Farming News Review - February 2008

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

Other crop news Other livestock news Marketing Miscellaneous

Policy issues

The European Food Safety Authority and the US Food and Drug Administration have both concluded that food products from cloned animals are safe for human consumption.
The EU animal heath strategy 2007-2013 has been ratified by the European Economic and Social Committee. It includes establishing prevention plans for animal disease and changes to animal transport regulations.

CAP (etc.) support details/payments

The 10 month occupation period to qualify for Single Farm Payments has been replaced by a single date, May 15, with effect from this year. However, the requirement to comply with cross compliance conditions for the whole calendar year remains, even if land has been transferred. The change may have a significant taxation effect for many growers with the possibility of two years’ of Single Farm payments being subject to tax in one fiscal year.
Defra is considering advice from Natural England and the Environment Agency to introduce a new cross compliance condition requiring 5 per cent of arable land to be kept out of production and “managed for the benefit of the natural environment”.
A report prepared for the European Commission has advocated a radical annual increase in milk quotas as the best way to ease farmers towards the end of the quota regime in 2015. The report concludes that a fall in milk prices will be more than offset by an increase in production.
Defra has again deferred its decision on the application of British Sugar to relinquish 13.5 per cent of UK sugar quota.
The EU Council has agreed to exclude the UK from the potentially restrictive vineyard planting ban. The European Commission is planning to introduce a planting ban until 2015 on vineyards producing more than 3.3 million bottles of wine a year.
By the beginning of this month, 75 per cent of all claimants in England had received the 2007 Single Farm Payment in full.

Grants/regulations/legislation/environment

EU health commissioner, Markos Kyprianou, has confirmed that Community agricultural funds will be available to meet 100 per cent of the cost of bluetongue vaccines and 50 per cent of the application costs. Whether the UK Government takes up the funding is another matter.
A Memorandum of Agreement has been published giving guidelines on when growers can use red diesel on public roads.
Agricultural vehicles are likely to be exempt from the Low Emissions Zone charge being introduced by Transport for London this month.
A cross-party report from MPs has recommended that biofuel targets should be scrapped until a sustainable framework is put in place for their development. The Environmental Audit Committee has concluded that biofuels are expensive and an ineffective way of cutting greenhouse gas emissions when compared to other policies.
The European Commission is proposing to reduce the thermal input threshold of glasshouse businesses from 50 MW to 20 MW. The NFU fears at least a dozen UK glasshouse businesses could be adversely affected.
A report from the Royal Society, “Sustainable biofuels: prospects and challenges”, has urged the Government to put the right biofuels policies in place or risk damaging the long term viability of growing plants to make fuel.
The Waste and Resources Action Programme is to provide funding to nine farms around the country to develop existing compost production facilities and increase the UK’s compost production capacity by 75,000 tonnes.
Lincolnshire based Renewable Zukunft and Austrian company Ökoenergie Utzenaich have joined forces to produce an anaerobic digestion process to provide a sustainable solution to biogas production.
A five year funding programme, totalling £63 millions, has been announced to aid rural businesses in Yorkshire and Humberside. The programme will be managed by Yorkshire Forward.
With effect from 1 May, anyone transporting animals in connection with an economic activity and who is travelling over 65 km and up to or over 8 hours will need to hold a Certificate of Competence.

Other matters of farm finance and tenure

UK farm income figures for 2007 have been published. Total income from farming rose by 10.2 per cent to £2.54 billions or by 5.7 per cent in real terms. Cereals output increased by 26.2 per cent, oilseed rape by 35.8 per cent, fresh vegetables 5.3 per cent, potatoes 6.9 per cent and fresh fruit 16.1 per cent. Cattle output increased by 4.9 per cent but sheep fell by 7.8 per cent, poultry was unchanged while pig output increased by 7.3 per cent, the highest value since 2001. Milk output increased by 13.3 per cent and egg output by 13.5 per cent. On the cost side, feed costs increased by 17 per cent, fertilizer 10.6 per cent and energy costs 6.6 per cent.
The Chancellor, Alastair Darling, at last announced the long-awaited changes to Capital Gains Tax. An “entrepreneurs” relief has been introduced which will tax £1 million of capital gains at 10 per cent but for many the new relief will not compensate for the loss of indexation allowance and Business Asset Taper Relief.
The annual Farm Profits Survey of the Institute of Chartered Accountants has reported that average subsidy income of £45,000 per farm represents about 97 per cent of annual profit.
The Scottish Government has published a discussion paper “Choosing the right ingredients”. The paper proposes a policy which integrates every part of the food chain from farm gate to plate.
The Scottish Environment Department has published a consultation document on proposals to extend crofting to Arran and Cumbrae and areas of the Highlands and Islands not currently designated.
The value of tractors and farm machinery stolen during 2007 increased by 22 per cent over the year to £5.5 millions.
Vilnius Recruitment of Leiston, Suffolk has become the 46th business to have its activity suspended by the Gangmasters Licensing Authority.

Product prices

A. Crops

Oilseed rape prices have dominated the headlines this month as prices, having a midmonth peak above £320/tonne, reached unprecedented levels. However, the commodity market has largely been lead by the concerns over a potential global recession and the same forces that suppressed the world’s stock markets have had an effect. Further market factors were predictions that the 2008 wheat crop will be 6.5% above 2007 and the strengthening of the Dollar vs the Euro. World stocks remain low and demand for energy crops remains high so the market, being pulled in several directions simultaneously, is demonstrating high volatility for cereal and oilseed prices. Despite the uncertainty, feed wheat prices have strengthened further this month to sit £85 above those in January 2007, whilst milling wheat prices have held steady. Feed barley has weakened slightly, but still remains £70/tonne above January 2007 prices. Average prices in late January (£/tonne ex-farm): feed wheat 174, milling wheat 194; feed barley 157; oilseed rape 300; feed peas and beans 204.
Average potato prices, after a positive start to the year at over £160/tonne, dropped back over the course of the month to just above £150/tonne. The free market premium sits slightly stronger than last month at £12/tonne, having been as high as £18 mid-month. Trade since the New Year has been slow. A high proportion of the crop coming to market is of lesser quality, pushing average prices down, but demand for samples with high baker content remains high and premiums reflect this. Average prices sit £14 higher than January 2007 whilst the average free market price sits £7 higher. In late January, King Edwards were marketed between £170 and 220/tonne; Desiree prices have held steady at £170 to £200/tonne; £220/tonne for best quality. Good quality samples of Estima with high baker content were obtaining between £200 and £220/tonne. Maris Piper were trading slightly weaker at between £160 and £190/tonne, but good quality graded samples were still achieving as much as £230/tonne.

B. Livestock

The average steer price has started the year with an element of confidence. Initially commanding 115 to 120p/kg lw in the early stages, then improving further to close the month at between 125 and 128p/kg lw. Prices in January 2007 were 113 p/kg, although feed prices a year ago were far lower than present.
UK average lamb prices are following a very similar pattern to 2007, opening the new year at just below 100p/kg lw and steadily gaining strength to close the month at 110p/kg lw. Quality animals sold in late January were achieving between 115 and 118p/kg lw.
The average pig price, following the Christmas break, started at 110.5p/kg dw, 3p/kg above the same time last year. Over the course of the month, the price relaxed to 110p/kg, where it held relatively steady. Prices in late January were 5.5p/kg above prices at the same time in 2007.
The average farmgate milk price for November (reported in January) gained an additional 0.75ppl on the October price to 27.25ppl, which is 8.25ppl above prices a year ago. Based on Defra figures, British farmers may struggle to produce the 14.6 billion litres required to meet the new UK quota level following the 2% increase effective from 1 April 2008. This view has led to the demand for milk quota dropping back further. Clean, 4% butterfat holdings were changing hands in late January for 1.29 ppl, 0.36ppl down on December.

Other crop news

Defra has revised UK 2007 wheat production to 13.4 million tonnes, a fall of 11 per cent from 14.7 million tonnes in 2006. Barley output was down 3 per cent but oilseed rape was 12 per cent higher at 2.1 million tonnes.
Scientists from the Central Science Laboratory and Warwick Horticulture Research Institute have warned of the threat of pests and diseases spreading to the UK. Tetranychus evansi, a species of South American red spider mite which attacks tomatoes and peppers, has already reached Spain and southern France and is heading for the UK. It produces 15 generations each year in heated crops. Verticillium Wilt is threatening to attack brassicas. The disease has caused 100 per cent infection of cauliflower crops in California and 50 per cent yield losses in oilseed rape in Sweden.
Trials carried out over the past six years at East Malling Research Station and on two farms in Kent on behalf of Defra and the Horticulture Development Council have shown that it is possible to produce zero-residue apples without compromising quality thereby satisfying supermarket demands.
Poor weather in the so-called Wakefield Triangle has resulted in a shortage of forced rhubarb.
Lamb Weston/Meijer, part of the ConAgra group, is planning to build a potato factory complex at Wisbech at a cost of £20 millions.
Tyrrells is to build a potato vodka distillery and biofuels plant in Herefordshire.
The New Zealand Braeburn crop is expected to be down by at least 20 per cent this year, its lowest volume for at least 10 years.
Vegetable growers have been warned that an increasing number of herbicides will cease to be available this season following the ending of “Essential Use” status for several active ingredients and further losses are expected in the next couple of years.

Other livestock news

The export of Brazilian beef to Europe has effectively been banned from the beginning of this month as the European Commission has told Brazil it will not accept a list of farms the country claims fully meet EU rules on eligibility for export until they have been inspected.
Industry leaders, politicians and animal welfare charities have welcomed a scheme to develop a UK beef market from male dairy calves. The National Beef Association estimates domestic beef production could be increased by 70,000 tonnes annually and dramatically reduce imports.
The pre-movement testing of livestock for the bluetongue disease has thrown up cases in the existing Protection Zone and also a number of “false positives” occurring in Cheshire and Shropshire.
The NFU has urged Defra to order more bluetongue vaccine because of fears the 22.5 millions ordered to date will not be enough. The first 2-3 million doses will be used in the current Protection Zone when they arrive in May.
Average Holstein milk production, which accounts for 92 per cent of all lactations, fell in the year to September 2007 by 6kg to 8,264kg, the first time in over 10 years that average yields have fallen.
Overall dairy cow numbers in Scotland have held steady compared to a year ago despite many herds ceasing production. During 2007 the average herd increased by six cows to 141 cows.
Milk sales from Jersey and Guernsey herds increased by 6.6 per cent in 2007 to 8.1 million litres.
Arla announced an increase of 0.5ppl in its standard litre price to 25.5 ppl.
Figures from Defra show that in the first eleven months of 2007, 3,771 incidents of bovine tuberculosis were reported, higher than the whole of 2005, the previous record year. A total of 7,364 herds were under a TB2 restriction, 9 per cent of the total UK herd.
A Somerset organic farming partnership has won the right to have the credibility of Defra’s gamma interferon blood testing system tested in the High Court.
Defra statistics report that bovine tuberculosis has cost taxpayers over £500 millions since 1997.
Migratory wild birds from eastern Europe are believed to have brought avian flu to the Dorset coast.
The Llandysal market in Ceredigion has closed.

Marketing

The Competition Commission has put back the publication of its report into the grocery market to April. Publication has already been postponed several times but the Commission has a statutory responsibility to publish by 8 May.
Figures released by the Office for National Statistics have revealed that wholesale food prices have increased by 7.4 per cent over the past year. Retail beef prices have risen by 14.9 per cent over the past five years, lamb by 10.3 per cent but these increases have not filtered their way down to farmers. The share of the retail beef price received by farmers has fallen from 48 per cent to 46 per cent while the share of the lamb price has fallen from 42 per cent to 35 per cent.
The British Pig Executive has launched a £1.5 millions marketing campaign designed to persuade supermarkets to increase the price of pork and pork products.
The Liverpool Produce Terminal, to be built in the Port of Liverpool at a cost of £6 millions, is expected to be completed by September. It will allow the import of fresh produce from Spain and it is estimated it will replace the need for 300 trucks to arrive in the UK on a daily basis.

Miscellaneous

Marion Regan is the new chairman of KG Growers Ltd, taking over from Angus Davison.
John Deere produced 26 per cent of all tractors sold in the UK in 2006, ahead of New Holland at 18 per cent and Massey Ferguson 17 per cent.
Cargill has acquired Freeman’s of Newent, a primary chicken processing in Gloucestershire.
Lloyd Maunder, the poultry firm based in Devon, has been sold to the 2 Sisters Food Group.
Keelings has closed B-Prepared, the company it bought from the administrators of Bomfords in July 2007.
Yorkshire-based pig companies DRS Pigs and MCB Sow Company have gone into administration with debts said to be in excess of £3 millions.