Farming News Review - April 2006

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Policy issues

1. On 8th March EU vets voted unanimously in favour of lifting the export ban on British beef, which was imposed ten years ago. The decision will not take immediate effect: the law has still to be amended and formally sanctioned by the EU parliament; this is expected to take at least six weeks. Exports should begin, therefore, in late April or early May. Protests have already begun over the possible resumption of the exporting of live calves to the Continent.
2. The Office of Fair Trading (OFT) has announced its intention to refer the grocery section of the “Big Four” supermarkets (i.e. Tesco, Asda, Sainsbury’s and Morrisons) to the Competition Commission for a full inquiry; this could take two years. Accusations particularly to be considered are: i) the use of local price cuts and promotions to put nearby small stores out of business; (ii) the use of their increasing buying power to drive down prices paid to suppliers; (iii) their acquisition of “landbanks”: the hundreds of development sites they now own, many of which may have been bought solely to prevent rivals opening stores; the last is a relatively new area of concern that particularly applies to Tesco. The four chains account for nearly 75% of the UK grocery market; Tesco alone accounts for some 30%. There have been two previous inquiries in the past five or six years; the OFT cleared the supermarkets of market abuse only seven months ago, to the dismay of many.
3. Trade and agriculture ministers from the so-called G6 group (the EU, Australia, Brazil, India, Japan and the US) appear to have made little progress at their world trade talks in London in mid-March; (ref. March MFU, I.5).
4. EU Commissioner Fischer Boel has repeated that she considers voluntary modulation without co-financing a “killer” for the CAP because it is, in her opinion, tantamount to a re-nationalisation of the policy and does not require member states to follow the agreed Rural Development Regulation rules, which include spending limits.
5. France has produced an unanticipated five-page policy document on the future of the CAP, which has quickly won the backing of 11 member states. Unsurprisingly, it makes a strong case for continuing the CAP in fundamentally its present form, but with simplifications and new measures to support farm incomes with the aim of keeping as many farmers as possible on the land. It urges the Commission to make full use of export refunds and retain a degree of protection.
6. Britain’s balance of payments deficit rose from £24 billion in 2004 to £32 billion in 2005 (£11 billion in the last quarter). This news helped weaken the pound in foreign exchanges.
   

CAP (etc.) support details/payments

1. Following the admission, on 14th March, by the Rural Payments Agency that it would be unable to issue the bulk of the single payments in England by the end of March, despite earlier assurances, Margaret Beckett replaced its chief executive, Johnson McNeill, with Mark Addison as acting chief executive. By the end of March only about a quarter of claimants had been paid, totalling 13% of the total sum due, causing great cash flow and borrowing difficulties for many farmers (and their suppliers), especially for those with low levels of security, which means a sizeable proportion of tenant farmers. The difficulties involved in administering the clever, but complicated, dynamic hybrid system had obviously been seriously underestimated. However, farmers in Germany and Sweden, with similar systems, have fared considerably better.
   

Grants/regulations/legislation/environment

1. From 1st December this year it will be an offence to use the workers or services of an unlicensed gangmaster in Great Britain. However, farm businesses that swap and lend labour between each other will be exempt, as will the supply of individual specialist farm workers.
2. The government has launched its Climate Change Programme, setting out policies for minimising the impact of global warming.
3. The plan to close four leading research centres that focus on wildlife and climate change has been widely criticised. The centres include the world-famous Monks Wood in Cambridgeshire. The closures are part of a restructuring of facilities owned by the Natural Environment Research Council.
4. Ministers have rejected an application to construct the UK’s largest wind farm – at Whinash, near Tebay, Cumbria, very close to the Lake District National Park.
5. Protests and demonstrations have continued against the intention of the Welsh Assembly to scrap the Tir Mynydd less favoured area support scheme, especially as similar support schemes are to continue in the rest of the UK. Opposition parties (Conservatives, Lib Dems and Plaid Cymru) are united in attacking the winding up of the scheme.
   

Other matters of farm finance and tenure

1. Savills’ Agricultural Land Market survey reports that the average value for all types of farmland across Great Britain rose by 12.3% in 2005, making 28% in the past two years. It puts the overall average at £2,340/acre (£5,780/ha). It expects the supply coming to the market to continue to increase in 2006 and that demand will remain strong.
2. The European Central Bank raised its key interest rate by a quarter of a point to 2.5% at the beginning of March, the second such rise in less than three months; it is now at its highest level for three years. (The UK bank base rate stays at 4.5%).
3. The U.S. Federal Reserve rate has risen to 4.75%, which is the highest level since the early 1980s for any length of time. (The rate was at only 1% in 2004). Sterling has consequently weakened against the dollar. It has also been falling against the euro.
4. In the Budget Chancellor Gordon Brown raised red diesel duty by 1.25ppl, the same as the increase in road fuel duty, to 7.69ppl. Thresholds for inheritance tax, capital gains tax and stamp duty were raised and corporation tax was lightened for small companies, but property transfer to future generations through trusts has been made more difficult.
5. An Entitlement Release Scheme has been set up, allowing farmers to raise money against their single (farm) payments. The commercial banks are offering similar facilities.
6. The Whole Farm Approach, Defra’s internet based system, aimed at speeding up form filling and reducing duplication, is now operational.
7. The Tenant Farmers Association has appointed Cambridgeshire farmer Greg Bliss as its new national vice-chairman. He succeeds Jerry Rider, who has stood down from this role after nine years.
8. The Agricultural Wages Board in Northern Ireland is to be scrapped.

Product prices

A. Crops

1. Feed wheat and feed barley prices have risen about £1 pound/tonne during March, feed beans and peas prices have fallen by around £1.50/tonne, but oilseed rape prices have jumped by about £10/tonne, with crushers returning to the market strongly. Wheat in Russia and Ukraine has been seriously hit by their very cold winter, but just how badly remains to be seen. Feed wheat is currently around £66/tonne ex-farm at harvest and £70 for November; oilseed rape is at £150/tonne at harvest, with (at present) an extra £10/tonne for each of the following two seasons.
2. Average prices in late March (£/tonne, ex-farm): feed wheat 68.50, milling 74; feed barley 67; oilseed rape 150 feed peas and beans 77.50.
3. Potato stocks at the end of February were the lowest at that time in any of the preceding five years, except for 2003. Utilisation is lower than in 2000-04, but this is because of reduced losses to stockfeed and other wastage, not lower demand. Average price in late March: £112, with top grade Maris Piper up to £220/tonne.

B. Livestock

1. Average finished steer prices rose by some 5p/kg during March to around 107p/kg lw.
2. Average lamb (hogget) prices leapt from around 105p/kg lw at the start of March to 125p at one point but fell back to 120p later in the month. Some traders put the increase down to an increase in export demand, with consumers on the Continent, especially France, switching from poultry to red meat in the wake of avian flu; others say the cause was the very cold dry early March, reducing supplies.
3. The average pig price has fallen below 100p/kg, at a time of year when prices traditionally firm; prices were 6p/kg higher at this time last year. Supermarket price wars are largely blamed.
4. As expected, Robert Wiseman Dairies cut its milk price for its direct suppliers from 1st March; the cut was 0.65ppl, less than generally anticipated. Dairy Crest and First Milk reduced their ex-farm prices by 0.5ppl from 1st April. Asda has cut its shelf milk price by 14% but doubled the 0.5ppl premium paid to its 550 suppliers in the Arla Foods Milk Partnership. Members of Milk Link and Dairy Farmers of Britain are to have their 1ppl capital retention halved from April, these companies having successfully reduced their debts.
   

Other crop news

1. The first three weeks of March were consistently very cold, with lots of snow, especially in Scotland, but again very little precipation in south-east England, where the drought conditions, leading already to hosepipe bans, continued to make national headlines. Milder weather, with at last some rain, arrived on 23rd of the month. The effect on crop yields remains to be seen; they may be significant on lighter soils.
2. The December 2005 census UK figures for autumn and winter crops show a 3.4% reduction in the wheat area, 4.6% less oilseed rape and a 38% increase in the area of oats; the area of (winter) barley was almost unchanged. Drilling conditions last autumn were near perfect.
3. According to the 2005 Farmers’ Voice Survey, farmers intend on average to reduce cropping of winter cereals by 10% and oilseed rape by 9% between now and 2010. However, the majority of farmers did not expect to make significant changes to their cropping in the next five years.
4. UK sugar beet growers have a quota cut of 11.66% in 2006/07; (this is in addition to the 6.84% cut already in place for this season). This is below the EU average cut of 13.6%, because the UK has a smaller B quota and thus contributes less to EU export surpluses.
5. Defra has issued a consultation on incorporation of the compensation payments for sugar beet price cuts into the single payment scheme.
6. Sugar production in Ireland will cease after the 2005/06 campaign, with the closure of its last beet plant, at Mallow in County Cork.
7. Cargill has bought a 25% stake in Greenergy Biofuels, which is constructing a £13.5 million biodiesel plant at Immingham on Humberside and planning a second plant in the Liverpool area. Tesco is also involved in these plans.
8. The EC has produced a report on the co-existence of GM and conventional crops and concluded there is no need as yet for EU-wide legislation.

Other livestock news

1. Ending of the beef export ban: see I.1.
2. UK dairy production was under quota in February, for the 11th consecutive month. With a month to go in the current milk year the cumulative shortfall is 320 million litres. Quota (4% BF) remained at 0.1ppl to lease; purchase price is 4.4ppl.
3. UK December 2005 census figures show decreases in breeding numbers compared with the previous year as follows: dairy herd 3.6% (but an increase in heifers in calf (first calf) of 4.3%), beef herd 4.4% (with a decrease of heifers in calf of 7.4%), sheep 4.1% and pigs 7.2%.
4. The NFU and The Royal Association of British Dairy Farmers have jointly produced a new report, “British Milk – What Price 2006?” showing the extent to which average costs have been increasing and the significant shortfall compared with prices received.
5. The consultation on Defra’s proposals to cull badgers in bovine TB endemic areas has evoked a considerable response.
6. Pre-movement TB testing began in England on 27th March. It has been a requirement in Scotland in high-risk areas since last autumn.
7. A newly published study says the mass slaughter during the 2001 foot-and-mouth outbreak could have been avoided if vaccination had been used effectively.
8. Kingshay is running a number of free courses on various aspects of dairying throughout the year.
9. Once the date based export scheme goes the removal of the vertebral column (“de-boning”) will have to start at 24 months instead of the current 30 months. However, butchers’ shops and small abattoirs have been given clearance to perform this task; it had been feared that it would have to be done in licensed cutting plants, thereby adding to costs.
10. Argentina has suspended most of its beef exports for 180 days. This is in an attempt to curb rising beef prices for domestic consumers.
11. A new strain of scrapie, “atypical scrapie”, has been discovered. It is thought likely to be more prevalent in UK sheep than classical scrapie.
12. The NFU has attacked the Veterinary Medicines Directorate’s decision to ban cypermethrin-based sheep dips immediately (because of evidence of pollution of watercourses), without consultation. The British Veterinary Association has also expressed its concern at the decision.
13. Better news re avian flu. Relatively little has been heard, or read, about it during March. A new case has occurred in the Czech Republic, but none in commercial flocks. Some negative effects on demand for poultry and feed persist, notably in France.
    

Inputs/Supply businesses

1. Defra has published its strategy for the sustainable use of pesticides, aimed at reducing their impact on the environment in the future. This follows consultation last year. It is especially intended to reduce the level of water pollution and reverse any loss of biodiversity.
2. BOCM PAULS is ending its lease on Cornwall Farmers’ mill in Launceston, which will therefore close soon.
3. Farmer-controlled Cheviot Farmers, based at Alnwick in Northumberland, is to merge its business with Farmway.
4. A shortage of maize gluten and maize distillers is pushing up their spot prices significantly.
5. The EC has authorised GM maize variety 1507 for feed use in the EU.

Marketing

1. A new inquiry into the major supermarkets’ grocery section: see I.2.
2. A new report by the Milk Development Council, “Barriers to Innovation in the UK Dairy Industry”, lists the obstacles affecting the uptake of new ideas and outlines action needed to kickstart innovation. It calls for better collaboration between farmers, processors and retailers and says more research into market opportunities is vital.
3. Westbury Dairies has announced a full-scale strategic review of its business. Sir Ben Gill is stepping down after two years as chairman.
4. Robert Wiseman Dairies has acquired Definitely Devon’s milk processing business, for £800,000.
5. A city analyst has criticised Milk Link and Dairy Farmers of Britain for their various processing acquisitions in recent years but has supported First Milk’s strategy. He predicts further consolidation of both producers and processors.
6. A new UK-wide co-op, Anglo European Farmers, has been set up to restart live exports to the Continent, with the backing of the farmers’ unions and several major farming organisations: Defra is also said to be supportive. It is to be headed by West Sussex dairy farmer – and chairman of the NFU’s national milk board – Gwyn Jones.
7. A Bonus Plus Beef Plan has been launched by Beef Production Systems and processor St. Merryn Foods.
8. Tunbridge Wells-based Dewhurst, the largest chain of butchers in Britain, has closed 60 of its 95 shops and gone into administration. Dewhurst was acquired by Lloyd Maunder a year ago.
9. Grampian Country Foods is to close its Elmswell pork factory, near Bury St. Edmunds in Suffolk, in June, with the loss of 380 jobs. The reasons given are over-capacity and rising costs. The factory opened in 1911.
10. Shrewsbury’s new livestock market opened near the end of March.
    

Miscellaneous

1. The 2006 Smithfield Show has been cancelled, owing to the larger farm machinery firms withdrawing their support. The Show started in 1799; it was annual until 1996, when it became biennial. The closure could be permanent. There will still be the traditional livestock competitions; the venue is yet to be decided.
2. Bedfordshire farmer Peter Kendall ousted Tim Bennett as NFU president, the first time since the 1970s that the incumbent president has been defeated in office. Tributes were paid to Tim Bennett, both for his past work and as a person, following this event. Pembrokeshire farmer Meurig Raymond was elected deputy president, after serving two years as vice-president. Paul Temple, from Driffield, was elected vice-president.
3. Bob Howat and Jim McLaren were elected vice-presidents of NFU Scotland. It is the fourth year as a vice-president for the former and the first for the latter. John Kinnaird, president for a fourth year, stands down in 2007.
4. Anthony Gibson, NFU regional director in the south-west, has become director of NFU communications at head office, Stoneleigh, on a six-month secondment.
5. Bishops Burton College’s new Higher Education Centre has been opened; it is the first building to be refurbished as part of a £23 million investment in new facilities. It has become an associate college of Hull University.
6. The Fresh Start initiative, aimed at finding new opportunities for young people to get into a farming career, is progressing well in various parts of the country. National seminars have been held recently in London and at Harper Adams.
7. Still more work and responsibilities for Defra. It is now chairing the Chewing Gum Action Group.