Industry Insight: average EU coupled payment of €89/head

Twenty-three out of the 28 EU members will pay up to €1.7bn on 19.3m head of cattle in 2019, which is an average of €89 per head. These payments are made under the voluntary coupled support (VCS) scheme where countries can opt to use a percentage of their annual ceiling for direct payments as a VCS. Normally this is limited to 8+2% of the annual national ceiling available for direct payments though this can be increased to 13+2% under certain conditions. Any further increase is subject to Commission approval for very specific conditions.

Only five countries, including Ireland, have opted out of the VCS for beef. Of these, only Ireland and Germany are substantial beef producers. The remaining countries are Cyprus, Luxembourg and Estonia. The VCS varies in how it is used, with some countries, having multiple measures for payment and different payments for rates within countries for defined geographical areas.

One such example is Scotland, which is the only region of the UK to avail of the scheme. Overall, Scottish beef producers receive on average €105 for beef-bred calf. However, this rate varies from €99 per head on the Scottish mainland compared with €159 paid on the 41,528 calves that come from the offshore islands in Scotland.

Big differences in amounts paid

Overall, there are 50 different schemes spread across the 23 member states that use VCS to support beef production.

Finland, with nine different schemes spread across just over 260,000 cattle, has the most.

These are made up by a combination of regional payments and payments on cows as well as a fattening premium and a dairy cow heifer premium.

Average rates in member states vary from a low of €36 per head in Austria to €360 per head on the 35,000 cattle that are eligible in Romania.

When the payment of €1.7bn is averaged across the 19.3m cattle, it works out at €89 per head.

In terms of where the €1.7bn is spent in the EU, France is by far the largest single recipient, taking €641m of this, spread across 4.2m cattle, averaging at €154 per head. In absolute money, Spain is the next largest user of this fund on €227.8m, though with this spread across almost 5m head, it means Spain has one of the lower average payments per animal at €46.

Do coupled payments depress prices?

One of the big arguments against coupled subsidy is that the market will pay farmers less because they know there is a subsidy in place.

EU price data comparing Irish R3 steer prices which don’t receive a coupled payment against R3 young bull prices in countries that provide coupled payments suggest the opposite in fact is the case.

For the week ending 16 April, French R3 young bull prices were €3.80/kg, 17c/kg more than Ireland’s €3.63/kg for R3 steers.

Italy was on €4.03/kg while Britain was on the equivalent of €3.99/kg last week. Scotland is comfortably the highest-priced region and it is the only region of the UK that has a coupled payment.

Germany doesn’t have a coupled payment and its R3 young bull price was the same as Ireland’s R3 steer price at €3.63/kg.

Therefore, level of coupled support appears to have little negative impact on farmgate price.