Farming News Review - February 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

Single Payment Scheme news:-

i) The deadline for applications for hardship (force majeure or exceptional circumstances) has been delayed until 28th February.

ii) It is becoming clear that the number of farmers claiming from the national reserve will be too high for the proposed 3% cutback to provide sufficient funding; estimates currently range between 5 and 7%.

iii) The Rural Payments Agency says that farmers in England will not receive their first single farm payment until February 2006 at the earliest, although the original intention was for payments to begin on 1st December 2005. Clearly this will create serious cash flow problems for many farmers.

iv) The exchange rate for converting euros into sterling for this year’s payments remains unknown; it had been expected that the average rate last December (approx. 70p) would be used but this has not been agreed by the EU; this year’s June rate now appears to be the most likely option.

v) A full legal challenge to the way Defra plans to implement the dairy reform in England has received further support from another leading barrister and therefore remains a real possibility.
At the Oxford Farming Conference farming minister Lord Whitty announced that under the new Freedom of Information Act, which came into force on 1st January, the payments received for each individual claimant of the single farm payment (plus other payments presumably) in England will be disclosed to the general public. Later Ross Finnie said that this would be the case in Scotland too. The CLA has questioned the legality of this policy, arguing that for sole traders the Data Protection Act is likely to have precedence over the Freedom of Information Act.
Also at Oxford Lord Whitty warned that further “fundamental” reforms of the CAP were likely before very long; this was because of three “formidable pressures”: the EU budget, the WTO Doha round of negotiations and agreements and the effects of climate change.
A group of cross-party MPs has proposed that half the CAP payments made to “rich EU farmers” should be redirected to helping children orphaned by Aids in Africa; only 2% of EU farmers would be affected. Lord Whitty pointed out that the UK farming industry would be disproportionately affected by such a move. The idea of capping individual support payments is of course far from new. Many potential difficulties with such action have been pointed out and counter-proposals made.
Farm incomes in the ten new EU member states rose considerably during 2004 (reportedly by 74% in Poland); their exports have boomed. By contrast, those in the 15 “old” states rose by an average 0.8%.
UK total income from farming (TIFF) fell by 8.1% in real terms in 2004 compared with 2003, to £3.01 billion. In 2004/05 net from incomes will be 29% lower than in 2003/04: with cereal farms down by 59% and general cropping farms by 55%. Average earnings from diversification in 2004 were £300 million; 48% of full-time farmers are reckoned to have diversified, with an average output of £19,500 and an average net income of £5,000.
An independent review of the Agriculture and Environment Biotechnology Commission has recommended that it should be abolished by the end of the financial year and replaced by a similar body with a wider remit. It was set up to advise the government on a range of issues connected with the public consultation GM Nation.
Defra has announced an independent review of the levy bodies (MLC, MDC, HGCA, BPC, HDC), which follows a recommendation of the 2003 Haskins Report; mergers of at least some of these bodies, to reduce costs, will be considered.

CAP (etc.) support details/payments

Included in I.1. above.

Grants/regulations/legislation/environment

The Countryside Agency is to research and reinstate 20,000 historic rights of way in England. This “Discovering Lost Ways Project” will take 10 years and cost £11 million.
The government is providing £300,000 under the fifth Defra Rural Stress Action Plan; grants of between £5,000 and £75,000 are available to charities and voluntary community groups.
The Agricultural Industries Confederation has been awarded an Agriculture Development Scheme Grant to develop its assurance schemes and related matters.
The Gangmasters (Licensing) Act, which came into force last July, will begin to operate in April. Its chairman and chief executive designate have been named.

Other matters of farm finance and tenure

The bank base rate has been left at 4.75% for the fifth consecutive month. The European Central Bank has held its rate at 2% for the 19th month in a row.
The government is planning to levy new taxes of up to £50,000 on any public entertainment event with more than 6,000 people that involves using temporary accommodation and serves alcohol. There was major concern that this could be applied to many agricultural shows but it now appears that they have been spared, following action taken by the CLA and other bodies.
Chartered surveyors group Berrys, of Northamptonshire, is to manage English Partnerships’ agricultural holdings in central and south England. Paul Pridmore will be project director.
The sterling value of the euro began January at around 70p and ended the month close to 69p.

Product prices

A. Crops

Cereal prices have stayed low; forward wheat prices have drifted downwards, with the 2005 harvest price very similar to the current spot price for feed wheat, about £61/tonne. World markets for wheat and maize are already well supplied and the USDA has revised production estimates upwards. EU intervention stocks are rising fast; export refunds for two million tonnes of wheat are to begin shortly. Just after mid-January oilseed rape prices slumped by between £5 and £10/tonne following a slowdown in Chicago soya futures; the UK still has a sizeable potentially exportable surplus. Scottish malting barley contracts are at £77-£80/tonne ex-farm for next October.
Average prices in late January (£/tonne, ex-farm): feed wheat 61, milling 83; feed barley 64; oilseed rape 124; feed peas and beans 82.
Potatoes average £86/tonne. Best Pipers are £95 to £115/tonne, but many supplies are fetching less than £50/tonne. Prices across northern Europe are at a six-year low.

B. Livestock

Finished steer prices rose substantially during January, to average 102.5p/kg lw. The store cattle trade has been surprisingly good.
Finished lamb prices also rose, reaching an average 115p/kg lw near the end of the month.
The average pig price fell very slightly, to 99.5p/kg lw.
For over a month now the major co-ops and direct supplier groups have been pressing for a 3p/litre increase in the retail price of milk, half of which would go to producers to cover their increased costs. There has been increasing optimism that this could be achieved. However, the Office of Fair Trading has warned that moves that could be viewed as price fixing agreements constitute serious breaches of competition law.

Other crop news

In the first half of January there were severe gales and widespread flooding, particularly in Cumbria, south-west Scotland and North Wales; insurance claims could reach £15 million, from more than 4,000 policyholders: the highest level since October 2000.
However, early potato planting in south-west England has been well ahead of schedule, at least a fortnight earlier than last year. In East Anglia wheat has been drilled following a dry spell on land that was too wet to drill in the autumn, following potatoes.
Greencore is to close its Carlow sugar beet factory in March, with the loss of 326 jobs. This leaves Ireland with only one factory, at Mallow, Co Cork. The Netherlands, too, is closing one of its beet factories. These closures are in anticipation of the forthcoming reform of the EU sugar regime.
The government’s farm scale evaluation trials have shown GM sugar beet to reduce weed seed numbers in late season, resulting in less feed for birds. According to researchers at Broom’s Barn Research Station in Suffolk, however, moderating the applications of herbicides removes the problem: they say spraying just once, early in the season, provides both additional yields compared with conventional seed and more weeds later for the birds.
British Sugar has offered to buy back 160,000 tonnes (2%) of its contracted tonnage from beet growers; only a few weeks’ notice was given: the deadline is 4th February. This move has been caused by gradually increasing average yields.
Delays have continued at the Allscott sugar beet factory in Shropshire. This has reduced growers’ chances of drilling winter wheat after beet. Late delivery bonuses are being doubled to help compensate.
Advanta Netherlands Holdings, parent company of the Advanta Group, is to sell its European field crops business to the French co-op Limagrain, which owns plant breeder Nickersons UK.
The ProCam Group, the national crop protection product distributor and agronomy business based in Royston, Herts, has formed a new consultancy division, ProCam Consultancy.
A new UK-grown green apple variety, called Greenstar, is now for sale in Tesco stores. It has been developed by plant breeder Johann Nicolai in Belgium and grown by Adrian Scripps Ltd in Kent. Some 99% of green eating apples currently sold in the UK, including Granny Smith and Golden Delicious, are imported.
The UK cherry tomato harvest began on 30th January, the earliest ever grown under natural light.
A Cornish district council has stopped plans to set up a camp for up to 3,000 daffodil pickers. Hundreds of caravans would have been brought in to house the migrant workers.

Other livestock news

Milk deliveries were again below quota in December, as in all previous eight months of the current milk year. The shortfall has now grown to 215 million butterfat-adjusted litres. Dairies and co-ops are lifting their members’ quota thresholds, to varying extents. Quota values (4% BF) have fallen further, to 6ppl to lease, 11ppl to buy.
A five-year research project in Ireland showed that culling badgers resulted in a considerable reduction in the incidence of bovine TB. UK farmer organisations have therefore renewed their pressure on Defra to review its badger culling policy. However, the government’s leading adviser on bovine TB, Prof. John Bourne, has questioned the relevance of the Irish trials for UK policy.
More than 20,000 farmers joined the national fallen stock collection scheme in the first four weeks of its operation. There have been complaints from farmers saying they have had to wait much longer for animals to be collected than the 48 hours maximum stated in the scheme.
The remaining 3,000 BSE cohort cattle on UK farms are to be slaughtered in preparation for the lifting of the Over-30-Months Scheme, starting towards the end of February. They will be valued as breeding cattle, not OTM cattle.
Danish research has found that organic milk has higher levels of vitamin E, omega 3 essential fatty acids and antioxidants. These results echo an earlier study at Aberdeen University, where the difference was put down to the higher proportion of clover forage in the organic cows’ diets.
Work has begun on a £5.3 million scheme to upgrade Reading University’s dairying and animal science research facilities. The CEDAR development is being phased in over two years.
The government has announced plans to introduce a compulsory ram genotyping scheme later this year, under which scrapie susceptible VRQ rams will be slaughtered or castrated. Public consultation on the National Scrapie Plan last autumn gave broad support for new schemes.
John Thorley, chief executive of the National Sheep Association, which he has headed since 1969, is to retire early next year. He will be replaced by Peter Morris, previously policy development director and now deputy chief executive; he has been with the NSA for 14 months, prior to which he was NFU policy director in south-west England.
UK pig slaughterings were higher in both November and December (2004) than in the previous year; this is the first increase in the annual figure for six years.

Inputs/Supply businesses

Last December delivered domestic AN fertiliser prices averaged around £147.50/tonne. This compares with approximately £130 in December 2003 and £98 in December 2002.
Grainfarmers has opened its new £1.75 million seed plant at its headquarters in Colsterworth, Lincs. It can process 20,000 tonnes a year: more than 500 a day at peak times. It will complement two existing plants in Scotland and Hampshire.
The Committee on Carcinogenicity in Food etc. has found that prostate cancer may be linked to pesticide exposure and that farmers and farm workers appear to be at greater risk than those in other occupations. An earlier Canadian study indicated the same increased risk. The matter is being monitored and kept under review.
The Parliamentary all-party OP group, led by Lib Dem MP Paul Tyler, has published a report which claims that there is enough evidence for a complete ban on organophosphate–based sheep dip products. The report has been passed to animal health minister Ben Bradshaw.
The EU Feed Hygiene Regulation has been formally adopted and comes into effect on 1st January 2006. It adds further controls to existing EU legislation to cover the production, storage, handling and traceability of materials destined for animal feedstuffs.
ABNA has acquired the Rumenco feedtec operation.
Countrywide Farmers is to close the feed mill in Micheldever, Hants. at the end of May. Most of its output will then be produced at its Melksham mill; the rest will be contract manufactured by Grain Harvesters, based at Wingham in Kent.
Cheshire-based HST Feeds has completed a £500,000 refurbishment and upgrade of its Crewe mill.
Tate & Lyle and SVG Intermol, the UK’s two largest feed molasses suppliers, are collaborating to share storage facilities; each is to close one of its sites. Molasses volumes have declined considerably during the last six years.
Pfizer is to close its plant in Morpeth, Northumberland, with the loss of 571 jobs and also to cut 400 jobs at its site in Sandwich, Kent.
The Veterinary Medicines Directorate, which consolidates more than 50 previous regulations, has been published by Defra for consultation. It could be in place by October.
Reekie Manufacturing, the Scottish potato harvesting equipment specialist, has been placed into administration. Only 15 months ago there was a management buyout, following the collapse of its Dutch parent, Netagco.
UK tractor sales in 2004 increased for the fourth year running; there were 14,955 registrations. This followed the relatively high prices for the 2003 harvest crop. A downturn is anticipated in the current year.

Marketing

Farming leaders have expressed concern at the growing price war and battle for market share between the major supermarkets, particularly Tesco, Asda and Sainsbury’s.
The Sustainable Development Commission (SDC) has criticised the Little Red Tractor scheme for failing on several counts. In a new report it has called for a more ambitious approach: an improvement in the standards set and an assurance scheme that helps consumers identify food products significantly exceeding the current baseline; consumers need to understand what the tractor logo signifies. The SDC’s chairman, Jonathon Porritt, expressed some of these criticisms during his presentation at this year’s Oxford Farming Conference.
Worldwide Fruit has lost its Sainsbury’s top fruit contract, barring a successful appeal. The total contract was worth £25 million a year, of which £8 million represented English top fruit. Worldwide Fruit will still have a turnover of over £80 million a year. The lost business has been shared between Chingford Fruit and OrchardWorld.
A new quality standard mark for British pork has been launched, backed by a £1 million British Pig Executive advertising campaign telling consumers that two-thirds of imported pigmeat fails to meet British animal welfare standards and would be illegal to produce in the UK. This has (inevitably) provoked angry reactions from Dutch and Danish producers.
Yoplait Dairy Crest is to close it Yeovil factory, which produces own-label dairy desserts for retail chains, with the loss of 260 jobs. The company is to focus in future on its own-brand products such as Petits Filous, Frubes and Yop.
Scottish cheesemaker McLellands has been bought by Lactalis, the family-owned French cheese giant, for, it is said, more than £150 million. McLellands’ sales totalled £128 million in 2004; it processes up to 45,000 tonnes a year; its key, and booming, brand is “Seriously Strong” cheddar.
Neil Davidson, chief executive of Arla Foods, is to step down in September; he has been with Northern Foods, Express Dairies and then Arla after the 2003 merger since 1977.
Chippenham livestock market is to move to a new site near Bristol in February. The future of Hailsham market, in East Sussex, remains in the balance.

Miscellaneous

The New Year Honours included CBEs for Patrick Holden, Pam Warhurst and Tony Harris, OBEs for Tony Pexton and David Heather and MBEs for John Alvis, Bill Jordan, Graham Ward, Eddie Gillanders, Margaret Cameron, Thomas Renwick and twins Meurig and Mansel Raymond.
Shaun Leavey, who has been on the NFU staff since 1971 and regional director of the NFU in south-east England since 1989, is retiring. He will be succeeded by senior food and farming advisor William White.
The new editor of Farmers Weekly, replacing Stephen Howe in March, is Jane King, who has had 20 years of (non-farming) publishing experience.