Farming News Review - December 2006

<< back

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

Other crop news Other livestock news Inputs Marketing Miscellaneous

Policy issues

As a result of the gradual implementation of regulation H123 by the European Commission, farmers will soon cease to exist. Instead they must all be addressed as “food business operators”!
Mariann Fischer Boel, EU farm commissioner, has threatened to impose cuts in sugar quotas after 2010 if member states fail to progress the reform of the sugar regime. The main culprits are understood to be the new member states. Brussels is currently forecasting a 2007/08 surplus equivalent to a quarter of the total sugar quota.
In a further statement Ms Boel has confirmed that milk quotas will be abolished by 2015. She also favours a gradual phasing out once the 2015 date has been confirmed.

CAP (etc.) support details/payments

1 December has brought the start of the Single Payment Scheme payment for 2006. 75 per cent of farmers in Wales were expected to receive their payment on the opening date while 70 per cent of Scottish farmers are expected to be paid in full during December. The Northern Ireland Agriculture Minister has announced that the majority of Northern Irish growers will receive their Single Farm Payments by 22 December. As for England, payments on account representing approximately 50 per cent are expected to commence in mid-February. Farmers will no doubt be pleased to note that performance bonuses for Defra staff rose by 27 per cent in 2005 to over £4 millions.
The Government’s plans for voluntary modulation have been rejected by the European Parliament as “unfair” and “possibly illegal”. Until modulation regulation is agreed, Defra cannot complete its rural development plans which means that a number of rural development schemes, due to commence on 1 January, will have to be put on hold as no funding will be available. Sir Don Curry has warned that the Higher Level Scheme could be one of the main victims.
The Rural Payments Agency has agreed that it will relax the rules applying to land transfer between farmers provided Single Payment Entitlements are not being swapped in cases where land is being rented for growing fruit, vegetable and potato crops.
Additional Single Farm Payment entitlements are to be awarded to 11 member states, mainly in southern Europe, as part of a European Commission initiative to reform the fruit and vegetable regime. British growers will get nothing.

Grants/regulations/legislation/environment

The NFU has submitted 19 policy areas for deregulation as part of Defra’s attempt to reduce administrative costs on farming business by 25 per cent by 2010. The areas include abolition of the Agricultural Wages Board, abolition of the Hedgerows Regulations and reduced fees for Integrated Pollution and Prevention Controls.
New gangmaster rules came into force on 1 December making it an offence to use unlicensed operators.
Friends of the Earth has been granted permission to make a legal challenge in the High Court against the Food Standards Agency claiming that the FSA failed to take sufficient action to prevent GM rice from entering the UK food chain.
Sutton and East Surrey Water has withdrawn its application to extend its drought order powers beyond the deadline of November 15.
Research undertaken by University of Reading’s Centre for Agriculture Strategy has concluded that farmers spent more than £215 millions of uncompensated expenditure on landscape management in 2004 while the total agri-environment funding amounted to only £163 millions.

Other matters of farm finance and tenure

The Bank of England announced a 0.25 per cent increase in bank base rate to 5 per cent. It is estimated this will add £15 millions to farm costs.
The NFU’s quarterly “Farming Outlook” is predicting improved returns to farmers from wheat, barley, oilseed rape, beef and pork but not so for the dairy, poultry and horticulture sectors.
Bare land values in Scotland are believed to have overtaken those in England according to agents Savills. Average prices now exceed £4,000 per acre with some prime arable land reaching £8,000 per acre.

Product prices

A. Crops

Following the Ukraine’s lead of introducing grain export licences to control its exports, a number of countries, including Croatia and China, have introduced similar measures to secure their domestic supplies of maize. These indications of what are expected to be reduced exports worldwide have helped to maintain the general strength of grain prices throughout the month. After the drop in the milling wheat premium in October, the price has remained around £99 per tonne throughout November. Premiums for wheat sold for future movement (both milling and feed) are now starting to creep above £1 per month, with February movements now carrying a £3.50 to £4 premium. Barley prices have continued to rise over the course of the month, gaining a further £2.50 to finish at £88; the highest level since January 2004. Pea and bean prices have strengthened further and oilseed rape prices have gained £5 per tonne in the month. Average prices in late November (£/tonne ex-farm): feed wheat 91, milling wheat 100; feed barley 88; oilseed rape 173; feed peas and beans 90.
With the potato harvest complete, the market stabilised at the start of the month and then built steadily throughout November. The average market price finished £14 above October’s closing level, £34 above the market in November 2005. Average tuber size is relatively small this year, resulting in the market being particularly strong for samples suitable for the baker market. Overall trade remains good as packers and processors call in contracts. King Edwards are achieving between £160 and £190/tonne; best samples achieving £200/tonne, whilst top grade Maris Piper samples have strengthened to achieve £230/tonne. Top quality baking potatoes are currently achieving £300/tonne.

B. Livestock

A mismatch of supply and demand saw the average steer price start at 113p/kg lw, gain 3p/kg in the first half of the month and then drop back as more animals came to market, finishing at 111p/kg lw. The high cost of feed grain and pulses is thought to be partly responsible for animals coming to the marketplace earlier.
Lamb prices dropped steadily down to 100p/kg lw in the first half of November but regained those losses in the latter half to finish back at 104p/kg lw. Bluetongue outbreaks continue to be reported, but both frequency and proximity to the UK are reducing. The nearest new outbreaks were in Belgium and the Netherlands.
The average pig price dropped back slightly at the start of the month, then held relatively static throughout the remainder at 107.5p/kg dw; 5p higher than the same time last year.
Arla continued to dominate the dairy news; as discussions with its Scandinavian group parent continue, it announced a drop in profits and it has been publicly criticised for its complex new producer contracts. Milk quota values recovered at the start of the month with reports that a clean 4% butterfat holding achieved more than 2.15ppl. The market subsequently stalled with no trades being reported, causing the price to drop back again, finishing the month at 1.97ppl for 4% butterfat.

Other crop news

Defra’s first estimate of the 2006/07 UK cereal balance indicates wheat is lower than 2005 by 2 per cent and barley lower by 6 per cent. Wheat exports are forecast to be down by 14 per cent.
The final 2006 HGCA Cereals Quality Survey indicates that average hagberg levels were the highest since 2003 with little by way of regional variation. Specific weight is down slightly on 2005 but above the three-year average yet was up in all regions apart from the East and the Midlands. Protein content is up slightly on 2005 but matched the three-year average. Only the South East showed a decrease.
The provisional estimate of the 2006 potato supply is 5.528 million tonnes, down by 5 per cent on 2005 according to the British Potato Council. Scottish maincrop yields are forecast to be 17 per cent higher but yields in England are down by 12 per cent.
KG Growers, Driscoll Strawberry Associates and Alconera are to merge their European sales, marketing and breeding activities. The merger will bring together the UK-based berry marketing businesses of KG Fruits and Alconeras UK and the Dutch firm, Berry Alliance BV, which is jointly owned by Driscoll Strawberry Associates and Alconera.
BASF has been given the go-ahead to commence trials of genetically modified potatoes.
The British Potato Trade Association has been formed from the merger of the National Association of Seed Potato Merchants and the Scottish Potato Trade Association.
A report commissioned by Defra and the DTI, “Creating Value from Renewable Materials” concludes that all the overall area taken up with non-food production in England rose by 75 per cent between 2003 and 2005. It states that sales of bio-fuels in the UK increased by more than five times between 2004 and 2005.
A new biofuels plant, costing £240 millions, is to be built in Wilton, Teeside and is expected to commence production in 2008. It will be built by Ensus with Glencore Grain UK supplying 1.2 million tonnes of wheat each year.
The European Phytosanitory Research Coordination Project has been formed by bringing together research funders from throughout Europe concerned with quarantine plant pests, diseases and invasive species. Defra is represented in the project by the Defra Plant Health Division. The project is coordinated by Defra’s Central Science Laboratory.
The European Crop Protection Authority believes that up to 20 per cent of pesticides sold in the EU are fake or not approved for sale.
Hop breeding has ceased at Wye College after over 100 years. Withdrawal of Defra funding has resulted in the transfer of the breeding programme to a group of commercial growers led by chairman, Tony Redsell.

Other livestock news

A report commissioned by the English Beef and Lamb Executive has found that only the top one-third of producers are making a profit after removing subsidy and labour costs. On average, English farmers are losing £351 per animal in lowland suckler herds and £49 per animal in lowland flocks. Intensive finishing units are losing £74 per animal and £262 per animal for extensive finishing units. The Executive called on supermarkets and meat processors to increase farmgate prices.
“Pig Market Trends” published by the Meat and Livestock Commission, indicates that average pig prices are 11 per cent higher now than the EU average.
The English Beef and Lamb Executive has announced that exports of English beef have risen by 250 per cent since the ban was lifted in May.
Defra has published a consultation document “Animal Welfare Delivery Strategy”. It includes a proposal to introduce a new animal welfare labelling system on consumer products, ahead of plans for an EU-wide system which is currently under discussion.
The England Implementation Group, which has the responsibility of implementing the Animal Health and Welfare Strategy in England, has warned that major cuts to Defra’s budget could compromise the strategy.
The Food Ethics Council has claimed that Defra’s ambitions for reform of the Common Agricultural Policy by ending direct subsidies could jeopardise animal welfare.
The Cattle Health and Welfare Strategy Council has been launched with the objective of collaboration on cattle health issues. The council will comprise four members each from England, Scotland and Wales and will eventually expand to include representatives from Northern Ireland and the Republic of Ireland.
Atypical scrapie has been discovered in Defra’s own flock of sheep which was considered to be resistant to the disease.
In the year to September, Defra has announced that bovine TB incidents fell by 11 per cent compared to a year earlier but since April of this year, cases have risen by 13 per cent.
Defra has agreed to revisit the plan to extend pre-movement testing to all cattle over 42 days old from March 2007.
Some supermarkets have been forced to start importing free-range eggs in view of the substantial rise in demand. This is in spite of Defra investigating fraud in the egg industry when it was discovered that eggs from caged birds imported from France were being passed off as free-range.
The Chairman of the John Lewis Partnership, which owns Waitrose, has stated that unless action is taken soon Britain will not have a viable dairy sector and will be forced to import milk in as little as five years.
The dairy management committee of the European Commission has cut export refunds for milk powders signifying its intent to keep pressure on dairy support and limit any upward movement on milk prices.
The Office of Fair Trading has refused to intervene in the row between milk producers and retailers and processors stating that it did not believe that price regulation was necessary in the milk sector.
The body responsible for the Sustainable Control of Parasites has warned of high levels of worms this autumn leading to an increased number of sheep deaths.
The genetic material of the UK’s farm animals is to be preserved under the UK National Action Plan on Farm Animal Genetic Resources.
A joint venture by the Red Meat Industry Forum and the British Pig Executive has produced a web-based service pulling together the financial and physical performance data from the RMIF benchmarking clubs and the health data from the BPEX British Pig Health Scheme.
NMR has introduced Healthcheck, a milk testing service for IBR, BVD and Leptospirosis.
Dairy Farmers of Britain has bought the Golden Vale Dairies milk bottling plant in Bridgend.
Cherryridge Poultry is to close its processing and factory farm in Norfolk. The company is the third-largest poultry producer and has blamed cheap imports from Italy, Germany and Poland.

Inputs/Supply businesses

The Fertilizer Industry Assurance Scheme has fully accredited its first three companies. The scheme is designed to address traceability and covers manufacture, importation, storage, merchanting and transport of fertilizer.

Marketing

The Government has launched the Healthy Start scheme whereby families on low incomes receive vouchers which can be redeemed at participating retailers for fresh produce.
The UK market for organic food rose from £0.8 billions in 2000 to £1.6 billions in 2005. Research firm Datamonitor suggests the market will reach £2.7 billions by 2010.
Research from IGD suggests the online food and grocery market will grow from £1.6 billions or 1 per cent of the total food market to £3 billions by 2011 but still only 2 per cent of the market.

Miscellaneous

The Government is to launch the Year of Food and Farming in September 2007, aimed at helping young people achieve more understanding about the origins of food and its links to health.
A publication of the Health and Safety Executive, “Health and Safety Statistics 2005/06”, has revealed that agriculture has the highest rate of reportable non-fatal injury to workers at 2020 per 100,000.
The National Fly-tipping Prevention Group has published a guide, “Tackling Flytipping”, giving advice on preventing and dealing with illegal waste dumping.
Southern England Farms, a vegetable growing company from Cornwall, was the overall winner of the World Grower Awards as well as being the World Vegetable Grower of the Year.
Profits at Arla Foods UK fell by 10 per cent in the year to September to £18 millions, almost entirely due to increased costs.
First Milk has reported profits before tax of £5.7 millions in the year to March 2006.
Mike Hall has been elected president elect of the Institute of Horticulture.
Dairycrest has paid £248 millions for Uniq’s St Hubert French and Italian spreads business.