Category: Policy & Business

Scottish livestock farmers who applied for coupled support should shortly be receiving payments.  The Scottish Government plans to make payments under the 2016 Scottish Suckler Beef Support Scheme (SSBSS) in the first week of June.  Payments for eligible animals on the mainland are £92.05 per head, whilst the islands rate is £140.71.  Money due under the 2016 Scottish Upland Sheep Support Scheme (SUSSS) should be with farmers by the end of the month.

There is more confusion on the Greening rules for 2018, and particularly on whether pesticides will be allowed on Ecological Focus Areas (EFA).  We have written previously about the ‘simplification’ of the CAP and especially the rules on Greening.  One of the changes proposed for the 2018 BPS year was a prohibition on using plant protection products on any of the in-field EFA options, fallow, catch & cover crops, and nitrogen-fixing crops.  Of these, the latter is the most important.  Many producers have used beans or peas to meet their EFA requirement whilst growing them in the normal way.  Very few farmers would want to grow pulses under almost organic conditions simply to meet the EFA requirements.

The European Parliament’s Agriculture Committee voted on a package of measures, including the one outlined above.  It rejected the change by 30 votes to 11, claiming (probably correctly) that it would harm the production of protein crops in the EU.  The full Parliament will now vote later in the month.  If they follow the lead of the agriculture committee, which is likely, then negotiations will commence between the Parliament, EU Council and EU Commission.  This process will drag on during the summer, with a decision likely coming after most farmers have decided their 2018 cropping plans.  It is very unsatisfactory, but it is impossible to say at present whether farms should plan on an PPP ban being in place or not for next year.

The ‘bible’ for fertiliser applications has been updated.  A new version of the AHDB’s Nutrient Management Guide, also know as RB209 was published at the end of May.  It provides guidelines for crop nutrient requirements and the nutrient content of organic materials.  The major changes for the new, 9th Edition, are a restructuring of the grassland recommendations and optional adjustments to nitrogen rates for cereals, based on yields.  The publication is in seven sections and can be found at – http://www.ahdb.org.uk/projects/RB209.aspx

A reminder that those interested in applying for the Mid-tier of the Countryside Stewardship Scheme have until 31^st July to request a pack from Natural England.  Asking for a pack does not commit the farmer to making an application. But those that have not expressed an interest by the end of next month will be unable to apply.  The deadline for full applications is the 30^th September, with agreements starting on the 1^st January 2018.

Direct payments are unlikely to form part of a future domestic farm policy, but it may be 2025 before they are fully phased-out.  These are the implications of statements recently made by George Eustice, the current DEFRA Farming Minister.

In interviews, conducted as part of the General Election campaign, he is quoted as saying “I don’t think many people could defend the notion of an area-based subsidy system staying in place for perpetuity”.  The Conservative manifesto has pledged that the sums of money to supportagriculture will be maintained at current levels until the end of the next Parliament, due to be 2022 (see previous article).  Questioned on how the transition to a new policy might work, Mr Eustice stated “I would … envisage, perhaps between 2020 and 2025, a gradual change in the way we support agriculture, so we emerge with something that is much more focused”.

Of course, these are merely the personal comments of a current (junior) DEFRA Minister.  There is no guarantee MR Eustice will still be setting policy after the General Election, never mind in 2020.  However, it is difficult to believe that these comments do not, to some extent, represent the prevailing ‘departmental’ view in DEFRA or the current Conservative administration.  They therefore probably provide as good a guide as any to where policy might be going.  They also echo what we have been saying for some months on the future timings and direction of support.

UK agriculture actually made less profit in the 2016 calendar year than during 2015.  This is the somewhat surprising findings of the latest farm profitability figures released by DEFRA.

We wrote last month about the first estimate of Total Income from Farming (TIFF) for 2016.  This showed a real-terms increase of 1.5% between 2015 and 2016.  We were somewhat surprised at the small scale of the rise, given the better prices seen since the middle of the year.  However, DEFRA has now released revised figures.  These show a 7.5% drop in real terms to £3,610m for 2016.  Therefore, we are even more surprised.  The reason given for the significant downwards revisions are that the outputs of fruit, vegetables and milk were all overstated in the original figures.  Updated data has also become available in other areas to refine the figures.   Now the base level is even lower, we would certainly expect a sizeable upwards movement in TIFF for 2017, as long as current market conditions remain broadly similar for the rest of the year.

On the subject of statistics, DEFRA has also just published ‘Agriculture in the UK 2016’.  This is a compendium of many statistics relating to the farming industry.  It can be found at – https://www.gov.uk/government/statistics/agriculture-in-the-united-kingdom-2016

The new-season nitrogen price has opened at a competitive level.  For deliveries in the June to September period prices for UK-made 34% ammonium nitrate (AN) were in the high £170’s per tonne.  This was obviously attractive to farmers as the available tonnage was quickly booked out, and new price lists with values closer to £185 per tonne issued.   In fact, this starting price for the season is not that different to where the market was 12 months ago, but nitrogen values climbed strongly during the autumn reaching £250 per tonne in the early part of this year.  Therefore, the prices currently being quoted look quite attractive compared to the recent past.

Brexit may have just got a tiny bit easier, following a recent ruling by the European Court of Justice (ECJ).  The case concerns the proposed EU-Singapore Free Trade Agreement.  The Court was asked to rule whether the EU had the exclusive competence to negotiate and agree the deal, or whether individual Member States had to ratify it before it could come into force.  The ruling found that, because the deal included investors’ rights, it was a ‘composite deal’ and the 38 national and regional Parliaments across the EU did have to be consulted.  This was the line of reasoning that meant that the CETA deal with Canada (which also includes investors rights) had to be agreed by legislatures, and was almost derailed by the Wallonian Parliament.  On the face of it, this looks like bad news for the UK in trying to agree a post-Brexit trade deal – it would have to get agreement from all around Europe.  However, the ECJ ruling clarified that any trade deal that doesn’t include investors rights provisions is the exclusive competence of the EU to agree.  Many commentators think a UK-EU deal will not include such provisions.  Therefore, a deal could be concluded without the need to involve national Parliaments.

The Conservative Party has promised to keep spending on farm support at current levels until 2022.  This is probably the most eye-catching pledge contained in the main parties’ manifestos for the upcoming General Election.  The commitment states that ‘we will continue to commit the same cash total in funds for farm support until the end of the [current] Parliament’.  Unless there is an early election (again) this would be 2022.  Although many are cynical about politicians’ promises, a manifesto commitment is usually regarded as the gold-standard in this area.  Thus, there seems a reasonable chance that this policy will be followed-through if there is a Conservative administration.  It is worth noting that this only guarantees the cash total (i.e. no commitment to increase support in line with inflation).  It also only refers to the budget and not the way support will be delivered – i.e. it should no be assumed that a Basic Payment-like system will be in place until 2022.   

The document also states that ‘we will work with farmers, food producers and environmental experts across Britain and with the devolved administrations to devise a new agri-environment system, to be introduced in the following Parliament’.  At the risk of reading too much into this, the phrasing suggests that there is a desire to set farm policy at a UK level, rather than on a devolved basis.  It also seems that it may not be until 2022 that new agri-environment policies will be ready.  This would either suggest a roll-over of the present CSS, Glastir, AECS etc., or a significant gap in scheme availability. 

It is outlined that the UK ‘would lodge new WTO schedules in line with EU schedules to which we are bound whilst still a member of the EU’.  Whilst seemingly a dry, technical point, this could be very important to UK farming.  It suggests that the UK would ‘mirror’ current EU tariffs including on agricultural commodities and food.  This would prevent a surge of low cost imports from around the world entering our market on Brexit.  Also, in the absence of a trade agreement with the EU, the current (relatively high) tariffs would apply to imports coming from Europe.  This would be important in markets where we currently import large amounts of produce from the EU – e.g. pigmeat. 

The manifesto also promises to deliver ‘landscape scale’ environmental improvement and a backing for natural flood defence systems.  There will also be a free vote on the Hunting Act.  Lastly, there is a wider commitment to move Government Departments and Civil Servants out of London and into the regions.  If anyone has an empty suite of farm offices, make DEFRA an offer . . .  The full  manifesto can be found at – https://www.conservatives.com/manifesto (the farming section is on page 25).

The focus has been on the Conservatives, as the opinion polls suggest that this is the programme that has by far the best chance of being enacted.  However, if the last few years have taught us anything, it’s that you cannot always rely on opinion polls.  The Labour manifesto includes commitments to ban neonicotinoids, reinstate the Agricultural Wages Board, refocus support on smaller farmers and ‘sustainable’ practices, and consider options for a new land value tax (see http://www.labour.org.uk/index.php/manifesto2017).  The Liberal Democrats want to ‘cap’ support to larger claimants whilst encouraging new entrants to theindustry.  The Party’s commitment to a softer version of Brexit with full Single Market membership maintained would be the policy with the greatest impact on agriculture however (http://www.libdems.org.uk/manifesto).

The latest Organic Report from the Soil Association reveals the UK organic market continues its 5^th consecutive year of growth.  In contrast non-organic sales continue to decline.  Total sales of organic products increased by 7.1% in 2016 and are now worth £2.09bn.  Organic production represents approximately 1.5% of the total UK food and drinks market.

Organic supermarket sales have seen a 6.1% growth in 2016; supermarkets currently account for 69% of all sales.  Other key movers include:

• A 6.3% increase in organic sales by independent retailers
• 10.5% increase in sales of organic products through home delivery
• 19.1% increase in the foodservice sector
• The organic beauty and wellbeing sector grew by 13%
• The Soil Association textile licensees increased organic sales by 30%

Globally, the organic food market is valued at $81bn and the UK is starting to catch up with growth rates seen in other areas of the world.  The UK represents in the region of 4% of global sales.  The Soil Association (SA) report the numbers of farmers applying for SA Certification was up by 13.5% in 2016.

However, this positive message from the SA is not reflected in the organic statistics recently released by DEFRA (see – https://www.gov.uk/government/statistics/organic-farming-statistics-2016).  These show that the land area in the UK being managed organically declined by 2.5% between 2015 and 2016 to 507,900 hectares.  Within this, the area of ‘in-conversion’ land did show an increase though.  The area of organic land has declined by 32% since its high-point in2008.  It now represents 2.9% of the total farmland area of the UK.  Within the total, organic grassland is by far the largest category (84%).  The areas of organic crops has been falling steadily since 2009.  Organic cereals accounted for just 1.2% of the total cereal area in 2016.

The number of organic livestock remained fairly stable between 2015 and 2016.  The decline in the number of organic producers continued however, with a drop of just under 1% to 3,398 organic farmers.  This is a fall of 35% since 2007.  The fact that the organic market appears strong (as evidenced by the SA report) whilst the UK production base has declined, suggests that imports are fulfilling much of the growing market.  There are signs that farmers are responding to demand, with anecdotal evidence suggesting, for example, an increase in organic dairying.