Request for extra-ordinary funding from the Treasury to support cattle exports and trade in bovine embryos requiring compliance with EU legislation including a testing programme for three notifiable bovine diseases – bovine Tuberculosis (bTB), Enzootic Bovine Leucosis (EBL) and Brucellosis
Summary
- Historical testing and surveillance for 3 notifiable diseases of cattle (bTB, EBL and Brucellosis) demonstrates that the diseases have not been present in Jersey for at least 50 years and possibly longer.
- EU Directive 64/432 governing trade in live bovine animals and swine provides a mechanism for officially recognising herds and regions or zones are disease free, part of which requires testing to a pre-determined programme.
- Jersey testing and surveillance has not followed the 1964 EU Directive for trade in live cattle which predicates disease presence and eradication. From records, it has not been possible to establish the historic testing policy but it is reasonable to conjecture following the Directive testing programme was not required for export to UK which has consistently recognised diseases are not present in Jersey.
- The Jersey cattle industry wish to have international recognition of the high health status of the island herd in order to add-value to exports and to build a reputation for high health status in emerging Chinese and far east markets. Consequently, working with Guernsey, a joint CI submission was prepared for the EU Commission seeking official recognition of disease freedom and submitted via the UK for informal consideration.
- Live cattle have been exported to UK for many years accompanied by official export health certification provided by States Veterinary Officer with no reference to EU Directive.
- Consequent to the view by the European Commission veterinary legal expert that Jersey has not followed the testing regime, therefore official disease free status is not granted, UK have amended import conditions requiring cattle to originate from herds tested to officially free status. GB is officially free of brucellosis and EBL and Scotland is officially bTB free.
- These new and additional import conditions imposed by the UK have brought Jersey live cattle exports to an immediate halt and mean future exports of live cattle to UK require exporting herds to undergo testing for the 3 diseases. Minimum time between the first tests to attain the required status varies for the diseases with the greatest length of 6 months between tuberculin tests.
- This newly required testing programme will be required to run for a minimum of 5 years and possibly indefinitely, with first year costs estimated to be in the region of £267,000.
Introduction
- EU trade in live cattle is governed by Directive 64/432 adopted in 1964. The diseases for which there are specific requirements to be met for cattle trade are Foot and Mouth (FMD), Rabies, Contagious Bovine Pleuro Pneumonia (CBPP) bovine tuberculosis (bTB), Brucellosis (B abortus), Enzootic Bovine Leucosis (EBL) and Anthrax.
- Only cattle from officially bTB, Brucellosis and EBL free herds may be traded.
- Trade in embryos is linked by virtue of the herd of origin having to be officially free of the three diseases. The 3rd country certificates agreed between Jersey and importing countries include reference to this standard.
EU Official Freedom
- There is a mechanism in the EU Directive to recognise official area disease freedom (distinct from herd freedom) when all herds have maintained officially free status for specified periods. There are other requirements to fulfil for trade e.g. concerning residency period on the holding, individual tests pre-export and identification.
- With ref to bTB, B abortus and EBL, the specific testing regimes to demonstrate freedom derive from OIE, the World Organisation for Animal Health. OIE sets out standards for the improvement of animal health and welfare and veterinary public health worldwide, including standards for safe international trade in animals and their products.
Demonstrating freedom from non-notifiable diseases to underline high health status -
The Cattle Health Certification Standards (CHeCS) testing programme.
- In 2010, registered cattle keepers in Jersey commenced an extensive testing programme to confirm, the expected, freedom from three non – notifiable (not officially controlled) bovine cattle diseases namely Bovine Viral Diarrhoea (BVD), Infectious Bovine Rhinitis (IBR) and Leptospirosis hardjo. The cost of the testing regime was funded by the Rural Initiative Scheme (RIS) with its co-ordination and administration undertaken by Jersey Island Genetics (owned by RJA&HS) and with individual farmers providing on farm labour and other necessary infrastructure to carry out the tests.
- The aim of the project was to prove freedom from the non-notifiable BVD, IBR and Leptospirosis and to add this status to the freedom from notifiable diseases bTB, EBL and Brucella Abortus, established under the States funded disease testing programme. Cattle of this high health status attract a premium in the market.
- The ultimate objective of establishing the high health status of cattle in Jersey is to add value to future exports of Jersey dairy products, live cattle, bovine embryos and bovine semen.
Application for EU official Freedom
- In 2011, it was agreed with the cattle industry that Jersey would submit evidence to the EU Commission, via the CVO UK, for zone or area (the terms are synonymous) freedom recognition, although non-compliance with Directive requirements was identified by the States Veterinary Officer (SVO) before submission.
- The submission was considered in Defra and subsequently submitted to the EU Commission veterinary legal expert early in 2012, for an informal view. In the 1990s former MAFF, UK recognized the disease free status of the island herd and cattle were regularly exported to UK.
- The Commission veterinary expert’s view is that official disease free status cannot be granted because the Directive testing regime has not been followed. Records show all herds attained official free status for both bTB and B abortus in 1984 and for EBL in 1991, however, subsequent testing did not follow the Directive and status was not maintained.
- Research to establish the aim of the past testing regime, which may have been for reasons other than to meet Directive requirements, has not been carried out. Official identification did not conform to Directive requirements until 2002.
- The situation is hugely frustrating because all the evidence supports the case that the diseases bTB, Brucellosis and EBL are not present and have not been present for many years, if ever, particularly in the case of EBL.
- The EU does not provide a mechanism for alternative means to demonstrate freedom, and the Commission expert does not appear willing to consider an alternative. This stance is understandable given the lack of flexibility in the 50 year old Directive.
- Subsequently, the EU informed DEFRA in the spring of 2013 that Jersey had historically (over a 30 year period) not complied with EU legislation and therefore the Island could not be classed as being officially free from bTB, EBL and Brucella despite the Island wide testing regime over many years.
- In October 2013 Jersey was also officially informed by DEFRA that the import conditions for cattle from Jersey had been amended requiring exporting herds in Jersey to demonstrate compliance with the EU Directive.
- The current status is therefore that Jersey can only export live cattle, bovine embryos or semen after the necessary testing programme has been carried out in the Island. This situation could also have, it is perceived, a negative impact on diary product exports from Jersey and the reputation of the islands dairy industry.
- On the 14th February, 2014 a request was received from the RJA&HS and Jersey Dairy for Government support to undertake the necessary testing programme in order to establish official recognition of the islands’ herds freedom from bTB, ELB and Brucellosis. It should be noted the HMG cover the costs of these programmes in the UK.
- The following sets out the financial implications to the Jersey dairy/cattle industry of non – compliance to the EU trade requirements over the course of the next five years.
Costs of the cattle testing programme required to enable Jersey to be compliant with the EU Directive
- The following testing programme (which is subject to confirmation by Defra) would enable Jersey to demonstrate compliance with EU legislation and fulfil the UK import conditions for cattle from Jersey after year 1 of the programme. The total testing costs for this programme are estimated as follows:-
Year 1 - £267,030 (bTB,EBL &Brucella)
Year 2 - £71,515 (bTB & Brucella)
Year 3 - £71,515 (bTB & Brucella)
Year 4 - £117,000 (bTB, EBL & Brucella)
Year 5 - £15,557 (bTB only)
The total estimated cost over the 5 year programme £542,617
Total expenditure on the Cattle Health Certification Standards (CHeCS) testing programme
- To reiterate, in 2010 all registered cattle keepers in Jersey undertook an extensive island – wide testing programme to confirm a clear status for Bovine Viral Diarrhoea (BVD), Infectious Bovine Rhintis (IBR) and Leptospirosis hardjo, diseases with significant economic impact which are endemic in many countries. In addition, tests confirmed the very low levels of Johnes Disease in Island herds and allowed dairy framers to formulate their herd control and/or eradication programme in conjunction with their private veterinary adviser. The objective of this testing regime was to confirm the absence of the above three bovine diseases which was achieved by the CHeCS awarding Jersey full accreditation status.
- Jersey Dairy successfully used this accreditation to prove the high health status of their products to new customers especially in Asia. The cost of the CHeCS testing program from 2010 - 2014 has totalled £149,253. The RIS has provided £130,343 and industry £32,585. It could be argued that this expenditure would have little value from a cattle export perspective unless the testing of bTB, EBL and Brucella is resumed.
Cost of CHeCS testing program = £149,253
Expected income from livestock exports prior to EU legislation non- compliance issue
- One of the main objectives of allowing the import of international bovine semen in 2008 was to reinvigorate the cattle export trade. There are currently 23 commercial dairy farms in Jersey, 8 of which (35%) have intentionally reared heifers for the UK export trade (one having invested in a purpose built young stock rearing building to take advantage of this new income stream) since the legal restriction on the importation of bovine semen was lifted. A further 11 (49%) dairy farms have previously exported heifers to the UK. As such, up to 84% of the industry have and continue to looking at this trade as a way of lifting farm incomes and profitability. It should be noted that from the recently published farm benchmarking figures (EBIDTA) it is clear that levels of profitability are low, due in part to two years of bad weather, but also rapidly increasing costs.
- Since 2008, dairy farmers have quite rightly concentrated on rearing replacement heifers to upgrade their own dairy herds in order to improve milk output and farm efficiency. This initial replacement programme has now reached a stage where herd replacement rates can be reduced and excess quality heifers can be reared for export.
- In 2013, 68 animals from a number of dairy herds were exported for sale at Kivells Exeter Auction Mart. Average sale prices suggest that a realistic return for a down calving heifer (24 months old) is £1200 per head less export costs of £200 per head. The following is an estimate of the returns from heifers already being reared for the export trade in 2014 and 2015 and projected sales 2016 -2018.
2014 – 120 - In calf and down calving heifers at £1000 per head = £120,000
2015 – 150 – As above = £150,000
2016 - 200 – As above = £200,000
2017 - 200+ = £200,000
2018 – 200+ =£200,000
Estimated total cattle export returns 2014 – 2018 = £870,000
Economic impacts of holding additional cattle that were destined for the export
- The 2014 animals are already being reared for the export trade and will have to calve down in Jersey resulting in excessive milk output which will be penalised by reduced pricing (25ppl) and in individual farms failing to conform to their Jersey Dairy level delivery bonus incentives (2ppl on all milk supplied to Jersey Dairy). In addition, these farms will be faced by increased feeding costs over the coming autumn and winter. The five dairy farms concerned are therefore likely loose not only the above export income but will also have to cope with the cost of feeding, housing and milking of unprofitable animals.
- Estimated additional cost in 2014 for dairy farms retaining extra milking animals is approximately £400 per head x 120 animals = £48,000. (In 2015 this will amount to £60,000 thereafter no extra heifers will be reared if the disease testing programme is not resumed).
- Notes: - The above estimates are based on full loads (50 animals) being exported for sale at Kivells southern spring and autumn livestock sales. Beyond 2016 the attendance at Northern auction sales in spring and autumn has been discussed and is in development.
- Welfare Impact of Holding Cattle reared for Export.
- Cattle reared for export which cannot leave the island are surplus to requirements and if insufficient market for products from the live animals or for meat, is unavailable, there may be calls for a planned cull on welfare grounds with consequent reputational damage and potentially compensation.
- EU milk quotas will be removed in 2015 and this coupled with the positive outlook for the world trade in dairy products suggests that the export trade in quality Jersey cattle will be very positive as the milk from high health status, high genetic merit Jersey heifers and cows acquired at a reasonable price will be very attractive to UK the UK dairy industry.
- To promote the above trade Kivells and the RJA&HS are hosting a visit to Jersey of 26 members of the UK Jersey Breed Society Senior Youth Section to view herds in the Island over the weekend 12th April 2014.
Bovine Embryo exports
- In 2012, seven dairy herds exported 120 bovine embryos valued at £76,000 to Argentina. Exports to Australian, UK and Canadian markets are planned, with 150 embryos already collected at a cost £30,000. These exports had to be cancelled due to the effects of the Schmallenberg virus in Europe. It is expected that once the Schmallenberg problems have been resolved a bovine embryo trade can resume at a similar level. However, this will not be possible without compliance with the EU Directive.
Expected annual loss of future bovine embryo exports = £75,000
Possible impact on dairy product exports
- Jersey Dairy have recently had considerable success in developing a growing dairy product export market based on milk supplied from high health status, exclusively pedigree Jersey cows farmed in their Island home. The islands freedom from bTB, EBL, Brucella, BVD, IBR and leptospirosis has been instrumental in securing these contracts especially in Hong Kong and China.
- The effects on the international reputation of Jersey and in particular the islands dairy industry of non - compliance with EU legislation could have far reaching consequences. Jersey dairy estimate, if any suggestion of non – compliance were to become known, a loss of annual export sales to the Asian market of approximately £890,000 per annum. This would have a devastating effect on profitability of Jersey Dairy and the islands individual dairy farms.
- The connection between disease incidence and the ability to export dairy products to China was clearly illustrated at a recent call by the Chief Minister to AQSIQ, the Chinese Import and Export Food Safety Bureau in Beijing, to discuss health certification for the exportation of UHT milk from Jersey to China, where Jersey was requested to provide sufficient information on outbreaks of diseases in the last 3 years.
Estimated annual loss to dairy export trade as a consequence of a perceived reduction in Jersey’s cattle health status = £890,000
Funding and payback
The following table illustrates the potential financial consequences to Jersey of not complying with EU Directive.
Year | EU Compliance testing | Loss of the value of previous CHeCS testing costs | Loss cattle exports | Loss of bovine embryo exports | Loss of milk sales |
2014 | 267,030 | £149,253 | 120,000 | | |
2015 | 71,515 | 0 | 150,000 | | 890,000 |
2016 | 71,515 | 0 | 200,000 | 75,000 | 890,000 |
2017 | 117,000 | 0 | 200,000 | 75,000 | 890,000 |
2018 | 15,557 | 0 | 200,000 | 75,000 | 890,000 |
Total | 542,617 | £149,253 | 870,000 | 225,000 | 3,560,000 |
Conclusion
- The draft 5- year bovine disease testing and monitoring programme will cost approximately £542K, with approximately 50% of which being spent in the first year (2014).
- The dairy industry estimated potential losses over the course of the five year testing programme would amount to approximately £4.8m, with the loss of live cattle and embryo exports over this period alone being worth £1.1m.
- Annually the ratio of projected spend to projected losses in year 1 of the proposed testing programme would be 1:1. In year 2, the ratio increase to 1:14 and year 3 would increase to 1:16. In year 4, the ratio would reduce to 1:10 due to the second EBL test and then increase to 1:75 in the last year of the testing programme.
- Overall the ratio of projected spend to projected losses at the end of the five year programme would be 1:9. In subsequent years, the ongoing maintenance costs would remain low whilst the potential for increased dairy product and cattle exports will continue to expand making the investment of £542k in the cattle disease testing program eminently sensible from an economic perspective.
Recommendation
- On the basis that this is a new and unexpected requirement in relation to trade and that revenue budgets are committed, that the Treasury consider exceptional funding to come from central contingencies to cover the programme costs for years 1 (2014) and 2 (2015). Subsequent costs will be resolved through the Departmental MTFP allocations from 2016.
Director, Rural Economy
11 April 2014
gov.je