Farming News Review - March 2006

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Policy issues

1. UK Total Income From Farming (TIFF) for 2005 is provisionally estimated to be £2.52 billion; this is 11.2% down in real terms on 2004, which has been reduced from the previous figure of £3.01 to £2.84 billion. The 2005 figure, which includes the value of single farm payments – even though not yet paid – is the lowest since 2001.
2. Forecasts of net farm income in 2005/06 are for a small rise for dairying, a larger one for pigs and sharp falls for cereals, lowland grazing livestock and poultry.
3. Defra estimates that 46% of full-time farms now have a diversified business, generating an average output of £18,500.
4. There is growing anxiety that the EU budget deal agreed before Christmas (which incorporated a large cut in “Pillar 2” payments) will result in a substantial cut in UK agri-environment payments. Sir Don Curry has expressed his concern that a large increase in voluntary modulation to compensate, without match-funding, will place UK farmers at a major competitive disadvantage.
5. With the end of April given as the deadline for deals on agricultural and manufacturing tariffs in the World Trade Organisation (WTO) Doha Round trade talks, a meeting will be held in London on March 10th and 11th, attended by the EU, the US, Japan, Brazil, Australia and India, for further discussions. This follows weeks of negotiations in Geneva since last December’s major meeting in Hong Kong.
6. In a draft ruling, the WTO has upheld a complaint by the USA, Canada and Argentina, first brought in 2003, that the EU import ban on GM foods between 1998 and 2004 was unjustifiable on scientific grounds of food safety or environmental damage. The complete moratorium ended in 2004, but six EU member countries still have national bans in place, which the WTO says are in breach of trade rules. The publication of the full official report (which will be close to 1,000 pages in length) is not due for some months, after which the EU has the right to appeal.
7. The Scottish Executive has launched for consultation a seven-year rural development strategy, aimed at creating a sustainable future for Scottish farming and land-based businesses.
8. A report from The University of Newcastle’s Centre for Rural Economy, “Foot and Mouth: Five Years On” is not only highly critical of Defra’s handling of that crisis (““closing” the countryside during the outbreak was a huge and expensive mistake”) but says Defra’s subsequent record on rural affairs has been wholly inadequate. It stresses in particular that badly affected non-agricultural businesses, especially tourism, have been given very little aid compared with the compensation paid to farmers.
9. A joint letter from the presidents of the four UK farming unions has been sent to EU and UK political leaders calling for the export ban on British beef to be lifted “at the earliest opportunity”.
10. Eight farming organisations from the UK and Ireland have formed a new alliance called Fairness for Farmers in Europe.
    

CAP (etc.) support details/payments

1. Approximate levels of the regional, or flat-rate, payments in England (i.e. 10% of the total payments due) have been announced. Before deductions (except for the National Reserve (now determined at 4.2%) and a small scaleback for overshooting) these will be about £19.25/ha (£7.80/acre) for lowland, £16.10/ha (£6.50/acre) for severely disadvantaged areas (SDAs) and £2.30/ha (£0.95/acre) for moorland. These are lower than previous expectations for lowland but higher for SDAs.
2. The first single payments in England were made on 20th February. The Rural Payments Agency says the majority will be paid in the second half of March.
   

Grants/regulations/legislation/environment

1. The National Trust says Hill Farm Allowances need to be almost doubled in order to safeguard the management of upland areas.
2. A Somerset farmer has been jailed for three years and nine months for a major sheep fraud. He claimed to have traded 425,000 sheep with a Spanish farmer and claimed £865,000 in VAT compensation. An investigation began following a tip off from his estranged wife. He was found to own just 29 animals.
   

Other matters of farm finance and tenure

1. The Royal Institution of Chartered Surveyors reports that the average price of farmland in the final quarter of 2005 was £9,370/ha (£3,792/acre), a drop of 1% on the previous quarter and nearly 5% on the same quarter in 2004. Representatives from several firms of chartered surveyors disputed these findings, saying there had been no fall in values during the past year.
2. Savills reports that over 3,000 ha (7,500 acres) of UK farmland have been sold to Danish investors in the past three years, most of it in the Eastern Counties.
3. UK farm borrowings rose by more than £1 billion, some 13%, during 2005, to £9.4 billion, caused by a combination of lower commodity prices, higher costs and non-receipt of single payments owing.
4. A government-backed initiative, the Risk Aware programme, has been launched, supported by a large number of industry organisations, to train farm advisers and consultants to assist farmers in adapting to the changing business environment.
5. A Developing Income Programme has been set up by Lloyds TSB Agriculture, the Agriculture Mortgage Corporation and the Farmers Weekly to find ideas and ways for farm businesses to increase their income.
6. The Tenant Farmers’ Association recently celebrated the 25th Anniversary of its formation. Reg Haydon has been the national chairman since 1995. The government has been sharply criticised in the annual report, notably for its handling of the single payment scheme and bovine TB.
   

Product prices

A. Crops

1. 1 Wheat, oilseed rape, feed peas and beans prices all rose by a pound or two a tonne during February, thought the threat of bird flu caused wheat values to slip late in the month as poultry feed manufacturers cooled their commitments. Bad weather in Russia and the Ukraine has contributed to the increases. Shortage of rain in parts of the UK and other parts of the world, together with increasing demands for wheat and rape for biofuels, have helped raise futures prices for the 2006 and 2007 harvest crops.

2. Average prices in late February (£/tonne, ex-farm): feed wheat 67, milling 72.50; feed barley 65.50; oilseed rape 138; feed peas and beans 78.50; potatoes 105.

B. Livestock

1. Average finished steer prices rose from 99p/kg lw at the end of January to 105p during February but fell back to 102p towards the end of that month.
2. A similar pattern occurred at first with finished lamb prices, the average rising from 100p/kg lw to 104p, then falling back to 100p, but rising again to 103p near the end of the month.
3. Average pig prices remained close to 101p/kg dw during February.
4. Arla announced an 0.9ppl cut in its milk price for February and March (causing much anger) and a new pricing strategy. Dairy Farmers of Britain is holding its price until the end of March. Dairy Crest has cut its direct supplier price for commodity cheese milk by 0.5ppl from 1st March. A liquid milk price cut by Robert Wiseman Dairies is widely anticipated.
5. Wool prices are down on last year’s 81p, averaging 75p/kg at the end of January, rising to 76p/kg in late February.
6. A British Limousin bull has been sold in Carlisle Mart for a record figure of 100,000 guineas, beating the previous world record for a bull by £40,000.
   

Other crop news

1. The south-east, southern and central England suffered the fourth driest year on record last year and the driest year since 1973. Furthermore, England and Wales had the driest January since 1997 and the sixth driest on record. Rain at last returned in earnest in mid-February, but still nowhere near enough for south-east England; by the end of February it was being described as the worst drought for 75 years.
2. The UK malting industry is trying to persuade farmers that malting barley is still a worthwhile crop to grow, despite low malting premiums and hence poor profitability in recent years.
3. Tests on the new potato variety (launched in 2001) Vivaldi indicate that it has 26% less carbohydrate and 33% fewer calories than the average potato. Demand is apparently growing fast, despite its high retail cost.
4. The EC will probably decide the extent of sugar beet production cuts in each member state in early March; the average cut will be 14 to 15%. Growers are being given the choice as to whether to cut their areas planted this year or next.
5. Most of the Golden Wonder crisp business has been sold to an affiliate company of the Tayto (NI) Group. All 335 jobs at its Scunthorpe site have been secured.
6. The EC has been heavily criticised by the Soil Association and Organic Farmers and Growers for its proposal to allow up to 0.9% contamination with GM material in organic foods. They wish to retain their own 0.1% standard.
7. The EU has launched its “biofuels strategy”, based on a seven-point plan to promote their production and use.
8. Two-year premium-priced oilseed rape contracts are being offered to supply a new 140,000 tonne crushing plant at UK Coal Harworth Colliery headquarters near Doncaster, in South Yorkshire. This is a joint venture between Harworth Power and Springdale Energy.
9. Fengrain, based near March, Cambs., has formed a strategic alliance with Somerset-based Wessex Grain, which is diversifying into the manufacture of bioethanol from wheat at Henstridge through its Green Spirit Fuels subsidiary (ref. Feb: MFU, VI.5).
10. British Sugar has signed a contract for the supply of bioethanol to Greenergy Fuels for the £20 million plant now under construction at the Wissington sugar factory in Norfolk; (see also Feb. MFU, IV.4).
11. The Spanish bioethanol company Abengoa (Europe’s largest producer) wishes to secure up to 50,000 tonnes of UK wheat this year on fixed-price contracts for its new 600,000 tonne plant in north-west Spain. It says it is considering building a plant in the UK.
12. France is planning to produce diesel fuel from three million tonnes of rape by harvest 2007, including a million tonne plant being planned by Soufflet. A German company has launched a bioethanol brand processing 700,000 tonnes of wheat a year.
13. Thousands of French winegrowers have marched in the south of the country demanding government assistance. Serious problems have arisen through a combination of overproduction, falling home demand and New World competition.
    

Other livestock news

1. Cases of avian flu have been confirmed across Europe in recent weeks. All cases had been wild birds – believed to be migratory swans and ducks – until near the end of February, when the first case on a commercial unit (a turkey farm) occurred, in south-east France. In the UK poultry keepers have been warned to be prepared to bring all their birds indoors. EU rules dictate that a country must establish a three-kilometre protection zone around an outbreak and a surrounding “surveillance zone” of an additional seven kilometres. Member states are divided over vaccination: France is using it but UK government vets have been on balance against. Government chief scientist Prof. Sir David King says avian flu will inevitably reach the UK and will persist for five years plus.
2. UK milk production was yet again below profile in January, making the cumulative shortfall for the first 10 months of the year 301 million litres. With no likelihood of the annual quota being exceeded, quota leasing values are down to 0.1ppl, but the purchase price is up on the mid-December figure at 4.5ppl; (both at 4% BF).
3. The NFU and the Livestock Auctioneers Association are taking legal action challenging Defra’s imposition of compulsory pre-movement bovine TB testing, which was to have started on 20th February but was put off, three days before that date, until 27th March.
4. The RSPCA has launched a national campaign to prevent badger culling being introduced to help combat bovine TB. The government’s consultation period on the subject closes on 10th March. Five of the government’s scientific advisers have said badger culling has no scientific basis and could make the TB situation worse, not better. The number of cattle culled because of the disease rose by 28% last year, from just over 23,000 in 2004 to 29,585.
5. Defra has published the first of its controversial table valuations for animals compulsorily slaughtered for bovine TB, brucellosis and enzootic bovine leukosis.
6. Defra has announced an independent review of livestock movement rules, because of evidence that farmers find them difficult to understand.
7. The EU has banned imports of beef from eight areas in northern Argentina, after an outbreak there of foot-and-mouth disease.
8. China, South Korea and Taiwan banned pigmeat imports from Holland, Belgium and Germany, following the discovery of high dioxin levels in feed mills in January.
9. Research findings by the consumer watchdog, The Food Commission, that the mineral content of meat and dairy products fell significantly between 1940 and 2002 have been strongly disputed by the Food Standards Agency, the Meat and Livestock Commission, the British Nutrition Foundation and the Scottish Agricultural College.
10. Following Prince Charles’s launch of the Mutton Renaissance Campaign last year he has recently launched the Mutton Renaissance Club, with an inaugural dinner at the Ritz.
11. According to the policy statement by the Sheep Vet Society, “Sheep Welfare in the UK”, shepherds and sheep farmers should hold a certificate of competence to keep sheep. The response has been predictable …..
12. Defra has cut the £17 million annual budget of the Institute of Grassland and Environment Research (IGER) by £2 million to release funding for work on climate change and alternative energy crop research. Around 40 jobs will be lost at IGER, mainly from its administrative centre and the North Wyke field research station in Devon.
13. The UK pig breeding herd fell from 793,000 in 1997 to 468,000 last year.
14. In Gloucestershire a nine-year old pedigree Ayrshire has had healthy triplets, a feat described by vets as being as rare as human quintuplets.
    
    

Inputs/Supply businesses

1. The average domestic AN price appears to have peaked – at approximately £175/tonne delivered.
2. The two fertiliser blending plants bought by J & H Bunn from ConAgra Resources at Leith and Gunness on the Humber are to close by May. Together they have produced about 100,000 tonnes a year.
3. The new £3.7 million Harbro animal feed plant in Lanarkshire has been opened, by Princess Anne. Harbro is now also to supply fertiliser across its whole trading area, adding Yara compounds and Carrs’ blends to its portfolio.
4. Masstock Arable has invested £250,000 to update and increase by 25% the capacity of its already large Lincoln seed processing plant, one of four that it owns.
5. Wynnstay has obtained EU grant aid to build a feed blending plant at Rhosfawr in North Wales.
6. In its response to the Royal Commission on Environment Pollution’s report, “Crop Spraying and the Health of Residents and Bystanders”, issued last year, the Advisory Committee on Pesticides says there are no scientific grounds for the recommended introduction of 5 metre no-spray buffer zones between fields and houses, schools etc.
7. Defra has published a new statutory Code of Practice for Professional Users of Plant Products in England and Wales, which replaces and updates three existing industry codes. Versions for Scotland and Northern Ireland are also being produced. The code states the new legal requirements to keep spray records and advises on the new laws regarding protection of ground water and waste management.
   

Marketing

1. The joint First Milk and Dairy Farmers of Britain venture independent milk haulage company, Milk Industry Logistics, established only in December 2004, has been closed down. The two co-ops will revert to operating separately.
2. A Middle Eastern boycott of Danish products, resulting from the published cartoons that greatly offended many Muslims, has been costly for Arla Foods.
3. The Junction 38 Partnership, the meat processing plant recently built close to the M6 motorway, has been officially opened by Prince Charles.
4. Fengrain members have approved plans for a £400,000, 5,000 tonne increase in storage capacity at its headquarters at Wimblington, Cambs.
5. ADM is to close its Newcastle flourmill from May. It has nine other flourmills in the UK.
6. The All-Party Parliamentary Group (of 73 M.Ps.) for Small Shops has produced a 91-page report entitled “High Street Britain: 2005”, which has received widespread coverage in the national media. It says the squeezing out of small and independent retailers by the growth of the major supermarkets is unsustainable and should be stopped. It calls for an independent regulator, a strengthened code of practice, a full-scale inquiry, a moratorium on all mergers and for local authorities to have a greater say in planning applications.
7. Unilever is to sell Birds Eye. About 600 jobs in Hull and Lowestoft are affected. It is less than a year since the Grimsby site was closed, which led to 600 redundancies. Frozen food profitability has been restricted by supermarket competitive pricing and growth prospects are limited, especially because of the large increase in sales of chilled prepared vegetables.
8. Countrywide Farmers has just opened a new Country Store, near Cardiff, the 40th of its retail outlets.
9. Neil Davidson, who retired seven months ago as chief executive of Arla Foods UK, received £1.6 million in pay, bonus and benefits in 2006, including £1.1 million “compensation for loss of office”. (His total pay in 2004 was £820,000). Some shareholders are objecting.
   

Miscellaneous

1. Three years ago Hadlow College, in Kent, was graded four by OFSTED and the Adult Learning Inspectorate and deemed a “failing institution” because of falling student numbers, financial losses and a worn-out estate; it was threatened with closure or, at best, amalgamation. However, a recent report gives Hadlow a grade two, making it the UK’s third best performing specialist college in terms of OFSTED results. The College has invested £4.5 million in improvements in less than three years and a further £8 million is planned over the next three years.
2. The Silsoe Research Institute, the agricultural engineering research centre near Bedford, closes in March. The BBSRC withdrew its funding in May 2004, following a review.
3. A competition to find a name for the new bridge connecting the Isle of Sheppey with mainland Kent received 700 entries. The Highway Agency’s choice was “The Sheppey Crossing”. Inspirational.