Category: Policy & Business

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

 

Defra Ministers

The Government reshuffle undertaken on the 15th and 16th September has left Defra Ministers largely unchanged.  George Eustice remains as Secretary of State.  There is a promotion in the junior ranks with Victoria Prentis being upgraded from ‘Parliamentary Under Secretary’  to ‘Minister of State’.  Defra gets one more junior Minister with Jo Churchill being brought in as an Under Secretary.  Ms Churchill is the MP for Bury St Edmonds and was previously a Minister in the Department of Health.

Facilitation Fund

Defra is giving a ‘heads-up’ that the Countryside Stewardship Facilitation Fund will open for a 6th round in December 2021.  The fund supports facilitators, either individuals or organisations, to bring farmers and foresters together to produce landscape-scale Countryside Stewardship agreements.  A total of £2.5m will be available under the latest round, which will close to applications on 19th January.  Further details will be made available soon.

 

 

UK Border Operating Model: Delayed Again

The UK Government has, once again, delayed the implementation of border controls on agri-food imports from the EU.  The postponement is blamed on the combined effects of the Covid-19 pandemic and food supply-chain issues, but it is equally a result of the Hard Brexit the Government negotiated.  This move was becoming increasingly inevitable in recent weeks as it is clear that the infrastructure required to deliver effective border controls for imports from the EU was not ready and businesses were becoming increasingly concerned about the lack of preparation time.  The key aspects of the revised timetable are;

  • Pre-notification of Sanitary and Phytosanitary (SPS) goods: requirements which were due to be introduced on 1st October 2021, will now be introduced on 1st January 2022.
  • Export Health Certificates: these requirements, which were due to be introduced on 1st October 2021, will now be introduced on 1st July 2022.
  • Phytosanitary Certificates and physical checks on SPS goods at Border Control Posts: were due to be introduced on 1st January 2022, but will now be introduced on 1st July 2022.
  • Safety and Security declarations on imports: will now be required as of 1st July 2022 as opposed to 1st January 2022.
  • Full customs declarations and controls: will be introduced on 1st January 2022 as previously announced.

Remember that this only applies to imports from the EU – exports from the UK to Europe have been subject to the full range of EU checks since the start of this year.  More checks and bureaucracy on imports would raise costs and could reduce the competitiveness of EU goods on our market.  For this reason the delays outlined above might not be welcomed by the farming sector.  Particularly as the rules are currently ‘lopsided’ with imports exempt from many checks, but our exports being fully subject to EU rules.    

The delay will be seen as a welcome move by most businesses in the wider food chain.  But the UK Border Operating Model has already been delayed before and there is still a lot of work to be done before the revised timetable can be achieved.  Of course, a comprehensive veterinary agreement with the EU would help greatly on multiple levels.  For example, it would reduce the requirements for physical checks quite considerably (for instance, the New Zealand veterinary agreement with the EU reduces physical checks for red meat from the default of 15% down to 1%).

A veterinary agreement would also help to make the implementation of the NI Protocol more sustainable, as it is the levels of regulatory checks at NI ports which are seen by some communities as being the most invasive.  Reducing these towards the levels currently in place for live animals (which were subject to physical checks even before Brexit) would help the implementation of the Protocol.  Coincidentally, the delays to the UK Border Operating Model will also mean delays to the announcement of rules covering NI-GB ‘qualifying goods’ (i.e. NI-produced goods which would qualify for unfettered access to the GB market). 

Thirdly, it would also help UK-GB exports to the EU.  In addition to the revenue lost on trade with the EU, this has also had a significant indirect impact on the food supply-chain shortages that the UK is currently witnessing.  Previously, haulage companies carrying imports into the UK would use ‘backloads’ of goods being exported from the UK to the EU to contribute to the overall cost of travelling to and from the UK.  With such shipments being significantly reduced, in addition to the pandemic impacts which have made drivers more reluctant to travel to the UK, the HGV driver shortage has been exacerbated. 

There were calls for a 2-3 year ‘Implementation Period’ after the UK formally left the EU; the latest delays to the UK Government’s Border Operating Model are creating this by default.  Whilst the latest move from the UK Government will help somewhat to address the current supply-chain situation, this additional time needs to be used wisely.  In its press release announcing the new timetable (see link below), the Government calls its approach ‘pragmatic’.  If it seeks to be truly pragmatic then implementing a veterinary agreement with the EU combined with addressing the agri-food industry’s labour issues would go some way to addressing the problems generated by Brexit.   

Further information on the UK Government announcement is accessible via: https://www.gov.uk/government/news/government-sets-out-pragmatic-new-timetable-for-introducing-border-controls

Sustainable Agricultural Capital Grant Scheme

Applicants to the Sustainable Agricultural Capital Grant Scheme in Scotland now have until 31st December 2021 to submit their claim.  This is the second time the deadline has been extended.  The original date was put back from 31st March until 30th September and now the Scottish Governement has announced claimants have until the end of the year to make a claim.  It appears there are issues over the supplies of certain items.  Completed claims and supporting documents should be emailed to a claimant’s local office.

NI Farm Policy

Northern Ireland’s Agriculture Minister, Edwin Poots, has published a framework for future agricultural policy in the province.  The Future Agricultural Policy Framework Portfolio takes into account the views from a consultation undertaken in 2018.  That exercise focused on a vision for future agriculture in Northern Ireland based around four ‘desired’ outcomes; increased productivity, improved resilience, environmental sustainability and a responsive supply chain.  The Portfolio assesses the views on these key outcomes and sets out a framework on how they can be delivered:

  • A simple, area based (resilience) measure – this will be set at a level to provide a ‘safety-net’ so that it does not ‘blunt’ innovation or productivity.  There will be minimum and maximum thresholds with recipients having to adhere to certain standards of farming activity and behaviour; similar to cross-compliance but targeted more towards NI’s issues.
  • A headage sustainable measure – this will be for suckler cow and breeding ewe producers to support the ‘economic and environmental performance’ of these sectors.  The formation of a genetics and livestock data programme will also be explored.
  • An Agri-environment package – will form a major part of future policy, but it is unlikely to be just one all-encompassing scheme as this is not seen as being able to deliver the multiple environmental issues that need addressing in NI.  The package is expected to ‘evolve and expand’.
  • An investment measure – will be aimed at investments which drive innovation, productivity and result in better environmental outcomes, including reducing carbon, ammonia and nitrate emissions.
  • Knowledge measures –  forming an important part of the policy portfolio, Continuous Professional Development (CPD) is seen as key to being able to deliver the objectives.  Following the success of the Business Development Group a knowledge measure will form a component in as many policy initiatives as possible.
  • Generational Renewal – the view is that, by accelerating the transition down the generations, these will be better trained, more open to innovation and change and will help drive the desired policy outcomes.  But it is acknowledged that it will take more than just simple financial incentives and more work in developing this idea is being undertaken.
  • Supply chain measures – it is acknowledged that this is an area where greater engagement locally is required.  The Independent Strategic Review of the Agri-Food Policy being led by Sir Peter Kendall is expected to feed into this area.

The ‘workstreams’ above are seen as the seven key components of the future support framework.  However there are other ‘cross-cutting’ elements that are seen as being required to fulfil the objectives, these are;

  • Soil testing and LiDAR
  • Livestock genetics and data initiatives
  • Carbon reduction
  • Controls and assurance
  • Metrics, monitoring and evaluation
  • Environmental assessments

There will also be a horticultural workstream.  Work is currently progressing on all 14 separate but related workstreams developing future policy proposals.  The Framework aims to form the basis for ongoing discussions with the industry and stakeholders as policy proposals are developed.  There will be a full consultation on these this autumn.  The development of farm policy in Northern Ireland has been delayed due to the suspension of the NI Government and the Framework gives little indication of when a new policy will be introduced – only to say the move from CAP based schemes will need to happen over ‘a number of years’ in order to deliver a ‘managed’ transition.  The full Framework Portfolio can be found at https://www.daera-ni.gov.uk/sites/default/files/publications/daera/21.22.086%20Future%20Agriculture%20Framework%20final%20V2.PDF 

 

Environment Bill

The Government has made new amendments to its landmark Environment Bill.  Following work with Parliamentarians and wider stakeholders a number of amendments have been tabled including the duty to set a legally-binding target to halt species decline by 2030.  Other measures will tackle storm overflows through a new requirement for water companies to monitor the water quality impacts of their sewage discharges and publish this information.  The full amendments can be found at https://bills.parliament.uk/bills/2593/stages/15657/amendments?searchTerm=&Decision=All&MemberId=4062