The decision of the EU Beef Management Committee to reduce export refunds on beef exports will be raised by the Minister for Agriculture and Food, Mr Walsh, when the Council of Agriculture Ministers meets in Brussels this morning.

The reduction, of 20 per cent on steer beef and 25 per cent on heifer beef, applies to exports to Third Countries (non-EU), which take 45 per cent of Irish beef exports.

Mr John Smith, chief executive of the Irish Meat Association, estimates that the European Commission decision will cost the Irish industry some £40 million (€50 million) in refunds in a single year.

The decision has been condemned by Mr Pat O'Rourke, president of the Irish Creamery Milk Suppliers' Association, who described it as "a direct attack on the Irish beef sector". He said the Commission had time and again undermined farmers' confidence in the beef industry. "This situation, where officials cut refunds without any political accountability, will have to be reviewed."

Mr Tom Parlon, president of the Irish Farmers' Association, said the processing industry should be in a position to absorb the impact of the reduction because of the weak euro and strength of the dollar (deals are made in dollars). "We reject the notion that it could lead to a reduction in factory prices. The industry has to redouble its efforts to sell more into Europe. There's no future in Third Countries," he said. The reduction is part of continuing measures to bring European beef prices closer to world prices over time and is considered a pre-emptive strike by the Commission in the context of the Agenda 2000 Common Agricultural Policy reforms. The market for beef is holding fairly well, and the Commission believes that farmers should not keep gaining both from firm market prices and a high level of refunds. The Commission was criticised for allowing this situation to develop at the time of the 1992 trade reform negotiations.

Ireland, however, is the State most affected by the reduction, as the EU's biggest exporter of beef. The refunds apply to exports to North Africa and the Middle East - where 45 to 50 per cent of exports go - and at their highest level to steer beef, two-thirds of which is exported to these markets.

"The pence per pound cost on steer beef would equate to 8.5p per pound carcass weight," Mr Smith says. "That amounts to a reduction of £65 to £70 an animal. It's going to have a far bigger impact on Ireland than other countries. We produce 8 per cent of European beef production, yet account for 45 per cent of EU beef exports. If you have a situation where you have a disproportionate amount of production going to Third Countries, you're going to be affected more than a country with a large domestic market."

However, there are still some licences for exports at the old refund level, which applies for the next three weeks.