Category: Policy & Business

Early Welsh BPS Payments

The Welsh Government paid the vast majority of farmers an advance of 70% on their 2021 BPS payments on the 15th October.  Around 97% of claimants received the advance.  The balancing payments will be sent from the 15th December.

SFI Pilot

Defra received 938 applications for the SFI Pilot.  Whilst this is down on the 2,000 farmers who expressed an interest, Defra is pleased with the overall numbers which apparently provide a good spread of farm types, sizes and locations.  Applications will be contacted over the next few weeks once their agreements are ‘live’ on the RPA portal.  They will then have 15 days to accept them or request amendments.  Agreements will start from the 1st November (apart from those with land coming out of Stewardship, which will be 1st January).  Payments are being done on a quarterly basis so the first agreements will see initial payments in February.

CO2 (and Fertiliser)

It is reported that the fertiliser producer, CF Industries, will continue to operate its plants in the UK after buyers of carbon dioxide (CO2) agreed to pay higher prices.  The deal operates until January.  This means that ammonium nitrate manufacture will continue for at least the next couple of months (ironically as a by-product of Co2 production).  Although this eases some of the concerns about availability, fertiliser prices are likely to be high given gas prices.

Agricultural R & D

Defra invited the first applications under a new agricultural Research and Development grant this month.  This is all part of the Government’s Farming Innovation Programme.  There will be three ‘funds’ under this heading;

  • Research and Development Partnerships Fund: the first to launch; more details on this given below
  • Farming Futures Research and Development Fund:  aiming to bring agri-food businesses and researchers together to address strategic challenges in he sector.  This will open early next year.
  • Projects to Accelerate Adoption Fund:  based on getting smaller projects that are nearer to commercialisation through to market.  Should be available later in 2022.

More details on the Research and Development Partnership Fund is available from a new website (https://farminginnovation.ukri.org/).  The project is being run in conjunction with UK Research and Innovation (UKRI).  It has four components that are summarised in the table below;

The grant is in the form of a competition so only the best projects will be funded.  There will be further rounds in the future.

Gene Editing Allowed

The Government will ease the rules on gene editing technology in England.  Defra’s response to a consultation exercise (see https://www.gov.uk/government/consultations/genetic-technologies-regulation) sets out how it plans to regulate the technology.

Firstly, this will involve amending legislation by the end of the year to simplify the rules on field-scale research trials (essentially, there will only be a requirement to notify Defra).  The rules on trials involving animals will not change.  Secondly, primary legislation will be enacted to change the definition of a Genetically Modified Organism (GMO).  Gene edited crops and animals will be taken out of the definition as the changes introduced by the technique are equivalent to those hat could have been achieved by conventional techniques.  Only organisms  where genes have been transferred between species (transgenic) will be deemed GMOs.  When this legislative change might happen is unknown.  When it occurs, it should simplify the process of getting gene edited products onto market.  However, Defra highlights that any product would still need to prove it was safe for human consumption and didn’t pose a threat to the environment.  Labelling rules for gene edited products would still need to be decided.

These plans only cover England.  The regulation of GM is a devolved matter and Scotland, Wales and N. Ireland will set their own rules.  There may be divergence between what each nation decides.

NI Protocol Proposals

Proposals to simplify the operation of the Northern Ireland Protocol would see checks on consumer goods arriving from Great Britain drop by an estimated 80% as well as a greater role for NI institutions in the operation of the Protocol.

The plans come from the European Commission and aim to address the difficulties that Northern Ireland has been experiencing as a result of the NI Protocol.  This is the arrangement put in place via the UK-EU Withdrawal Agreement to avert a hard border on the island of Ireland.  However, by keeping NI in the Single Market for goods it meant the introduction of customs and regulatory checks on products entering NI from GB.  This has angered Unionists who see a threat to the integrity of the UK and has also caused practical problems in the supply of goods – especially foodstuffs.

The Commission has published four ‘non-papers’ suggesting further flexibilities on key areas, as outlined below. These proposals are applicable to GB-NI trade only and don’t affect the significant trade friction on GB-EU trade. For agri-food, the proposals on SPS are the most important.

  • Food, Animal and Plant Health (Sanitary and Phytosanitary (SPS) regulations): proposes the following;
    1. ‘Simplified access’ (simplified certification and reduction of physical checks) for GB-NI movements of a significant range of retail goods (destined solely for sale to end consumers in NI retail shops).
      • Simplified certification: means that if a truck load of agri-food goods destined for an NI retail distribution centre contained 100 products subject to SPS regulations (but are not prohibited/restricted), just one simplified official certificate would be required stating that the goods meet EU standards, as opposed to the default of 100 health certificates. 
      • Reduced checks: documentary checks would remain compulsory and would be carried out remotely (electronically).  Identity and physical checks would need to be performed at Border Control Posts but could be reduced substantially with a focus on risk-based management principles.  The Commission claims that regulatory checks could reduce by approximately 80% although it is unclear how such an estimate was reached. 
      • Exemptions for ‘identity products’: such as Cumberland sausages and other chilled meats brought in from GB for final consumption in NI, provided such products remain aligned with the EU’s standards.
    2. Conditions for simplified access include;
      • Labelling: products packed for consumers need to be labelled accordingly and should be only permitted for sale in the UK.
      • Goods sold to other operators (e.g. farmers or food processors) would be excluded from these arrangements.
      • Origin: simplified access would only be applicable to goods originating in the UK as defined by the UK-EU Trade and Cooperation Agreement (TCA).
      • Monitoring: these facilitations would only be available to “authorised traders” and the EU would need to have access to NI databases for verification purposes and to monitor trade flows.
    3. Safeguards include a review clause as well as the following mechanisms;
      • Compliance verification mechanism: via audits and on-site inspections of traders by the EU Commission and Union representatives in NI.
      • Unilateral measures by the EU: to suspend or revoke facilitations in the case of the UK failing to react to or to remedy an identified problem.
      • Rapid reaction mechanism: to identified problems in relation to individual products or traders.
  • Customs: the EU proposals are aimed at dramatically reducing customs formalities and costs for goods deemed “not at risk of being subsequently moved into the (European) Union”.  These are essentially goods for final consumption in Northern Ireland, effectively creating an “express lane” upon arrival in NI for such goods.  Whilst further detail will be required on how these reduced formalities would operate in practice, the EU is again seeking access to ‘real-time’ data to ensure that the Single Market is protected. 
  • Medicines: focuses on ensuring undisrupted medical supplies from GB to NI for the benefit of patients in NI.  Whilst of limited relevance to agriculture, the EU is ready to continue discussions with the UK to help to ensure continuity of veterinary medicines supply to in Northern Ireland. 
  • Engagement with NI Stakeholders: sets out proposals for how NI stakeholders, including business groups and Assembly members, can play a more active role in how the Protocol is implemented to ensure greater transparency.  This would be done via the Joint Committee and Specialised Committee overseeing the Protocol’s implementation (e.g. on SPS rules) as well as via the EU-UK Parliamentary Partnership Assembly.  

Taken together, the Commission believes that these proposals represent a different model for implementing the NI Protocol, facilitating the highest degree of frictionless trade between Great Britain and Northern Ireland, whilst continuing to protect the Single Market.   The proposals do not propose any amendments to the role of the European Court of Justice (ECJ) which the EU sees as fundamental to the functioning of the Single Market and Northern Ireland’s unique position.  The UK Government is likely to take issue with this, as it sees the ECJ’s continued involvement in UK matters as a ‘red-line’.  However, one does have to question how important the ECJ’s role is in practical terms for most businesses and consumers?  In any case, there might be scope for an arrangement similar to the EU-Switzerland relationship where the ECJ has a more ‘arms length’ oversight of Swiss law. 

The EU Commission’s proposals represent a significant shift in position and whilst more detail is needed on the specifics, they provide a firm basis for substantive negotiations to address the key Protocol difficulties.  Attention now shifts towards how the UK Government will respond.  Initial indications are positive.  Further turbulence is expected in the coming weeks as both sides negotiate.  If implemented with careful consideration of both communities, the Protocol has the potential to offer Northern Ireland ‘the best of both worlds’ in terms of being an integral part of the UK and enjoying frictionless access to the EU Single Market for goods.  It could, therefore, be a major driver of economic growth across NI and within the agri-food sector in particular. 

Further detail on the EU Commission’s proposals is accessible via; https://ec.europa.eu/info/strategy/relations-non-eu-countries/relations-united-kingdom/eu-uk-withdrawal-agreement/protocol-ireland-and-northern-ireland_en#october-2021-package

Fertiliser and CO2

The nitrogen fertiliser market has seen turmoil this month which has resulted in knock-on effects into the wider food chain.  The root cause is the surge in natural gas prices.  This has been caused by a low stocks (the UK has very little storage), high demand (partly due to the lack of wind, reducing renewables output) and constrained supply (lower availability from Russia and the Middle East).  The effects are being seen in the consumer market with some energy supply firms going bust as the Government price cap sees them having to supply energy at below the cost of buying it.  Over the short-to-medium term, energy bills (electricity, gas and oil) will all rise.

Natural gas is the major feedstock of ammonium nitrate (AN)  production.  As prices have risen it has become uneconomic to manufacture fertiliser and, on the 17th September, CF fertilisers announced it would be shutting its two UK plants.  Yara has already reduced output at its Hull plant.  Values of AN rose to around £500 per tonne.  Aside from the price, availability is likely to be just as much an issue, with little product on the market.

The CF plants supply around 60% of the UK’s carbon dioxide – generated as a by-product.  The gas has a variety of uses in the food chain including stunning poultry and pigs prior to slaughter, displacing air in food packaging and carbonating beer and soft drinks.  The interruption in supply had the potential to cause major disruption.  The Government stepped-in and offered financial incentives for CF to restart its plants for a three-week period from the 21st September.  It appears that only the Billingham plant and not the one at Ince will reopen.  After this period, it is hoped that high prices will encourage the market to deliver new supplies of CO2.

Forecasters do not believe that gas prices will fall anytime soon.  This suggests that fertiliser production in the UK and Europe will remain constrained for a number of months.  Although additional tonnages are coming in from other places, this is likely to be in limited amounts.  Therefore, it seems fertiliser prices may remain high.

NI BPS Bonus

Farmers in Northern Ireland will receive a boost in their 2021 BPS.  The Farm Minister, Edwin Poots has announced the scheme budget will increase by 6.2% this year, which will be translated into higher payments across-the-board – equal to £800 for an average farm.  The extra money has come from leftover funding from the Covid-19 Income Support Scheme which was granted to the Province but not used.  It comes after a 4.3% uplift in BPS payments last year.

Gene Editing

It is widely rumoured that the Government will propose allowing gene editing to be used commercially in the UK for both crops and livestock.  Defra issued a consultation on the issue which closed in March.  The Department’s response to this is expected shortly.  It seems highly likely that this will propose changing current legislation (and diverting from EU rules) to allow the technique to be used.  This is supported by the announcement recently made by the Brexit Minister, Lord Frost, that the repeal of EU laws governing the use of genetic editing was one of the ‘opportunities’ from Brexit.  This move is likely to be broadly welcomed by the farming industry as another technology that can be applied to solve problems in the sector.  However, such as large divergence from EU production standards may trigger issues with the Europe under the Trade and Cooperation Agreement.   

Future Welsh Farm Support

There will be no change in Welsh support schemes until after 2023.  This was announced by Rural Affairs Minister, Lesley Griffiths in the Welsh Government’s Policy Response to the Consultation on the Agriculture White Paper which closed in March this year (see December 2020 Bulletin for details).

The announcement on the continuation of current schemes includes;

  • the Basic Payment Scheme will continue until 2023 (with the caveat from the Welsh Government that sufficient funding needs to be provided by the UK Government in the upcoming Spending Review).  Although not completely clear, we take this to mean that the usual BPS claim will be made in May 2023 with a payment in autumn/winter 2023.
  • existing Glastir Advanced, Commons and Organic contracts will be extended until December 2023.  All existing eligible contract holders will be offered an extension via their RPW on-line accounts.
  • the Farming Connect Programme will be extended to March 2023 with £7m of funding)

The Minister also set out a timetable for how new policy arrangements are to be taken forward over the next few years;

  • first half of 2022: the draft Agriculture Bill will be published.  This will give the Government powers to enact a new farm policy.  The legislation will also make changes to the Agricultural Holdings Act 1986 and set the legal framework for new National Minimum Standards which will replace cross-compliance.
  • first half of 2022: alongside the Agriculture Bill a draft outline of the Sustainable Farming Scheme (SFS) will be published.  This will set out details of the structure of the scheme and the actions that farmers might be expected to take.
  • summer 2022: a further round of ‘co-design’ on the SFS will commence, to refine the scheme
  • 2022: a range of ‘interventions’ are promised to help farmers prepare for the SFS.  There are no details of what these might encompass.  Also, a new scheme will be launched to fund woodland creation.  This will eventually form part of the SFS.
  • spring 2023:  the final version of the SFS should be published along with a consultation.  This will contain details of the proposed transition from the BPS (i.e. phasing).  The Policy document specifically states there will be a ‘multi-year’ transition from the BPS to the SFS.
  • 2024: there will be an outreach programme to prepare farmers for the launch of the SFS.  This will include commencing farm Sustainability Reviews.
  • 2025: the SFS will open in January 2025.  This does rather beg the question of what happens in 2024 – the BPS will continue in its present form including the 2023 year, but there then appears to be a gap where the BPS is not guaranteed but the SFS hasn’t started.  The BPS may well continue in much the same way for 2024 but the Welsh Government may not want to have committed to this as the funding cannot be guaranteed this far in advance.  Alternatively, the first BPS deductions might start in 2024 to generate a fund of money to be spent on the SFS – much as the English BPS is currently being phased-out without ELMs yet being in place.

Further detail on the announcement can be found at – https://gov.wales/written-statement-agriculture-wales-white-paper-summary-responses-and-welsh-government-policy