Category: Policy & Business

The profit of UK agriculture in 2017 rose by 45% compared to the previous year.  Total Income from Farming (‘TIFF’) was £5,345m last year, compared to £3,682m in 2016 according to forecast figures released by DEFRA.  This sizeable increase returns profitability back to the levels seen in 2013 and 2014, before the ‘dip’ of 2015 and 2016.

The main factors behind the increase where higher physical crop volumes and better prices for crops, meat and milk.  The weakening of Sterling since the middle of 2016 is the prime cause of the across-the-board price improvements.

Total Income from Farming is the aggregate measure of profits for all UK farming businesses on a calendar year basis.  It is the return to all the entrepreneurs in agriculture and horticulture for their labour, management and capital invested.  The series has been running for over 40 years and is considered the benchmark for gauging the financial health of the sector.  Despite the use of the word ‘income’ it can be thought of as the profit of ‘UK Agriculture Plc’.

It should be cautioned that these figures are only forecasts.  Usually, the first estimate of TIFF comes at the end of April (once more data is available).  However, DEFRA is required to submit an estimate to the EU, so it has decided to publish it.  There is a history of large revisions to the TIFF figure, so it will be interesting to see if the figure in a couple of months’ time shows much change.  We had forecast a substantial rise in the 2017 TIFF, but not by as much as this first DEFRA estimate.  Our modelling predicted a rise of around 30%.   

For the first time in its 109 year history the National Farmer Union (NFU) of England and Wales has elected a woman President.  Minette Batters, a beef farmer from Wiltshire, beat off the challenge of Essex arable farmer Guy Smith for the top job.  Mr Smith had the consolation of being voted in as Deputy President by delegates to the NFU conference.  The third member of the leadership team is Stuart Roberts, a beef and arable farmer from Hertfordshire, who becomes Vice President.   Ms Batters takes over from outgoing President Meurig Raymond, who has held the post for two 2-year terms.

New funding of £90m is to be invested by the Government in agri-tech.  It will be used to support artificial intelligence, robotics and satellite imagery in the food and farming sector to boost efficiency and provide high-skill jobs.  The funding is part of the Industrial Strategy Challenge Fund and will be known as the ‘Transforming Food Production Challenge’.

The Governments in both England and Scotland have announced initiatives this month to improve the level of collaboration between farm businesses.

England

DEFRA has announced a ‘collaboration fund’ of up to £10m to help bring together those interested in working together.  The precise details of the scheme are not yet know as it is to be designed in consultation with the industry.  The announcement was part of the Government’s response to a report into the remit of the Groceries Code Adjudicator (GCA).  Other policy measures announced include;

• compulsory milk contracts
• standard grading grids to be used in sheep abattoirs
• a commitment to improve price transparency in the food supply chain (although there no details of what this might involve)
• an investigation of whether more retailers should fall under the remit of the GCA
• talking late payments by promoting the use of the Small Business Commissioner

Scotland

A new programme called the Rural Innovation Support Service (RISS) has been launched by the Scottish Government.  It aims to provide facilitators which will help set up and run groups to explore ideas, find solutions and implement innovations.  More details can be found at – www.innovativefarmers.org/welcometoriss

Although the 2018 BPS application window is not opening until Mid-March, there is still a fair amount going on and we will try to keep readers up-to-date over the coming weeks and months.

Adding Land

The ‘Add Land’ email route is available again as from 20th February.  The deadline for ensuring land parcels are added in time for this year’s application is 5th May 2018.  To use this method, email the RPA at [email protected] with ‘BPS 2018 Add Land’ in the subject title.  Give the field parcel(s) number(s) you wish to be added and the SBI and Business name of where you want the fields to be linked to.  A confirmation email should be received.

You can only add land by this method where the parcel is already mapped by RPA i.e already been claimed on.  For land not previously mapped a paper RLE1 will need to be sent in to register new land.  It is important to realise that all land that is mapped will be linked to an SBI called a Customer Land Link (CLL).  The PLCD mapping update, has seen some land linked to the wrong SBIs and other land ‘lost’ which is why some may need to use this route.  But where possible land should be transferred online.  There is also the option to ‘remove’ land online, for land that is to be taken out of agricultural production or where this land has wrongly been linked to an SBI.  There are however three situations where applicants cannot transfer or remove land online and a paper RLE 1 will be required;

• the ‘Holding Type’ says ‘Tenant’; or
• the’ % owned’ is not 100%; or
• transferring part of a land parcel

There is no reason why land is held as ‘Tenanted’ or less that 100% owned and the RPA are looking into ‘correcting’ this for future years.  But for these types of transfers, the person acquiring the land could use the ‘Add Land’ email route, to ensure the land is on their application in time for submission in May.  But note, the transferor should still put in an RLE1 otherwise there is a potential ‘dual claim’ issue as the ‘Add Land’ email route does not sever the CLL with the previous SBI and therefore the land parcel will be linked to both SBIs.

Hedge Layer

A new ‘hedge layer’ will be available under ‘View Land’ this year.  It is not ready as yet, but may be before the application window opens.  The ‘hedge layer’ will show for each land parcel, the length and location of hedges which are eligible for EFAs.  There will be a ‘hedge’ tab at the top of each land parcel page, which will open a separate ‘hedge layer’ view at the bottom of the page for applicants to view the hedges mapped by Ordnance Survey.  If applicants disagree with the mapped lengths and locations of hedges an RLE 1 will need to be submitted to request a change.  Hedges will only be shown where they are EFA eligible i.e on or adjacent to fields where the ‘land cover’ is arable.  Lengths of hedges used to satisfy EFA requirements in previous years will be pre-populated again this year in the Greening Section of the ‘form’ unless they are deemed as ineligible after this ‘hedge layer’ mapping exercise.  The system will not pre-populate hedges where they are deemed ineligible.  In theory this new tool sounds useful, as many applicants have turned to using hedges (and margins) to satisfy their EFA requirement instead of Nitrogen Fixing Crops (NFCs).  The aim is to reduce the need for inspections, but ultimately it will be down to the applicant to ensure that the hedge length and location is eligible for EFAs

PLCD Mapping Changes

The Proactive Land Change Mapping (PLCD) exercise which took place during the second half of last year has resulted in a number of incorrect mapping updates.  Under EU rules the mapping data must not be more than three years old.  This is not a new requirement, it happened under SPS, but with online maps it is perhaps now more visual.  However RPA has not undertaken the exercise since BPS commenced in 2015.  It was going to undertake it prior to the 2017 application period but (thankfully) delayed it until afterwards.  But this meant that about 1.6 million parcels were viewed with approximately 1.2 million amended at the back-end of last year.  In the future, the RPA will maintain the mapping register (know as LPIS – Land Parcel Identification System) annually in the period January to March.  This year about 150,000 parcels will be viewed, considerably less.

Even so, the extent of the mapping update undertaken in 2017 has resulted in an a lot more work to be done before claims can be submitted this year due to the number of in incorrect ‘land covers’ being remapped i.e arable land as permanent pasture, temporary boundaries being classed as permanent, parcels incorrectly merged, pifs wrongly removed, land parcels incorrectly added or removed from SBIs.  This will mean that online maps will need to be checked carefully.  In the main the only way to rectify these ‘errors’ is to send in an RLE1 and sketch map with ‘Unrequested change query’ on both.  However, the RPA has said it will be shortly trialing a telephone route.  This will be via their helpline, but will only be for simple mapping updates i.e.where a sketch map is not required.  This could be where the ‘land cover’ for a whole parcel as been mapped as Permanent Crops where it should be Arable.  Or where a pif has been incorrectly removed and it needs putting back.

Land Use Codes

The RPA has published the Land Use Codes for 2018.  These can be found on Gov.UK at https://www.gov.uk/guidance/rural-payments-service-land-use-codes-2018 copies can be downloaded.  The only change is that you can now claim for Spelt Wheat as a separate crop by using code AC96, although the the online system will show Samphire (!).  The Land Use Codes have been made available now following the turning on of the ‘Land Use’ screen (see earlier article).  Remember the codes are used when declaring land in the Land Use Screen; they should reflect the position on the ground on 15th May 2018 and will be used for BPS applications and also Countryside Stewardship.

The supply of farmland coming onto the market continues to fall according to the latest Rural Land Market Survey from the Royal Institution of Chartered Surveyors (RICS) and the Royal Agricultural University (RAU).  Both the availability of residential and commercial units has declined over the last twelve months and more respondents reported that they did not expect the situation to change much in 2018, citing the ongoing uncertainty over Brexit resulting in less land being made available.  On the demand side, this appears to have stabilised in the second quarter of 2017, after declining for a couple of years.  However, this is probably more due to an upturn in ‘lifestyle’ buyers returning to the market as demand for purely commercial farmland still continues to fall marginally.  In addition, there remains a divide between good quality land in the right location and the poorer quality farmland.

The survey’s transaction-based measure for the second half of 2017, shows the weighted average price increased by 1.6% to £10,257 per acre (£25,345 per hectare) compared with the first quarter.  However, this is 2% down on the year.   By contrast, the opinion-based survey, fell by a further 1.4% in quarter two to £7,434 per acre (£18,369 per hectare); nearly 8% down compared to year-earlier levels.  The opinion-based measure, is a hypothetical estimate from surveyors of bareland prices.  The transaction-based measure is from actual sales and also includes a residential component where its value is estimated to be less than 50% of the total, and is therefore usually higher.

Looking ahead, the survey reports a net balance of -13% of surveyors expect land values to fall over the coming year, with more anticipating the value of commercial farmland to fall compared to those blocks of land which also have a residential element.

Turning to rents, arable FBT rents showed a fall in the second quarter, from £146 per acre (£361 per Ha) to £141 per acre (£348 per Ha), although these are still up by 4% year-on-year.  Pasture rents also declined marginally from £94 per acre (£232 per Ha) in the first half of 2017 to £93 per acre (£230 per Ha) in the second quarter and are 1% down annually.  In comparison, Agricultural Holdings Act tenancies saw an increase for both arable and pastureland in quarter two compared to the first half of 2017, from £75 per acre to £78 per acre and £53 per acre to £58 per acre respectively.

Average yields on investment land, although edging upwards from 1.5% to 1.6% in the second quarter, are still at their second lowest figure on record.