Agri News

Future of Stewardship

Wed, 1 Feb 2012 00:00:00 GMT

An Information Note containing a summary of the information, including budgets for the next twoyears, has been produced. Various other supporting documents are also available;

Calendars for the 2012/13 and 2013/14 HLS years outlining what landowners need to do when if intending to apply to the HLS. This will be particularly relevant for the many agreementholderswho have ESA and CSS agreements expiring in the next two years.
Further information on how Natural England will judge expiring ESA agreements for transition to the ES
Details on the ‘Making Environmental Stewardship More Effective’ (MESME) programme. This includes the proposed changes being made ES schemes from 1st January 2013. These are fairly minor (and still require EU approval) but will require a new ‘4th Edition’ handbook to be produced for each scheme.
An updated Q & A covering the transition to next RDPE programme from 2014 to 2020. This includes as much as is currently understood about how ES schemes will interact with Greening

Full details of the package can be accessed via the Natural England website.

Andersons at LAMMA 2012

Thu, 15 Dec 2011 00:00:00 GMT

The Andersons Centre will once again be exhibiting at the forthcoming LAMMA show - 18th and 19th of January 2012. Our team of consultants will be on hand to provide updates on the latest industry news covering all sectors. We can be found on stand number 883 in Hall 8.

If you wold like to arrange to meet one of our consultants at the show, please contact us to confirm an appointment time. Further information on LAMMA 2012 can be found at www.lammashow.co.uk

The Euro Crisis

Thu, 1 Dec 2011 00:00:00 GMT

The Euro crisis is clearly now affecting the UK economy. This is the point at which the UK farming industry could start to feel smug, being in an industry that is in demand regardless of theconsumer’s prosperity (or more likely feeling of prosperity). But complacency should not enter the industry. We could well see the debt debacle affect us yet;

The negotiations for the EU Budget for 2014-2020 are progressing (the European Parliament have a plenary session in December on it). This is where the money for farm support under theCAP ultimately comes from. With greater and greater debt mounting up in Member States, the likelihood of overall increases in the Budget recede. Most countries are net recipients of the CAP so might be expected to vote an increase in the Budget. But Germany, the Paymaster General, is assuming ever greater powers in Europe and is clearly under pressure from its own voters and taxpayers to restrict its contributions to other Member States.
As we have written, the current CAP reform proposals are written with a focus on making the policy more acceptable to EU taxpayers and voters. This may not be enough to protect it from cuts. With austerity measures in place around Europe, it may not take much for the general public’s attention to turn to farm support and start to question its value.
The balance of power in Europe is shifting. France is clearly no longer a super heavyweight in Europe; there is only one and it is Germany. Furthermore, the Commission (EU Civil Service) is becoming weaker in the mix of power too. Member States are dealing with the Euro crisis, not the Commission. The likely treaty changes that Germany is insisting on will further weaken the Commission especially if changes only affect the Euro zone and not the EU as a whole. The German Chancellor, Angela Merkel, recently also called for the Commission to lose one of its key powers, the sole right of legislative initiative. The Commission has been a big defender of the CAP and a loss in power may see the policy weakened.
The UK is increasingly marginalised in Europe. Being outside the Eurozone it has not played a large part in the crisis. Some members of the current government have also seen the crisis as an opportunity to repatriate powers back to the UK. In Europe this has been seen as taking advantage of others’ problems and has not gone down well. In the short term this is likely to mean that we may be short of allies when it comes to making the current CAP proposals more sensible. At the wilder extremes of Euroscepticism, farm policy is one of the areas where the UK would take back power from Europe. If this ever happened (admittedly a big if), then any UK policy would be very unlikely to be as generous as the CAP.
Probably the most important point is that exchange rates could change. The Government would be very happy to maintain a weak Pound. Not only will it encourage exports and therefore boost manufacturing, but it also keeps inflation up which, whilst squeezing family budgets, is also eroding debt. Nevertheless, if the Euro area is in real strife, then one would expect the Euro to be even weaker than the Pound in the long term. This will affect not only Single Payments but also of course just about every commodity that UK agriculture produces. The US Dollar has remained strong so far as a ‘safe-haven’ currency, but questions are being raised about its possible collapse in value due to the planet-sized debt burden the US has created for itself of late.

In summary, whatever happens to Greece and even Italy, even if they have to drop out of the Eurozone, there will still be a CAP in Europe. If the most extreme situation occurs where, for

whatever reason, a country is ejected (or leaves) the EU, again, there will still be a CAP. It would take many years to unwind all the legislation to eject a country so would probably still be taking place in 2020 when the next round of CAP reform negotiations are taking place. We could expect more policy changes to favour Germany than France, Italy, Greece and Portugal added together
but then on the positive side, this could in fact benefit the farming systems we have here in the UK.

Farm Business Grants

Mon, 14 Nov 2011 00:00:00 GMT

DEFRA have finally announced the details of the new farm business grant scheme available in England. The new scheme is called the Farming and Forestry Improvement Scheme (FFIS) and the window for applications is now open.

The scheme aims to improve the competitiveness of English farm businesses. Unlike previous grant initiatives, the scheme will support smaller projects with grants of between £2,500 and £25,000 being offered for 40% of eligible expenditure (50% in the upland areas).

Nutrient Management

Eligible items including;

Slurry separators, slurry store covers, manure sampling equipment, GPS equipment, slurry application systems, silage pit and muck store roofing

Energy Saving

Eligible items including;

Heat recovery systems, electricity saving devices and equipment

Water Resource Management

Eligible items including;

Rainwater harvesting equipment including pipework, pumps, filters, storage facilities, additional roofing

Animal Health & Welfare

Eligible items including;

Electronic weigh scales, turning crates, EID readers, computer software, ‘above standard’ cattle crushes, foot trimming facilities, automatic footbaths and spraying, cow brushes, cluster flushing systems, heat detection systems (cattle), dairy unit rubber flooring, concrete grooving, pig and poultry health and welfare investment(s)

The scheme will operate in application ‘windows’ meaning that the necessary application forms and supporting information needs to be submitted by 17^th January 2012 if businesses are to be successful at the first opportunity. DEFRA indicates that once the money is used up, the scheme will be closed. We therefore recommend that businesses submit applications sooner rather than later to avoid disappointment.

Contact Oliver Lee for more information

Supermarket Adjudicator Plans

Fri, 4 Nov 2011 00:00:00 GMT

The Government has released its response to the Business, Innovation and Skills (BIS) Parliamentary Committee’s recommendations to the Draft Groceries Adjudicator Bill (aka the Supermarket Ombudsman). The Committee announced its recommendations in July; two of the most notable were for changes to be made so that ‘trade associations’ (i.e. NFU, CLA) and whistle-blowers within the retailers could provide evidence to trigger an investigation and also to introduce fines as a sanction available to the Adjudicator from the outset.

But in its response the Government has ignored these recommendations. Although it is stated that ‘it will consider further the arguments for extending the remit of information which can trigger an investigation’, the Government’s position at the stage remains that ‘information provided by trade associations should not be able to be used to trigger an investigation’. The onus to complain therefore remains on individual farmers or suppliers to contact the Adjudicator directly.

On the issue of fining retailers, the Government ‘remains of the view that financial penalties should be kept as a reserve power’. According to the Government the threat of an investigation and the publicity this would bring should be enough to make retailers comply. But it has added if there is evidence of significant non-compliance and measures within the existing regime are not sufficiently effective, financial penalties can be introduced quickly and without the need for primary legislation.

Many in the industry have been waiting a long time for a supermarket adjudicator and to say they will be disappointed with the outcomes will probably an understatement. Most had hoped for something that would be able to stand up to the ‘might’ of the retailers but it seems the longer the wait the weaker the plans get. The full Government’s response can be found at http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/1546/154604.htm#a1

CAP Reform Proposals

Wed, 12 Oct 2011 00:00:00 GMT

As expected, the EU Commission released legal proposals for the CAP post-2013 today. For those interested, the full set of texts can be found on the European Commission website.

There are proposals for seven Regulations, plus an Impact Study. Of the most interest will be the one relating to Direct Payments (i.e. the successor to the Single Payment Scheme). The other Regulations cover areas such as Market Support, Rural Development, the IACS System, and what will happen to the CAP during the ‘missing’ 2013 SPS year.

So, pending more detailed analysis (and the devil usually is in the detail), the following is a brief summary of the main points;

‘Basic Payment Scheme’ (BPS) to replace the SPS. Scheduled to begin on 1st January 2014 - although this must be doubtful.
BPS to pay at a flat-rate regional level by 2019, but can contain some link with entitlement ‘history’ in the meantime.
There will be a new grant of entitlements (in 2014) – but there will be a ‘link to beneficiaries of the SPS in 2011 to avoid speculation’. It is not yet clear what this means.
Some redistribution of direct payment funding between countries (National Envelopes) to address disparities – again, more analysis will be required to see what this might mean in the UK.
It will be possible to transfer up to 10% of Pillar 1 funding to Pillar 2 (a modulation replacement) – likely to be of interest to DEFRA.
Parts of the Direct Payment National Envelope (NE) will be earmarked for specific uses;

Greening measures (mandatory for Member States) – 30% of funds (see below for details)
Areas with Natural Constraints (optional) – up to 5% of NE
Young Farmers (mandatory) – up to 2%
Coupled Payments (voluntary) – up to 10%
Small Farmers Scheme – (mandatory) – up to 10% but this depends on how many claimants opt into it

All funds not spent on the top-ups are available for the BPS.

In terms of ‘greening’ the three now-familiar measures are proposed (organic farmers exempted);

Crop rotation – a minimum of 3 arable crops each comprising between 5%-70% of arable area
Retention of permanent pasture
Having ‘ecological focus areas’ – comprising at least 7% of all farmland (excluding permanent pasture) – this can be fallow, field margins, hedges, woods, etc.

Capping of BPS payments will be introduced as indicated in earlier 'leaks'.

An active farmer test will be applied. This states that direct payments would not be granted where these form less than 5% of the business’s total receipts from non-agricultural activities. The rules on eligible land will also be amended and cross-compliance will be simplified.

Under the Market Management Regulation it is stated that sugar quotas will end on the 30th September 2015.

In the same way that Direct Payment National Envelopes will be rebalanced between Member States, the same will apply to Rural Development funds. How this is to be done is left undefined.

Within the Rural Development Regulation the existing structure of ‘axes’ with minimum spending will be abandoned. Instead there will be six RD priorities for schemes to address.

We will be publishing more detail on all of this in the coming weeks. Remember that these are only legislative proposals. As we have stated many times in the past, it does not mean that all or any of this will actually find its way onto the statute books. The publication of these documents is only the start of the negotiating
process.

The Andersons Centre is running a series of dedicated policy Seminars in late November looking at these proposals and their possible impacts for UK businesses. For details please see the Seminar page.

Single Farm Payment Conversion Rate 2011

Fri, 30 Sep 2011 00:00:00 GMT

UK farmers will generally receive slightly higher Single Payments this year than last. The ECB’s official exchange rate on the 30th September is used to convert Single Payments from Euros to Sterling.

The rate has been fixed at €1 = 86.665p. This is a 0.8% increase on last year, and the second highest rate on record (see table below).

Single Payment Year	€1 = £
2005	0.68195
2006	0.6777
2007	0.6989
2008	0.7903
2009	0.9093
2010	0.85995
2011	0.86665

However, the figure is not as high as looked likely; the Euro had been trading close to, or above, 87p for most of the last fortnight. Modulation rates in the UK are unchanged in 2011 compared to 2010, except in Wales where there is a 0.7% increase.

Actual payments can now be calculated in Scotland and Wales for 2011 – although, of course, payments will not start until the start of December. In England, however, the RPA still needs to calculate the regional average rates for 2011. In recent years these have been announced at the end of October or beginning of November.

Working on Andersons’ estimates of the likely English regional rates, the lowland flat rate regional amount is estimated at £203.2 per Ha compared to £167.97 per Ha last year after all deductions: but remember part of the increase is due to the phasing-in of the regional payment – 75% in 2010; 90% in 2011.

For a hectare of historically combinable crop land in England, the full payment after all deductions for 2011 is estimated at £227.8 per Ha compared with £228.5 per Ha last year – i.e. almost no change.

Agri-Environment Schemes Post-2013

Thu, 1 Sep 2011 00:00:00 GMT

Natural England has clarified the position with regards to agri-environment schemes which run into the next Rural Development Programme. Agreements running beyond 2013 (the end of the current RDPE) would have been required to come into line with any new funding rules under the next Rural Development Programme. This would have led to a lot of uncertainty for existing agreement holders and also increased admin for Natural England.

However, a change in the EU legislation means there will now be far less impact on existing agri-environmental scheme agreements. The new rules are as follows;

All ELS, OELS, UELS, HLS, CSS or ESA agreements which started before 1st January 2012 will not be affected by the new requirements.
The new requirements will only apply to 5-7 year agreements; HLS agreements (which are for 10 years) even if signed after 1st January 2012 will not be affected.
ELS, OELS and Uplands ELS starting after 1st January 2012 will include a clause which will enable the agreement to be amended if necessary to meet any new requirements under the next Rural Development Programme. Agreement holders will be able to accept the new requirements or end their agreement without penalties or any recovery of payment.

On the face of it, this appears to ensure that those who sign up to ES before the end of this year will be protected from changes in their agreements. However, it is not that simple. Firstly, all agreements already have a clause incorporated which allows them to be brought into line with any ‘changes to the legislative baseline’. This effectively means cross-compliance. Stewardship agreements would have to be altered if cross-compliance rules were changed to cover something currently paid for under ES.

The other uncertainty is the ‘greening measures’. Although not cross-compliance the same rules apply – Stewardship agreements would not be able to fund management practices required by greening (for example field margins). Therefore changes could still be required as a result of CAP reform. More information is available at -

http://www.naturalengland.org.uk/Images/Transition%20note%20v2%20_tcm6-27399.pdf

Dual Use on Agricultural Land

Thu, 4 Aug 2011 00:00:00 GMT

The RPA plans to write to 1,100 English farmers asking for details of the occupation arrangements on land that it has identified as potentially having ‘dual use’. Simplistically, it is where two parties claim under different CAP schemes on one land parcel - for example SPS and agri-environmental schemes.

The RPA is looking to gather evidence around this issue to support its arguments with the EU that dual use should continue to be allowed. The Agency will be contacting both scheme claimants (SPS and non-SPS). Evidence collected may include tenancy agreements, licences and details of any other agreements in place.

The survey is part of the 2011 SPS validation process. Therefore if claimants do not respond to the RPA’s request for information they risk having their payments held up. Any issues highlighted by the process (for example, ineligibility for a scheme) will result in penalties in the normal way.

Also on the dual use theme, the Welsh Government has announced that it will be amending its rules. It appears that, rather than a blanket ban, there may be exceptional circumstances where dual use is allowed. An announcement is expected this autumn with any new rules applying from 1st January 2012.

EU Budget Plans

Thu, 30 Jun 2011 00:00:00 GMT

The budget for the Common Agricultural Policy (CAP) should be frozen close to 2013 levels for the following seven years. This is one of the headline points from the proposals set out on the 29th June from the EU Commission on the ‘multi-annual financial framework’ (MFF) for the EU for the period 2014-2020.

Overall

The total EU budget proposed shows a 5% increase on the current 2007-13 totals. This is highly likely to prove contentious as the discussions on the draft MFF progress – the UK government has already branded them ‘unrealistic’ in times of austerity. The UK wishes to see EU spending frozen. It may have backing on this from other contributor nations such as Germany and France, although net recipient nations may, not surprisingly, be happy for an increase. The Commission may well have started off proposing an increase with a view to cutting this back as negotiations proceed. It is proposed that the funding of the EU should alter. Instead of largely receiving money from Member States based on national income and VAT receipts, the EU would instead move towards collecting revenues itself (‘own resources’ in the jargon). One of the main mechanisms for this would be a tax on financial transactions – again, not something the British Government would be keen on. As part of the shift in financing, the whole system of budget rebates and corrections would be much-simplified.

Agriculture

Making comparisons with current spending on agriculture is not always easy as some spending has switched ‘headings’ and some sits outside the MFF completely. The table below shows some of the headline figures;

*EU MULTI-ANNUAL FINANCIAL FRAMEWORK 2014-2020 PROPOSAL*
€bn at constant 2011 prices	2013	2014-20 Total	2014-2020 Yearly Ave.	Difference
Total EU Budget *	*145.7*	*1,083.3*	*154.8*	*+6.2%* **
Budget as a % of EU GNI	1.12%	1.05%		-
Pillar 1 – SPS and Market Support	43.5	281.8	40.3	-7.3%
Pillar 2 – Rural Development	13.9	89.9	12.8	-7.9%
Pillar 1 / Pillar 2 Split	76:24	76:24		-
Other Agricultural Spending ***	-	15.2	2.2	-
*Total Agricultural Spend*	*57.4*	*386.9*	*55.3*	*-3.6%*
Agriculture as a % of EU Spending	39.4%	35.7%
* includes spending outside the MFF. higher than the 5% increase quoted as the comparison is with 2013 year rather than 2007-13 average. * includes food safety, ‘aid for the needy’, an agricultural crisis reserve, agricultural R & D funds and funding to help the EU cope with globalisation.

It can be seen that there is, in fact, a slight decline in farm spending during the next budgeting period of almost 4%. It should also be remembered that all these figures are at 2011 prices. Therefore, in real terms there will be a significant reduction in funding. Even at an inflation rate of 2%, funds nine years hence in 2020 will be worth almost 20% less than today.

Due to the projected rise in the overall EU budget, and the slight fall in farm support, the CAP’s share of overall spending falls from being close to 40% of the total to nearer 36%. It will also be noted that the split of spending between the two ‘Pillars’ of the CAP would not change at all if these proposals are agreed.

In general terms this looks to be a quite a coup for the EU Farm Commissioner Dacian Ciolos. He has persuaded his colleagues to leave the farm budget relatively untouched and has got his plans for CAP reform endorsed. Of course these are only proposals, and if the overall budget is squeezed, the agricultural portion could well be a prime place to look for savings.

Red Tape in Farming

Thu, 2 Jun 2011 00:00:00 GMT

Richard Macdonald has delivered his report into cutting the bureaucracy faced by the farming and food industries. It runs to 150 pages and contains 215 specific recommendations. The overall message from the ‘Farming Regulation Taskforce’ is that the industry should be trusted more, but it has to warrant such trust. The phrase that is used is ‘earned recognition’.

In terms of changing the culture of regulation, the report has six overall recommendations;

Question whether there is actually a problem and if regulation is the best way to solve it
Foster better partnership between the industry and government – allowing for more voluntary industry-led initiatives, and ensuring industry advice is heeded
Ensuring inspection and enforcement is targeted and fairer (cracking-down on major breaches but allow warnings for minor wrong-doing)
Making the process of compliance easier through reforming paperwork requirements (including greater use of information sharing within government, and electronic data capture)
Understanding farmers and their motivations better so that behaviour can be influenced without regulation (or to make regulation more effective)
Being more proactive at an EU level to ensure any new regulation is minimised and implementable

Following these broad recommendations, a large number of specific problem areas are addressed. Obviously these cannot be comprehensively covered here (the full report can be found at - http://www.defra.gov.uk/publications/2011/05/17/pb13527farming-reg-report/).

Please contact us for a summary of the main recommendations covering areas including:

SPS and Cross-compliance
Animal Movement Regime
Environment
Business Issues

Remember that the Task Force’s remit only extends to England. However, if there are any real reductions in red-tape made as a result, it seems highly likely that the devolved administrations would be watching very closely. The next, and most important, stage is to see how many of the recommendations are translated into action.

Farm Incomes Fall

Mon, 2 May 2011 00:00:00 GMT

Profitability on UK farms fell by 4% in real terms in 2010 compared to the previous year. This is the (somewhat surprising) result of the latest Total Income from Farming (TIFF) figures released by DEFRA. TIFF is the aggregate return to all the entrepreneurs in UK agriculture and horticulture, and is the benchmark indicator for the profitability for the entire UK farming sector (in DEFRA jargon ‘income’ is used rather than the ‘profit’).

We reported the TIFF forecasts late in 2010. At that point the 2009 figure had just been revised to £3.59bn. The latest figures have TIFF for 2009 standing at £4.58bn – a change of £1bn! A small part of the change (around 4%) will have come from restating the figures at 2010 prices. However, this still leaves a massive adjustment to account for. Part of this (over £0.5bn) comes about because there has been a change in the way the paid labour is calculated. It has been decided that the previous methodology was overestimating this cost due to non-commercial and inactive holdings. This has led to a significant rise in TIFF as costs have reduced. The TIFF series back to 2000 has been restated in line with the new calculation basis.

Turning to 2010, incomes (profit) was marginally up compared to 2009. But this turned into a reduction of 4.3% when inflation is taken into account. TIFF in 2010 is put at £4.38bn. Crop and livestock output were both up on 2009 at 8.5% and 3.8% respectively. This improvement was offset by a rise in costs (3.3%) and a fall in the value of the Single Payment and other payments (down 12%).