Subsidy system causes cattle shortage Inadequate supplies of steers and young bulls are causing concern in the processing sector, prompting warnings of upward pressure on British beef prices in the next few weeks despite the normal seasonal softening of demand and perhaps further sales weakness attributable to BSE on the continent. Relatively low numbers of male cattle available for slaughter are thought to reflect stock retention by farmers wanting to claim Beef Special Premium payments, generous subsidies likely to be worth well over £80 per steer and more than £112 for each young bull. These animals must be held on the farm for two months to become eligible for the payments, a regulatory requirement known to have distorted the market last year. Cattle prices were unexpectedly strong in January and February 2000 but then began sliding in March as beasts came on to the market at the end of the retention period. Worse disruption is possible this time, because the government has recently relaxed the subsidy rules. Removal of the 90-head limit on subsidy claims per farm means much larger numbers may be held back to qualify for the payments. "The risk is of a tight market for the next few weeks but then a glut in the spring," according to MLC beef sector economist Duncan Sinclair. This threat to abattoir operators' throughputs and margins is unnecessary, as producers do not have to lodge claims and retain livestock immediately. "They're entitled to stagger the claims, putting forward a few cattle each month throughout the year," Sinclair pointed out. Claiming on all cattle in January may be more convenient, as official inspection is easier while the stock are winter housed. But the MLC suspects many producers do not realise phased applications are possible and is trying to publicise this to avoid price volatility. {{MEAT }}

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