Category: Policy & Business

In normal times the UK farming sector might be getting quite excited about the next round of CAP reform, which is due to start in earnest in the New Year.  But these are not normal times, with Brexit rendering changes to EU farm policy somewhat a moot point.  However, the UK should not ignore the process.  Europe is likely to remain our largest trading partner for farm goods, as well as being our closest neighbour.  How the EU decides to support its farmers from 2020 onwards will set one end of the metaphorical playing field which the UK farm lobby will argue needs to be ‘level’.  The EU Commission plans to launch a wide-ranging consultation on the CAP in January.  Proposals for the next Multi-Annual Financial Framework (MFF), or EU budget, need to be presented by the end of the year.  This will indicate how much money the CAP might have.  Perversely, Brexit might lead to more pressure for change in the CAP.  The UK is a large net contributor to the EU.  If these funds were to disappear, then budgetary forces may result in a more radical shake-up of the CAP than might otherwise be the case. 

DEFRA has updated its 2015/16 Farm Business Income (FBI) results which were published on 27th October (see November’s article).  The revisions, which are fairly minor, are due to updated data regarding dairy farms.  This sees FBI for the average dairy farm increase from £42,300 to £43,900.  The other enterprises a part from ‘Mixed’ have been revised downwards marginally.  The full report can be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/577244/fbs-farmaccountsengland-15dec16.pdf

There has been considerable discussion and argument over Brexit this month, but little in the way of concrete developments.

The Supreme Court has heard the case concerning the triggering of Article 50.  As reported last month, the High Court ruled that the Government could not invoke the article under Royal Prerogative and needed Parliament’s approval.  The result of the Government’s Appeal is expected in January.

Meanwhile, Parliament has had a debate on Brexit.  On the 7^th December, MPs voted by 461 to 89 to back the Prime Minister’s timetable for Brexit, with Article 50 being triggered bythe end of March.  However, the Opposition motion also committed the Government to providing Parliament with a ‘plan’ for Brexit before triggering Article 50.  There was no indication of how much detail such a plan needed to go into, but the Brexit Secretary, David Davis, has indicated it will not be published before February.  Being a Parliamentary motion, the vote is not legally binding.  If the Supreme Court rules against the Government then it is highly likely that an Act of Parliament (primary legislation) would be required.  Whilst MPs are unlikely to use the passage of such a Bill to block Brexit, the process will take time.  If many amendments are tabled, then the timetable may slip beyond March, despite what the recent motion has stated.

The Government still seems to have no clear plan for what it wants out of the negotiations.  The ever-more meaningless messages have moved up a notch with Theresa May now claiming she wants a ‘red, white and blue’ Brexit – whatever that is.  However, Ministers and officials have been ‘flying kites’ about possible outcomes.  David Davis has suggested that the UK may pay into the EU Budget in return for Single Market access.  The Chancellor, Philip Hammond, has stated that there should be a transitional deal after the end of the formal two-year negotiating period to help smooth the path to a new UK-EU arrangement.  This looks necessary when set against recent comments from the UK’s Ambassador to the EU.  he stated that it may take ten years to negotiate a comprehensive trade deal, and even then, it may not be accepted by other EU Member States.

There is a perception that the terms of Brexit will be decided in the UK.  But there is another party to the negotiations who, arguably, have a stronger hand to play.  As the UK position perhaps softens slightly, the talk coming out of the EU is becoming more hard-line.  The EU Commission’s Brexit negotiator, Michael Barnier, has spoken publically about the talks for the first time this month.  He has stated that the Article 50 talks, rather than taking two years, must be concluded in 18 months, finishing in October 2018, to allow 6 months for EU Member States to ratify any deal.  He has also clearly outlined that any deal for Britain must not be as good as full membership of the EU.

Finally, in an item of news that might be described as ‘unsurprising’, a report has been published that finds DEFRA is unprepared for Brexit.  Produced by the Institute for Government, it finds that the capacity of the Department has been degraded by budget cuts over the last decade.  The potential effectiveness of DEFRA is also being compromised as the Civil Servants have no clear idea of the process, and what role DEFRA is expected to play in the negotiations.  For full details of the report see – https://www.instituteforgovernment.org.uk/publications/whitehall%E2%80%99s-preparation-uk%E2%80%99s-exit-eu

DEFRA and Natural England have announced an additional round of the Countryside Stewardship:Facilitation Fund.  This is in response to actions identified in Flood Action Plans following the storms last December.  The areas eligible to apply for funding are those where the Farming Recovery Fund was available which includes:

• Cumbria
• Lancashire
• Greater Manchester
• Northumberland
• County Durham
• Yorkshire

The Facilitation Fund provides money to bring farmers and land managers together to provide ‘landscape-scale’ agreements.  This additional round will be focused on providing catchment-scale solutions in the above areas in response to the flooding in 2015.  Grants are available for three years.  The Agreement must involve at least four holdings and cover a minimum of 2,000 Ha.  The scheme is competitive.  Potential facilitators should contact Natural England first; email – [email protected] or tel. 0300 060 3900

The RPA has released a further update on 2016 BPS payment progress.  As of 13^th December 59,000 claimants (68%) had received their payment.  This is a further 8,000 farmers and in total amounts to £822m.  This equates to around 50% of the total BPS funds (although, interestingly, unlike previous years, the RPA is not quoting payments in terms of total funds).  Unfortunately a number of 2016 payments are incorrect.  This is especially the case where 2015 problems have still not been rectified.  Agent Relationship Managers (ARMs) are re-starting to make contact with agents who have 5 or more SBIs connected to them and hopefully this should be a way of getting the 2015 and 2016 payments rectified.

Rural Payments Wales has confirmed that nearly 90% of eligible BPS claims were paid on 1^st December.  After a difficult year in 2015, £173m was issued to 13,176 Welsh farmers on the first day of the 2016 BPS payment window.  This is a return to Rural Payments Wales’ previous performance and has been helped by 100% of the Single Application Forms (SAFs) in Wales being made online in 2016.

The Welsh Government has made a number of announcements regarding Rural Development Schemes some of which claimants need to respond to fairly quickly:

• During December, those who entered into Glastir Entry in 2012 and also took up a Glastir Advanced agreement will be written to and offered a replacement contract.  The new contract will extend the Glastir Entry commitment to match the end date of their Glastir Advanced Agreement.  Claimants need to check the offer carefully as payment details may differ from the current £34/Ha and decide whether to accept the continuation of the Glastir Entry Commitments by 31^st December.
• The Glastir Organic application window closed on 4^th November.  Offers are now being sent out via claimants’ RPW online account and must be accepted within 7 days of the offer being made, otherwise the offer will be withdrawn.
• Those who already have a Glastir Organic Contract must submit a business plan via their RPW Online Account by 31^st December in order to validate their claim for payment.
• Those Grazing Associations which entered into a Glastir Commons contract in 2012 will be written to in December offering them a replacement agreement.  They must respond by 31^st December if they wish to continue with the scheme.  Revised contracts will be issued in Spring 2017.
• A reminder that the Glastir Small Grants Scheme opened for expressions of interest on 12^th December and closes on 23^rd January.  The theme for this round is ‘water’.

The consultancy firm ADAS has been purchased by the environmental and engineering services group RSK.  ADAS employs 300 people from 15 offices in the UK, and claims to be the largest independent consultancy business in the agricultural and environmental sector.  RSK has 45 offices around the world.  It is perhaps slightly ironic that the remnants of the old National Agricultural Advisory Service (NAAS), the forerunner of ADAS, is disappearing as an independent entity in the same month that the AHDB has called farming’s knowledge transfer activity ‘fragmented’.  NAAS coordinated much of work that led to the post-War boom in farming productivity.  ADAS has moved away from its farm consultancy roots since privatisation in 1997, concentrating more on government or corporate contracts.

DEFRA has produced statistics on the use of energy crops in the UK.  These show that just under 2% of the arable land in the UK was devoted to energy production in 2015.  Over half of the total was growing crops for biofuels (mainly wheat and sugar beet).  However, the amount of maize for anaerobic digestion (AD) continues to increase and 34,000 Ha of land was used for this crop in 2015 – this is a third of the total maize area.  For more details see – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/575827/nonfood-statsnotice2015i-08dec16.pdf

Farm profitability in Wales fell by almost a quarter in 2015/16.  This is according to the latest Farm Business Income (FBI) figures released by the Welsh Government.  Dairy farms saw returns fall by an average of 53% to £32,800.  Lowland beef and sheep farms saw a decline of 40% to £16,300.  Upland farms fared slightly better with ‘only’ a fall of 1% compared to 2014/15 to return £21,900.  Overall, the average for all farm types saw a 23% decline with a FBI of £22,200.  For full details see – http://gov.wales/statistics-and-research/farm-incomes/?lang=en.  These largely mirror the English figures reported on last month.  The current 2016/17 year may see some improvement in beef and sheep returns, but the recent uplift in milk prices has probably come too late to turn around profitability in the dairy sector.