Farming News Review - August 2006

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Policy issues CAP (etc.) support details/payments Grants Farm finance Product prices

Other crop news Other livestock news Inputs Marketing Miscellaneous

Policy issues

An EU Commission official, Peter Berkowitz, has stated that the next reform of the CAP will include less money for market supports, higher rates of compulsory modulation and the capping of direct payments. At the top of the agenda will be the transfer of funds from Pillar 1 supports (direct payments and intervention), to Pillar 2 (rural development).
Defra minister, David Miliband, has stated that the UK should be able to implement voluntary modulation without the need for spending to be divided between the compulsory axes of the post 2007 rural development programme.
The government has published its long-awaited Energy Review which outlines its plans and policies for reaching targets for carbon emissions and ensuring future energy supplies. It includes a policy that all fuel must contain 5 percent biofuels by 2010. The review was given a cautious welcome by NFU and CLBA leaders. However, a leading executive of Royal Dutch Shell, one of the world’s biggest sellers of green fuels, has stated that it is “morally inappropriate” to turn food into fuel while people are starving in Africa.
Defra has launched a new government policy document “Sustainable Farming and Food Strategy : Forward Look”. The report sets out the key priorities for the future of British agriculture.
“Living Landscapes”, a report compiled by the NFU and CPRE, has concluded that removing government support for farmers could have devastating consequences for the landscape. It is estimated that farmers spend £412 millions each year conserving and managing the landscape, approximately £2,410 for the average English farm.

CAP (etc.) support details/payments

No decision on whether the government will pay partial Single Farm Payments in respect of the 2006 season is expected before October.
The government has been heavily criticised by the Forum of Private Business for the “derisory” rate of interest being paid on late Single Farm Payments. It calculates that interest payments to farmers should be £138 millions more than they are likely to be.
The delay on release of Single Farm Payments has been blamed for a 50 percent increase in calls to the Farm Crisis Network in the first five months of 2006 compared to the same period in 2005.

Grants/regulations/legislation/environment

Defra has introduced four new environmental stewardship schemes. The new Entry Level Stewardship and Organic Entry Level Stewardship schemes will only be available to new applicants while the Higher Level Stewardship scheme will be open to new and existing agreement holders.
While the EU and 19 member governments will spend 55.3 million Euros over the next three years on agri-product promotion, nothing whatsoever has been awarded to UK horticulture.
Defra has announced that its fertiliser recommendation guidance, RB 209, is to be revised to take account of technological advances and the requirements of new higher-yielding crop varieties. The new guidance is to be published in 2008.
As a result of obtaining funding from the European Social Fund, Lantra, the Sector Skills Council for the environmental and land-based sector, is offering funding for training of between £80 and £450.
Defra has rejected compulsory five metre no-spray zones in fields adjacent to homes in order to avoid placing a greater regulatory burden on farmers.
Farmers are to continue to be allowed to use Tarmac road planings to repair farm roads without penalty after successful lobbying by the NFU to the Environment Agency.
Defra has published a co-existence consultation paper proposing the minimum separation distances between genetically modified crops and their conventional counterparts so as to minimise cross-pollination.
Sheep shearers are to be exempt from new licensing laws governing labour providers which will come into force in October.
Shropshire-based consultant, Davis Meade, has launched “Alternative Crops for Renewable Energy Solutions”, a service to advise farmers on the use of renewable energy technology.
The Health and Safety Executive has announced a clampdown on manual handling industries, working at height and workplace transport safety.
Cambridge University, University College, London and the Institute of Animal Health have been awarded grants totalling £1.5 millions by the Biotechnology and Biological Sciences Research Council to fund research into Salmonella.
“Conservation Agriculture” is a new booklet co-funded by Syngenta and EU Life offering guidelines to help achieve sustainable farming.

Other matters of farm finance and tenure

A report from property analyst IPD has suggested that the total return from let land, including sales, in 2005 was 9.4% compared with 18.5% in 2004. Returns fell because of the slower growth of capital values but over a five year period the average annual return was 16.4%, better than commercial and residential property and equities.
According to Knight Frank, the value of Scottish land is becoming more linked to its amenity potential rather than its agricultural productivity. The agents forecast a substantial increase in the value of rough grazing land. At the same time the number of farms for sale in the north east of Scotland is at its highest level for five years.
“Farming Outlook”: A quarterly report on the Agriculture and Horticulture Sectors” is to be published by the NFU.

Product prices

A. Crops

With barley and oilseed rape harvest well under way, the market is adjusting to the reported average yields and quality of the new crops. Average yields so far are slightly down as a result of heat-stress, early senescence and low grain moisture content: all caused by the current heat wave. After initial volatility, as the market adapted to the 2006 harvest results, the new crops barley price stabilised at £63/tonne and oilseed rape maintained its price at £160. Milling wheat prices continued to increase moderately during the month, as stocks of 2005 harvest wheat of sufficient quality grow even lower. Feed wheat prices dropped back by £2/tonne as the market adjusted for the predicted new crop results. Peas and beans increased a further £4/tonne. New crop wheat prices for November movement, increased to £82/tonne, due to better knowledge of overseas production and the UK harvest predictions. Average prices in late July (£/tonne ex-farm): feed wheat 74, milling 86; feed barley 63; oilseed rape 160; feed peas and beans 90.
The steady decline of the average potato price seen at the end of June, for 2005 main crop, was curtailed at the start of the month and the price remained relatively steady throughout as the stocks continue to run dry. The average price closed at £129/tonne and the price for top grade Maris Piper remained at £240/tonne. 2006 early crop prices are strong for bagged crop as a result of lower crop yields. Crop exports, particularly to Southern Ireland which is suffering from shortages, are seeing premiums lifting prices above £170/tonne.

B. Livestock

After the strong price rise in June, July saw the average price of steers drop back to 114/kg lw over the first half of the month. After minor fluctuations in the second half of the good weather; high demand for certain cuts (those that barbecue best) and low demand for the remaining cuts has pushed the average carcass price down.
The boom in average lamb prices came to an end over the course of this month. New season animals starting to go to market, combined with the continuing hot weather, saw the average price drop back by 40p to 115p/kg lw. Despite this, the average deadweight price remains above that of the same time last year.
The average pig price continued its upward trend, strengthening by a further 3p/kg, finishing at 107p/kg dw. This is attributed to higher prices in Spain and Italy, linked to the summer holiday season, but is also still thought to be a knock on from the high German demand during the World Cup.
Further price cuts by two major dairy processors has added pressure to the dairy industry this month: Dairy Crest, after announcing a 0.75ppl cut in liquid milk prices for July, cut 0.75ppl from its cheese milk prices for August and Wiseman, despite reporting good financial performance itself, cut 0.9ppl from its liquid milk prices. Milk quota prices have continued to fall to just above 1.83ppl for 4% butterfat and as low as 1.75ppl for lower butterfat allowance.

Other crop news

The hot spell has resulted in extremely good harvest conditions with the prospect of very low drying costs. However, reduced yields are forecast and Strategie Grains has lowered its forecast of EU grain production by 2.3 million tonnes.
A leading wheat breeder has predicted bumper yields of first wheats this year but “a very bad year” for second wheats. Bill Angus of Nickersons has forecast reductions in second wheat yields of as much as three tonnes per hectare.
The London futures market has opened a contract for November 2008 wheat, the first time a futures position has been available so far ahead. The move has been driven by biofuels manufacturers wanting to secure fixed prices for fuelstock
Persistent hot weather has resulted in pea growers having to leave as much as 20% of vining peas to be harvested dry for animal feed.
A large crop of raspberries has given cause for concern that supply will exceed demand leading to a downward pressure on prices for producers.
Camgrain, the eastern counties cooperative, has been granted planning permission to build a 90,000 tonnes grain store in Cambridgeshire. In terms of tonnage, it is understood to be the biggest approval ever granted for a grain store in the UK. The new store will add to the existing 130,000 tonnes facility nearby.
The first crop of premium apricots grown commercially in England, by Highland Court Farms in Kent, has gone on sale in Sainsbury’s stores.
This year’s asparagus crop has seen growth in volumes of 7.4% and values 7.8% compared to 2005.

Other livestock news

The Food Standards Agency has stated that the risk to human health from eating meat contaminated with bovine tuberculosis is “very low”. The statement came in response to a claim from the Badger Trust suggesting “fundamental weaknesses in the government’s bovine tuberculosis testing regime” and as a consequence infected meat was unwittingly being processed for human consumption.
Defra has admitted that it has been making prosecutions in respect of illegal cattle movements under the “wrong law” for more than five years. A decision of a court in North Wales may enable a number of farmers to appeal against wrongful convictions.
A report published jointly by Defra and representatives of the livestock industry has concluded that the best way to fund the cost of tackling an outbreak of an exotic animal disease would be the introduction of a compulsory producer levy.
Defra has announced that subsidy levels for the Fallen Stock Scheme are to fall from 50 percent to 35 percent with effect from the beginning of this month.
Derogation from identification requirements for UK sheep has been renewed for a further year by the EU but export lambs must still be double tagged.
Defra has invited tenders to supply 10 million doses of avian influenza vaccine but has stated that the vaccine would only be used if a risk assessment and scientific evidence indicated it would help prevent disease spread.
Milk output fell again in June to 6% below the quota profile. In the quota year to date production is nearly 200 million litres below profile.
More than 47,000 responses were received to a Defra consultation on bovine TB and 95% were opposed to a badger cull. However, 33,000 of the responses were as a consequence of campaigns run by wildlife groups, the biggest being organised by the RSPCA.
Scotbeef, the Scottish meat processor, is investing £16 millions in a new retail packing plant in Glasgow.

Inputs/Supply businesses

The merger of the Nickerson and Advanta wheat breeding programmes has resulted in the new company having a 46% share of the UK winter wheat market.
British Sugar is planning to close its processing factories at York and Allscott.

Marketing

Dairy Crest has purchased Express Dairies from Arla Foods for £33 millions.
Robert Wiseman Dairies increased its volumes of fresh milk sales by 2.5 percent in the first quarter of the new financial year.
The annual organic market report published by the Soil Association suggests that, within the next five years, there will be a chronic under-supply in the organic food sector. In 2005 the organic market increased by 30 percent year-on-year with 75 percent of the market being absorbed by supermarkets. Approximately two-thirds of organic food sales are sourced in the UK.
Consumption of fresh fruit per person in the UK has increased by 60 percent in the past thirty years but the share of apples, pears and citrus fruit has fallen from 75 percent to less than 50 percent.

Miscellaneous

HM Revenue & Customs is challenging the use of red diesel as a fuel for increasingly powerful tractors which are used for transport purposes as well as on-farm use.
The Royal Show suffered a 5% drop in visitor numbers. Organisers blamed the hot weather, others said the absence of much of the farming community was noticeable.
As a consequence of the discovery of serious accounting anomalies, 15 members of staff have been made redundant by Associa, the company jointly owned by the NFU and NFU Mutual.
The first Wholesome Food Conference is to be held in Staunton, Gloucestershire this month to encourage more entrepreneurs to start up local food businesses.
The estimated cost of rural crime in the UK rose from £15.48 millions in 2004 to £15.58 millions last year.
Baroness Hazel Byford, Shadow Minister in the Lords for Food and Rural Affairs, has been named president of LEAF.
Dr Neil Kift, the principal policy adviser in pesticide and integrated crop management of the NFU, has died.