International Egg and Poultry Review

US - By the USDA's Agricultural Marketing Service (AMS). This is a weekly report looking at international developments concerning the poultry industry. This week's report focuses on the poultry situation in Germany.

25 February 2009

5 minute read

North America

German Court Rules Mandatory Check-off System Illegal

On 3 February 2009, the German Constitutional Court (GCC) ruled that the mandatory check-off system for agricultural commodities violates the German constitution and subsequently invalidated it. The court ruled that the check-off program unfairly interferes with entrepreneurial freedom and stated that the information gathering and agricultural promotions are no longer a government task to be financed with special duties. As a consequence of the ruling, the German agriculture and food industries will either have to develop their own sector-related generic promotion programs and information gathering and analysis or general governmental funds will have to be provided to accomplish these efforts.

The German Central Marketing Agency for Agriculture (CMA) was established under the 1972 Agricultural Sales Promotion Act, which stipulates that the German food industry (producers and processors) must contribute a certain portion of their proceeds to the agency. CMA is a state-controlled enterprise in charge of sales promotion and marketing of German agricultural products. The Central Market and Price Reporting Bureau (ZMP) also receives funds for market research and marketing monitoring. ZMP’s core objective is to provide impartial agricultural market analysis reports.

In Germany, farmers and the food industry were legally required to pay assessments which varied by commodity for sugar, flour, malt, horticultural products, milk, poultry products, beef cattle, hogs, sheep, rapeseed oil, and sunflower oil to cover generic promotion programs within and outside of Germany, market and price reports, and analysis for agricultural products. The collections of contributions are made in the so-called bottleneck operations, such as egg packing stations and slaughter houses. Contributions to the fund average 0.4 percent of the product value. The levy on egg packing stations is 0.30 Euro per 1,000 eggs and the levy on poultry slaughter houses is 0.36 Euro per 100 kg live weight.

Germany - Wholesale cost prices, large eggs (63-73 grams per egg) Source & copyright: ZMP GmbH, Bonn, http://www.zmp.de, 20/02/2009

USA – USDA Weekly Combined Regional Shell Eggs, Northeast Large, Prices to volume buyers delivered warehouse

In recent years, many individual farmers and companies in Germany filed complaints against the German sales promotion fund. The complainants argued that they were not receiving adequate value from the generic marketing programs run by the CMA. In anticipation of a negative ruling by the Constitutional Court, the German Government withheld the sales promotion funds and did not spend the proceedings received from the complainants. These proceeds will now be returned to the complainants.

The GCC stated that special duties, such as a check-off program, need to be a very rare exception and meet strict constitutional standards. These standards require that the contributors to the fund must receive an identifiable advantage which cannot be achieved through other private industry programs. The court drew a line between what the government responsibility is and what can be achieved privately. The court opined that the check-off program unfairly interferes with entrepreneurial freedom and stated that agricultural promotion can be adequately organized by the private industry or industry organizations.

The German government will now have to draft a new regulation for the financing of CMA and ZMP if the continuation of the organizations is politically desired. It is likely that both institutions will be partly financed out of the general government budget and to a small degree from their own proceeds.

The total budget of the sales promotion fund is reportedly €90 million annually, thereof €80 million for CMA and €10 million for ZMP. CMA does not generate its own proceeds while ZMP generates about €2.5 million of its own revenues, primarily from selling their market reports.

Source: USDA Foreign Agricultural Service Attaché Report and FAS online; Europa Rapid Press Release; Federal Constitutional Court press release; Federal Ministry of Justice, Section 10 Funding.

An outbreak of highly pathogenic avian influenza H7N7 resulted in the loss of 30.3 million birds in 2003, about 30 per cent of all Dutch poultry.

Source: Food and Agriculture Organization of the United Nations http://faostat.fao.org, accessed 19 February 2009; European Commission; www.cidrap.umn.edu