Description

In times of state or private stock surpluses of products (cereals, oilseed, sugar, fruit or vegetables) that cannot be sold on the domestic market on regular market terms, it is possible to pay feed producers and farmers so-called ‘denaturing premiums’. These ensure that the foodstuffs are used for feeding purposes, albeit at an inferior level in order to avoid flooding the domestic market or the export market with these products. These premiums are paid per tonne of food on provision of proof that the product has been turned into animal feed.

This instrument for the inferior utilisation of foodstuffs is not suitable for use in countries in which food shortages occur regularly. However, it is a quick and relatively easy way of reducing short-term surpluses of foods such as rice. An alternative would be to turn surpluses of cereals, potatoes or even wine into industrial alcohol by means of a distillation premium. Processing subsidies (e.g. for canning) could also be paid.

Requirements

• A properly functioning country-wide administration and monitoring system with access to the relevant information and sufficient technical and human capacities for its design, implementation and monitoring
• Clear and coherent political strategy and targets for policy-makers and public authorities
• Constant market surveying and forecasting
• Regulated and legally protected payment structures
• Regulatory framework

Possible Negative Effects

• Market distortion, particularly on the feed markets
• Risk of corruption, lack of transparency, nepotism
• High macroeconomic costs if premiums set too high or too low