Farming News Review - June 2008

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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

Proposals put forward by the World Trade Organisation advocate quotas on imported products and a scaling back of protection for domestic produce against foreign imports. The EU would only be allowed to place special protection on 6 per cent of its farm produce.
The CAP health check proposals have been announced by Agriculture Commissioner, Mariann Fischer Boel. The proposals includes removing the remaining coupled support payments with the exception of suckler cow, goat and sheep premiums; making it easier for national governments to take money from their national budget ceilings for direct payments and divert it to disadvantaged sectors; abolition of set-aside; simplified but enhanced cross-compliance; an increase in compulsory modulation by 2 per cent each year from 5 per cent in 2008 to 13 per cent by 2012; higher rates of modulation for bigger farms; the phasing out of milk quotas by 2015; abolition of intervention for durum wheat, rice and pig meat; moving away from historical payments to a flat rate payment system.
EU Ministers have failed to reach agreement on changes to the pesticide approval process. A compromise proposal put forward by the Slovenian presidency of the EU was rejected by France which wants much tighter controls.

CAP (etc.) support details/payments

The Rural Payments Agency met its target of making 90 per cent of Single Payments by value by the end of May.

Grants/regulations/legislation/environment

Defra and Natural England have published a progress review of Environmental Stewardship. While the report confirms that the schemes have delivered improvements to the countryside, it makes nearly 200 recommendations for change, many of which are intended to help combat and mitigate the effects of climate change. Over 100 changes to the Entry Level Scheme are proposed and over 80 to the Higher Level Scheme.
Defra and Natural England have published a progress review of Environmental Stewardship. While the report confirms that the schemes have delivered improvements to the countryside, it makes nearly 200 recommendations for change, many of which are intended to help combat and mitigate the effects of climate change. Over 100 changes to the Entry Level Scheme are proposed and over 80 to the Higher Level Scheme.
Advantage West Midlands is to run a scheme on behalf of the Rural Development Programme for England whereby growers can access funding of £53 millions to help businesses reduce their carbon emissions.

Other matters of farm finance and tenure

A survey carried out by Farmers Weekly in association with the NFU and the TFA has found that almost 75 per cent of tenant farmers have been served a rent review notice in the past year. Those who had an indication of the demands of their landlords were facing average increases of 52 per cent.
The Scottish Government is to lobby the UK Government over the shortage of seasonal agricultural workers amid fears there will not be an adequate labour force to pick this year’s crop.
The Gangmasters Licensing Authority has revoked the licence of Timberland Homes Ltd of Suffolk.

Product prices

A. Crops

April’s trend for the cereal markets continued into May, demonstrating less volatility and showing signs of settling. Price changes for cereals were generally negative as more accurate estimates for the 2008 harvest were released to the marketplace. Oilseed rape bucked this trend and, despite opening the month almost double the price of a year earlier, prices bounced back from the drop seen in April, gaining £30/tonne. Factors affecting grain markets included: the release of the official CAP health-check proposals which, among other things suggested the scrapping of compulsory set-aside; the US Department of Agriculture’s upward revision of both its figures for the 2008 wheat harvest and its expected world consumption; reports that Ukraine’s 2008 grain production will exceed 40mt and that Eastern Australia is already concerned by low rainfall. Whilst, non-specific to agriculture, the soaring oil price has also had a marked effect, making biofuels more attractive and inputs more expensive. Average prices in late May (£/tonne ex-farm): feed wheat 145, milling wheat 171; feed barley 139; oilseed rape 346; feed peas and beans 182.
Average potato prices strengthened marginally at the start of the month and held steady for the remainder. With uncommitted samples of quality produce now hard to find, focus has moved both to secondary graded samples and imported crop. Poor quality crop is still very hard to market. New crop and salad potatoes started to come to market this month, removing some of the pressure on buyers. Earliest set-skin maincrop samples are now expected in July. Average prices in late May sat at £182/tonne, up £8/tonne on prices in late April and £20 up on prices a year earlier. The free market price at the end of May was £200/tonne, up £18/tonne on April and up £21 on May 2007. Demand for clean, high quality samples remains high. In late May, Maris Piper were achieving between £150 and £200/tonne, with good quality graded samples getting up to £310/tonne; King Edwards were obtaining between £200 and £250/tonne, with clean samples making up to £300/tonne; Desiree prices stood at £180 to £200/tonne; £230/tonne for top quality. Estima prices, still the most variable, were between £150 and £250/tonne; high baker, grade 1 samples were reaching as much as £320/tonne.

B. Livestock

The price of beef steadied this month after four successive months of increase. The average steer price dropped back marginally to 145p/kg lw from its starting position of 148p/kg lw. Prices proceeded to fluctuate between these two levels but finally closed 1p/kg up on April, at 149p/kg lw. Average prices at the end of May sat 33p/kg higher than those a year earlier.
UK average lamb prices started the month by continuing the gentle downward trend seen at the end of April, reaching 137p/kg lw. However, prices jumped substantially midmonth reaching a high point of 193p/kg lw by the end of the month. Prices in late May sat 65p/kg above prices a year earlier. Imports of fresh and frozen meat were down compared to May 2007 and exports to France and Germany were both up.
The average pig price continued to climb marginally during May. Prices closed the month at 122p/kg dw. The pig sector is still not benefiting noticeably from substitution purchasing on the back of the high red meat prices but, despite a slight weakening, the strong Euro remains an ally to UK producers as imports remain expensive. Prices a year ago sat at 108p/kg.
The farmgate milk price for March (reported in May) showed a small recovery, with the average price gaining 0.15ppl to sit at 25.77ppl; just over 8ppl above prices in March 2007. Robert Wiseman Dairies, Dairy Crest and Arla each reported price increases of 0.5ppl (from 1 May, 1 June and 1 June respectively). Milk quota prices have relaxed after last month’s buoyancy, reacting to the EU commission’s recommendation that the intended “soft landing” should take the form of five consecutive annual quota increases of 1% starting in 2009. Clean, 4% butterfat holdings were being traded in late May for 0.80ppl, 0.20ppl down on April levels.

Other crop news

The High Level Set-Aside Group, chaired by Sir Don Curry, has concluded that the zero set-aside rate for 2008 has led to a reduction of 50 per cent in uncropped land; up to 70 per cent of set-aside land and fallow could be back in production this autumn; set-aside has had demonstrable environmental benefits in the UK and EU. The Group has suggested that a range of options should be considered to compensate for the loss of set-aside including a percentage of arable land to be managed primarily for environmental purposes; wider buffer strips and changes to location of buffer strips under cross compliance; extending the requirement for green cover on land not in agricultural production; mandatory winter stubbles.
The latest forecast from the Farming and Agriculture Organisation for world cereal production in 2008 indicates a record output of 2,192 million tonnes.
A leading French grain analyst has forecast a record EU-27 grain harvest of 290 million tonnes, up 13 per cent on 2007.
Defra has reported that stocks of wheat on farms at the end of the first quarter this year were 27 per cent down on the same time in 2007, barley was 9 per cent lower.
British Sugar has announced that the 2009 beet contract price will be £26.10 per tonne based upon an exchange rate of £0.80/€ and a wheat price of £150 per tonne.
Defra has agreed to the original sugar beet industry proposal for growers to receive 86 per cent of compensation monies and contractors 14 per cent. The compensation of £73.6 millions is being paid as a result of British Sugar renouncing 13.5 per cent of the UK sugar quota.
Defra has given the go ahead to the University of Leeds to trial potatoes genetically modified to resist infection by potato cyst nematodes. Some 400 plants will be grown at a farm near Tadcaster, North Yorkshire.
Taypack, based in Perth, has ended its 10-year-long supply partnership with Asda, worth £32 millions each year in order to protect the long-term sustainability of the company and its growers. Taypack has a 9 per cent share of the UK’s annual potato crop supplying 80,000 tonnes to Asda.
Researchers at the Universities of Manchester and Newcastle have identified that eating five tomatoes a day may protect against sunburn and premature ageing.
The Competition Commission has reported that, in the 10-year period to 2006, fruit growers took a decreasing share of the retail prices of apples, peas and strawberries. It has also revealed that average incomes of fruit growers were lower than other sectors in the farming industry. In 1996 dessert apple growers received 47 per cent of the retail price compared to 30 per cent in 2006; pear growers received 37 per cent in 1996 compared to 30 per cent in 2006; culinary apple growers received a constant 25 per cent.
A Defra-funded study undertaken by the National Resources Management Centre at the University of Cranfield into the life-cycle of 1kg of strawberries arriving at a UK regional distribution centre from both the UK and the Spanish region of Huelva has found that the two options match each other in terms of energy consumption when packaging and transport have been taken into consideration.
Trials of a new protein-based product named Pre-Tect by the Farm Advisory Services Team have indicated it can prevent cherries from cracking during wet harvests.

Other livestock news

An epidemiology report published by Defra has indicated that so far bluetongue disease is confined to the south and east of England. Despite the testing of over 55,000 animals on over 2,000 premises, active infection has not been found on any holding in the Surveillance Zone.
Defra has issued a tender for the supply of an additional 13 million doses of bluetongue vaccine to add to the 22.5 million doses already ordered. The latest order is expected to provide enough vaccine to cover all susceptible livestock in England and Wales.
Irish MEP Liam Aylward has submitted a blueprint for the European sheep sector that outlines a range of steps required to make the industry sustainable, the main proposal of which is to revise the plans to introduce compulsory electronic tagging in January 2010. The report highlights the “difficulty in implementation, high costs and unproven benefits of Electronic ID systems” and recommends its introduction should be on a voluntary basis decided by individual states.
Irish MEP Liam Aylward has submitted a blueprint for the European sheep sector that outlines a range of steps required to make the industry sustainable, the main proposal of which is to revise the plans to introduce compulsory electronic tagging in January 2010. The report highlights the “difficulty in implementation, high costs and unproven benefits of Electronic ID systems” and recommends its introduction should be on a voluntary basis decided by individual states.
A cull cow marketing scheme has been set up between Sainsbury’s Dairy Development Group and Anglo Beef Processors. The aim of the voluntary scheme is to enhance the value of dairy culls and given Anglo Beef Processors a more consistent supply through its abattoirs in Perth, Lancashire and Shropshire.
QMS is to conduct a survey “Beef Intentions” to help signpost the future direction of the Scottish beef industry. Beef producers will be asked questions about their intentions for the shape and scale of their beef business in the coming year.
Morrisons is to pay an extra 1ppl for liquid milk sourced through Dairy Crest and Arla.
Robert Wiseman Dairies has increased its producer price by 0.5ppl to 26.2ppl with effect from 1 May.
Members of the Arla Foods Milk Partnership, via their investment company Milk Partnership Limited, have formed a joint venture with Danish and Swedish producers to take a 7 per cent stake in Arla Foods UK.
The Wales Dairy Development Centre has commissioned Andersons to look at Welsh, UK and EU dairy farmers that are operating collaborative ventures so as to assess the longterm future of dairy farming in Wales should the exodus of milk producers continue and remaining smaller units be forced to amalgamate.
A milk strike has been mounted by German farmers in response to falling producer prices. Support from the farmers has been received from eight neighbouring countries to disrupt the movement of milk to dairies and retailers. Almost 90 per cent of the members of the German Dairy Farmers Association have participated in the boycott.
The European Food Safety Authority has reported that salmonella was found to be present in one-third of turkeys reared for human consumption in the UK last year but the specific strains responsible for food infections in humans were detected in just 0.9 per cent.
European consumer and agricultural organisations have called upon the European Commission to retain the 11-year ban on US poultry meat treated with anti-microbial substances in response to calls from the US for the ban to be lifted.
The Scottish Agricultural Science Agency has revealed that animal poisonings in Scotland have reached a 10-year high. The agency dealt with 190 suspected pesticide poisoning incidents in 2007, up from 144 in 1997.

Inputs/Supply businesses

Revision of the Defra RB209 fertiliser recommendations for agricultural and horticultural crops is expected to be completed by Defra’s end of June deadline. It is expected that all seven Soil Nitrogen Supply indices will be retained but there will be changes in the sections covering nitrogen response curves for cereals, potash use in potatoes and nitrogen use in field vegetable crops.

Marketing

A six month study conducted by the dunnhumby Academy of Consumer Research at Kent Business School, Canterbury has concluded that the fresh produce industry is failing to help consumers make an informed choice between organic and non-organic produce. It is also failing to invest in the market opportunities that exist in both sectors because of its lack of understanding of what consumers want.
Sales of organic fruit grew by 18 per cent in the year to January 2008 compare with 2 per cent for conventional produce. Sales of organic vegetables grew by 11 per cent in the same period compared with 7 per cent for conventional produce.
The Organic Trade Board has been formed by 10 found members from the edible and nonedible organic sectors to enhance and market the organic brand to consumers.
Consumer awareness of the Fairtrade mark has increased from 57 per cent to 70 per cent during the past year according to the Fairtrade Foundation.
The Ernst & Young ITEM club has predicted that middle-class shoppers will abandon organic and fair-trade food as inflation continues to climb.
Northern Foods is mothballing its Fenland Foods factory in Grantham for two years after abandoning a supply contract with Marks & Spencer.

Miscellaneous

KG Growers increased profits by 23 per cent in 2007 over 2006 based on an increase in turnover from £95 millions to £117 millions.
Total Produce UK has acquired wholesale business Haluco in Birmingham market.