Farming News Review - July 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

Major confrontations between EU heads of state made headline news during much of June. Tony Blair was put under intense pressure for the UK to give up, or at least reduce, the budget rebate won by Margaret Thatcher 21 years ago, particularly to help the new, poorer member states. Mr Blair insisted that the rebate remained fully justified with present EU budgeting arrangements and that he would only consider any reduction if EU expenditure were completely revised, especially with a view to cutting agricultural subsidies, which President Chirac vehemently refused even to consider. One UK politician after another echoed Blair’s call, parrot-fashion, for the CAP to be reformed, most apparently ignorant of the fact that a major reform was agreed only a few years ago and its implementation had only just begun (albeit slowly and reluctantly in France). These wranglings followed the considerable embarrassment caused to the French and Dutch government leaders by their populace rejecting the new EU constitution in their referendums.
Britain took over the EU presidency on 1st July. Mr Blair will be seeking reforms, especially of its finances. He will have great difficulty, having incurred widespread animosity amongst member states for his strong stand on the UK’s budget rebate. His proposal to reopen discussions for further changes to the CAP as soon as possible has already caused apoplexy in government ministers across the EU – let alone its farmers and those in associated businesses. However, Mr Blair’s resilience and persuasiveness are legendary and he does have some support, particularly from Holland and Sweden.
A report by the House of Lords European Union Select Committee, chaired by Lord Renton, firmly advises against re-negotiating 2002 CAP reform, which would obviously create further instability for farmers. It says EU leaders should resist cutting the agricultural budget but neither should it be exceeded because of EU expansion. It says direct payments to farmers should be phased out from 2013 with EU funds targeted towards improving the environment (with a separate fund set up to reward farmers for non-production benefits) and helping the new member states.
EU farm ministers have agreed a new rural strategy for the so-called “second pillar” of the CAP, which allocates funding between improving the environment, diversification and rural employment, and raising agricultural competitiveness. However, the total level of funding has yet to be agreed. There are fears that cuts might be made, which could lead to higher national modulation rates.
The EC has formally tabled its proposals for reforming the EU sugar regime, which is designed to cut production from the current 20 million tonnes a year to 12.4 million tonnes by 2012. The proposals were already well known: they include a 39% cut in the sugar price and a 43% cut in the beet price over two years, 2006 and 2007, 60% compensation through the Single Payment Scheme, the merging of A and B quotas, the abolition of intervention, no quota cuts, a quota buy-up scheme, the introduction of private storage aid and a programme of voluntary closure of beet factories, with payments to help. Many EU member states are strongly opposed to these proposals; hence compromise changes are likely. A large-scale rally of protesting beet growers is planned in Brussels for when the EU Council of Ministers meets to discuss the reform on 18th July.

CAP (etc.) support details/payments

The exchange rate for converting euros to sterling in determining the level of the year’s single farm payments will be the rate prevailing, on a single day in the same year, 30th September. In the past average monthly rates have been used.
According to a survey conducted by HSBC Agriculture and reported at this year’s Cereals Event, 51% of farmers will be changing their cropping pattern in the coming year, 40% will be growing less cereals, 39% of farms over 400 ha (1,000 acres) expect to get bigger because of the reforms, with only 3% expecting to become smaller, and 94% expect to join the ELS (Entry Level Scheme) in the next year.

Grants/regulations/legislation/environment

A high percentage of farmers have had problems making ELS applications, primarily because the Rural Development Service has been unable to supply the maps required. Defra is introducing monthly instead of quarterly start dates to ease the situation.
The government has published the Commons Bill, aimed at protecting common land in England and Wales.
The Forestry Commission has announced that up to 20 million conifer trees are to be felled over the next 20 years and allowed to be replaced by deciduous species such as oak, ash, birch and beech, regenerating naturally.

Other matters of farm finance and tenure

The Agricultural Wages Board has agreed on a 3.4% pay increase from 1st October (making the standard rate £5.85/hour) and a new six-grade system: a new intermediate rate will be introduced between the standard and craft rates, called the lead worker rate. There is also a commitment to tackle the pensions issue.
HM Revenue and Customs has published its guidance on the tax treatment of entitlements under the Single Payment Scheme. No surprises.
According to Strutt and Parker’s latest arable land index the average arable price fell to £2,858/acre (£7,062/ha) in the six months ending in March. This followed nine months during which it rose by more than 30% from £2,353/acre (£5,814/ha) to over £3,100 (£7,660).
Andersons East has moved from its premises in Bury St. Edmunds to Bridgham, just outside Norwich.
The euro weakened in value following the “no” votes in the French and Dutch referendums on the new EU constitution and further still after the differences in agreement over the EU budget and Britain’s rebate. The rate was 68.8p at the end of May, fell to 66.2p at one point but rallied suddenly to 67.55p on the last day in June.

Product prices

A. Crops

Minor ups and downs in the prices of cereals, rape and beans occurred during June for diverse reasons, but they were little different at the end of the month from the beginning.
Average prices in late June (£/tonne, ex-farm): feed wheat 63.50, milling 82; feed barley 64.50; oilseed rape 125; feed peas and beans 94. Potatoes up a little at average £103; spot prices lower, at around £85/tonne average.

B. Livestock

Finished steer prices fairly steady during June, but dipped a little towards the end of the month to an average 102p/kg lw.
New season lamb prices nose-dived from 150p/kg lw at the start of June to around 116p at the end – the usual seasonal drop.
The average pig price rose during June to reach close to 107p/kg dw; pig prices have been rising across the EU.
Arla Foods UK cut its June milk price by 0.35ppl, causing much farmer fury and widespread protest action led by FFA leader David Handley. Later, Milk Link announced an 0.62ppl cut in its price for its May milk, as part of a complex new payment system, stressing that the cut only applied to that month. Later still, Wiseman announced an 0.25ppl price cut for July milk. The EC cut export refunds for milk powder, butter and cheese. However, Tesco has increased its cheese price to processors.
The “wool cheque” will be based on a rate in the region of 54p/kg in 2005, similar to last year.
2,300 guineas was paid for a sheepdog at a recent sale in Yorkshire.

Other crop news

Crops have generally continued to look well but very dry weather across much of the south and east is causing anxiety on many farms. The weather was cool until a heatwave arrived in mid-June, accompanied by thunderstorms and torrential rain in many parts of the country. Flash floods in North Yorkshire caused millions of pounds worth of damage to livestock and crops.
HGCA’s plantings estimates for this year’s harvest in Great Britain are: wheat area down by 3% (but 5% up in Scotland and 8% up in Wales), winter barley down by 10% (to the lowest level since 1977 and half the 1998 level), spring barley down 4%, oilseed rape up 6%, set-aside up 14%.
EU environment ministers have voted overwhelmingly against lifting the national bans on GM crops, as opposed to the EC’s recommendation, which was supported by minister Elliot Morley for the UK.
The HGCA has been awarded £2 million by the government to create the Cereal Industry Forum, to examine the UK grain chain and promote efficiency – including through an internet system of benchmarking.
HGCA levies have again been frozen, for the seventh year.
British Sugar has placed a design contract for the UK’s first bioethanol production facility, which will be at the Wissington factory, near Downham Market in Norfolk. The plan is for 55,000 tonnes of beet to be used a year, coming on stream in early 2007.
The HGCA has published a report on the environmental effects of using cereals and oilseeds to produce biofuel.
A cross-industry coalition has been formed to support UK biofuels. It has launched a “Bioethanol Declaration”, calling on the government to boost biofuel production.
Funding has been obtained for a £6.5 million generator to be built at Eccleshall in Staffordshire using miscanthus (elephant grass).
The SAC has launched Agronomy Select, a new advice service for Scottish combinable crop growers.
The British Potato Council estimates a 5% drop in the potato area this year.
The British Potato Council and producers are asking for the term “couch potato” to be removed from the Oxford English Dictionary, arguing that the phrase is derogatory and misrepresents the excellent food value of the crop. Success looks unlikely.
A born optimist is growing 20 acres of tea near Truro in Cornwall. His ambition is to have a 150-acre plantation.

Other livestock news

UK milk production in May was the lowest for that month since the current system of recording began in 1994. The weather was cold and, in many areas, wet; another reason is thought to be buyers’ efforts to flatten production profiles with seasonality price penalties, i.e. to reduce the traditional spring flush. Quota values (4% BF) are down to just below 1ppl to lease and 6.3ppl to buy.
Defra has published a 72-page report on bovine TB, produced by an independent stakeholder group, recommending pre-movement testing for the disease; farmer leaders said this could cause massive problems. The NFU has presented a comprehensive paper to Defra on the measures it thinks should be taken. Defra is to start a small-scale badger vaccine trial. Exeter University’s Centre for Rural Research produced a report saying the economic impact on individual farmers affected could be even worse than an outbreak of foot-and-mouth.
The EC has indicated that it will fund 50% of the cost of a scheme to pay compensation for cattle born before August 1996 for three years after the Over-Thirty Month Scheme (OTMS) ends, as these cattle will still be excluded from the food chain. This proposal has still to be approved by the Council of Ministers.
EU inspectors have been touring Britain to assess the robustness of BSE controls ahead of changes to the Over-Thirty Months rule. Abattoirs, markets and farms are being visited across England, Scotland and Wales. Northern Ireland has already received approval.
Contaminated imported feed is thought to be the likeliest explanation for the recent BSE outbreak in Pembrokeshire; (ref. June MFU, VII.9). The investigation continues.
Edinburgh University plans to bring all its veterinary education into a single site at Easter Bush in Midlothian by 2008, at a cost of £37 million.
The Farm Animal Welfare Council has published a report, which contains 30 recommendations, including that welfare standards should be applied to all livestock products, whether home-produced or imported.
Defra has announced the appointees to the new body to advise the government on implementing the new Animal Health & Welfare Strategy. It will be called the England Implementation Group and be chaired by Helen Browning.
The EC has proposed tighter welfare standards for broiler hens – for the first time on an EU-basis. They will include maximum stocking densities.
Norfolk C.C. turned down Banham Poultry’s planning application to build a power plant using its abattoir wastes (ref. May MFU, VII.8) because of a possible odour problem. The firm is to appeal.
A “geep”, or “shoat”, has been born to a Cheviot ewe on the island of Islay, off the west coast of Scotland, a wild goat having apparently had his wicked way with her. While this is not too uncommon the ensuing foetus usually dies; hence this is a very rare occurrence.

Inputs/Supply businesses

UK made AN, delivered in 500 kg bags, is currently averaging around £140/tonne, compared with less than £120/tonne a year ago. £155-£160 is predicted for next spring. The cost of gas is held mainly to blame, its having risen nearly 60% during the same period.
Countrywide Farmers has replaced Terra with Yara as the supplier of all its nitrogen and most of its compound fertiliser.
Forward soybean prices in the US have risen by the equivalent of £30/tonne in a month. In late June the eastern half of the US soya belt was very dry and more dry weather was forecast.
The British Society of Plant Breeders is taking steps to ensure the payment of farm-saved seed royalties.

Marketing

New junior agricultural minister Lord Bach has promised a further examination of the dairy marketing chain. The NFU dairy board has announced a fundamental review of the same subject.
A new paper, by Dairy Crest’s commercial director of milk purchasing, Mark Taylor, entitled “The Challenges Facing the UK Dairy Industry”, suggests that a system of dual pricing and raw material management could offer the best chance of improving the dairy industry situation.
Dairy UK is to receive £50,000 from the EU to help promote liquid milk consumption in primary schools.
Wm Morrison has sold 12 of the 13 ex-Safeway stores in Northern Ireland to Asda for £74 million. Morrison’s profitability and therefore share value has fallen considerably since it acquired Safeway in March last year.
Tesco’s share of the UK grocery market has exceeded 30% for the first time. Sainsbury’s share is increasing again and Asda’s is falling.
The CLA has called for a new Competition Commission investigation into supermarket practices, the appointment of an independent ombudsman and anonymity for suppliers’ complaints. The British Retail Consortium has objected to these requests.
The integration of the Banks Cargill Agriculture and Allied Grain marketing businesses into Frontier Agriculture is now complete.
The HGCA is to sign an agreement with Egypt, the world’s largest wheat importer (six to seven million tonnes a year), for substantial exports of UK wheat over the next five years.
Centaur Grain is reported to be nearing the final stage of a merger with Fengrain. This would increase Centaur’s marketing of grain and oilseeds from 1.5 million tonnes a year to 2.2 million tonnes. Over 80 Fengrain members have signed a petition expressing their concern over the proposed merger, about which the chairman expressed surprise and said all members would be consulted before any deal was agreed.
Grain merchant Gleadell Agriculture is expanding its trading area by opening a new office, its fourth, in Leicestershire.
East Lincolnshire grain storage co-op Union Grain, which owns a 20,000 tonne store, has appointed Grainfarmers as its marketing agent. Aberdeen Grain and Weald Granary, storage enterprises already using Grainfarmers, have recently increased their storage capacities by 6,000 and 12,500 tonnes respectively. Grainfarmers owns 200,000 tonnes capacity storage at nine sites and manages a further 340,000 tonnes owned by nine other co-ops.
Congrain is constructing an extra 21,000 tonnes of storage near Linton, Cambs.
North Eastern Farmers, the 99-year old Aberdeenshire co-op virtually dismantled three years ago following a decade of losses, has gone into voluntary liquidation.
The ANM Group, Scotland’s largest farmer-controlled business (whose chief executive is Brian Pack), has been named the best business in the North East region at the Grampian Awards for Business Enterprise.

Miscellaneous

Defra is providing £500,000 over the next three years to voluntary and community sector organisations giving support to people in rural areas suffering from stress.
A Rural Enterprise Gateway has been launched in Somerset, to provide rural business advice and funding across south west England. Another has been opened at Reaseheath College, to cover Cheshire.
The Queen’s Birthday Honours List included an MBE for Denis Chamberlain (M.D. of the Chamberlain P.R. business, former editor of Farmers Weekly and immediate past president of the Farmers Club) and OBEs for Shaun Leavey (recently retired NFU regional director for south-east England) and Prof. David Winter (head of the Centre for Rural Research, University of Exeter).
Joanne Denney-Finch, chief executive of IGD, has been appointed chair of the Food Chain Centre, replacing Dame Deidre Hutton, now newly chairing the Food Standards Agency.
Gareth Vaughan and Emyr Jones have been unanimously re-elected president and deputy president respectively of the Farmers Union of Wales, Glyn Roberts was elected vice-president, replacing Terry Bayliss, who retired.