Ref. Ares(2016)365222 - 22/01/2016
Transatlantic Trade and Investment Partnership (TTIP):
Almost 50,000 jobs under threat in the French bovine meat sector
Introduction: Employment in the French bovine meat sector, the leading beef
producer in Europe
In 2015, the French bovine meat sector provided 259,800 jobs, shared between various sectors, including
livestock farming (138,000), marketing (7,100), processing (29,700) and distribution (85,000).
As wel as fulfil ing their main objective - feeding the population - these workers also make a significant
contribution to the development and dynamism of rural areas, generate economic activities (tourism, etc.)
and are key stakeholders in France’s cultural influence.
French
English
Elevage
Livestock farming
Eleveurs
Livestock farmers
Effectifs
Workers
ETP
Ful -time jobs
Mise en marché animaux
Marketing of animals
Commerçants en bestiaux
Livestock traders
Coopératives d'éleveurs
Cooperatives of livestock farmers
Transformation (entreprises privées et coopératives)
Processing (private companies and cooperatives)
Abatteurs
Slaughterers
1
Transformateurs découpe et élaboration
Processing, cutting and production
Commerçants en gros de viande (chevil ards)
Wholesale meat traders
Commercialisation viande
Sale of meat
Hypermarchés et supermarchés rayon tradition/libre-service
Hypermarkets and supermarkets (traditional/self-service
sections)
Restaurateurs (collectivités ou privés)
Restaurant owners (private or community caterers)
Boucheries et triperies traditionnel es (artisans)
Traditional butchers and tripe shops (artisans)
Consommation
Consumption
Consommateurs
Consumers
In its study “Jobs connected to French livestock farming”, the Scientific Interest Group GIS Elevage
Demain (Livestock farming tomorrow) offers an in-depth analysis of the jobs which depend directly on
livestock farming in France: these represent 183,000 full-time jobs, involving 236,300 workers (see
diagram on the following page).
2
183,000 full-time jobs are dependent on French beef farming
(“Jobs connected to French livestock farming” study, scientific interest group
GIS Elevage demain,
2015)
Animal feed: 7,700 full-time
jobs
183,000 ful -time jobs depend on
Manufacturers of compound
French beef farming
animal feed, supplements, by-
Total number of ful -time jobs in
products, transport, etc.
these sectors: 339,000
Sector total: 22,000 ful -time
jobs
Other goods and services:
13,500 ful -time jobs
Equipment, buildings, animal
health, genetics and
performance, etc.
Sector total: 59,700 ful -time
jobs
Public and para-public
services
7,300 ful -time jobs
Administration, research,
education
Sector total: 21,900 ful -
time jobs
Collection, processing and
[Central circle]
wholesale: 34,600 ful -time jobs
Bovine meat farming: 104,000
Slaughter, cutting, livestock
ful -time jobs
traders, wholesale meat traders,
Sector total: 203,000 ful -time
producer organisations, storage,
jobs
by-product management,
industry suppliers, animal
transport
Sector total: 171,200 ful -time
jobs
Distribution: 15,900 ful -time
jobs
Artisan butchers and
delicatessens, supermarket
butchers, transport of end
products
Sector total: 64,300 ful -time
jobs
3
I - “Before TTIP”: companies in jeopardy, struggling for competitiveness
1 - French beef producers in serious difficulty
Economically, workers in the French bovine meat sector are on the brink: closures of suckler farms and
slaughterhouses have increased over the last 5 years throughout the country.
In 2013, the annual pre-tax profits of beef farmers hovered between €10,000 and €15,000 net and
26.5% of
these farms had annual pre-tax profits of below €10,000.
2 - Profitability relies heavily on the sale of loin
The consumption of beef is radically different between Europe and USA: although demand for minced beef
is high in USA, the sale of prime cuts (such as loin steak) remains lukewarm. However,
these cuts are
particularly popular in Europe, especially in France, making them by far the most profitable products for
French producers.
Nevertheless, the European market for loin from suckling cattle is particularly narrow: according to the
French Livestock Institute (L’Institut de l’Elevage), it is estimated to only represent 400,000 tonnes
(Source: Eurostat).
3 - Current American exports to the EU directly target the loin market.
This difference in habits regarding the consumption of beef on either side of the Atlantic has inevitably led
to American producers exporting their loin to the European Union.
As of today, imports of beef from USA - notably as part of the Hilton and the “High quality beef » (HQB)
quota1 -
are made up of 75% loin2.
The European market - and more specifical y the French market - is al the more attractive to Americans
since their production methods give them a major competitive advantage over French producers.
The reasons for this competitiveness gulf between European and American loin are mainly structural: whilst
European beef farms are, in the large majority of cases, family businesses with an average of 61 LU
(Livestock Units) per farm, mainly grass-fed as part of long production cycles, in the USA 2/3 of American
cows are fed using industrial methods in “feedlots” (see note attached
“Transatlantic Trade and Investment
Partnership: Towards a new model of bovine meat production in Europe?”)
1 Issued from the 2009 Memorandum of Understanding (MoU) between the EU and the US.
2 Estimate from French Livestock Institute (
L’Institut de l’Elevage Français)
4
II - “After-TTIP” according to estimates carried out by the sector: around 50,000
workers in the French bovine meat sector will be forced out of business due to
competition from America.
1 - The American price, soon to become the benchmark on the European market?
Although imports of American beef is currently limited and the price of this meat is relatively high due to its
rarity, a large-scale opening of the European beef market through TTIP (and future free-trade agreements
currently being negotiated with the EU’s other American partners) could have a significant destabilising
effect on prices in this market.
Indeed, according to our estimates:
! Given the duty free quota on beef already agreed with Canada (65,000 tonnes)
and because USA
produces 10 times more and exports 25 times more beef to the EU, a particularly high quota could
be granted to them, in accordance with the opening of 300,000 tonnes to be potential y handed
over to exporters from third countries as part of the 2008 WTO project.
! Because the European market for loin from suckling cattle is estimated at 400,000 tonnes, it could
be dictated by the American price if it is inundated with American imports.
In the event of USA
being granted a large duty free quota as part of TTIP, we have estimated this price at €8.60/kg
cwe (carcass weight equivalent)3 (wholesale price estimated as sold in Europe). By way of a
comparison, the current standard price of 1 kg of loin produced and sold in Europe is €13.70/kg.
2 - A drop in earnings which French producers simply cannot absorb, with an impact on the
entire supply chain leading to a large-scale destruction of jobs4.
According to the same estimation, such downward pressure on prices in the European loin market would
trigger
a drop of 9.6% in the price of young bull paid to French producers, causing a 30% to 60% fall in
operating profits of farms which specialise in bovine meat production.
Given farms’ current earnings (over 25% of beef production farms have pre-tax operating profits below
€10,000),
between 25,000 and 30,000 directly associated full-time jobs in this sector would be in grave
danger (out of a total of 104,000 such full-time jobs in France).
According to the study “Jobs connected to French livestock farming” by GIS Elevage Demain (Livestock
farming tomorrow) June 2015, since 0.76 “indirect” full-time jobs (slaughter and cutting, butchery, etc.)
depend on each of these full-time beef farming jobs, a total of between 44,000 and 53,000 full-time jobs
in the French beef industry could be lost due to American competition.
And this number could grow yet further, taking into account other jobs resulting from livestock farming
(i.e. jobs generated by household spending in direct and indirect sectors) and/or created by a “leverage
effect” within the sector, which this study does not examine.
APPENDICES
3Estimate based on wholesale price in 2013 in USA (€4.40/kg cwe (carcass weight equivalent), source: USDA) to which was added the standard
premium applied to “hormone-free” beef, transport costs to the EU and wholesaler’s margin. 2013 was chosen because it falls between 2008-2011
(when the price of loin sold in the EU increased to €6.50) and 2014-2015 when prices exploded in USA due to temporary shortages.
4Estimated using a counterfactual analysis of the consequences of the TTIP and CETA in 2009 on profits of farms specialising in beef production over
the last 5 years.
5
APPENDICES
1 - Estimate of the potential impact of TTIP and CETA on the French beef sector: Proposed
methodology.
Step 1 (Nov 2014): impact analysis of the opening of duty free quotas on the prices of French young bul ,
using case studies of French farms specialising in beef production (database:
Réseaux d’élevage (Livestock
farming networks)). Working on the assumption that CETA + TTIP will lead to an opening of quotas totalling
around 200,000 tonnes.
Pays de la Pays de la Pays de
Poitou-
Pays
Pays de la
Région
Auvergne
Limousin
Loire
de la
Loire
la Loire
Charentes
Loire
Loire
Grass-fed
Collective
and
Semi
Race
AOC
farming
Extensive
Semi-
Case study
Intensive
intensiv
Maine
Farming
intensive
concentra
“Parthenaise”
group
e
-Anjou
Limousine Limousine
tes
(GAEC)
Number of LU
132
122
118
211
105
233
109
125
Of which: suckling
76
65
63
117
58
119
70
72
System of
cattle
production
Agricultural land
95
(hectares)
65
85
150
80
150
110
95
Labour Unit
1,2
1,2
1,2
2,0
1,2
2,2
1,8
1,5
Share of adult
cattle in turnover
75%
73%
71%
71%
69%
69%
60%
69%
(%)
2013 profits
Turnover (€1,000)
178
151
151
293
137
298
163
156
before impact
Operating profits
20
19
21
44
20
50
26
38
(€1,000)
% operating
11%
13%
14%
15%
14%
17%
16%
24%
profits/turnover
TTIP+CETA impact on operating
profits - 2013
-66%
-55%
-50%
-46%
-46%
-40%
-37%
-27%
Share of adult
bovines in
72%
68%
68%
67%
65%
66%
67%
turnover (%)
2012 profits
Turnover (€1,000)
170
153
150
279
134
295
150
before impact
Operating profits
(€1,000)
12
22
21
30
17
46
33
% operating
profits/turnover
7%
14%
14%
11%
13%
16%
22%
TTIP+CETA impact on operating
-124%
-58%
-61%
-77%
-62%
-52%
-37%
profits - 2012
Source: Inosys Réseaux d’élevage - Idele data, 2014 – See details of this estimate in the annexed document
titled “Estimate of the impact of TTIP and CETA on the earnings of French beef farmers”.
6
Step 2: Estimated losses of direct jobs (beef meat breeders / farmers) caused by an unsubsidised drop in
turnover from beef production:
- Estimated drop in unsubsidised farm turnover (database =
Comptes de l’Agriculture de la Nation
(National Agriculture Accounts))
- Estimate of jobs lost as a result:
% of fal in price of
juvenile beef
Change in the unsubsidized turnover of the beef
production industry (year N)
------------------------------------------------------------- = Number of full-time jobs destroyed by the agreement
Average farm operating profits (year N-1)
7
2– Etude « Les emplois liés à l’élevage français », GIS Elevage demain, Juin 2015 – Notice
méthodologique et résultat concernant la filière viande bovine.
8
9
10
11
12
3 – Study: “Estimate of the impact of TTIP and CETA on the earnings of French beef farmers”,
IDELE for INTERBEV, 2014
Estimate of the impact of TTIP and CETA on the earnings of French beef farmers
This analysis consists of 2 stages:
1. Impact of TTIP and CETA on the prices of European young bul carcasses paid to the producer;
2. Impact of the drop in prices of European young bul carcasses on the earnings of French beef
farmers.
Part 1 – Impact on the domestic price using 2013 data
This model only takes into account North American exports of loin to Europe
- North America is a net exporter of loin, while European imports consist largely of this type of cut: in
North America, the management of the “carcass balance” (“
équilibre carcasse”) is less focused on
the quality cuts from the rear of the carcass since demand for minced meat is much higher. It is
estimated that USA and Canada wil fil their quotas with a minimum of 75%
loin.
-
The price of American loin will set the benchmark price for loin on the European market, due to:
o
The size of quotas currently expected (over 100,000 tonnes5/year for USA alone, since a
duty free quota of 67,500 tonnes/year is already granted to Canada). A duty free quota of
200,000 tonnes/year fil ed with 75% North American loin would equate to half of the
European production of loin from suckling livestock, and a quota of 400,000 tonnes/year
would correspond to the entirety of annual production in Europe (
source: estimates from
GEB-Institut de l’Elevage according to data from BDNI-Normabev Eurostat, AMI)6.
According to American exporters, exports outside of the established quotas are not
profitable.
o The possible application of a “first come, first served” rule with regard to quotas, which
could encourage competition between wholesale importers and a squeezing of their
margins.
According to data on
2013, the arrival of such volumes of American loin in Europe would
lead to a
reduction of almost 10% in the price of young bull paid to the producer:
- European loin is sold at a wholesale price of €13.70/kg cwe (carcass weight equivalent) before the
impact:
o The average price of a young bul carcass in the wholesale market in Hamburg: €4.00/kg
(carcass equivalent weight) (
Source: AMI)
o Loin represents 9% of the weight of the carcass but 31% of its price in Europe (
Source:
UECBV).
- American loin would be sold at €8.60/kg cwe (carcass weight equivalent) in Europe:
o “Choice”7 loin is sold at an average wholesale price of USD 3.24/kg (carcass equivalent
weight) (
Source: USDA)
5 Tonnages are given as carcass equivalent weight
6 Currently, the price of imports does not set the benchmark price on the European market due to tariff and non-tariff
protections limiting the imported volumes of fresh meat which could substitute European loin in various areas of the
market: smal Hilton quotas, GATT quotas on frozen products only, customs duties of 20% on Hilton and GATT quotas,
“High Quality Beef” quota is too smal to lead to a large-scale implementation of hormone-free supply chains, and
prohibitive customs duties outside of quotas.
7 Meat from carcasses classified as “Choice” (premium quality) currently make up the majority of the volume exported
to the EU.
13
CONFIDENTIAL
o For the carcass of an animal reared without hormones, the loin wil represent 75% of the
value in the EU. 75% of the NHTC8 premium paid to the livestock farmer (
USD 200 per
animal, source: US press and surveys) is attributable to the loin (9% of the carcass),
equating to an extra cost of €3.07/kg (carcass equivalent weight) per loin.
o The TTIP quotas, like the CETA and the “High Quality Beef” quotas, would be duty free
quotas.
o The cost of transatlantic transport and the wholesaler margin are estimated at respectively
5% (
Source: OECD) and 10% (
Source: INSEE, commercial margin of wholesale meat traders)
of the price of the product, amounting to a surcharge of approximately €1.10/kg (carcass
equivalent weight) per loin.
- European loin would therefore be sold at €9.40/kg cwe (carcass weight equivalent) with TTIP and
CETA quotas:
o European loin would retain an added value of around 10% compared to loin imported from
third countries (
as is currently the case, source: AMI/pricing in Hamburg).
- Only taking into account this drop in the price of loin, the average price of a young bul carcass on
the wholesale market in Hamburg would therefore decrease from €4.00 to €3.60/kg, equivalent to
a 9.6% fall.
- Working on the assumption that this 9.6% decrease wil be passed on to al of the links in the
supply chain in the same way, the price of young bull paid to the producer would also fall by 9.6%.
Part 2 – Impact on the profits of farms in 2013
It is estimated that this decrease would be the same for prices in all categories of adult cattle and in all
countries in Europe.
The impact of the 9.6% fall in prices of adult cattle on beef meat farms has been estimated using case
studies from the Livestock Farming Networks (
Réseaux d’élevage). We based our estimates exclusively on
the breeders and fatteners systems, due to the lack of models for the price of lean meat. Moreover, we
selected case studies representing systems specialised in beef production9.
According to
data on 2013, with everything else remaining equal,
a fall of 9.6% in the price of adult cattle
would lead to a drop in farms’ operating profits (pre-tax operating profits, with Agricultural Social
Insurance payments (MSA) deducted) of between 27% and 66%, depending on the type of farm. The discrepancy in the impact between different types of farm can be explained by:
- The varying economic efficiency of different case studies, measured here by the relationship
between the operating profit and the turnover
- The varying share of the turnover which comes from meat products, and therefore the impact of
the fal in the price of adult cattle is felt to a greater or lesser extent.
Model for data from 2012
For 2012, the same model gives:
- A fal in the price of adult cattle of 12.4% paid to the producer
- A fal in earnings of between 37% and 124%.
8 Non-Hormone Treated Cattle. Name of the hormone-free rearing programme applied to European supply chains.
The EU is the only region to apply the NHTC premium: cuts which are not sent to the EU and are sold on the
conventional market do not benefit from their “non-hormone treated” origin.
9 Where over 60% of their turnover comes from the sale of adult bovines.
14
CONFIDENTIAL
Pays de la Pays de la Pays de
Poitou-
Pays
Pays de la
Région
Loire
de la
Auvergne
Limousin
Loire
la Loire
Charentes
Loire
Loire
Grass-fed
Collective
Semi
Race
AOC
Extensive
Semi-
Case study
and
farming
Intensive
intensiv
Maine
Farming
intensive
concentra
“Parthenaise”
group
tes
e
-Anjou
Limousine Limousine
(GAEC)
Number of LU
132
122
118
211
105
233
109
125
Of which: suckling
76
System of
cattle
65
63
117
58
119
70
72
production
Agricultural land
95
65
85
150
80
150
110
95
(hectares)
Labour Unit
1,2
1,2
1,2
2,0
1,2
2,2
1,8
1,5
Share of adult
cattle in turnover
75%
73%
71%
71%
69%
69%
60%
69%
(%)
2013 profits
Turnover (€1,000)
178
151
151
293
137
298
163
156
before impact
Operating profits
20
19
21
44
20
50
26
38
(€1,000)
% operating
11%
profits/turnover
13%
14%
15%
14%
17%
16%
24%
TTIP+CETA impact on operating
-66%
-55%
-50%
-46%
-46%
-40%
-37%
-27%
profits - 2013
Share of adult
bovines in
72%
68%
68%
67%
65%
66%
67%
turnover (%)
2012 profits
Turnover (€1,000)
170
153
150
279
134
295
150
before impact
Operating profits
(€1,000)
12
22
21
30
17
46
33
% operating
profits/turnover
7%
14%
14%
11%
13%
16%
22%
TTIP+CETA impact on operating
profits - 2012
-124%
-58%
-61%
-77%
-62%
-52%
-37%
Summary of Estimates and Data from Part 1
2012
2013 Source
Exchange rate €/USD
0.78
0.75
Banque de France
Price of CHOICE loin (cwt/USD)
263
264
USDA
Price of CHOICE carcass (cwt/USD)
191
195
USDA
Type of meat
100% Choice
100% Choice
Estimations
Level of NHTC premium (USD/animal)
150
200
Interviews/Bibliography
% of loin in exports to EU
75%
75%
Estimations
Transport cost
5%
5%
OECD
Wholesaler margin
10%
10%
INSEE
Customs duties
0%
0%
Estimations
Price of young bul carcass in Hamburg before impact (€/kg)
4.2
4.0
AMI
Price to the producer of young bul in Europe before impact
3.84
3.80
European Commission
(€/kg carcass equivalent weight)
Premium for EU-origin meat on the European market
10%
10%
Estimations/AMI
15