveerrageage ffaarrmm ssizizee iiss vveerryy ddiiffffeerrenentt ffrroomm aa rregegiionon ttoo aanonottheherr,, wwiitthh bbiiggggeerr oowwnneedd ssuurrffaaccee iinn SSaarrdedeggnna.a.

üü4848%% ooff ffaarrmmss,, wwiitthh lleessss tthhaann 1010 hhaa,, rreaearrss 1414%% ooff ananiimmaalls;s; üü3737%% ooff ffaarrmmss,, wwiitthh aa ssuurrffaaccee ooff 1111--5050 haha,, rreaearrss 3939%% ooff ananiimmaalls;s; üü1010%% ooff ffaarrmmss,, wwiitthh aa ssuurrffaaccee ooff 5151--100100 haha,, rreeaarrss 2525%% ooff ananiimmaalls;s; üü55%% ooff ffaarrmmss,, wwiitthh oovveerr 100100 haha,, rreaearrss 2222%% ooff ananiimmaalls.s.

••TThehe aavveerraaggee sseemmii--iinnttenensisivvee ssheepheep hheerrdd aannnunuaall iinnccoommee ((iinncclluuddiingng prpreemmiiuummss andand ssuubbssiiddiiees)s) hahass beenbeen ccaallccuullaatteedd iinn 44..116969 eeuurroo//yyeeaarr.. IIff nono ccononssiidederriingng ssububssiiddiieess,, tthehe aavveerraaggee ItItaalliiaann ssheheeepp ffaarrmm wwoouulldd hhaavvee nono iinnccoomme.e.

••SShheeepep && ggooaatt pprroodduuccttiioonn mmeetthodhod iiss ssttiillll eexxttenensisivvee andand poopoorrllyy iinntteeggrraatteded wwiitthh agagrriiccuullttuurraall pprrooduduccttiionon:: shshepepheherrdd iiss sstiltilll nonott anan agagrriiccuullttuurraall enenttrreepprreenneeuur.r.

••TThehe sseeccttoorr iiss ffooccuusseded onon mmililkk pprroduoduccttiionon:: mmeaeatt pprroduoduccttiionon mmeerreellyybbeeiinngg aa bbyy--pprrooduducctt ooff mmililkk eewwees.s.

January08 11.. SSpecpecifiificciittiieses ooff tthehe nanatitionaonall conconttexextt ––pprroducoductitionon ((44//4)4) -- SSheeheepp&& GGoaoattpprrooduduccttiionon

•• ItItalaliianan sshheeepep && goagoatt mmeeaatt pprroodduuccttiionon iiss rreelalatteded aatt lliighghtt llaammbb//kkidid (up(up tto12o12 kkgg lilivvee wweeiigghht,t, andand aabouboutt 77 kkgg dedeaatthh wweeiighght)t),, aaccccoouunnttiningg ffoorr666%6% ooff pprrododuucceedd mmeaeat.t.

•• YYeaearrllyy ssheeheepp && ggooaatt mmeaeatt pprrooduduccttionion (62(62..000000 ttoonns)s) onlonlyy aaccccooununttss ffoorr 22%% oonn ttoottalal pprrododuucceedd rreded mmeeaat.t. •• AAllll pprroodduucceded eewwe’e’ss mmiillkk iiss pprroocceesssseedd ininttoo ccheheeessee,, ggeenenerraallllyy ccalallleded ““PPeeccoorrinoino””.. AAnn aavveerrageage ooff 550303..000000 ttoonnss ooff sshheepeep mmiillkk aarree yyeaearrllyy ccolollleecctted.ed. •• GGoaoattss’’mmiillkk iiss mmaaiinlnlyy pprroocceesssseedd ininttoo ccheheeessee,, anandd oonnllyy inin mmiininimmuumm paparrtt uusseded ffoorr huhummaanene ccoonnssuummppttionion.. EEvveerryy yyeaearr 5511..550000 ttoonnss ooff ggoaoatt mmiillkk aarree ccoolllleecctteedd..

•• TThehe rroleole ooff ssheheeepp && ggoaoatt sseeccttoorr ((wwiitthh aa vvaallueue ooff 673673,,66 mmiilllliionon euroeuro fforor mmeaeatt ++ mimillkk produproduccttiionon:: 6767%% ffrroomm mimillkk,, 3333%% ffrroomm mmeaeat)t) iiss mmaarrggiinanall inin tthehe eeccoononommyy ooff ItItalalyy,, onlonlyy aaccccounounttiningg ffoorr 11,,55%% onon ttoottaall IIttalialiaann agagrriiccululttuurree vvalaluuee aandnd ffoorr lleessss tthhaann 55%% onon anianimmalal pprroodduuccttionion vvaaluelue.. GGoaoatt sseeccttoorr iiss eevveenn mmoorree mmaarrggiinanal.l. •• TThehe aavveerrageage fflloockck ssiizzee iiss aabobouutt 106106 eewweess//heherrdd ((mmoorree tthanhan ddooublubleeddiinn SSaarrddegegnana wwiitthh 280280 eewweess//hheerrdd)),, bubutt eexxpeperrttss ssaayyss tthhaatt tthhee eeccoonnoommiiccaall ccononvvenienieenntt ssiizzee aaccttuuallallyy iiss >>350350 eewweess//heherrd.d.

January08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeamam ••TThehe iindundussttryry ––6969%% ooff totatotall eweewe’s’s mmilkilk pprroodduucceded isis ccoolllleecctedted bbyy pprroocceessssoorrss (27(27%% bbyy ccooperaooperattiivveess ––7733%% bbyy iindnduussttrriieess),), agaagaiinnsstt ononllyy 5500%% ffoorr goatgoat’s’s mmilk.ilk. ––1717%% ooff eweewe’s’s mmilkilk andand 3838%% ooff goatgoat’s’s mmilkilk iiss pprroocceesssseded onon--ffaarrm.m. ––OOnnllyy 3366%% ooff ItaItalilianan slslaughteaughterrss pprroocceessss oovviinene mmeat,eat, aanndd oonnllyy 99%% aarree sspepeciciaalilizzeded iinn iitt ((wwiitthh ononllyy 11 ssllaaughughtterer wwiitthh ttranranssnanattiioonanalleexxperperiienencce).e). ––MMaaiinn oovviinene mmeateat pprroduoduccttss aarre:e: whowholle/hae/hallff llaammbb ccaarrccaasssseess,, llaammbb ccututss andand ““aarrrroosstticiicinini”” ssmmaallll ppiieecceess ooff aduadulltt ssheepheep mmeaeatt onon tthehe ssppiitt,, ssuuiittaabbllee fforor barbebarbeccueues.s. ––EEwewe’s’s mmilkilk isis pprroocceesssseded iintonto PPeeccoorriinono,, wwiithth aa llotot ooff rregegiioonnaall sspepecciiffiicicittiieess andand 99 DDOOPP (on(on aa ttoottaall ooff 1717 DDOOPP ffrroomm eewwee andand goagoatt’’ss mmiillkk ++ 22 IIGGPP fforor lilighghtt llaammbb mmeeaatt).). ••TThehe rreettaailileersrs ––MMaarrkketet sshaharree ooff butbutccheherrss isis aarrouounndd 2828%%,, aagagaiinnsstt 5050%% ooff mmooddeerrnn ddisisttrriibutbutiion.on. BBututccheherrss’’ssttrrategategiieess aarree ffooccuusseded onon ““hhiighgh qquuaalilitty”y” ((llabeabellss,, IIGGP)P) andand ““ffaarrmm pprroodduucct”t” (bond(bond wwiitthh tterrerriittororyy//llooccaall sshepherdhepherdss).). ––IImmppoorrtteedd llaammbb ccoovveerrss aa rreelleevvantant qquuotaota ooff oovviinene mmeateat ccoonnssuummeedd iinn ItaItallyy ((sseellff ssuuffffiicciieennccyy rarattee 4141%%).). MMaaiinn ddisisttrriibutbutiivvee ssttrrategategiieess ccononcceerrnnss ““sspepeciciaall ofofffeerrss””andand llaayy oout.ut. January08 33.. 20032003 CACAPP RReefoforrmm eeffffeecctsts • Flock and number of sheep/goat farms – The expected decrease in Italian flock didn’t happen, because of: • the high availability of forage lands. Average rental price for forage lands descended from 500 euro/ha before Reform to 300 euro/ha after Reform; • the good “milk market”perspectives, with recover in Pecorino market price (and increased export in USA) and new agreements on ewe’s milk price (0,78 euro/litre against 0,56 euro/litre). – Article 69 payment (5% in Italy for 8,67 million euro) had no real impact on sheep & goat sector, as only granted an annual payment of less than 2 euro/head. – Even if depending on the Region, a more relevant aid come from the sum of farmer’s subsidies: CAP + less favoured areas + Rural Development + PEP, even granting 20-30 euro/head. • Production and trade – Reduction in land rental and feedings’cost has been the main CAP Reform’s effect on production. The main impact on meat balance has been represented by: • high availability of cheapest (and heavier than Sardabreed) live animals to slaughter coming from EU partners • increased internal production (higher lambs born and higher culling of ewes) January08 44.. WWeakeaknnessesesses aanndd ddiiffffiiccuullttiieses iinn tthhee secsecttoror • Higher production costs: increasing price for grasslands (rented also up to 50%) and feeds (cereals and agro-energy competition). • Necessity of new agreements on milk price (too low to allow quality production and sector’s growth). • Old age of breeders. • Loss of know how and specific abilities (gain of multitasking abilities; high turnover of immigrants workers; no generational turnover) with increasing production loss for sanitary problems (sub clinical mastitis, high somatic cells and bacterial charge). • Lack of forage management (silage, quality fresh forage, feed nutritional value) and sole use of grassland. • Adaptation at sanitary contest: hygiene, vaccination, animal transport, identification, in- farm processing rules, animal health and welfare. High pressure by EU hygienic requirements. • Bureaucracy: too many form to fulfil and delay in reimbursement. • Lack of origin identification for the big part of lambs producedin Italy (2 IGP, one to be approved, but no way for consumer to know if a lamb borne or was only slaughtered in Italy). January08 55.. RRececoommmmeendndaattiioonnss --uuppssttrreameam • Farming -often being the only possible economic activity in less favoured areas, is really important to find the way to improve sheep and goat sector’s survival opportunities, that depends both from market and rural development problems. – Finding an agreement between producers, processors and distributors in order to grant a right price for milk (as well as quality for industry and promotion for distribution), could solve costs problems. – Social thematic involves social integration of shepherds and education of community, in order to renew stock raising image in a modern key (e.g.: educational programs to make new generation met shepherd’s world, story, tradition but also his economic and social role). – Know how problems need to “take back”shepherd on the ewes. Technical support is necessary: Sardegna’sTV program for “shepherd’s know how divulgation”is a good idea: allowing also not legal workers to improve their knowledge and little or difficult to reach herds to attend lessons. Use of images make lessons easily comprehensible for everybody. New EU laws on hygiene of food could be the incentive to begin an effective technical support on herd’s management (to prevent risks and have maximum quality) to make shepherd become an agricultural entrepreneur. – Reduction of bureaucracy pressure: shepherd have to fulfil forms for moving lambs to slaughterhouse, forms for identification, forms for vaccination,forms for TSE eradication, … frequently having to cover wide distances (minimum 30 km) only to take and then to give back forms. – Reduction of economical impact of EU hygienic/sanitary policy. Sardegnahad good results reimbursing production losses at tJahenu aacrty o08f blue tongue vaccination instead of after long time like in the past. It’s necessary to find the way to make available for breeders identification by ruminaltransponder (incentives?). 66.. RRececoommmmeendndaattiioonnss --DDoowwnnssttrreameam • Industry and processing – Seasoned, fragmented and not uniform production both in meat andmilk. This problem could be solved by: • Import of live animals to slaughter. • Technology: freezing milk, vacuum preservation of cheese

• Technical support to breeders: make them buy milk tank to store 3 day milk (highly reducing their collecting costs), periodically checking milking machine • Agreements with producers:giving higher payments for de-seasoned milk (allowing breeder to face higher costs for grassland irrigation and for purchasing concentrates) and for quality milk (hygienic quality as well as fat and protein content, important for processing milk yield) – Product innovation (milk): • consumer requires little sized and fresh cheese more the traditional big sized seasoned Pecorino cheese. To produce fresh cheese is important to have quality milk (low bacterial charge and somatic cells), so that technical support to shepherd is fundamental • Retailing – Promotion, for modern retail (using high % of imported lamb) is the main strategy. – Labelling and bond with territory are the main strategies for traditional retail (butcher’s).

January08 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE

THE IMPORTANCE OF SHEEP BREEDING AND EXPLOITATION IN ROMANIA

The sheep breeding is a traditional activity of our country, thus allowing Romania to be ranked among the first countries in Europe concerning this species breeding and exploitation, taking into account the flock size and the production level. The integration of Romania in the EU structures and the sheep breeding, exploitation and genetic improvement changes according to the EU economic demands, can increase our country balance in the European flock structure and production. The sheep breeders are interested both in the meat and in the milk production, thus a new breed structure being developed, which is targeted mainly to the meat and milk production for the momment. Nowadays in Romania the exploitation targets in sheep breeding have been changed, and the genetic improvement programmes were modified, thus the increase of the meat and milk production levels being in top. For this purpose, Romania benefits from some reasons that allow the achievement of the strategic goals of the genetic improvement programmes, because it has both well preserved genetics adapted to the local conditions, and a large area of pastures that may contribute to a significant increase both of the meat, and of the milk production. For the moment the breeeds bred and exploited in our country have relative low meat and milk productions performances, because the flocks are exploited in small farms by private owners, having small land areas and a deficitary organization of this species breeding and exploitation. Because EU represents and will represent the main market both for the sheep carcasses, and for the light and heavy lambs raised in Romania, sustained efforts are necessary, both from breeders, and from the specialists, in order to achieve the carcasses quality standards (carcasse conformation, carcasse quality, meat quality). The sheep breeding and exploitation strategic programme in our country must ensure both the increase of the flocks size, and the productivity/animal, the productions quality, mainly for meat and milk, and an economic efficiency in their making and use. Thus, the sheep flocks genetic improvement process must go on, by aplplying some efficient programmes that allow both the goals achievement and the link of the Romanian genetics to the world one. AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE

THE SHEEP BREEDING ACTUALITIES IN ROMANIA

The official centralised data from A.N.A.R.Z. show that the ewe female flock size mapped in 2008 was of 7.649.365 heads, with a rise of 314.811, meaning 4,3% from the total, in comparison with 2007. At the country level the ewe female flock size was of over 300.000 heads in 6 counties, between 200.000 – 300.000 heads in 10 counties, between 100.000 – 200.000 heads in 20 counties and under 100.000 in 5 counties. From the entire ewe female flock size, 7.311.724 heads are bred in pure breed, meaning 95,6%, and 337.641 are mixed breeds, meaning 4,4%.

Dynamics of the mapped, stock flocks and total flocks in the Sheep Official Production Recording No Specification Period . 2005 2006 2007 2008 1 Female 6.655.674 6.910.625 7.334.554 7.649.365 flocks mapped 2 Stock flock 6.223.427 6.452.817 6.526.303 - 3 Flocks in 128.250 253.931 445.013 - OCP

Dynamics of the mapped, stock flocks and total flocks in the sheep Official Production Recording 9.000.000 7.649.365 8.000.000 7.334.554 6.526.303 7.000.000 6.910.625 6.452.817 6.000.000 6.655.674 6.223.427 5.000.000 4.000.000 3.000.000 2.000.000 445.013 1.000.000 253.931 0 128.250 Mapped female flock Stock flock Flocks in OPR

2005 2006 2007 2008

2 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE

In Romania, the most preponderent breed is Tzurkana, meaning 54,8%, from the pure bred flock, and 52,4% from the total flock, which is a very resistant breed to the harsh climate, with a milk production of 70 - 110 l, from which 40 – 70 l amilked, the ewes weight is about 45 kg, the rams weight 75 kg, natality 102 %, and it is raised mainly in the highlands. Tsigai represents 25,5 % from the pure bred flock, and 24,3% from the total flock size, the ewes weigh is about 45 kg, the rams 70 kg, the milk production is 80 – 90 l, from which 45 l amilked, natality 105 %, living mainly in the hills and plains. Merino sheep represent 9,4% of the pure bred flock and 9,0% of the total sheep flock size, being a mixed breed raised for meat and wool, with an average ewe weight of 65 kg, and 100 kg for the rams, the milk production is 60 – 80 l, natality 130 %, having the best traits for the meat production, and they are raised in the plains. Karakul means 5,6% from the pure bred flock 5,4% of the total sheep flock size, Spanca is 4,3%, from the pure bred flock and 4,1% of the total sheep flock size, and a total of 0,4% from the pure bred flock (0,3% of the total sheep flock size) is represented by other races. The mixed breeds represent in this species 4,4%.

Breed structures of the mapped sheep female flocks in 2008

4,1% 0,3% 4,4% 5,4% 9,0%

52,4%

24,3%

Tzurkana Tzigai Merino Karakul Spanc? Other breedsMixed breeds

The sheep are distributed in Romania according to the territory, the most favourable areas being those with permanent pastures. The sheep density/ha is between 0,26 - 0,71 heads. The largest sheep flocks are placed in the following areas:

3 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE - Centre: Sibiu, Mures, Brasov; - East: Timisoara, Arad; - North-East: Iasi, Botosani; - South-East: Constanta, Tulcea; - North-East: Cluj.

THE AGRICULTURAL EXPLOITATIONS IN RELATION WITH THE FLOCK SIZE ACTUALITIES IN OUR COUNTRY

In Romania, the average flock size is about 7,73 heads. By applying the specific measures in order to support the young stock sheep breeding and the young rams from the meat and milk breeds, both a significant increase of the total flocks, and an increase with 12 heads for every farm is targeted until 2008. Under these circumstances about 98 % from the total stock will undergo the eligibility conditions mentioned in the provisions of the documents signed following the EU negociations. The achievement of these goals means both that the national stock flocks will be in 2011 of an average size of 9.100.000 ewes with lambs and this corresponds to the 8.900.000 heads eligible to annual support, with an additional national sheep reserve of about 3%. The 3% represents about 270.000 heads that, together with the national solicited level, will cover the necessary support to be granted for the eligible targeted flock. Table 1 presents the centralised situation of the agricultural exploitations that owe sheep flocks, according to their legal status. The presented data emphasize that the most numerous exploitations (99,88%) belong to the private agricultural sector. Even if from their total about 91,39% have less than 20 heads, the most of them are in line with the eligibility conditions provided from the EU negociations concerning the support for the sheep breeders. Table 1 The flocks size and the legal status of the agricultural exploitations with the main activity represented by the sheep breeding

The exploitation Exploitation classification according to the flock size (head Total legal status no) Sub 20 20-49 50-99 100-199 200-499 Peste 500 Individual 584919 32444 11160 6492 3583 677 639275 agricultural exploitation

4 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE Unities with legal 205 113 103 104 111 100 736 personality, of which: Societies/agricultural 11 13 16 26 11 9 86 associations Comercial societies 58 43 44 49 73 73 340 Public 44 29 20 15 19 16 143 administration unities Co-operatist unities - - 3 1 - - 4 Other forms of 92 28 20 13 8 2 163 property Total agricultural 585124 32557 11263 6596 3694 777 640011 exploitations

Table 2 shows the sheep flocks number from the different exploitations. The most numerous flocks belong to te exploitations from the individual sector with groups of less 20 heads. In this exploitation type there are about 3,4 million heads, namely 44,3% from the national stock.

Table 2 The sheep flocks in different types of agricultural exploitations The exploitation Exploitation classification according to the flock size (head no) Total legal status Sub 20 20-49 50-99 100-199 200-499 Peste 500 Individual 3390082 905460 722756 837241 1025712 538797 7420048 agricultural exploitation Unities with legal 1757 3471 7136 14379 35491 167083 229317 personality, of which: Societies/agricultur 93 482 1076 3363 3350 6540 14904 al associations Comercial 557 1439 3023 6978 22899 140858 175754 societies Public 367 776 1492 2118 6552 16173 27478 administration unities Co-operatist - - 231 137 - - 368 unities Other forms of 740 774 1314 1783 2690 3512 10813 property Total agricultural 3391839 908931 729892 851620 1061203 705880 7649365 exploitations

5 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE Sheep flocks distribution according to exploitation size

705.880 9,0% 1.061.203 14,0%

3.391.839 44,0%

851.620 11,0%

729.892 10,0% 908.931 12,0%

under 20 heads 20 - 49 heads 50 - 99 heads 100 - 199 heads 200 - 499 heads over 500 heads

The types of sheep breeding farms are different from area to area, such as: - In the North-East there are mainly small farms – under 20 heads; - In the East there are mainly average farms – of 20-200 heads; - In the South-West there are mainly farms of under 5000 heads; - In the central area ½ of the farms have under 50 heads, and ½ have over 200 heads. Two counties are traditional for the sheep breeding: Sibiu – with over 0,5 million sheep; two counties – Constanta, Tulcea – have a relative homogene flock distribution – 1/3 small flocks, 1/3 medium flocks, 1/3 large flocks. The sheep stock from Romania is represented generally by mixed breeds (with productions of meat-milk-wool). In the past the wool production was the most important, so that efforts were done in order to develop the Merino breed, thus appearing the Palas Merino and the Transylvanian one. Nowadays a decrease can be noticed, due to the low interest in wool, so that only 8-10% from the Romanian dominant Merino sheep mai be found, mainly in the East part of the country. The most sheep belong to the rustic breeds, mainly Tsigai and Tzurkana, in about equal flocks: Tsigai in the hills and plains, Tzurkana in

6 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE the highlands, characterized by difficult access, but both breeds can be found in some areas in the plains as well. These breeds are raised for mixed purposes – meat, milk, wool. The genetic improvement progress is due to the production economic value: Tsigai: – meat 40%; – milk 50%; – wool 5%; – prolificity 5%.

Tzurkana: - meat 20%; - milk 68%; - wool 5%; - prolificity 7%.

The sheep are raised for milk, meat and wool productions. The farms specialized on one of these productions are extremely rare. In 2005 the farms with less than 20 heads represented 1/3 from the total flocks, the average farms, with 20-200 heads represented about ¼ of the total, and 43% of these flocks belonged to the large farms. According to the size of the sheep flocks, there can be mentioned: - small farms, in a total of 585.124, mainly in the highlands from Transylvania, with flocks of less than 20 heads; - average farms, in a total of 50.416, with about 20-200 heads; - large farms, in a total of 4.471, with over 200 heads. Concerning the technical-economical purposes, the sheep breeding activity is more specialised than the cattle one. Half of the flocks belong to farms having both sheep and goats, in a total of 225.000, on an area of 2,6 million ha, the remaining ones being those of “polyvalent breeding with a pastoral purpose”.

Romania has strong reasons in developing the sheep breeding: - the flock size is ranked 3-4 in Europe; - there are good genetics, concerning the local conditions adaptability; - developed scientific research and a good conservation of the genetics; - large pasture areas (5 million ha);

Romania has an agricultural area of 14.700.000 ha, ranked 6 in Europe, with 4.900.000 ha pastures, ranked 7 in Europe, these meaning an exceptional biomass source, which is not yet completely used in the zootechnical sector, and 6.800.000 ha forests.

7 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE An important natural food resource for our country is represented by pastures, which can be exploited by grazing during the vegetation period, or as forage such as hay or silage during the stabulation one. The socio-economic changes that came along with the democracy after 1990, had negative influences upon the pastures maintainance and exploitation, these being a condition on continuous degradation due either to the wrong valorification (grazing), or to the desertion of large pasture areas in the highlands. The consequences were seen in the low pasture productivity of about 5-7 t/ha hay that allows a small number of animals between 0,2-0,5 UVM/ha, a low economic efficiency and high production losses (meat, milk, wool), with the additional taking out from the productive circuitry of some areas. According to the O.M. no. 226/2003, the activity of culturing pastures was reconsidered, the increase of the production level and pasture use representing an activity of national interest that allows the zootechny development and thus the improvement of our people living standards. By this order the Strategy concerning the organization of the activity for pasture improvement and exploitation at national level on average and long term was approved, that contains some technical and organisational measures in order to improve the pastures, and the responsabilities involving all the interested factors in the pastures valorification and forage producing with high economical efficiency, as well. Pasture areas/landforms Of which: Specification UM Total plains hills highlands Total/country thousa 4.926,2 1.091,3 2.590,4 1.244,5 ndd ha % 100,0 22,2 52,5 25,3

The rational and efficient use of the natural resources implies an organisational an exploitation strategy, with the following goals: ♦ establishing the size and production potential; ♦ establishing the structure and distribution/ landforms; ♦ the pastures grouping according to the limitative factors of the greenmass production; ♦ the use of the native species adapted to the pedo-climatic conditions; ♦ the long-term cointeresation of the breeders by leasing or other forms (up to owning) of the common village lands and alpine pastures;

8 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE ♦ establishing of the technical measures necessary for the pastures improvement; ♦ establishing the measures and actions for the pastures rational exploitation; ♦ the apply of new ecological technologies of biomass maintaining and conservation; ♦ the pasture use in order to obtain ecological products; ♦ organising the sheep flocks transhumance.

The pastures size and distribution / land forms 6.000.000 4.926.200 5.000.000

4.000.000

3.000.000 2.590.400

2.000.000 1.091.300 1.244.500 1.000.000 100% 22,2% 52,5% 25,3% 0 Total pastures Plaius Hills Highlands

ha %

Pasture and grasslands a reas dynamics (thousands hectars)

3.441,70 3322,8 3424,4 3424,0 3355,0 3346,9 3364,0

1512,0 1507,1 1510,0 1513,6 1490,4 1498,4 1514,7

1999 2000 2001 2002 2003 2004 2005

Pastures Grasslands

9 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE

PASTURES USE STRUCTURE DYNAMICS (thousands hectars)

3295,8 3285,7 3346,9 3197,7 3197 3132,8

2324,1

1808,8 1514

1078,6

244,00 237,5 231,2 125,6 138,3 157,9 1998 1999 2000 2001 2002 2003 2004 2005

ESTATE PRIVATE

GRASSLANDS USE STRUCTURE DYNAMICS (thousands hectars)

1469,1 1470,8 1479,2 1456,4 1498,4 1482,3 1409,7 1443,9

93,7 68,1 38 39,2 34,4 34,0 32,3 32,4

1998 1999 2000 2001 2002 2003 2004 2005

ESTATE PRIVATE

- average to high breed diversity (taking into account mixed breeds with breeds from abroad); - still cheap and insufficient labor; - traditional areas of breeding and production (ex: Bran-Moeciu, Sibiu, Covasna, Dobrogea, Oltenia – Vaideeni, Novaci, Banat, Arad, Hunedoara – Sasciori, Hateg, Bistrita, Zalau or Botosani – for skins and pelts); - a good sanitary-veterinary status – the lack of the major diseases. The sanitary-veterinary status in sheep is under control for the moment. An important gain of the sheep breeding in Romania is represented

10 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE by the flock sanitary-veterinary status. A huge progress has been achieved since ‘90: - brucellosis lacks officially, at least the human transmissible form (B. melitensis); there are only occurrences of B. ovis, a less dangerous form; - Bluetongue – lacks as well; - Paratuberculosis is still present, and rabies as well in the Carpatic Arch area; - tuberculination is used in prophylaxis and serologic analyses for BSE are taken systematically; - the only real problem is that the private breeders have not understood yet the necessity of these tests.

There are some weak points as well in the sheep breeding, but which can be corrected, such as: - the genetic quality of the national populations which is low according to the productions levels; - the lack of the specialised breeds; - the unproportional farm size (very large farms – with over 1000 heads, average farms – under 200 heads and small farms - under 20 heads). - low quality nutrition; - extensive breeding system, almost permanent grazing from spring till late autumn, even in winter from the pastures in ponds, plains and valleys; - a lot of small breeders with small areas of private land; - the low meat consumption of the national population that does not encourage the increase of the productivity for the internal market; - insufficient slaughter houses and slaughter points allow the marketing of live animals at low prices, meaning low incomes for the breeders; - the lack of the carcasse classification system does not stimulate competition for high class carcasses and slows the genetic improvement with meat breeds; - the poor mechanization of the dairy farms; - the decrease of the number of dairy factories; - the decrease almost to maximum of the gain from dairy products, the only alternative being the traditional production; - the decrease of the number of wool processing factories (there are traditional manufacture areas); - the lack of skin and pelts processing plants; - poor marketing organisation; - minimal mechanization, the equipments being still expensive; - the sheep owners are still considered as owning rentals, without accessing investments targeting the productivity increase and thus the decrease of the production costs;

11 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE - there is a harsh climate mainly in the highlands which are isolated and far of the communication axes; - there are problems concerning the drinking water, mainly in the South, thus difficulties in meeting the sanitary-veterinary standards being encountered; - the milk market is different from year to year and from season to season.

There are beginnings in order to make the sheep productions competitive. For instance, Marpod Dairy Farm – placed on Vulpar Valley, at 20 km from Sibiu, where can be found 50 sheep farms with flocks of about 100-1000 heads, was created in order to sell the milk and dairy products, thus helping the breeders. The ASI-Natura Society – intended to form a group of producers, and has already joined 50 breeders under an annual contract with the dairy plant. The main problems encountered in the development of sheep breeding are due to the administrative part – the access in the area is difficult, the prices for exploitations are high, such as the ones for the buildings. There is a constant aim to increase the work productivity provided that the sanitary-veterinary standards are respected – projects for investments in mechanization systems and refrigeration tanks.

The main problem is the genetic improvement – the rustic breeds are well adapted but have low productivity; little support is offered in importing the genetic material from specialized breeds. In Dobrogea, at 50 km far of Constanta, towards Tulcea, a dairy farm was built on 3000 ha area, where 1000 sheep are raised in intensive system, very rarely adopted in Romania. The average performance is important, aiming the meat production (3 lambing/year). A ewe has an average of 1,5 kg lamb/year, the replacement is of 200 ewes/year (25 rams); 1300 lambs/year are sold at the market, at 27, 28 kg live animals. The production is sold mainly in Greece, Italy and Bulgaria, during Easter. For the remaining production, there is an internal market, mainly in Bucharest, at a price of 6RON/kg alive in 2006 (about 3, 4 E/kg) with an average over the one/country. There is a project of a rapid onset and development of an agreed slaughter house, using SAPARD funding. There are chances to form a production co-operative in the Zalau area, with a mixed Romanian-Norvegian co-operation.

12 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE

TOTAL MEAT PRODUCTION / LIVE ANIMALS MII TONE SHEEP AND GOATS

2007* 120

2006 104

2005 114

2004 166

2003 135

* ESTIMATD

AVERAGE WEIGHT AT SLANGHTER FOR YOUNG ANIMALS KG

2007* 20

2006 18

2005 19

2004 28

2003 23 * ESTIMAT AVERAGE LAMB MEAT PRICE DYNAMICS

LEI/KG

5,8 5,5 5,6 4,8 4,5

2003 2004 2005 2006 2007

13 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE The genetic improvement is based on the quantitative selection in order to maintain the production and incomes of the private breeders, mainly from the rustic breeds. The average performance is difficult to be established; evaluations are made by ANARZ, the data concerning only the flocks in control, thus being disparate: Tsigai – 115 l milk, daily average gain at 150 days of 200g, 105% prolificity, Tzurkana – 125 l milk, daily average gain at 150 days of 180 g, 103% prolificity.

These evaluations data will increase in the future, as long as the breeders associations will take out the Official Productions Recording services.

IMPROVEMENT AND EXPLOITATION GOALS

MEAT, MILK, WOOL MILK, MEAT, WOOL PELTS AND MILK

MERINO SHEEP TZIGAI AND TZURK ANA SHEEP KARAKUL SHEEP

14 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE

The sheep breeding and exploitation goals

- increasing in efficiency of the sheep breeding sector by targeting their exploitation towards meat and milk production; - increasing of the sheep flock at the national potential level established by the pastures total area; - long-term mutual interest of the breeders by land leasing or other forms (up to owning) of common village lands, pastures or alpine grasslands; - stimulating the associations or exploitations organization in order to improve the young sheep breeding and fattening aiming to provide meat for the internal and external market; - increasing the internal meat consumption/inhabitant; - supporting the new slaughter houses founding and organization, and introducing of new equipments in the old ones, according to the EU requirements and standards; - increasing the breeders incomes by marketing their productions; - modifying the prioritary aims in milk-meat productions; - the sheep genetic improvement in order to increase the milk and meat production, and their quality, using the artificial insemination and the improving stock rams, and the extinct of the official productions recording, and breeding animals testing for meat and milk productions; - intensive breeding by natural mating using authorised stock rams and using larger flocks for artificial insemination or other new biotechnologies, mainly embryo transfer; - import of breeding sheep (male and female), young sheep (male and female), and frozen semen, mainly from breeds with high potential for milk and meat production. Thus, there will be used methods like selection for milk and meat production, and mixed breeds and lines with high productive potential, according to the market demands and following the West European tendencies; - founding of new pilot centers for sheep breeding, genetic improvement and spreading; - founding of new pilot centers for producing and spreading of ram semen; - concerning the biologic efficiency for sheep breeding and exploitation, mainly for meat production, the people demands will be taken into account as being mailny influenced by the breeding traits value. Thus, the sheep breeding can be achieved by using:

15 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE - artificial puberty and heat inducing in the young ewes, which allow the early use of the young ewes in breeding; - lambing intensification, rhytmical obtaining of litters using a decreased lambing interval; - seasonal grouping of lambing acording to the market demands; - aplying of the sheep carcasses classification system, EUROP system, according to the European standard in meeting the correlation of the price- quality for meat; - training of the workers in the applying of sheep carcasse classification; - training and specialisation of sheep breeders towards the meat and milk production increasing; - specialization of the insemination operators and the breeding process organisation; - conservation and support of the sheep genetics; - according to ANSVSA, in our country there are 22 county laboratories, and the National Refference Laboratory from IDSA, well equipped in order to perform the specific laboratory tests for BSE, thus providing the necessary surveillance for scrapie; - the surveillance measures concerning this disease are provided and achieved according to the provisions of the Programme of the surveillance, prevention and control of animal disease actions, concerning the human transmissible disease and the environment protection.

16 AGENŢIA NAŢIONALĂ PENTRU AMELIORARE ŞI REPRODUCŢIE ÎN ZOOTEHNIE

SHEEP GENETIC IMPROVEMENT

Breeding rams obtaining and

testing for the replacement of OP R sheep flocks breeding the replaced rams in the elite and reproduction farms

OPR se rvices leasing to private OBJECTIVES: organis ations - breed structure modification by increasing the meat and milk breeds and decreasing the wood breeds percentage;

- milk production increasing up to 90 – 125 kg, according to the breed; - average daily weight gain increasing up to 180-240g/day; - valuable wood breeds conservation;

- creating of BSE resistant flocks by ADN genotyping.

Breeding rams obtaining and testing for the replacement of the replaced rams in the production farms

Improvement of breeders professional associations

17 Alicia Langreo. Saborá, Spain

Spain’s sheep report

1. - Census evolution

Ovine census in 2005 showed 22.749.000 heads, a 5,4% decrease in relation to 1990. Census grew between 1990 and 1993, when a decrease started, which reached the lowest point in 1995. In the following two years there was an increase, then a decrease to grow again in 2000 and 2001, and then a new decrease in the following 3 years. Highest point was in 1997, 24.857.000 heads.

Sheep Census (thousand of heads) Year Nº of Animals Year Nº of Animals 1990 24037 1998 24190 1991 24625 1999 23695 1992 24615 2000 24400 1993 23872 2001 24289 1994 23058 2002 23813 1995 21323 2003 23485 1996 23982 2004 22672 1997 24857 2005 22749 Source: MAPA. Livestock Inquiry and Agribusiness Statistics Yearbook

Census structure according to kind of animals (thousand animals) Year Total Lambs Older than 12 months Studs ewes 1990 24037 4603 455 18979 1995 21323 3687 419 17216 2000 24927 3971 542 20414 2005 22749 3974 534 18241 Source MAPA

In 1990, lambs’ census in relation to ewes older than 12 months was 0, 24 and currently is 0, 25, but a few years ago this indicator was worse. This phenomenon, that decreases Spanish sheep productivity, has been tied to bonus.

According to FEAGAS in a controlled census of 650.000 sheep, the most populous breed was “Merina” (24,9%), followed by “Rasa Aragonesa” (15,4%), “Manchega” (11,7%), “Segureña” (11%), “Castellana” (9,2%), “Assaf” (6,6%) and “Churra” (5,9%). Alicia Langreo. Saborá, Spain

Spanish native breeds keep their preponderance with the only addition of Assaf for milk production. Sheep is present all over Spanish territory: more than 86 % of the municipalities got this type of cattle. Its presence in Less Favoured Areas is very high, 85 % of sheep census is located in these areas. More than 40 % of census belongs to farms that cash the compensatory allowance1. Requirements to receive compensatory allowance make quite frequently difficult for sheep farmers to get it.

Sheep Census according to Regions (thousand animals) 1992 1995 1998 2000 2001 2002 2003 2004 2005 Galicia 206 n.a. 309 313 325 242 330 330 330 P. de Asturias 57 90 101 101 98 83 87 74 64 Cantabria 75 n.a. 137 76 53 67 68 74 74 Basque Country 309 337 368 370 373 366 363 357 354 Navarre 797 896 878 916 876 853 857 881 754 La Rioja 248 209 268 250 248 238 209 170 198 Aragon 3750 2593 3166 3184 3590 3289 2861 2755 3145 Catalonia 1124 1238 1160 1174 1099 1044 1108 895 947 Baleares 296 300 423 358 343 331 347 347 336 Castilla & León 5809 4481 5496 4884 5172 4860 4851 4343 4042 Madrid 167 179 196 191 165 166 156 110 120 Castilla La Mancha 3492 3206 3196 3476 3616 3660 3367 3376 3431 C. Valenciana 610 502 562 635 523 488 515 491 482 Murcia 518 550 580 912 708 605 613 644 666 Extremadura 3973 3865 3840 4513 4381 4377 4424 4575 4546 Andalusia 3144 2605 3485 2989 2666 3076 3260 3246 3147 Canary Islands 40 21 26 57 60 68 68 74 114 Spain 24615 21323 24190 24400 24300 23813 23485 22672 22749 Source: MAPA

More than 80% of sheep is concentrated in five Regions: Extremadura (20%), Castilla & León (17,7%), Castilla La Mancha (15,1%), Andalusia (13,4%) and Aragon (13,8%). Census, during the last 15 years, has grown in Extremadura and fallen in all the other cattle regions.

In 2005 milk sheep meant 19% of the ewe that gave birth, less than in 1992 (23,3%). Milk sheep census is concentrated in few Regions: only between Castilla & León (almost 45% of all Spanish milk ewe) and Castilla La Mancha (more than 28%) add up to more than 70%, also Extremadura (9, 82%), Basque Country (5,24%), Navarre (4,9%) and Aragon (3,22%) stand out.

1 Data comes from Compensating Indemnity Evaluation carried out by Saborá for MAPA in collaboration with ETSIA-UPM. Alicia Langreo. Saborá, Spain

Animals census analysis according to types Ewe for life Never gave birth Gave birth Total YEAR Total Lambs Studs Non Covered Covered1st Milk Non milk 1992 24615285 4627839 479658 19507788 1172577 1334602 3219761 13780848 1996 23981987 3826258 469413 19686316 1479687 1775358 3191178 13240093 2000 24399645 3873295 532465 19993885 1164389 1524712 3105753 14199031 2005 22.749.483 3.974.002 534.462 18.241.018 1.165.014 1.475.870 2.491.257 13.108.877 Source: MAPA

Lambs’ distribution shows important differences due to concentration of last fattening steps in areas with more available slaughter houses

Region’s Share of sheep census. 2005 Aragon 18,95% Catalonia 7,07% Castilla & León 12,28% Castilla la Mancha 13,81% Valencia 2,32% Murcia 3,02% Extremadura 22,80% Andalusia 13,49%

2. - Meat production

Sheep meat production (2005) reached 224.000 Tm. due to the slaughtering of 19.391.000 heads. In relation to 1990, it increased a little bit over 3%, being 2002 the year with the highest production (236.983 tonnes). Share of sheep meat in overall meat production went down from 6 % to a little bit more than 4 % since 1990.

One fundamental feature of sheep meat production is slaughter’s seasonality, main reason of price’s oscillations, which make difficult consumption’s increase and stabilization.

Alicia Langreo. Saborá, Spain

Sheep slaughtering satcionality average 2002-2006 (tonnes)

40000

35000

30000

25000

20000

15000

10000

5000

0

l t r r r r ry ry h ri y e ly s e e e e a a rc p a n u u b b u u a M u J g b b n r A J u m to m m a b M A te c e e J e p O v c F e o e S N D

Main slaughtering volume is located in Castilla & Leon, followed by Catalonia and Aragon. Castilla Mancha’s and specially Extremadura and Andalusia’s limited meat production stands out, less than 2 % of the overall national production, in spite of their important census.

Meat production share (2004)

Castilla y León Cataluña 16,7% Aragón

47,7% 10,3% C. Valenciana Castilla La Mancha Madrid

9,7% Resto 2,3% 7,5% 5,8%

Alicia Langreo. Saborá, Spain

Between 1990 and 2005, sheep slaughter average weights have fluctuated from 11,8 Kg slit to 12,8 Kg in young lambs and 6,5 and 7 Kg slit in suckling lambs, but a trend is not clear.

Differences of slaughter weights among Regions are huge: Castilla & Leon shows the lowest slit weight, 8,4 Kg., smaller than that of 1990, due to the high slaughtering of suckling lambs, being much higher in all the others production areas (11,4 kg in Castilla La Mancha, 12 kg in Aragon, 12,1 in Extremadura and 12,4 kg in Andalusia).

Young lambs mean the main share of sheep meat produced in Spain, around 75%, while suckling lambs mean 16% and older sheep 9%. Since 1990 suckling lambs’ share has increased 5 points and there was a slight decrease of older sheep. Currently almost 25% are slaughtered as suckling, 70% as young and a little bit over 5 % as older sheep.

Slaughtering of suckling is concentrated in Castilla & Leon (54 %), followed by Castilla La Mancha (9, 5%) and Navarre (6%). From 1990 to 2005 slaughtering of suckling lambs increased up to over 70% in Spain, near 100% in Castilla & León and well over 100% in Aragon, Catalonia, Castilla La Mancha, Comunidad Valenciana, and Extremadura and in a minor scale in Andalusia and Navarre.

3. - Foreign trade

Meat Foreign trade

Since the final years of the 20th Century nineties a positive balance of Spanish sheep meat trade has been consolidated due to an exports’ increase, that has multiplied by 4 in a 15 years period.

Sheep and goats’ meat foreign trade (tonnes) Year Imports Exports Trade balance 1990 20.154 2.814 -17.340 1991 18.446 5.487 -12.959 1992 21.009 3.977 -17.032 1993 14.905 4.993 -9.912 1994 19.437 4.804 -14.633 1995 17.448 7.732 -9.716 1996 13.064 12.917 -147 1997 12.393 16.184 3.791 Alicia Langreo. Saborá, Spain

1998 9.926 15.822 5.896 1999 12.397 17.786 5.389 2000 11.392 18.036 6.645 2001 9.520 21.585 12.065 2002 10.888 23.495 12.607 2003 14.681 21.546 6.865 2004 10.381 20.420 10.039 2005 13.703 19.513 5.810 Source;. Agencia Estatal de Administración Tributaria. Spain’s Foreign Trade Statistics

Imports and exports behave in a different way: imports are made mainly of frozen meat while two thirds of exports are fresh meat, with a higher price. Frozen meat’s imports are aimed to cheap markets, basically HORECA, while fresh imports are due to market segments that look for a bigger animal that the one produced in Spain. Between 1991 and 1995, share of exports of frozen meat were slightly over 60% and between 2000 and 2005 around 32%, made up mainly by ewe. Imports of frozen meat come from Third Countries, although share of imports of refrigerated meat from New Zeeland is increasing.

Sheep meat foreign trade Tonnes. Year Imports Exports Fresh Frozen Total Fresh Frozen Total 1991 6159 12078 18237 2856 2593 5449 1992 9703 11127 20830 1577 2355 3952 1993 7903 6850 14752 1424 3429 4923 1994 10943 8008 17617 1703 3055 4743 1995 10556 6193 16072 2765 4895 7871 1996 5094 6325 11419 6899 5891 12790 1997 3484 8737 12221 10786 5311 16097 1998 2920 7265 10185 11235 5709 16944 1999 4143 7610 11753 12131 5513 17644 2000 2271 8523 10794 10953 5868 16821 2001 659 8629 9288 15111 5995 21106 2002 1554 8956 10510 17320 5723 23043 2003 5044 9103 14018 14122 6826 20551 2004 1062 8574 9636 11978 8001 19793 2005 1705 12110 13815 11225 8277 19502 Source: Customs

Sheep meat imports, in a broad stroke, come from a narrow number of countries: Less of 30% from inside European Union, around 30% from Argentina and another 30% from New Zeeland. Imports cause a problem to Spanish production, due to smaller production costs in case of third countries and bigger existing subsidies in some Alicia Langreo. Saborá, Spain

European countries of origin, producing a competitive disadvantage for Spanish production. Exports go almost exclusively to other European Union countries, specially to France and Italy, Portugal and United Kingdom Live animals foreign trade Live animals trade balance shows a deficit of around 300.000 animals (years 2003- 2005): imports reach almost 800.000 animals and exports around 500.000. Live animals trade takes place almost entirely with member countries of European Union. Exports of Spanish sheep are made of animals for slaughtering that mainly go to the South of France, Greece, Italy, part of which is sent from there to Greece, and to Portugal. Imports are made mainly of young animals that go through fattening before slaughtering. Its volume means between 2-3% of the animals slaughtered in Spain. Live animals foreign trade. Sheep. Number of heads 2005 2006 EU Third Total EU Third Total Countries Countries Exports Breeding 57.747 5.350 63.097 49.708 7.630 57.338 Rest of animals 333.996 647 334643 472964 3152 476.116 TOTAL 391.743 5997 397.740 522.672 10.782 533.454 Imports Breeding 2.068 0 2.068 1.222 0 1.222 Rest of animals 438.470 8.653 447.123 394.216 1.240 395.456 TOTAL 440.538 8.653 449.191 395.438 1.240 396.678 Source: MAPA

4. - Consumption2

In the period 1990-2005, sheep and goat meat’s consumption has fallen from 151.390.000 Kg till 137.650.000 Kg. The deepest fall was detected between 1994 and 1999, and then went up. In those years, total consumption changed between a maximum of 165.900.000 and a minimum of 124.070.000 kg. Between 2000 and 2005, total consumption grew 5,84%, with a peak in 2002 and a slow fall since then.

Till 1993, sheep consumption per capita remained around 4 Kg, then began a show fall till 3,2 Kg per person and year (2005), what means a decrease around 10-15%, according to yearly fluctuations.

2 This chapter has been elaborated according to data from MAPA Consumption Panel Alicia Langreo. Saborá, Spain

In sheep and goat, share of HORECA channels is 15,5%. Its share went up, average was 12,3 % during first half of nineties, and almost 17 % from 2001 to 2005.

Sheep and goat consumption’s evolution. Bought quantity. (Million Kg) Meat Year Homes HORECA Institutions Total Per capita (Kg) consumption per capita 1990 133,95 15,31 2,14 151,39 3,8 66,2 1991 140,20 19,79 1,95 161,94 4,1 68,9 1992 145,75 18,18 1,96 165,90 4,2 69,2 1993 135,31 17 1,47 153,78 3,9 67,0 1994 130,74 17,31 1,38 149,43 3,8 64,1 1995 116,12 18,55 1,48 136,14 3,5 61,2 1996 103,18 19,23 1,66 124,07 3,2 63,1 1997 105,36 21,77 2,32 129,46 3,3 65,9 1998 104,56 23,69 1,22 129,46 3,2 65,3 1999 98,40 22,76 1,04 122,20 3,1 64,9 2000 110,99 23,91 1,95 136,85 3,4 65,5 2001 119,38 23,75 1,57 144,70 3,6 66,1 2002 126,92 22,98 1,99 151,89 3,7 68,3 2003 120,64 22,84 2,09 145,57 3,6 67,6 2004 117,96 23,20 2,85 144,01 3,4 66,3 2005 116,40 19,48 1,77 137,65 3,22 65,9 Source: MAPA.Food in Spain.

HORECA channels’ establishments buy meat, around 60,9 % through specialised dealers, followed by 13 % through meat wholesalers, 11,2 % through traditional shops and 2,5 % through supermarkets. Sheep and goat’s meat consumption differs among Regions, going from 6, 4 Kg per person and year in Aragon till less than 0,5 in the Canary Islands and 0,8 en Andalusia.

Consumption per capita according to Regions at homes (Kg) 2005 Regions Consumption Regions Consumption Andalusia 0,8 Kg Galicia 3,3 Kg Aragon 6,4 Kg. Madrid 2,9 Kg Asturias 3,1 Kg Murcia 2,7 Kg I. Baleares 1,9 Kg. Navarre 5,3 Kg. Canary Islands 0,5 Kg Basque Country 2,3 Kg Cantabria 2,9 Kg La Rioja 4,8 kg Castilla la Mancha 4 kg C. Valenciana 2,5 Kg. Castilla & León 4,6 Kg. Catalonia 3,5 Kg SPAIN 2,7 Kg Extremadura 2,3 Kg Metropolitan areas 2,5 Kg.

Prices paid for sheep meat at homes are the highest ones among meat’s prices and are 40% above the average meat price. This difference grew since the mid nineties. In 20033 the average price per bought unit at homes was 7,42 €/Kg face to 5,45 € /Kg for the total of meats; prices were sensible higher in metropolitan areas and showed differences

3 Latest year MAPA issued this information. Alicia Langreo. Saborá, Spain among Regions: from 8,18 € in Navarre and 8,16 € in Catalonia, in the more expensive side till 6,25 € in Extremadura and 7,57 € in Castilla & León.

One of the main problems of sheep consumption is the high seasonality, which influences the low consumption registered levels compared to other meats. This seasonality in consumption makes seasonality in prices with deep influences in the production chain.

Sheep and goat's consumption seasonality (M Kg) 2004-2006

20,00 18,00 16,00 14,00 12,00 10,00 8,00 6,00 4,00 2,00 0,00

l o o o ri o io io to e e re e r r z b y n l s r r r e re r a u u b b b b n b a A J J o m tu m m E M M g e c e e e A ti i i F p O v ic e o D S N

Average prices of sheep and goat's consumed meat €/kg. 2004-2006

10,00 9,50 9,00 8,50 8,00 7,50 7,00

l ro ro o ri o io io to re re re re e e rz b y n l s b b b n r a A a u Ju o u b E b M M J g m ct m m e A tie ie ie F p O v ic e o D S N

Alicia Langreo. Saborá, Spain

5. - Milk production and cheese’s consumption

Latest year’s sheep milk production was a slightly over 400 million litres, below goat milk that reached 470 million litres. In the second half of the nineties it showed a big growth and now it is stabilised.

Sheep and goat milk production (million litres) Year Sheep milk Goat milk 1990 319,7 472,6 1991 306,6 290,5 1992 305,5 353,7 1993 334,3 393,5 1994 294,3 376,8 1995 226,1 316,0 1996 303,4 358,0 1997 326,4 381,7 1998 342,2 387,9 1999 349,3 404,1 2000 392,0 438,5 2001 394,2 488,7 2002 406,5 513,1 2003 411,3 486,8 2004 410,1 479,4 2005 409,3 468,6 Source: MAPA

In 2005, average price for sheep milk was 70,1 €/100 litres, same that in 1999. in fact all production goes to industry, in concrete for cheese’s manufacturing. Sheep milk production is concentrated in Castilla & León (60, 6%) and Castilla La Mancha (27, 3%). Goat milk production is highly concentrated too: 48% in Andalusia, 26 % in Canary Islands and 11, 6 % in Castilla La Mancha 11, 6%.

Cheese consumption in Spain (2005) went up to 320, 78 million kg., around 40 % cured and semi-cured ones, categories where most of sheep cheeses belong to. Since 2000, total cheese consumption increased 20% and cured and semi-cured 22%. Consumption behaved very positively. 94 % of cheese consumption was at homes, but in cured and semi-cured ones HORECA consumption goes up to 21, 5 %.

6. - Sheep farming Alicia Langreo. Saborá, Spain

According to Survey on the Structure of Agricultural Holdings (INE-National Institute of Statistics), between 1997 and 2005, the number of farms fell from 102.832 to 85.247, more than 17%. This decrease met with a practically negligible census fall, meaning that there was an increase of cattle stock average size, that went up from 191,3 to 230,6 heads, 20,5% bigger The sector goes through a farming concentration process trying to reach the competitive minimum level.

Aragon (520), ), Castilla La Mancha (391), Castilla & León (357), La Rioja (357), Extremadura (339) and Catalonia (291) are the Regions where flock average size is bigger, while Asturias, Canary Islands, Baleares, Cantabria and the Basque Country remain below the 100 heads level. According to the Survey on the Structure of Agricultural Holdings, 97 % of farms have breeding sheep. Farms without breeding sheep are mainly fattening ones, numbering 2.385 in 2005. In 2005 there were 32.013 farms into the sheep ETO (Specialised in ovine cattle), 37, 6% out of the total sheep farms. Since 1997 their concentration was bigger than the overall one. 28, 2 % of farms into sheep ETO have an economic size smaller than 6 EDU, quite far from the minimum feasibility level and even further from the possibility of professional dedication. Another 10, 9 % were between 6 and 12 EDU, being considered unlikely viable. It means that near 40 % of farms has a difficult future. On the other side, 25, 5 % of farms are above 40 EDU.

Sheep ETO farms Stratification according to economic size EDU Number of farms Total 32013 < 1 1755 1 a < 2 1990 2 a < 4 3263 4 a < 6 2015 6 a < 8 1418 8 a < 12 2083 12 a < 16 1935 16 a < 40 9389 40 a < 60 3906 60 a < 100 2725 >= 100 1532 Source: Elaborated after INE Statistics (2005) Alicia Langreo. Saborá, Spain

There are 24.062 farms into sheep ETO that have more than one AWU (Annual Working Unit), 75, 2% out of the total sheep ETO farms. Out of this subgroup, 32,6 % are bigger than 40 EDU, but 14,2 % are smaller than 6 EDU and 10,3 % are between 6 and 12 EDU; that means that 14,5 % of the ones smaller than one AWU have a difficult viability.

Since 1997, concentration process into bigger farms has been consolidated: there are more bigger than 40 EDU ones, while there is a drastic reduction of the ones between 4 and 12 EDU and in a minor scale the ones smaller than 4 EDU. In a parallel process, census concentrates in the bigger strata.

Farmers’ age is an important problem: 34% were older than 65 years and only 22,6% younger than 44. That shows a very aged sector. Aging is higher in smallest farms. In the ones bigger than 60 EDU, less than 10 % were older than 65 and 34 % less than 44.

According to FEGA, in 2006 there were 67.226 farms entitled to ewe and goat premium; almost 70% of farmers had less than 300 rights amounting to near 26% of all rights. On the other side, 16,5% of farmers with more than 500 rights summed up to 54% of all rights. Number of farmers with more than 300 rights was slightly over 21.000. Since 2000, ewe and goat premium structure got concentrated although rights concentration is much more relevant on the ones with bigger cattle stocks than the decrease in the number of farmers with smaller stocks.

Rights structure evolution 2000 2006 No. of owners No. of rights No. of owners No. of rights < 200 60,50% 19,01% 57,40% 15,80% > 500 12,00% 43,07% 16,5% 53,70%

Alicia Langreo. Saborá, Spain

According to MAPA Farming Registry, in January 2007 there were 127.485 sheep farms, 6,4 % less than the previous year.

SHEEP FARMS Difference 07/06 Jan-06 Jan-07 Percentage No. of farms Fatten or fattening 2.868 2.854 -0,5 -14 Birthing for milk production 9.967 9.338 -6,3 -629 Birthing for meat production 104.221 96.403 -7,5 -7.818 Mixed birthing 15.835 15.335 -3,2 -500 Pre-fattening 32 5 -84,4 -27 Without classification 3.213 3.550 10,5 337 All 136.136 127.485 -6,4 -8.651 Source: REGA. MAPA

According to REGA, in November 2007, there were 2.722 fattening, on 1.979 of which there was information. 60%, 1.631 had less than 500 animals, 177 (6,5%) between 500 and 999, 154 (5,66%) had between 1.000 and 4.999 animals and only 17 had more than 5.000 animals. The latest ones belong to the main commercial operators and co- operatives..

Both the National Accountancy Data Network and the considered costs studies, all previous to last year fodder prices increases, show the scarce margins of meat oriented farms. Milk oriented farms, besides current price crisis, have better perspectives. Achieved entrepreneurial results is quite low in meat farms with worse perspectives face to fodder price increases, costs of cross compliance and food safety.

6. – Main trading companies

Sheep sector has been traditionally very disperse, with a big number of operators and a long commercial chain, including the likes of trader, purveyor or bringers, maquiladora slaughterhouse, marketer, and finally retailing, in charge of quartering. It was an obsolete wholesale food market system, with almost no vertical integration, where slit was not identified and quite far from food system’s current trends. This structure has experienced a deep transformation under the hand of the new typifying centres and because of entrepreneurial vertical concentration from fattening tasks, live animal’s Alicia Langreo. Saborá, Spain wholesale business and the meat industry. Changes started in a significant way in 20th Century nineties and have been enhanced during the 21st Century first decade.

Sheep meat production chain is directly linked to the new strategies of big retailers in relation to meats. Their decisions on what goes out to the market, their supplier’s requirements and the finished agreements with them, have forced the concentration and vertical integration process of the production chain and the qualification of meats’ markets.

Nowadays different kinds of sheep production sub chains live together, going from the traditional chain made up of a large number of links and characterised by the existence of secondary markets to the most developed chain, with a high vertical integration, with bigger size companies and oriented in good measure to supply big distribution. Each one is oriented to different market segments. Anyway, there are not international companies working in this sector

Commercial operators in the most developed chain have gone vertical with the sheep wholesale, fattening finalising, slaughtering and quartering. They are co-operatives and private companies. All of them have a typifying centre that enable them to qualify for slit markets and many can make quartering. Their production aims mainly big retailers. Some of them have specialised in supplying HORECA channels.

Presence of co-operatives in cattle selling phase is significant, according to CCAE (Spanish Confederation of Agrifood Co-operatives), they sum up 30 % of the volume of commercialised sheep, although lower than co-operatives’ presence in sheep milk, where they are over 40 %. According to CCAE they are 100 co-operatives. However, those with a significant size are less than 25, number which is getting reduced as they merger, some of them have created second degree co-operatives. As a result of this merger process, the big co-operative groups with presence in the market are fewer than ten, all of them with an important volume, they are among the main sector operators and they have begun vertical processes spreading their activities to subsequent phases of the commercial chain with more or less depth. Alicia Langreo. Saborá, Spain

Main Co-operatives of sheep meat Sales 2006 Company Region Characteristics Notes (million €) Grupo Pastores Aragón 35 Co-operative 2º 95% Coop OVIARAGON, 5% COLEAR Coop. COPRECA* Extremadura 32,2 Co-operative 2º Participates in Coop. Comercial Ovino Coop. COLEAR* Castilla & Leon 12,5 Co-operative 2º Part of its co-operatives are on milk Coop OVISO Extremadura 23,27 Co-operative 2º Participates in Coop Comercial de Ovino Coop Casa Ganaderos Aragon 9,83 Co-operative 1º Coop COVAP* Andalucía 229,3 Co-operative 1º Coop ASOVINO* Castilla y León 16,2 Co-operative 1º Collaborates with COPRECA Coop Dehesas Cordobesas Andalucía 12 Co-operative 2º Coop OVIPOR* Andalucía 16,5 Co-operative 1º * They have another productions, either milk or other meats Source: Alimarket and Saborá Documentation Centre .

The rest of the companies forms a very heterogeneous collective that embraces from the biggest sheep operators to the small runners that barely own a lorry. There is no informative source that allows to know the size of this collective, but the number of the ones that move a significant quantity is not big, maybe around 40 companies. As in the case of co-operatives, the best ones have already jumped from the selling of live stock to meat, slit and in a minor scale quartering and have established typifying centres, basis for market segmentation and qualification., entering into the final phase of fattening. That means they are commercial operators that jumped up and down the production chain, becoming a key factor of the whole production chain’s modernization and market qualification..

Livestock that goes through typifying centres oscillates according different guesses, but is around 40 %. This volume that meets the one of the most modern chain, the one that can begin traceability and safety food processes. Since 2000 could have grown between 5 and 10 points.

To give an idea of the important concentration experienced inside the leader group, let just say that in 1998, the first operator controlled barely a little bit more than 1,5% of the total volume and the second one around 1%, while in 2000, after several merging movements, the first operator was near 3% and six of them have a share above 1,5%. Among the first twelve they control jus above 15% of meat volume. According to 2005 Alicia Langreo. Saborá, Spain

data, volume of first operator was near 5% and among the first twelve they control more than 25 %.

Main companies of sheep meat sector. 2005 Company Location Slit weight production. Tonnes Products slits, quartering, filleting, G.C. Magnus SA Zamora 10800 fresh and marinated elaborations MURGAZA SA Lleida 7.080 Sheep quartering. Quartering and slaughtering rooms SAT Los González Teruel 6450 slits, quartering and filleting slits, quartering, filleting Coop Pastores Saragossa 6000 and prepared food Ovinos Manchegos SL CR 4590 slits, quartering and filleting Martínez Loriente SA Valencia 4561 Filleting. Exclusively Mercadona INCARLOPSA Cuenca 4524 Slits, quartering and filleting I.C. Los Norteños SA Madrid 4100 Slits and quartering. A lot of HORECA Coop. COPRECA Cáceres 3775 Slits and quartering. Cárnicas Azor Murcia 3000 Slits for M Loriente Carns Pelleja SA Barcelona 2500 Slits, quartering and filleting Carns J.B. SL Lleida 2041 Slits, quartering and filleting Cárnicas Embajadores SA Madrid 2000 Slits, quartering and filleting Escorxador Roca SA Girona 2000 Slits and quartering Matadero de Pamplona Navarre 1924 Slits, quartering and filleting Corp. Alimentaria Guissona Lleida 1914 Slit , quartering and filleting FERCE SA Barcelona 1800 Slits, quartering and filleting Suministros a Carnicerías SA Barcelona 1750 Slits and quartering Bor Market SA Madrid 1718 Importer. Slits and quartering Cárnicas Ceraugusta SA Zaragoza 1624 Quartering and filleting Carns Prior SA Barcelona 1600 Slits, quartering y filleting P.C. Cárnicos Ruiz Arroyo SL Toledo 1500 Slits, quartering and filleting Suministros Medina Madrid 1500 Slits, quartering and filleting Tarrasa Carnes Industriales SA Barcelona 1500 Slits, quartering and filleting Coop. Colear CL Burgos 1500 Slits and quartering. Suckling Companya General Carnia SA Barcelona 1400 Slits, quartering and filleting Franco y Navarro SA Zaragoza 1400 Slits Kepac Clonee LTD (sucursal) Madrid 1000 Slits Coop. Ovino del Suroeste Badajoz 996 Slits Carnes Frescas SA Castellón 928 Slits, quartering and filleting La Protectora SA Navarre 800 Slits and quartering Ganados y Carnes Marti SL Tarragona 750 Slits and old sheep Hermanos Juan Nombela SA Madrid 700 Slits and quartering Viñals Soler SL Barcelona 650 Slits, quartering and filleting Cárnicas J. Chica SL Jaén 650 Slits Coop Casa de Ganaderos Saragossa 640 Slits and quartering SAT Los Nombela Madrid 600 Slits and quartering Coop. COVAP Cordoba 585 Slits, quartering and filleting Carns B SA Barcelona 567 Slits, quartering and filleting Source: Alimarket

Alicia Langreo. Saborá, Spain

There are not companies with foreign shareholders among operators in the Spanish sheep sector with the exception of some subsidiaries of European companies that just sell in Spain the production of their head company.

Producers of sheep cheese split in two categories: small artisan companies that make most of the cheeses with Designations of Origin and a group of big companies that make cheese with sheep and mixed hard paste, usually out of Designations of Origin. Production of first ones is small and is sold mostly in the proximity market and through specialised channels. Some companies of big distribution got them, even in their gourmet areas. Among the first 10 cheese manufacturing and distributing companies are four that work with sheep milk although non exclusively: Grupo TGT, specialised in import of European cheeses but also a producer in Spain, Lácteas García Baquero, Quesos Forlasa and Queserías Entrepinares.

7.- Sheep meat and cheese distribution

In sheep meat, share of big distribution is around 38 %, a little below the one of 2000. A fall on these channels between 2004 and 2005 has been detected. Sheep and goat supply to homes is similar to the one for cow and less developed than fresh chicken and pig. Traditional shop share remains around 50 %, without showing clear symptoms of change.

Sheep and goat’s meat homes acquisitions. Share according to channel Traditional Supply Street Year Supermarket Hypermarket Self-consumption Others shop Store market 2000 49,7% 28,4% 11,7% 0,4% 4% 5,3% 0,4% 2001 51,1% 28% 12,3% 0,3% 3,6% 4,4% 0,2% 2002 49,4% 27,5% 12,2% 0,3% 5,4% 4,8% 0,3% 2003 47,8% 27,6% 12,7% 0,2% 5,4% 5,9% 0,3% 2004 50,2% 26,7% 14,2% 0,1% 5% 3,4% 0,3% 2005 48,6% 26% 11,8% 0,1% 9,5% 3,6% 0,3% Source: Food in Spain .MAPA

Sales growth in big distribution is tied to filleting and shelf sales of packed meat, which favours the development of quartering and filleting rooms.

Alicia Langreo. Saborá, Spain

Vacuum packed products, prepared under controlled atmosphere and elaborated and semi-elaborated under refrigeration, sometimes produced by the own distribution chain or through production protocols with suppliers, are opening a wide range of possibilities that match big retailers strategy to guarantee quality to the customer through their brands.

Traditional shop fulfils the proximity objective besides being in better conditions to offer a preparation service and personalised delivery. Those shops have made of the customer confidence the better recruiting claim and their best way to compete and they have won service for most of hotels and restaurants. Nevertheless, face to new requirements they can have difficulties to offer a safe product with a brand or identification; probable only part of them will succeed. On the other hand, many of these shops do not manage well the slit and filleting channel.

This type of cattle’s big retailers strategy has been very important in the recent production chain modernisation due to the signing of production protocols, medium term agreements and the slit and quartering sales development, that has allowed qualify the meat wholesale market.

Sheep meat distribution’s main problem for Spanish producers is the lack of identification of national product face to the ones from third countries.

17,5 % of cheese purchases for homes are carried out in traditional shops, almost 78 % in big distribution and the rest in street markets and alternative channels. Since 2000 traditional shops share fell almost 2 points. Sales’ increase of big distribution is related to the introduction of innovations, new formats and packaging. Some big distribution companies have improved their cheese offer a lot and they have increased the number of shelves dedicated to these products. Anyhow, there is still a big margin for traditional and specialised commerce, especially in traditional cheeses.

8.- Quality strategies

In Spain there are six Geographical Indications of Origin and Designations of Origin: Navarre, Aragon, Castilla & León (lechazo), Castilla La Mancha, Extremadura and Alicia Langreo. Saborá, Spain

Andalusia. However the volume of commercialised meat with the corresponding label is still very small. For most of the sector this is the best way to identify and to protect Spanish sheep face to imports.

On the other side, there is a brand policy. Currently the ones that have a deeper impact are the retailers own brands, that are having a bigger development than the industrial brands. Generally, retailing companies put their brand on products of better quality and with higher control. In some cases, this strategy is compatible with the sale of products of differential quality (IGP).

There are six sheep cheese Designations of Origin, besides another two that include goat milk. In general terms, milk quantity sold for Denomination of Origin’s cheese is very low. Nevertheless, sheep milk is a very important ingredient for hard paste Spanish cheeses, considered as traditional cheeses and with different consumption patterns from the one of the other cheeses.

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The Future of the sheep and goat meat sector in Europe A Spanish perspective

Report summary Alicia Langreo

Monday 28th January 2008 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon II:: TThhee FFlloockck

– Ovine census in 2005 showed 22.749.000 heads, a 5,4% decrease in relation to 1990. • 19% were milk sheep. – Goat census in 2005 showed 2.905.000 heads, a 20,7% decrease in relation to 1990. • 63% were milk goat. – More than 80% of sheep is concentrated in five Regions: Extremadura(20%),Castilla&León(17,7%),CastillaLa Mancha(15,1%), Andalusia (13,4%) and Aragon (13,8%). • Census, during the last 15 years, has grown inExtremaduraand fallen in all the other cattle regions. – Milk sheep census is concentrated in few Regions: Castilla & León(almost 45% of all Spanish milk ewe) and CastillaLa Mancha(more than 28%)

January 08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon IIII

• The sheep/goat farms – According to INE the number of sheep farms were 85.247, 17% less than in 1997. – According to INE the number of goat farms were 38.648, 25% less than in 1997. – Spanish native breeds keep their preponderance with the only addition of Assaffor sheep milk production. – Sheep is present all over Spanish territory: more than 86 % of the municipalities got this type of cattle. • Its presence in Less Favoured Areas is very high, 85 % of sheep census is located in these areas. • More than 40 % of census belongs to farms that cash the compensatory allowance. Requirements to receive compensatory allowance make quite frequently difficult for sheep and goat farmers to get it.

January 08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon IIIIII • In 2005 there were 32.013 farms into the sheep and goat ETO, 37,6% out of the total farms. • 75,2% of farms into sheep ETO that have more than one AWU. – Out of this subgroup, 32,6 % are bigger than 40 EDU, but 14,2 % are smaller than 6 EDU and 10,3 % are between 6 and 12 EDU. – That means that 14,5 % of the ones smaller than one AWU have a difficult viability. • Since 1997, concentration process into bigger farms has been consolidated: there are more bigger than 40 EDU ones, while there is a drastic reduction of the ones smaller than 12 EDU. Census concentrates in the bigger strata. • Farmers’age is an important problem: – 34% were older than 65 years and only 22,6% younger than 44. – Aging is higher in smallest farms. – In the ones bigger than 60 EDU, less than 10 % were older than 65 and 34 % less than 44. January 08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon IVIV • According to FEGA, in 2006 there were 67.226 farms entitled to ewe and goat premium. – Almost 70% of farmers had less than 300 premium amounting to near 26% – 16,5% of farmers with more than 500 premium summed up to 54% – Number of farmers with more than 300 premium was slightly over 21.000. – Since 2000, ewe and goat premiumstructure got concentrated although premium concentration is much more relevant on the ones with bigger cattle stocks than the decrease in the number of farmers with smaller stocks. • According to REGA, in November 2007, there were 2.722 fattening farm. – 60% had less than 500 animals – 6,5% between 500 and 999 – 5,66% had between 1.000 and 4.999 animals – Only 17 had more than 5.000 animals. – The latest ones belong to the main commercial operators and co-operatives. • National Accountancy Data Network and the considered costs studies (previous to last year fodder prices increases) show the scarce margins of meat oriented farms. Milk oriented farms, have better perspectives.

January 08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon VV • Sheep meat production (2005) reached 224.000 Tm. due to the slaughtering of 19.391.000 heads. In relation to 1990, it increased a little bit over 3%. • Share of sheep meat in overall meat production went down from 6 % to a little bit more than 4 % since 1990 • One fundamental feature of sheep and meat production is slaughter’s seasonality, main reason of price’s oscillations, which make difficult consumption’s increase. • Young lambs mean the main share of sheep meat produced in Spain, around 75%, while suckling lambs mean 16% and older sheep 9%. Since 1990 suckling lambs’share has increased 5 points. • Since the final years of the 20th Century nineties a positive balance of Spanish sheep meat trade has been consolidated due to an exports’ increase, that has multiplied by 4 in a 15 years period.

January 08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon VIVI • In the period 1990-2005, sheep and goat meat’s consumption has fallen from 151.390.000 Kg till 137.650.000 Kg. • Till 1993, sheep consumption per capita remained around 4 Kg, then began a show fall till 3,2 Kg per person (2005) • In sheep and goat, share of HORECA channels is 15,5% • Sheep and goat’s meat consumption differs among Regions, going from 6, 4 Kg per person and year in Aragon till less than 0,5 in the Canary Islands and 0,8 en Andalusia. • Prices paid for sheep meat at homes are the highest ones among meat’s prices and are 40% above the average meat price. This difference grew since the mid nineties. • One of the main problems of sheep consumption is the high seasonality, which influences the low consumption registered levels compared to other meats.

January 08 11.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– pprrododuuccttiionon VVIIII • Latest year’s sheep milk production was a slightly over 400 million litres, below goat milk that reached 470 million litres. In the second half of the nineties it showed a big growth and now it is stabilised. • In 2005, average price for sheep milk was 70,1 €/100 litres, same that in 1999. in fact all production goes to industry, in concrete for cheese’s manufacturing. • Sheep milk production is concentrated in Castilla& León(60, 6%) and CastillaLa Mancha(27, 3%). • Goat milk production is highly concentrated too: 48% in Andalusia, 26 % in Canary Islands and 11, 6 % in CastillaLa Mancha11, 6%. • Cheese consumption in Spain (2005) went up to 320, 78 million kg., around 40 % cured and semi-cured ones, categories where most of sheep and goat cheeses belong to. Since 2000, total cheese consumption increased 20% and cured and semi-cured 22%.

January 08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm:: TThhee IIndnduussttrryy II ••PPrreessenenccee ooff ccoo--opeoperraattiivveess iinn ccaattttllee sseelllliingng pphahassee iiss ssiiggnniiffiiccanant,t, aaccccoorrddiingng ttoo CCCCAAEE,, tthheeyy ssumum upup 3030 %% ooff tthehe vvoolluummee ooff ccoommmmeerrcciiaalliisseded sshheeepep aandnd goagoat.t. TTheherree aarree aabbououtt 1122 bbiigg ccoo--opeoperraattiivveess ••PPrreessenenccee ooff ccoo--opeoperraattiivveess iinn ssheepheep andand goagoatt mmililkk iiss oovveerr 4040 %%.. ••TTheherree aarree aa llaarrggee nunummbeberr ooff ssmmaallll pprroodduucceerr ooff ttrradadiittiiononaall cchheeeesese ••TThehe rreesstt ooff tthehe ccoommpanpaniieess ffoorrmmss aa vveerryy hehetteerroogegenneoeouuss ccoolllleeccttivivee..TThehe nunummbeberr ooff tthehe oneoness tthahatt mmoovvee aa sisiggnniiffiiccanantt ququaannttiittyy ooff mmeaeatt iiss nonott bbiigg,, mmaayybebe aarrooundund 4040 ccoommpanpaniieess.. ••TThehe bebesstt oneoness ((ccoo--opeoperraattiivveess aanndd oottheherr ccoommpanpaniieess)) hahavvee aallrreeadadyy jjuummpedped ffrroomm tthehe sseelllliingng ooff lliivvee ssttoocckk ttoo mmeaeat,t, sslilitt aandnd iinn aa mmiinonorr scscaallee quaquarrtteerriingng aandnd hhaavvee eessttabablliisshheedd ttyyppiiffyyiingng ccenenttrreess,, babassiiss ffoorr mmaarrkkeett ququaalliiffiiccaattiioonn.,., enentteerriingng iinnttoo tthehe ffiinnaall pphhaassee ooff ffaatttteneniingng.. ••LLiivveessttoocckk tthahatt goegoess tthhrroughough ttyyppiiffyyiingng ccenenttrreess iiss aarrooundund 4040 %%.. TThhiiss vvoolluummee tthahatt mmeeeettss tthehe oneone ooff tthehe mmoosstt mmodeoderrnn cchahaiinn,, tthehe oonnee tthahattccanan bebeggiinn ttrraacceaeabbiililittyy aanndd ssaaffeettyy ffoodood pprroocceesssseess.. SiSinnccee 20002000 ccoouulldd hhaavvee ggrroowwnn bbeettwweeenen 55 andand 1010 ppooiinnttss.. January 08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm:: TThhee IIndnduussttrryy IIII ••TTheherree aarree nonott ccoommpanpaniieess wwiitthh ffoorreeiigngn sshaharreehhoolldederrss aammongong ooppeerraattoorrss iinn tthehe SSpapanniisshh sshheeepep aandnd ggooaatt mmeaeatt sseeccttoor.r. ••PPrroduoducceerrss ooff ssheheeepp aanndd goagoatt cchheeeessee sspplliitt iinn ttwwoo ccaattegoegorriieess:: ssmmaallll aarrttiissanan ccoommpanpaniieess tthhaatt mmaakkee mmoosstt ooff tthehe ccheeheesseess wwiitthh DDeessiiggnanattiioonnss ooff OrOriiggiinnandand aa ggrroouupp ooff bbiigg ccoommpanpaniieess tthhaatt mmaakkee ccheeheessee wwiitthh sshheeepep,, goagoat,t, aandnd ccooww,, uussuauallllyy oouutt ooff DDeessiignagnattiioonnss ooff OrOriiggiinn.. ––PPrroduoduccttiionon ooff ffiirrsstt oneoness iiss ssmmaallll andand isis ssoolldd mmoossttllyy iinn thethe pprrooxiximmiittyy mmaarrkketet andand tthhrrooughugh sspepeciciaalisliseded cchannehannelsls.. ––AAmmoonngg thethe ffiirrsstt 1010 bbiiggeggesstt ccheeheessee mmaanunuffaacctuturriingng aanndd ddisisttrriibutbutiingng ccoommppananiieess aarree ffouourr tthhatat woworrkk wwiithth ssheepheep andand ggooatat mmilkilk ••IInn SSpainpain ttheherree aarree ssiixx GGeogeogrraphiaphiccalal IIndindiccaattioionnssooff OOrrigiiginnffoorr ssheepheep mmeaeat.t. HHoowweevveerr tthhee vvoolluummee ooff ccoommmmeerrcciiaalliisseedd mmeaeatt wwiitthh tthhee ccoorrrreesspondpondiingng llaabbeell iiss ssttililll vveerryy ssmmaallll.. ••TTheherree aarree ssixix ssheepheep ccheheeessee DDeessiiggnnaattiiononss ooff OrOriiggiinn,, bebessiidedess aanonotthheerr twtwoo tthahatt iinncclluudede goagoatt mmililkk.. IInn ggeenenerraall tteerrmmss,, mmililkk qquanuanttiittyy ssoollddffoorr DDenoenommiinanattiioonn ooff OrOriiggiinn’’ss ccheeheessee iiss vveerryy lloow.w.

January 08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm:: TThhee RReettaailileerrss II ••IInn ssheepheep aanndd goagoatt mmeaeat,t, sshaharree ooff bbiigg ddiissttrriibubuttiioonn iiss aarrounoundd 3838--4400 %%,, aa lliittttllee bbeellooww tthehe oonene ooff 2020000.0. ••SShheeepep aanndd goagoatt ssupupppllyy ttoo hohommeess isis ssiimmililaarr ttoo tthhee oonene ffoorr ccooww aannddlleessss dedevveellooppeded tthhaann ffrreesshh cchhiickckenen aanndd ppiigg.. ••TTrradadiittiioonanall sshophop sshhaarree rreemmaaiinnss aarrooundund 5050 %.%. ••SSaalleess ggrroowwtthh iinn bbiigg ddiissttrriibbuuttiioonn iiss ttiieedd ttoo ffiilllleettiingng aanndd sshheellff ssaalleess ooff papacckkeded mmeaeat.t. ••TThhiiss ttyypepe ooff ccaattttllee’’ss bbiigg rreettaaiilleerrss ssttrraatteeggyy hhaass bbeeenen vveerryy iimmpoporrttanantt iinn tthehe rreeccenentt pprroduoduccttiioonn cchhaaiinn mmodeoderrnniissaattiionon duduee ttoo tthehe ssiiggnniingng ooff pprroduoduccttiionon pprroottooccoollss,, mmeeddiiuumm tteerrmm agagrreeeemmenenttss andand tthhee slsliitt aandnd quaquarrtteerriingng ssaalleess ddeevveellopopmmenent,t, tthahatt hahass aalllloowweded ququaalliiffyy tthhee mmeaeatt wwhhoolleessaallee mmaarrkkeet.t. ••SShheeepep mmeaeatt ddiissttrriibbuuttiioonn’’ss mmaaiinn pprroboblleemm ffoorr SSpapanniisshh pprroduoducceerrss iiss tthhee llaacckk ooff iidendenttiiffiiccaattiioonn ooff nanattiioonnaall pprroodduucctt ffaaccee ttoo tthhee oneoness ffrroommtthhiirrdd ccounounttrriieess..

January 08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeaamm:: TThhee RReettaailileerrss IIII ••SSheeheepp mmeaeatt ddiissttrriibubuttiionon’’ss mmaaiinn pprroboblleemm ffoorr SSppananiisshh pprroduoducceerrss iiss tthhee llaackck ooff iidedennttiiffiiccaattiioonn ooff nnaattiionaonall pprroduoducctt ffaaccee ttoo tthhee oonneess ffrroomm tthhiirrdd ccounounttrriieess.. ••1717,,55 %% ooff cchheeeessee pupurrcchahasseess ffoorr hhoommeess aarree ccaarrrriieded oouutt iinn ttrradadiittiionaonall sshhooppss,, aallmmoosstt 7788 %% iinn bbiigg ddiissttrriibubuttiioonn aanndd tthhee rreesstt iinn ssttrreeeett mmaarrkkeettss anandd aalltteerrnnaattiivvee cchanhannenellss.. SSiinnccee 22000000 ttrradadiittiionaonall sshhopopss sshhaarree ffeellll aallmmoosstt 22 popoiinnttss.. ••CCheeheessee ssaalleess’’iinnccrreeaassee ooff bbiigg ddiissttrriibubuttiioonn iiss rreellaatteded ttoo tthhee iinnttrroduoduccttiioonn ooff iinnonnovvaattiiononss,, neneww ffoorrmmaattss aandnd papacckkaaggiinngg.. SSoommee bbiigg ddiissttrriibubuttiioonn ccoommppaanniieess hhaavvee iimmpprroovveded ttheheiirr ccheeheessee ooffffeerr aa lloott aandnd ttheheyy hahavvee iinnccrreaeasseded tthehe nnuummbeberr ooff sshehellvveess deddediiccaatteedd ttoo tthheessee pprroodduuccttss..

January 08 33.. 20032003 CACAPP RReefoforrmm eeffffeecctsts • Flock and number of sheep/goat farms – Regarding the national decoupling scheme, census may fall 20% and number of farms 66%. – There will be no more than 25.000-30.000 farms, bigger than the one’s now. – Milk census may increases their participation. • Production and trade – Meat production may fall, but no very much – Milk and cheese production may increased

January 08 44.. WWeakeaknnessesesses aanndd ddiiffffiiccuullttiieses iinn tthhee secsecttoror • Seasonality of consumption and production. • Meat high prices and low consumption. • Low profitability of sheep and goat meat’s farms. • The excessive divide of cattle farms and the old age of farmers. Difficulties to get familiar or salaried hands at farms. • Deficient sector organisation, specially in farms. • Competition with EU products that get more subsidies and above all from Third Countries with lower costs. • Lack of Spanish lamb identification at retailer. • Feeding prices’increases. • Sheep and goat farmers hardly get subsidies from Rural Development Funds • Lack of goat and sheep meat promotion January 08 55.. RRececoommmmeendndaattiioonnss ––uuppssttrreeaamm:: FFaarrmmiingng • To increase size of flock and get specialised sheep and goat farms. In some areas, to develop milk production. • To develop Producers’Groups, as there are in fruit and vegetables, and support commercial concentration through co- operatives or others companies and vertical integration. • Ways of facing competition from Third Countries products: • Increasing Spanish IGP production • Establishing a mechanism so that consumer can identify lamb produced in Spain with specific feeding systems. • Priority application of article 69 to viable farms and to develop agro-environmental subsidies tied to traditional shepherding. • Establish measures that allow seasonality reduction. • Consumption promotional policies with public support.

January 08 66.. RRececoommmmeendndaattiioonnss ––DDoowwnnssttrreaeamm II

• Industry and processing • To establish medium term agreements with big retailers on commercialisation. • To specialise service HORECA • To develop quartering and filleting and ready dishes • Vertical integration of activities from fattening to quartering. • To increase IGP meat production and DOP cheese production. • Identification of Spanish lamb brought up according traditional systems. • To establish measures that allow seasonality decrease. • Consumption promotion. January 08 66.. RRececoommmmeendndaattiioonnss ––DDoowwnnssttrreaeamm IIII

• Retailing • To increase development of big retailers roll in the meat sector, through specific strategy: medium term supply agreements with specifications with the best industries and farmers’co-operatives. • To qualify small retailers sheep and goat meat offer. • To develop IGP meat brands and even the ones of industrials and retailers • To identify Spanish traditional breeding meat • To support promotion for meat and cheese consumption.

January 08

The Future of the sheep and goat meat sector in Europe

A UK perspective

Draft February 2008

Executive summary

• UK breeding sheep population has declined 10% between June 2004 and June 2007 coinciding with the decoupling of agricultural support payments.

• Regional variations in rate of decline are considerable with the biggest declines occurring in Northern Ireland and the West Highlands of Scotland, and smallest declines in Wales.

• UK processors have maintained throughputs as livestock liquidation has maintained numbers, however indications are that volumes are now declining.

• The number of British abattoirs slaughtering sheep has declined 20% since 2000 as volume concentrates into fewer hands.

• Without direct production coupled support payments many sheep enterprises are not profitable and following from de-coupling this is leading to some reduction of sheep production particularly in the most fragile areas.

• The potential for UK sheep production to become profitable is heavily influenced by access to export markets. Tariff rate quota agreements offer some protection in the European Market and any changes to this position would be threatening.

• Sheepmeat is in competition with other red and white meats and is challenged by the consumer perception that it is expensive, fatty and wasteful. Any amendments to trade rules that increase the competitiveness of other meats on the European market will have serious implications for sheep meat production in the United Kingdom.

Sheep and goat farming in the UK

Introduction

The United Kingdom has the largest sheep population of any Member State of the European Union. These sheep are used almost exclusively for meat production with wool seen only as a by-product of meat production. Although there are a number of sheep milk producers in the UK they are of minor importance farming less than 1% of the breeding ewe flock. Similarly, although there are a number of goat farmers in the UK producing dairy products; the goat population of the UK is estimated to be less than 250,000 head. Goat milk production has increased in recent years but still remains a niche operation. Goat production remains an unsupported sector in the UK other than for some access to regional rural development grants for developing processing and marketing initiatives. Commercial scale goat milk production, flocks of over 500 goats, can be profitable. However, all goat enterprises have little or no opportunity to sell goat meat, which is not a traditional meat product of the UK, and consequently specialist goat meat producing enterprises are extremely rare in the UK.

Therefore, in discussing the sheep and goat sector in the UK consideration is given only to sheep farming for meat production. Notwithstanding this most of the challenges faced by the sheep meat sector are replicated in the sheep milk sector and the goat farming sector.

Sheep production in the UK

Sheep production in the UK continues to have a distinctive structure characterised by a hierarchical or stratified pattern as illustrated in Figure 1 below, this structure remains the core of the UK sheep industry although the distinctions between categories have become blurred, see table 1.

Figure 1: UK stratified sheep industry structure

Source: Cooper and Thomas 1991 (Profitable sheep farming - Farming Press Books UK)

Three distinct sub-categories of sheep production can be easily identified, namely hill flocks, upland flocks and lowground flocks and the characteristics of the systems and products delivered are shown in Table 1. A characteristic of the UK sheep industry structure is the substantial flow of sheep from hill areas to lowland areas both for breeding and finishing. This characteristic of stock movement and change of ownership sets the UK production systems apart from many southern European production systems. As a consequence of this structure if one element in the chain begins to break down, for example hill sheep farming, it has consequences for the remainder of the chain as stock supplies begin to dry up. A further consequence of the structure is the wide variation is carcase quality and weight that is produced, varying from small poor conformation hill-breed male lambs to much heavier good conformation lowground breed male and female sheep

Table 1. Summary of typical British sheep production systems.

System Definition Main products Store lambs sold to upland and lowland farms for finishing

Bound acclimatised stock Pure-bred finished on a high proportion of lambs (14-18 kg Hill ewes producing semi-natural pasture dwt) pure-bred lambs producing pure-bred Hill systems (LFA lambs Pure-bred finished land) lambs (8-12 kg dwt) for export

Draft ewes As above but draft Hill ewes producing Bound stock on farms with ewe sales reduced some cross-bred a higher proportion of and cross-bred male lambs improved land and female lambs sold Cross-bred ewe lambs for breeding Unbound flock brought and slaughter. (17- Draft hill ewes onto unit - grazing 21 kg dwt) producing cross bred mainly sown pastures and lambs fenced hill areas Cross bred male Upland systems (LFA lambs for slaughter land) (17-21 kg dwt) 3 way cross lambs Unbound flock grazing for slaughter usually Cross-bred ewes only sown pastures and 50% of a terminal mated to terminal sire fenced hill areas sire breed (17-21 kg dwt) 3 way cross lambs Part of enterprise mix for slaughter usually Cross-bred ewes found grassland or arable 50% of a terminal mated to terminal sire farms sire breed (17-21 kg dwt) Lowalnd non-LFA Pure bred male and systems female lambs used Pure-bred ewes grazing for breeding and Pure-bred lowland low quality uncultivated surplus for slaughter breeds land in most favoured and some cross-bred farming areas lambs for slaughter (17-21 kg dwt) Source: After Ashworth in Elpen; proceedings from two international workshops: ed. Williams S and Wright I.A. .MLURI 1998 http://www.macaulay.ac.uk/elpen/index1.htm

Structure of sheep farming in the UK

The size and shape of the UK sheep industry has changed considerably since 2000. The occurrence of Foot and Mouth Disease (FMD) across significant parts of the UK sheep producing regions in 2001 had a substantial impact from which the industry was just recovering when the 2003 mid-term review of the CAP introduced de- coupling of support payments to the UK from 1 January 2005. Although each region of the UK adopted a de-coupled approach to the sheep industry regional variations in its application have also impacted on sheep numbers.

Change in breeding sheep population Thus in Scotland the rate of decline increased between 2005 and 2006 and followed at 100 a similar rate into 2007. 0

0 England after showing some 1

=

recovery from FMD between

0 90 0

0 2002 and 2004 had a steep 2

x

e decline between 2004 and d

n 80 I 2005, slower decline during 2005 and 2006 and a steeper 70 decline again between 2006 2000 2001 2002 2003 2004 2005 2006 2007 and 2007. Wales has shown a Scotland England Wales Northern Ireland longer term decline but again a slowing in the rate of decline Change in number of between 2005 and 2006 but return to trend in holdings with sheep 2007. Northern Ireland has shown a steep between 2003 and 2006 decline since 2004 after a short period of relative stability between 2002 and 2004. % change Scotland (-) 4 A measure of the decline in the number of businesses involved in sheep production can Wales (-) 2.5 be taken by considering the number of N. Ireland (-) 2 holdings recording sheep in the annual June census. However, it must be recognised that England (+) 5 a holding is not the same as a business as more than one holding may be farmed by one business. Nevertheless, there has been a decline in the number of holdings with sheep farming activity in Scotland, Wales and Northern Ireland since 2003. In contrast, there has been a net increase in holdings with sheep in England although the number of flocks with more than 500 ewes decreased.

With the exception of Wales, more than half of the ewe flocks are smaller than 50 ewes. More than half the ewes are in flocks of more than 500 ewes in Scotland and Wales.

Distribution of breeding flock holdings and ewes in the United Kingdom

England Wales Scotland N. Ireland Holdings Ewes Holdings Ewes Holdings Ewes Holdings Ewes Flocksize percent <50 41 5 27 2 42 4 35 8 50-99 17 8 12 3 14 5 26 16 100-199 16 14 15 6 14 9 23 27 200-499 16 31 22 22 17 25 13 32 500-999 6 26 16 32 9 30 2 11 >1000 2 17 8 35 4 28 1 5 Av Flock 170 338 216 115

Sheep production in the UK plays a significant part in the economy of the Less Favoured Areas. Many of these areas have few alternatives to sheep production and any erosion of the sheep industry has consequent impacts on local employment and economic well being.

Importance of sheep production in UK Less favoured Areas

Proportion of land in LFA Proportion of breeding sheep in LFA Per cent Scotland 86 91 England 17 45 Wales 78 90 N Ireland 70 80 Sources: Wales – Welsh Agricultural Statistics 2006, May 2007 Welsh Assembly Government Scotland – Economic Report on Scottish Agriculture 2007 edition Scottish Executive England – An assessment of the impact of CAP reform and other key policies on upland farms and land use implications in both seriously disadvantaged and disadvantaged areas of England - Defra 2005 Northern Ireland – Agricultural census in Northern Ireland 2006 – Department of Agriculture and Rural Development 2006

Breaking down the changes in breeding sheep numbers across the constituent countries of the United Kingdom into smaller regions shows the rates of change are not consistent. In Scotland for example the highest rate of change since June 2003 has occurred in the North West of Scotland, an area of extensive hill sheep production with little alternative to sheep. In contrast, in England the greatest decline has been among the Eastern areas of the country, North East England, the East Midlands and South East England, each of these regions has a greater opportunity to grow crops than in the west of England where rates of change have been slower. In Wales the greatest rate of change has been in Pembroke and South Wales, again areas with a greater range of alternative farming enterprises to sheep than for example Powys, which had the slowest rate of change. In Northern Ireland the greatest rate of change has been in the counties of Armagh, Tyrone, Down and Londonderry, counties in which alternative land use has more possibilities.

Regional changes in breeding ewe population 2003 to 2006

Change Change Change Change % % % % thousand thousand thousand thousand change change change change Head Head Head Head Northern Scotland -5.99 -239 England -3.91 -293 Wales -6.30 -316 -10.36 -114 Ireland North -13.35 -138 N.E Reg -5.20 -47 North West -7.68 -64 Antrim -7.30 -22 West North N. W -0.92 -3 -1.07 -15 North East -6.89 -54 Armagh -15.50 -9 East Reg South York & -0.53 -6 -3.69 -37 Powys -4.74 -87 Down -10.58 -24 East Humber South -5.93 -92 E Mid -6.18 -37 Ceredigion -7.25 -33 Fermanagh -9.11 -4 West W Mid -3.57 -39 Pembrokeshire -9.58 -14 Londonderry -11.64 -28 East -5.28 -9 Carmarthenshire -4.75 -19 Tyrone -11.70 -27 Lond -6.83 -46 South -9.51 -47 and SE S West -3.82 -63

Policy framework

Sheep producers across the UK operate within an industry support framework dominated by two measures. Firstly, measures under the auspices of the Common Agricultural Policy (CAP) single payment scheme introduced as part of the 2003 mid- term review and secondly, direct regional support under the various less favoured areas (LFA) measures. Producers also have access to a complex range of environmental measures.

Following the 2003 reforms, the UK applied full decoupling across all constituent countries and chose not to make use of article 69. However, each constituent country of the United Kingdom operates slightly different models to determine the level of support for these and other measures. This discussion comments only on CAP reform measures and less favoured area support measures, which are the measures the measures that impact on the widest number of producers.

CAP reform Scotland

Scotland applied a decoupled CAP regime from 1 January 2005. The model used to determine the Single Farm Payment was the historic payment approach. Account was taken of the amount of support received over the reference period 2000-2002 and the area of land registered through the IACS process, dividing one by the other resulted in a payment per hectare. The number of entitlements a producer received was the average number of hectares farmed during the reference period.

Less favoured area measures in Scotland

Those farming Less Favoured Area land are also eligible for an area support payment under the guise of the Less Favoured Area Support Scheme. Despite being paid on an area basis, this remains a degree of coupling by requiring applicants to farm cattle and or sheep although it does not stipulate how many. Nevertheless, historic stocking density influences the rate of payment, on the basis of grazing density in 2001, and the applicant must have sufficient stock grazing the land to demonstrate he is actively farming the land. Equally it is influenced by the degree of “fragility” of the area in which the farm is located with remote Islands being described as “very fragile” and mainland less favoured areas with lower transport costs as “standard” areas.

CAP Reform in England

From the beginning of 2005, England implemented full decoupling of livestock subsidies from the number of animals farmed. Instead livestock producers would receive subsidies as a single payment based on two elements. One element is calculated on what historical payments were received during 2000 to 2002. The other element is based on a flat rate payment determined by the type of area farmed, eg. moorland, disadvantaged land and lowland.

In the first year of the Single Payment, the historical element made up 90% of the subsidy and 10% from the flat rate element. Over the years to 2012, the historical proportion will reduce so that by 2012 the Single Payment will be entirely paid on a flat rate area based subsidy.

Less favoured area measures in England:-

Less favoured area support measures are made through the Hill Farm Allowance scheme (HFA). For HFA, claimants must have submitted a Single Payment Scheme (SPS) application form and have indicated their wish to claim. Livestock numbers declared on your SPS claim form are used to establish whether the minimum stocking rate for the scheme has been met. Suckler cow and/or sheep producers who have at least 10 ha of eligible forage area in the English LFAs (including common land). Holdings with less than 10 ha of English LFA land are not eligible. Livestock must be kept at a minimum stocking density of 0.15 livestock units per hectare (LU/ha).

There are different payment rates for: land within the Moorland Line, and LFA land outside the Moorland line that will be split by Severely Disadvantaged Area (SDA), Disadvantaged Area (DA) and Common Land.

Producers receive the full payment rate for their first 350 hectares of eligible land. Between 351-700 hectares, producers receive half rates. No payments are made on land held over 700 ha.

CAP Reform in Wales

Wales also applied a decoupled CAP regime from 01 January 2005 using the ‘historic’ payment model to determine the Single Farm Payment for the majority of farmers. Entitlements have been calculated based on the area of land that they farmed and the subsidies they received in the 2000 to 2002 “reference period”.

Less favoured area measures in Wales

In Wales, the Tir Mynydd scheme supports and maintains livestock production in the less productive farming areas of Wales. Introduced in 1999 it is an area-based payment for sheep and/or suckler cow producers who farm at least 6 hectares of LFA land.

The Tir Mynydd scheme for 2007 and 2008 comprises an area based payment per hectare of eligible forage land that lies within the Wales LFA. Payments are calculated with a 60/40-payment differential between the SDA and the DA. This is an interim measure with future amendment subject to the Commission's approval of the RDP (expected in March 2008); proposals from the Commission on criteria for re- designating LFA boundaries in 2010; and the outcome to the comprehensive and ongoing review of Axis 2 measures under the RDP, for implementation in 2010.

CAP Reform in Northern Ireland

The SFP method of calculation in Northern Ireland is based on a combination of an area component and an historical component, which will not be altered during the duration of the mid-term review.

The area component is funded from some of the decoupled subsidy schemes in varying proportions: 50% of the decoupled Beef Special Premium, 50% of the decoupled Slaughter Premium, 35% of the decoupled Sheep Annual Premium, 80% of the decoupled LFA Sheep Supplement and 20% of the decoupled Arable Area Payments.

The historical component is funded from the balance of the above schemes plus 100% of the decoupled Suckler Cow Premium, 100% of the decoupled Extensification Premium and 100% of the decoupled Dairy Premium Schemes.

Over the whole of Northern Ireland the area component averages out at 20% of the total SFP, and the historical component 80%, although each individual producer will not get this exact ratio.

Less favoured area measures in Northern Ireland

These are made through the Less Favoured Area Compensatory Allowances (LFACA) Scheme. Claimants must have at least 3ha of eligible forage land in the LFA and agree to farm it for five years with a regular breeding herd of suckler cows rearing calves for beef, or a flock in which the ewes have lambed at least once or are aged at least one year, or a breeding herd of farmed deer, or a herd of goats kept for milk or fibre production, or a combination of these livestock.

The stocking density must have been at least 0.2 livestock units (LU)/ha throughout the entire seven month period from 1 April to 31 October. An exemption is granted from the stocking density requirement if an Agri-environment scheme (AES) is in place that requires a stocking density of less than 0.2 LU/ha, in which case the AES maximum stocking density replaces the LFACA minimum stocking density.

The payment rate is influence by the degree of “disadvantage” of the area in which the eligible land is located. Farmers will receive approximately twice the payment for each hectare in Severely Disadvantaged Areas (SDA) than they will for each hectare in Disadvantaged Areas (DA) or on Common Land (CL). A number of cross- compliance standards must also be met.

The structure of the sheep processing sector

As the size of the GB breeding flock has declined, so too has the number of abattoirs slaughtering sheep and lambs. A big decline occurred during 2001, the year of significant sheep losses through Foot and Mouth Disease. However, there has also been a significant decline between 2003 and 2005 as the production industry adjusted to the 2003 CAP reforms.

The rate of change has been Number of Abattoirs in Great Britain killing sheep greatest in England which has seen 20% of sheep abattoirs 320 close since 2000, Wales has

300 seen a reduction of 17%, although numbers have varied 280 from year to year. Scotland saw a reduction of 16% in the 260 number of abattoirs handling sheep since 2000. In Scotland 240 all the change has taken place since 2003 while in England the 220 change has been steady over

200 the whole period. In Northern 2000 2001 2002 2003 2004 2005 2006 2007 Ireland the number of abattoirs Source: MLC slaughtering sheep reduced from 8 to 5 between 2002 and

Sheep slaughtering in the UK 2006, but went back up to 7 in 2007.

17000 2700 d n s a b 16000 2500 s

m In general terms the decline in e a l

15000 w

d 2300 e abattoir numbers has occurred

a d s

e 14000 a m

h among the smaller abattoirs, e 2100 a d h r

13000 n

d those slaughtering fewer than a

1900 n s

12000 a u

s 50,000 head, particularly since o 1700 u h

11000 o t

h 2003. However, in England the 10000 1500 t largest proportional rate of 20002001200220032004200520062007 decline since 2003 has occurred Source: Defra Lambs Ewes and Rams among medium sized abattoirs handling between 100,000 and 250,000 head per year.

Slaughter statistics show the impact of FMD during 2001 after which there was some recovery. Ewe and ram slaughterings increased substantially during 2005 and 2006 as flock reductions took place following the implementation on 1 January 2005 of the CAP mid-term review. Lamb slaughtering increased in 2005 as fewer ewe lambs were needed for replacements but subsequently declined during 2006 as the smaller flocksize impacted on the size of the lamb crop. A further decline in lamb slaughterings occurred in 2007.

The increase in slaughter numbers since FMD in 2001 has resulted in growth in the quantity of sheepmeat produced in the UK, but the pre-FMD level has not been restored because of the industry contraction that has taken place. In 2006, some 330,000 tonnes of sheepmeat was produced, almost 10% more than in 2003. However, some of this increase is due to flock liquidation and production will decline in the future as slaughter patterns adjust to the smaller national flock size.

UK sales of sheepmeat

UK distribution of sheepmeat sales Retail supermarkets are the biggest Export Supermarkets 27% fresh frozen outlets for sheepmeat produced in 39% the UK followed by the export market.

Foodservice Supermarkets tend to use the 10% British or New Zealand brand Retail Butchers although the use of Scotch and processed fresh/frozen 10% 8% Welsh PGI labelling is increasing. Other fresh/frozen Equally differentiation of higher 6% value lines is also beginning. Initially this tended to be the use of the organic label but supermarket UK quarterly consumption of lamb 2000 to Date own label “good for you” premium 110.0 brands are emerging.

100.0 s

e Domestic consumption and n n o t pricing d 90.0 n a s

u o h T 80.0 UK sheepmeat consumption fell dramatically as production declined 70.0 following FMD but has since then 1 3 1 3 1 3 1 3 1 3 1 3 1 3 1 3 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q shown some growth. However,

Lamb consumption Trend in consumption consumption is below the levels of the early 1990’s. As the size of the UK sheep flock has declined, the level of self-sufficiency has fallen from the broadly 100% at the turn of the millennium to around 85% currently.

Estimates made by the MLC (2007) indicate that 73% of sheepmeat consumed in the UK during 2006 was sold as fresh/frozen cuts of meat in the retail market. A further 14% is used by the foodservice sector and 13% is sold as processed, added value, products in the retail market.

Retail sales are dominated by the UK supermarket sector who supply 72% of household purchases of sheepmeat with butchers supplying 16% of household purchases. As UK supplies decline or come under greater threat some supermarkets are looking at ways of managing supplies to consumers. These initiatives include greater use of imports and closer links to suppliers which in some cases include an element of producer price guarantee – Waitrose (2007), Marks and Spencer (2007) – however these initiatives involve a very limited number of producers although there is an expectation that the numbers involved will increase over the next two years.

Producer Price as Percentage of Retail Price for Lamb Notwithstanding these new 2002 to date initiatives from some

65% supermarkets, the proportion of the average retail price for a 60% lamb carcase received by 55% producers has fallen steadily 50% since 2002. However, it must 45% be remembered that the 40% carcase balance used by 35% retailers changes during the 30% year and the estimate given in 2 2 3 3 4 4 5 5 6 6 7 7 0 0 0 0 0 0 0 0 0 0 0 0 - l- - l- - l- - l- - l- - l- n u n u n u n u n u n u Figure 1 does not fully reflect Ja J Ja J Ja J Ja J Ja J Ja J Source:MLC this seasonal change in carcase balance.

Index of producer and retail price for lamb Since 2003 the UK Office of 140 National Statistics record of 130

0 retail prices shows little 0 1 120 movement in lamb price while =

2 110 0 producer prices have tended to 0 2

n 100 trend downwards. a J 90

80 JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASON International Trade 2003 2004 2005 2006 2007

Retail Producer The UK sheep industry benefits Source: ONS from a significant element of intra community trade. Over the past three years UK sheepmeat processors have, on average, exported some 86,000 tonnes of meat, around 28% of annual production with an annual value of around £230m. More than 70% of the trade is with France where the UK competes with Ireland and New Zealand.

Equally, the United Kingdom is a major importer of sheepmeat, and during 2006 imported some 114,000 tonnes of sheep meat with a value of around £282m. Almost all of the imports come from New Zealand and Australia who benefit from favourable trade arrangements under the Tariff Rate Quota Agreements (TRQ) existing between these countries and the European Union.

Current tariff levels outside of the TRQ are sufficient to make the importation of sheep meat uneconomic and offer some protection to UK producers. Consequently any moves to reduce tariff levels or increase TRQ arrangements in the context of World Trade Organisation (WTO) reforms have potential to de-stabilise the UK sheepmeat market.

Additionally, sheep meat has to compete with other red meats for consumer spend. Consequently, anything that changes the relative consumer price of competing meats is a concern to the industry. Therefore, any measures introduced as a consequence of WTO reform that increases the competitiveness of beef, pigmeat and poultry will have implications for the sheep industry.

Enterprise profitability

The biggest challenge facing the UK sheep industry is that of achieving a fair return for the farmer. The advent of de-coupling and the removal of the need to keep animals to secure single farm premium payments has changed the operating environment of UK sheep producers. With coupled support payments sheep enterprise return positive net margins, without them they do not. The charts below illustrate the size of the challenge facing the UK industry. They summarise the results of a number of surveys seeking to estimate the Net Margin from sheep enterprises in England, Scotland and Northern Ireland. Nevertheless, they do not include a value for unpaid family labour nor make a full estimate of the sum needed to give a reasonable level of return on the capital invested in the business.

Enterprise profitability Enterprise profitability Lowground Ewe Flocks - England Less Favoured Area Ewe Flocks - England

10 15 5 10 e 0 e 5 w w e e r

-5 r 0 e e p p

£ -10 -5 £ -15 -10 -20 -15 2003 2004 2005 2006 2003 2004 2005 2006 Lamb crop year Lamb crop year

Net margin Net Margin inc. coupled support Net margin Net Margin inc. coupled support Source: EBLEX

Enterprise profitability Enterprise profitability Lowground Ewe Flocks - Scotland Less Favoured Area Upland Ewe Flocks - Scotland

25 20 20 15 15 e

e 10 w 10 w e e

5 r 5 r e e 0 p p

0 £ -5 £ -5 -10 -10 -15 -15 2003 2004 2005 2006 2003 2004 2005 2006 Lamb crop year Lamb crop year

Net margin Net Margin inc. coupled support Net margin Net Margin inc. coupled support

Enterprise profitability Less Favoured Area Hill Ewe Flocks - Scotland

10 5 0 e

w -5 e

r -10 e p

-15 £ -20 -25 -30 2003 2004 2005 2006 Lamb crop year

Net margin Net Margin inc. coupled support Source: QMS

Enterprise profitability Enterprise profitability Lowground Ewe Flocks - N Ireland Less Favoured Area Upland Ewe Flocks - N. Ireland

15 30 10 20

5 e

w 10 0 e

r

-5 e p 0

-10 £ -10 -15 -20 -20 -25 2003 2004 2005 2006 2003 2004 2005 2006 Lamb crop year

Net margin Net Margin inc. coupled support Net margin Net Margin inc. coupled support

Enterprise profitability Less Favoured Area Hill Ewe Flocks - N. Ireland

10 5

e 0 w

e -5

r

e -10 p

£ -15 -20 -25 2003 2004 2005 2006 Lamb crop year

Net margin Net Margin inc. coupled support

Source: Livestock and Meat Commission Northern Ireland

Although net margin data is not available from Wales, gross margin analysis shows a similar pattern of falling returns from the market place.

Enterprise profitability Enterprise profitability Less Favoured Area Upland Ewe Flocks - Wales Less Favoured Area Hill Ewe Flocks - Wales

60 40 50 35 30 e e 40 w w 25 e e

r r 30 20 e e p p

15

20 £ £ 10 10 5 0 0 2003 2004 2005 2006 2003 2004 2005 2006 Lamb crop year Lamb crop year

Gross margin Gross Margin inc. coupled support Gross margin Gross Margin inc. coupled support

Source: Farm Business Survey in Wales

Other issues impacting on sheep production in the UK

Labour

A contributory factor to the decline in the sheep population is the aging workforce in agriculture and the lack of new entrants. Furthermore, sheep farming is a very physically demanding enterprise offering little opportunity for capital investment in labour saving devices, which further dissuades young people from entering the industry. The consequence of this is a loss of skills required for sheep production.

Legislative burden

The UK farming industry carries a high level of legislative burden for which many in the industry see little value and which in some cases impose increased work with no financial reward. Examples include disposal of fallen stock, disposal of sheep dip, animal identification. Changes proposed to sheep identification involving individual identification and use of electronic identification is an example of a cost imposed on the industry, which brings no return in the market place.

In the processing sector there are a number of measures related to TSEs in sheep which should be reviewed on the basis of the developing science of TSEs and the risks involved.

Bio-security risks

The past twelve months have highlighted the animal health risks associated with ruminant livestock production in the UK. Controls over foot and mouth disease impacted adversely on sheep farming activities resulting in added cost and lost revenue from the market place. This has caused many to question their future in sheep production. The consequences on animal efficiency from blue tongue are well recognised and a major concern to the industry.

The movement of some animal diseases, although minimised by good levels of individual producer bio-security, can occur because of actions outside the control of an individual farmer for example through meteorological conditions, the movement of wildlife or through public access to land. As a consequence, many of these risks are difficult to insure against and thus the economic consequences are carried as uninsured losses by many in the industry putting at risk their long term viability when disease transmitted in these ways break out.

Wool and Skin prices

Wool is regarded as an industrial product and not within the scope of agricultural policy. However, wool production is an inevitable by-product of sheep farming. In recent years its value has declined significantly such that for many producers instead of making a contribution to sheep farm profitability it now reduces profitability as for many UK sheep farmers, the cost of harvesting and storing wool is greater than the return from selling wool.

The fall in sheep skin prices is reducing market returns for processors and acting as a drag on what they can pay producers.

Sheep production and the environment

It is generally accepted that sheep farming plays an important part in creating and maintaining the landscape characteristics of many parts of the UK including valuable high nature conservation areas of heaths, moors, mountain grazings, saltmarshes and costal fringes.

Over the past couple of decades concerns have been expressed by many conservation agencies that UK bio-diversity and landscapes were being badly impacted by over grazing of sheep. These concerns were often raised as a consequence of localised severe and in some case irreversible, changes to vegetation and soil (Poux et al 2006). Those sheep farming systems that have had a negative impact have however, often been those where shepherding has been reduced to a minimum.

More recently however, new concerns are being raised over the lack of grazing on semi-natural vegetation. Finding farmers who have sufficient appropriate livestock to graze these areas is becoming an increasing issue. Lack of grazing is beginning to become an issue in the context of the recent policy changes that are expected to lead to abandonment of sheep farming in the uplands. In parts of Wales and England (e.g. coastal areas of south and west Wales and south-west England) there is concern about the lack of livestock grazing, primarily by cattle but also by sheep, on areas of high nature conservation importance such as commons and coastal heaths. In England there are estimated to be 22,000 hectares of special conservation sites that are under-grazed because there are no longer any livestock farmers able or prepared to graze them with their stock. So the environmental issue of “lack of sheep grazing” may in time become more important (both in the lowlands and the uplands) than the current emphasis on excessive sheep numbers in some areas. (Poux et al 2006)

For sheep production to provide maximum environmental benefit a number of challenges need to be recognised including;

• A need to maintain grazing systems on the most marginal land within regions; • A need to specifically support sheep farming with environmental benefits, i.e. grazing on-farm and off-farm according to extensive patterns; • A need to favour shepherding (an integral element of the most environmentally valuable farming systems, and one which is becoming economically unviable). • A need to favour appropriate stocking levels and grazing regimes (minimum and maximum densities, seasonal movements of stock where environmentally beneficial)

Options for sheep meat policy in the UK

The challenges to be addressed can be summarised as:

• Achieving a profitable production system across the whole UK production chain; • Preventing land abandonment in the most fragile areas; • Preserving a critical mass for UK processors; • Maintain a viable economic community in fragile areas with few alternatives to sheep production; • Stimulating demand for sheepmeat across the UK and Europe; • Achieving an equitable market place with regard to production standards • Addressing concerns over health and welfare • Minimising bureaucratic burden

Market support measures

Market support measures have the disadvantage of masking the signals from the market place over product quality and changing consumer demands. They can also act as a break on structural change which would improve the business efficiency of the sector. In deed following from a recent study of the red meat industry in Northern Ireland (Northern Ireland Red Meat Industry Task Force: Strategy Review – LMC Northern Ireland 2007) some retailers made clear reference to not supporting an inefficient supply chain.

Nevertheless, consideration should be given to two elements of the market place firstly, short term market support measures to encourage high quality meat production and adaptation to market signals and secondly, a market failure measure.

Support for high quality production could be addressed through the use of Article 69 to make a headage payment based on lambs reaching or exceeding an industry standard for example R3L carcase grades or better.

An alternative method would be to develop a matrix of technical measures which would lead to improved production efficiency and product quality. These may include:

• Use of high quality genetic material – rams of high EBV’s; • Operation of a sheep health plan and high bio-security measures; • Attendance of staff at continuing professional development courses; • Etc.

By combining together some or all of the above a producer would access “business development” investment support.

A sudden and unexpected disruption to regional markets, as occurred in Great Britain following confirmation of FMD during 2007, can have serious consequences for the industry. Currently, aid to private storage (PSA) is the only available measure to support such a market failure. There are a number of weaknesses in this measure, including the speed with which it can be implemented. This measure should be reviewed and improved to provide a support mechanism for market failures that occur largely as a consequence of something outside the control of an individual producer, for example market constraints imposed as a control measure during animal disease outbreaks. Options may include co-funding of a market insurance programme.

The long term future of the sector will be determined by growing consumer demand for sheepmeat. In the UK, producers currently pay a promotional levy but a wider investment in pan-european marketing is required. Consequently it is recommended that an investment is made by the Commission in a pan-European generic lamb and sheepmeat marketing campaign. This should be targeted in particular at encouraging younger consumers to eat sheepmeat. Such a measure could be complimented by investment aid for new product development.

If the industry is to benefit from generic advertising of European sheepmeat it is important that the product is easily identified on the retail shelf and in food service outlets. The use of PGI’s are a useful starting point in this objective but country of origin labelling across retail and foodservice should be improved.

Animal health, welfare and traceability measures

A full cost benefit and risk analysis is need with regard to animal health, welfare and traceability proposals. In many cases the benefit of such measures relates more to public health than animal health. Where the measures have clear public good benefit then public investment is justified.

Nevertheless, it is in producers’ interests to maintain high animal health and welfare standards as they help to improve production efficiency and product quality. In this regard support for preparation and adoption of animal health and bio-security plans should be supported, see above.

However, several proposals that are under consideration with regard to traceability, proposed as an element of a disease control programme and to protect consumers from zoonosis, fail to recognise the practicalities of large scale extensive production systems found in many parts of northern Europe and the UK and Ireland in particular. These proposals should be re-assessed particularly with regard to risk management. Where they are considered to be necessary then some element of on- going public investment is urged.

One of the major concerns of the industry is the impact of disease outbreaks that are outside the control of individual farm bio-security measures. Disease brought on to the farm by metrological conditions, wild life or the result of public access. This issue affects all livestock sectors not just the sheep and goat sector nevertheless, the Commission should look anew at this issue.

Economic development measures

Sheep and goat production has particular importance to some of the most fragile economic communities of the UK. An aging workforce and low returns are hindering the development of the industry. In some cases producers are exiting the industry with nobody replacing them. Consideration should be given to supporting industry restructuring measures, encouraging new business models to encourage new entrants, allow business amalgamations and create economically viable flock sizes.

Areas with few or no alternatives to sheep farming could be zoned as fragile areas and targeted coupled support for sheep production should be made available in these areas – see also environmental protection measures below.

A challenge for both the primary producer and processor is the availability of skilled workers. Furthermore, the adoption of new technologies can lead to significant improvement in economic efficiency. A challenge for many small scale businesses is to get new knowledge transferred in to practice. Investment in skills training and technical updating is likely to result in production efficiencies. For some businesses one of the challenges of skills training is finding and paying for the replacement labour need while workers are on training courses. Investment aid for skills development should be made widely available to the primary and processing industries. Consideration should also be given for support to offset the costs of attending training courses including the cost of replacement labour.

Business development support should be made available for innovative business models using for example traditional breeds, local identities etc. as the foundation of small scale marketing initiatives.

Land management and environmental protection measures

The importance of managed grazing by sheep to maintaining valuable, and in some areas unique, eco-systems is increasingly being recognised as the effects of undergrazing become apparent.

Support should be made available for production systems in these environmentally sensitive areas that adopt traditional farming systems that enhance and manage fragile eco-systems. Protocols should be devised relating to for example seasonal grazing densities and traditional breeds that have been shown to benefit the eco- systems.

References

Waitrose (2007) - Waitrose press release 9 October 2007 “Waitrose supports beef and lamb farmers” http://www.waitrose.presscentre.com/content/default.asp?NewsAreaID=2&LocaleID =2&RunSearch=True

Marks and Spencer (2007) - Marks and Spencer Lamb Pledge October 2007 (http://www.meatinfo.co.uk/articles/52322/M/S-pledge-to-lamb- farmers.aspx?categoryid=9045 )

MLC (2007) - UK yearbook 2007 – meat and livestock; Meat and livestock Commission 2007

ONS (2007) - Focus on consumer price indices,.. Office of National

Cooper and Thomas (1991) - Profitable sheep farming - Farming Press Books, UK

QMS (2007) – Cattle and Sheep Enterprise Profitability in Scotland – results for 2006. Quality Meat Scotland

EBLEX (2007) - Business pointers for livestock enterprises 2007; Farmers Weekly Group, UK

Welsh Assembly Government (2007) – Welsh Agricultural Statistics 2006

Scottish Executive (2007) - Scotland – Economic Report on Scottish Agriculture 2007 edition

Poux X., Beaufoy G., Bignal E., Hadjigeorgiou I., Romain B. and Sesmel P. (2006) Study on environmental consequences of sheep and goat farming and of the sheep and goat premium system European Commission July 2006

DARD (2006) – Agricultural census in Northern Ireland 2006 – Northern Ireland Department of Agriculture and Rural Development 2006

Defra (2005) - An assessment of the impact of CAP reform and other key policies on upland farms and land use implications in both seriously disadvantaged and disadvantaged areas of England

Ashworth S. W (1998) Elpen; proceedings from two international workshops: ed. Williams S and Wright I.A. .MLURI 1998 http://www.macaulay.ac.uk/elpen/index1.htm

Organisations consulted

National Sheep Association National Farmers Union England and Wales National Farmers Union Scotland National Farmers Union Wales

British Meat Processors Association International Meat Traders Association Scottish Meat Wholesalers Association

Waitrose Supermarkets

European Forum on Nature Conservation and Pastrolism.

Quality Meat Scotland HCC Meat and Livestock Commission Livestock and Meat Commission Quality Meat Scotland

The Future of the sheep and goat meat sector in Europe A United Kingdom perspective

Report summary Stuart Ashworth

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% change in holdings with sheep 2003 to 2006 England +5

Wales -2.5

Scotland -4

N Ireland -2

January 08 11.. SSpecpecifiificciittiieses ooff tthehe nanatitionaonall conconttexextt ––pprroducoductitionon

% land in less % of ewes in less favoured areas favoured areas England 17 45

Wales 78 90

Scotland 86 91

N Ireland 70 80

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January 08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeamam ••TThehe iindundussttryry ––SScocottllaandnd anandd WWaalleses ooppeerraattee PPGIGI ffoorr llaammbb ––EEngngllaandnd aandnd NNoorrtthheerrnn IIrreellaanndd pprroommoottee llooccaall oorr rreeggiioonnaall iiddeennttiittyy bubutt wwiitthhououtt PPGIGI ––AAllll pprroommoottee oonn pprroovevennaannccee aanndd asasssuurreedd pprroodduucctitionon pprrooccesessseses ––SSoommee pprroocecesssosorrss aarree iinntteeggrraatteedd susupppplliieerrss ttoo SSuuppeermrmaarrkkeettss wwiitthh coconnssiidederraabbllee cucuttttiinngg ccaappaacciittyy andand rreettaailil ppaacckkiing.ng. ––RReeaaddyy mmeeaallss eettcc.. ttendend ttoo bebe iinn ssppeecciiaalliisstt ooppeerraattoorrss uussiinngg mmananyy pprrooducductsts ––EExxppoorrtteerrss tteenndd ttoo sesellll cacarrccasaseses

January 08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeamam ••TThehe rerettaaililersers ––MMaarrkkeett sshhaarree ooff bubuttccheherrss aanndd mmuullttiippllee rreettaailileersrs ––BBrraannddiinngg ssttrraattegegyy ((vvaalluuee,, ssttananddaarrdd,, ttopop qquuaalliittyy……oottheher)r) andand ddiiffffeerreenncceses iinn pprriices.ces. ––MMananyy susuppeerrmmaarrkekettss mmaakkee conconssiiddeerrababllee sseaeasosonnaall uussee ooff NNZZ pprrooducductt ffrroomm JJaannuauarryy ttoo MMaayy ––bubutt llaabebelllilingng nnoott aallwwayayss cclleaearr aanndd coco--mmiingnglliingng oonn sshehellvveses iiss ccoommmmonon ppllaacce.e.

January 08 PPeerrcecentnt ofof rreettaaiill sasalleses 20062006

SSouourrcece:: MMLCLC

2233.5.5 1188.5.5 1155.2.2

1100.6.6 88.6.6 77.3.3 55.7.7 44.3.3 33 33.2.2

FF/C/C FFrzrz OOtthherer FF/F/F LLaambmb LLegeg SShhoouullddererSStteewwiingng MMiinncece OOtthherer rreaeadydy rreeaadydy cchhoopsps sstteakeak rrooaastst rrooaastst mmeeatat ccuutsts mmeaealsls mmeeaalsls

January 08 22.. SSppececiiffiicciittiieses ofof tthhee nnaattiiononaall ccoonntteexxtt –– ddoowwnnssttrreeamam ••TThehe rerettaaililersers ––MMaarrkkeett sshhaarree ooff bubuttccheherrss aanndd mmuullttiippllee rreettaailileersrs ••MMuullttiippllee rreettaaiilleerrss iinnccrreeaassiinngg ––6868..11 %% iinn 22000055 ttoo 7474..88%% iinn 22000707 ••BBuuttccheherrss ddeecclliinniinngg ––1188..44%% iinn 22000055 ttoo 1414..55%% iinn 22000077 ––bubutt rreeggiioonn vvaarriiaattiioonn iinn mmoorree rruurraall zzoonneses ––BBrraannddiinngg ssttrraattegyegy ••TTeenndsds ttoo bbee BBrriittiishsh oorr NNeeww ZZeeaallaandnd bbuutt ssoommee rreeggiioonnaall iiddenenttiittyy ususiinngg PPGIGI oorr oottheherr ququaalliittyy llababelel ••SSllooww iinnttrroodducuctitionon ooff pprreemmiiuumm lliinneses ee..gg.. oorrggaanniicc,, ““ggooodod ffoorr yyouou””popossiititioonniinngg asas pprreemmiiuumm bbrraannd.d. ––MMananyy susuppeerrmmaarrkekettss mmaakkee conconssiiddeerrababllee sseaeasosonnaall uussee ooff NNZZ pprrooducductt ffrroomm JJaannuauarryy ttoo MMaayy ––bubutt llaabebelllilingng nnoott aallwwayayss cclleaearr aanndd coco--mmiingnglliingng oonn sshehellvveses occuoccursrs

January 08 WWeakeaknnesessseses aanndd ddiiffffiiccuullttiieses ffoorr pprrooduducceersrs

• Low market returns and decoupled support leading to: • Lack of confidence and declining sheep numbers • Excessive legislative burden which has not gone through an effective cost benefit analysis –adding cost with no financial reward e.g. • Animal Identification • Disposal of fallen stock • Haulage certificates

– And some which have more justification but add cost for no reward e.g: • Clean livestock at slaughter; • Safe disposal of dips and medicines

January 08 44.. WWeakeaknnessesesses aanndd ddiiffffiiccuullttiieses ffoorr pprrooduducceersrs

• Lack of new entrants and of skilled workers • Competition from low priced competing suppliers • Competition from low priced alternative meats: • Potentially made worse by WTO agreements • Low price for wool • Exchange rate variation

January 08 44.. WWeakeaknnessesesses aanndd ddiiffffiiccuullttiieses ffoorr pprroocescesssoorsrs • Power of supermarket buyers • High on costs at plants e.g. • TSE testing charges • Meat Inspection Charges • Environmental pollution control measures • Splitting carcases over twelve months of age • Low returns from fifth quarter • Skins • Blood and • Declining supplies • Improving skill levels among plant staff/recruiting skilled staff January 08 55.. RRececoommmmeendndaattiioonnss --uuppssttrreameam • Farming – Investment in technical innovation and skills: • Purchase of high genetic stock –husbandry models etc. • Animal husbandry training –practical skills – Investment for new entrants and business restructuring – Investment to produce what consumers require • In LFA’sthis may be environment and social cohesion • In better producing areas this may be for producing high quality product (but could be perceived as market interference and did not get universal support) –using Article 69 –deficiency payment – Root and branch review of legislative burden to remove unjustified measures and if measures needed for public good to make investment to reflect this. – Market failure measures -risk management

January 08 66.. RRececoommmmeendndaattiioonnss --DDoowwnnssttrreameam

• Industry and processing – Investment in product innovation and new product development – Investment in practical skills and support for job enrichment (secure a sufficient and skilled workforce) – Root and branch review of legislative burden to remove unjustified measures and if measures needed for public good to make investment to reflect this

• Retailing – Investment in generic and regional promotion building on PGI and other unique selling points e.g nutritional value of product, consumer perception of lamb, etc. – Improve quality of labelling (e.g. Country of Origin) across allsectors (retail and foodservice) and carried into added value products

January 08