Farming News Review - December 2005

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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

Further trade talks on agriculture in preparation for the major World Trade Organisation (WTO) “Doha Round” meeting to be held in Hong Kong in December ended without any agreement, despite a further concession by the EU, namely to cut its highest rate of import tariffs by 60% compared with the 50% offered the previous month; this meant a reduction in the average rate of tariff to 46% compared with the previous offer of less than 30%. The French government and various EU farmer organisations attacked this offer as going too far. Both EU trade commissioner Peter Mandelson and EU agriculture minister Marian Fischer Boel said there would be no new reform of the CAP.
At meetings of EU ministers during November the EU budget and the UK budget rebate have again been debated acrimoniously, as in June. The UK government repeated that it would only consider accepting cuts in the rebate if there were substantial changes in the EU budget and spending priorities, which needed to include cuts in agricultural support, at the very least in the mid-term review of the Fischler reforms in 2009. This was immediately rejected by France, which insisted on no changes until 2013 – a view supported, it seemed, by a majority of other member states.
EU farm ministers and the Commission reached a compromise agreement on a new sugar regime in late November, after three days of strong argument, ministers being deeply divided. Prices are to be cut by 36% (i.e. slightly down from the 39% previously proposed) over the next four years (instead of two), with 60% compensation to EU farmers for loss of income, and there is to be a restructuring scheme aimed at reducing EU production by some six million tonnes. The WTO has been pressing the EU hard to finalise the reform. Farmers in some African, Caribbean and Pacific developing countries, which get preferential access to the EU market, could be worse hit than EU producers.
OTM (over 30 months old) cattle returned to the food chain on 7th November, for the first time in nearly a decade, the ban having been replaced by a testing regime for BSE. The UK government expects the EU export embargo on British beef to be lifted in February, but many consider this to be optimistic, as all member states have to agree. The OTM scheme is expected to end in late January.
The government has announced a Renewable Transport Fuels Obligation, which requires 5% of all forecourt fuel to come from renewable sources by 2010. This still falls short of the EU target (8% by volume, which is 5.75% by energy) but is 20 times the UK volume produced at present.
The Defra - commissioned review of the five UK agricultural and horticultural levy boards, conducted by former civil servant economist Rosemary Radcliffe, has been completed. It is recommended that the boards should remain separate and that statutory levies should remain. (Mergers and a change to voluntary levies had been widely expected). A new “umbrella” administrative body is proposed, to service all five levy bodies for planning, accounts, recruitment, monitoring performance and reporting to the government. Some say this will simply add another layer of bureaucracy. The Milk Development Council chairman heavily criticised the review from the dairy farmers’ viewpoint. There is to be a three-month consultation period on the proposals, closing on 3rd February, after which Defra will consider how to implement the (184-page) report.
In a BBC interview Prince Charles expressed concern about our food security, coupled with worries about climate change. The UK’s self-sufficiency has fallen from 71% to 63% since 1988; in terms of indigenous foods the fall is from 82% to 72%. Concerns include health aspects of imports as well as volume.
A new study on the likely effects of climate change on British agriculture has been published by the NFU. It identifies areas of concern and considers how farming can best adapt to global warming.
A report entitled “Cherished Uplands” has been produced in Wales. It discusses the increasing problems of upland farming, which have general UK implications, and what action it thinks is needed.
The EC is to match-fund 13 million euros on 15 projects promoting EU agricultural products outside the EU.

CAP (etc.) support details/payments

Scottish farmers will receive 75% of their Single Farm Payments in December (82% less modulation), Northern Ireland producers 75% also and Welsh farmers 80% less modulation and any penalties. Farmers in England will not receive their payments until February at best.
A Policy Update booklet has been sent out to farmers. It includes guidance, with examples, of how set-aside transfers will work.

Grants/regulations/legislation/environment

Hill Farm Allowances for England for the year ending March 2006 have been announced; they are higher then the rates paid in 2005. The full rates per hectare are £30.82 for severely disadvantaged land, £16.66 for disadvantaged land and £11.66 for moorland and common land. Only half these rates are paid on an area between 350 and 700 ha and none on land over 700 ha per holding. These figures have to be approved by the EC. 2006 is the last year in which Hill Farm Allowances, as such, will be paid. A new system of support for the uplands (the “Upland Land Management Scheme”) is being devised, with wide consultation, for 2007 to 2013. The National Beef Association has unveiled its own proposals, highlighting the importance of suckler cows.
Sir Martin Doughty, presently chair of English Nature, is to be the first chair of the new body Natural England – a merger of the Countryside Agency and English Nature. Dr. Mike Moser will become acting chair of English Nature.

Other matters of farm finance and tenure

According to the RICS the average value of farmland has fallen for the third consecutive quarter. However, the current average given (£9,382/ha (£3,797/acre)) is still only 1% below the same quarter last year and the sample is very small (only 52 sales, totalling 2,400 ha). The price of bare land has continued to rise, topping £8,000/ha (£3,238/acre) for the first time, 14% higher than a year ago (£7,017/ha (£2,840/acre)).
Bank lending to UK farmers in the third quarter of this year rose to a new high, exceeding £9 billion for the first time. The level is nearly £500,000 (5.8%) higher than a year ago.
HM Revenue and Customs has withdrawn the reduced rate of fuel duty (27.1ppl) on biofuels made from waste vegetable oil. Not only will the full rate have to be paid as for conventional fuels in future (47.1ppl) but producers could be charged back payments on fuel already sold.
The National Trust has announced a two-year project to provide individual business advice to its 2,000 tenant farmers and support new entrants to its farms. The project is funded by a £300,000 sponsorship from Barclays bank. The National Trust owns some 250,000 ha of land in England, Wales and Northern Ireland.
English Food & Farming Partnerships (EFFP) has launched “Making Collaboration Work”: a range of services aimed at helping farmer-controlled businesses and other collaborative ventures in farming and the food industries. EFFP has also launched a food chain project to explore how costs might be removed, which is being supported by some top food companies

Product prices

A. Crops

The average prices of cereals changed little over November; the milling wheat premium fell further. The prices of oilseed rape, field peas and beans fell. Part at least of the drop in rape prices was blamed on rumours that the new German government was planning to scrap tax breaks for biodiesel; this was later denied and the price partially recovered.
Average prices in late November (£/tonne, ex-farm): feed wheat 64, milling 72; feed barley 63.50; oilseed rape 138; field peas 75.50, field beans 73.
Average potato prices are close to £90/tonne. Higher prices were expected in view of the British Potato Council’s provisional estimate of a 2005 crop 6% lower than last year, owing to both lower plantings and lower yields.

B. Livestock

The average finished steer price has continued to rise markedly, to 103p/kg lw near the end of November. As usual, average prices are at least 10% higher in Scotland than in England and Wales.
The average finished lamb price also rose substantially, to 108p/kg lw, but later fell back to 104.
Pig prices appeared to have bottomed out, at just over 101.5p/kg dw. Cold weather in the second half of November, together with shortage of supplies, boosted the average spot price to 104p.
No further changes in ex-farm milk prices were announced by major buyers during November. Dairy Farmers of Britain is to introduce new liquid and compositional milk prices from 1st October next year. The Office of Fair Trading is to investigate retail milk pricing initiatives implemented between 2000 and 2003 (notably the 2ppl rise in July 2003), to the great annoyance of farmers and their representatives.

Other crop news

Autumn-sown crops are generally looking well across the UK. Unseasonally mild weather in the first half of November suddenly changed to a prolonged very cold spell with widespread frosts and snowfalls in some areas.
Three Cambridgeshire arable businesses are collaborating in an arable crop trials, demonstration and results service for East Anglian farmers, to be named Cambridge Arable Technologies.
The NIAB has been awarded the contract for the independent trialling of grass and clover varieties for the National List over the next five years.
Potato brown rot has been found in Nottinghamshire; Defra is investigating the cause. The last outbreak was in Northants in December 1999.
Defra has launched a new LINK programme providing grants for research into non-food crops and renewable materials.
The Renewable Transport Fuels Obligation: see I.5 above.

Other livestock news

Milk production was yet again below profile in October. Quota values fell further: to (for 4% BF) just below 0.3ppl to lease, 4.7ppl to buy (a record low).
A worldwide literature review on bovine TB carried out by Reading University has concluded that while there was strong evidence that badgers can provide a reservoir for infection, culling them would do little to halt the spread of the disease and may even make matters worse. Its supported measures to reduce cattle-to-cattle spread. Animal health minister Ben Bradshaw has been strongly criticised for saying that 80% of TB cases are spread from cattle to cattle.
According to the Organic Milk Supplies Co-operative, demand for organic milk has risen by 77% in the past four months. Owing to inadequate home supplies Arla has imported from Denmark, stressing that this is only a temporary measure, particularly in view of its high cost.
About 100 farmers staged a three-hour protest at Tilbury docks against beef imports from Brazil. Many are demanding a complete ban until that country is totally foot-and-mouth disease free.
St. Merryn Foods has announced a new “elite” membership contract scheme for supplying Tesco’s Finest and Organic ranges of suckler beef, aiming towards 2,000 and 500 cattle a week respectively.
Genus has bid £187 million to buy the world’s largest pig breeding company Sygen, subject to shareholder approval. It would make Genus the world’s leading animal genetics business. Sygen includes the Pig Improvement Company.
The House of Commons Pubic Accounts Committee has produced a report suggesting that all or part of the cost of further animal disease outbreaks should be met by farmers, from a levy scheme. It criticises Defra’s weak financial controls in the 2001 foot-and-mouth outbreak, including what is considers to be the excessive levels of compensation paid to the affected farmers.
The media obsession with avian flu has fortunately subsided. UK bird owners have been urged to make plans to move their flocks indoors should there be an outbreak here. The EC has assigned 30 million euros to help Asian countries tackle the disease. China is vaccinating all of its 14 billion poultry. The government now says the outbreak at an Essex quarantine centre probably came not from the parrot originally specified but from another bird, or birds, from Taiwan; Defra has commissioned an independent review of quarantine arrangements.

Inputs/Supply businesses

Terra Nitrogen is cutting its production of ammonia because of rocketing gas prices. It says fertiliser output will not be affected, because of its stocks and the ability to import.
The British Society of Plant Breeders’ “Fair Play” campaign, aimed at ensuring that all farmers using farm-saved seed pay the royalties due on eligible varieties, has been stepped up considerably. The NFU has given the initiative its full support.
Feed manufacturer NWF Agriculture has built three new 20,000 tonne blending plants: at Exeter, Penrith and Ayr. The sites also include storage facilities to enable more efficient distribution of its compound feeds.
BOCM Pauls is to close its Renfrew feed mill early next year. It is outsourcing its central Scottish business to Davidson Brothers’ compound mill at Shotts in Lanarkshire, while manufacturing and distributing some feed for Davidson’s customers in southern Scotland from its Penrith mill in Cumbria.
Cornwall Farmers has made a bid to buy Countrywest Trading. The two businesses combined would have a turnover close to £80 million and employ 400 people.
Agrovista has launched a consultancy service aimed primarily at the health, safety and dangerous goods aspects of using chemicals.

Marketing

Robert Wiseman Dairies has taken over Longslow Dairies’ Manchester depot. Longslow closed its North Wales factory recently (ref. November MFU, IX.4). Longslow has stopped the monthly payments it had begun to make to repay the farmers to whom it owes large sums for unpaid-for milk.
Graham’s Dairies, Scotland’s second largest milk processor, has bought Scottish Milk Dairies from First Milk. Robert Wiseman was poised to make this purchase a month or so ago but withdrew after the Office of Fair Trading referred the proposed deal to the Competition Commission (ref. November MFU, IX.3).
The Office of Fair Trading (OFT) has agreed to reconsider its earlier decision not to recommend a full inquiry by the Competition Commission into the grocery market. A previous head of the OFT, John Bridgeman, said recently that he was concerned that Tesco (which now has 30% of the grocery market) was becoming too dominant, particularly since it had been allowed to move strongly into the “corner shop” sector.
The Soil Association claims that sales of organic food are rising fast. The supermarkets’ share of the organics market is said to be falling and concern is expressed over an increase in the percentage of organic meat imported, often produced to lower animal welfare standards.
J. Sainsbury is to increase the amount of Scotch branded red meat it sells in its 18 Scottish stores.
Premier Foods has bought Cauldron Foods, which makes organic and meat-free products from its base near Bristol.
Wynnstay has opened a £1 million store at Newton, Powys.
EFFP project to cut food chain costs: see above IV.5.

Miscellaneous

Farmers For Action chairman David Handley described the recent three-day strike as a “huge success”. Just over 4,000 farmers had pledged to withhold supplies of produce. There appeared to be little impact on national food supplies but the strike attracted substantial attention from the national media and there was support from the general public. Plans are being made for further direct action. The chairman of Dairy UK, David Curry, says strikes can do nothing to raise ex-farm milk prices.
The new president of the CLA, succeeding Mark Hudson, is David Fursdon, who runs a family farming and tourism business in Devon; he is a qualified rural chartered surveyor with a breadth of experience in both public and private organisations/companies.
The November 2005 (61st) edition of the Agricultural Budgeting and Costing Book (“the ABC”) is now available. Tel. 01664-567676. Price for single copies £36, post free in the UK; £59 for both this and the May 2006 edition.