Farming News Review - November 2006

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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

A meeting of the European parliament’s agriculture committee has rejected proposals put forward by the EU Commission for voluntary modulation. The view of the committee was that the proposal “jeopardises the survival of many farms, distorts competition and discriminates against farmers in individual member states as well as entailing the abandonment and re-nationalisation of the CAP.
EU farm commissioner, Mariann Fischer Boel, has proposed abolishing set-aside and phasing out milk quotas as a means of simplifying the CAP.

CAP (etc.) support details/payments

The euro conversion rate for the Single Farm Payment was fixed at the end of September at 67.7p per euro, down from 68.3p per euro in 2005.
The NFU held talks with DEFRA ministers in the hope of being reassured that the 2005 Single Farm Payment debacle would not be repeated but came away from the meeting very concerned that no contingency plan was in place. The head of the Rural Payments Agency, Tony Cooper, has admitted that it will take “another 18 to 24 months” to sort out the problems. Already 50% advance payments are being made to farmers in the Irish Republic and Germany expects to have completed payments by the end of December.
The National Audit Office issued a, not surprisingly, devastating report on the Government’s “delivery” of the Single Payment to farmers. It estimates that the failure of the Rural Payments Agency to deliver the payment efficiently cost farmers between £18.5 and £22.5 millions in interest charges and bank arrangement fees. It notes that the EU has it within its power to levy a fine on the UK of up to £131 millions. By March 2006 the cost of delivery had increased from a first estimate of £75 millions to over £121 millions and the final cost is expected to be much higher resulting in massive cutbacks in future DEFRA spending.

Grants/regulations/legislation/environment

Concern has been expressed as to the future of the Seasonal Agricultural Workers Scheme after the Home Office announced that nationals from Romania and Bulgaria would have restricted access to the UK labour market on accession to the EU in 2007.
As part of the Water Resources in Co-operation with Agriculture project, the NFU has teamed up with water and agricultural experts in the UK and Germany to help improve groundwater quality. DEFRA has announced the England Catchment Sensitive Farming Delivery Initiative to help farmers meet the cost of measure protecting water quality. Up to £5 millions has been committed to the scheme.
The area of organic and in-conversion land in the UK has fallen by 8 per cent according to DEFRA statistics. Fully organic land has fallen by 14 per cent to 533,902 hectares but inconversion land has risen by 60% to 85,951 hectares.
The NFU has criticised DEFRA for apparently changing the requirements for entry to the Higher Level Stewardship Scheme in some areas by increasing the points threshold without the knowledge of applicants.
Natural England, a new Government agency responsible for protecting and enhancing biodiversity and landscapes as well as encouraging countryside access, has been launched under the chairmanship of Sir Martin Doughty.
Reforms to the Agricultural Tenancies Act, as recommended by the Tenancy Reform Industry Group, came into force last month.
INEOS Enterprises has been awarded a grant of £9 millions by the Scottish Executive to help finance its planned biofuels factory at Grangemouth.

Other matters of farm finance and tenure

DEFRA has announced details of its budget cuts which, in total, are expected to exceed £200 millions. The budget of the State Veterinary Budget is to be reduced by £3 millions (3 per cent), a £2.4 million cut for the Veterinary Laboratory Agency, (3 per cent), £283,000 for the Veterinary Medicines Directorate (7 per cent), £839,000 for the Pesticides Safety Directorate (7 per cent) and £403,000 from Food for Britain (8 per cent). DEFRA has previously announced cuts of £24 millions for the Environment Agency and £13 millions for Natural England.
Savills’ Rural Estate Benchmarking Survey has revealed that income from all agricultural sources fell by 2.4 per cent to £48 per acre in the year to March. Overall, net estate income rose by 5.2 per cent to £79 per acre as a result of increased commercial and residential rents.
DEFRA has launched a consultation document concerning the method of calculation of Net Farm Income and whether it is the best means of determining the health of the farming sector. DEFRA believes the current method is ineffective and excludes as much as £135 millions from income calculations, representing about 25 per cent of diversified output. If included, income of farmers would increase by 1.2 per cent and net profit by 6.2 per cent.
The latest survey published by Strutt and Parker indicates that the average value of arable land has increased by 5 per cent in the year to September, reaching £3,061 per acre. Grassland values increased by 8 per cent to over £1,700 per acre in the first half of this year, mainly a result of general poor quality pasture.
Agricultural Central Trading increased turnover in the year to June to £65 millions and profits to £933,000.

Product prices

A. Crops

October has seen the severity of Australia’s drought underlined by the implementation of a Government funded drought relief package for the worst hit farming areas; whilst the Ukraine has issued grain export licences to control its exports, in an attempt to combat potential domestic shortages caused by its poor 2006 harvest. These events have contributed to the further strengthening of grain prices in general. Estimates in previous months of the effect the difficult harvest has had on the quantity of milling grade wheat were relaxed this month, seeing the premium for milling wheat dropping back slightly to £10. Wheat sold for future movement (milling and feed) is generally carrying a premium of £1 per month. Barley prices have also strengthened over the course of the month, finishing at £85.50, £22 higher than this time last year. Oilseed rape prices have bounced back and pea and bean prices have strengthened marginally, both on the back of the EU’s poor harvest. Average prices in late October (£/tonne ex-farm): feed wheat 90, milling 100; feed barley 85; oilseed rape 169; fees peas and beans 84.
90% of the main-crop potato harvest is reportedly now complete, which has increased the tonnage being moved and, in turn, depressed the average price to £110/tonne. This is still over £20 above the market price for same time last year. Reports are starting to emerge that, in parts, neither the mild weather not the tuber quality is suited to storage, suggesting that higher levels of early sale may squeeze prices early on in the season. Overall trade is good as packers and processors call in contracts. King Edwards are achieving between £180 and £210/tonne, best samples achieving £250/tonne, whilst top grade Maris Piper samples are hanging back at £210/tonne.

B. Livestock

The average steer price continued to fall from the September closing levels in the first half of the month, dropping to 110/kg lw, but recovering over the latter half of the month, to close at 113p/kg lw. The fact that UK beef consumption is reportedly up 2% on last year is adding some confidence to the marketplace.
Lamb prices held steady throughout the months at 104/kg lw, slightly above price levels for October 2005.
The average pig price remained relatively static throughout the month at between 108.5p and 109p/kg dw, 7p higher the same time last year. This was despite the drop in average prices across mainland Europe, thought simply to be attributable to more animals hitting the market.
In the same month that the MDC reported the expectation that farm-gate prices should stabilise in 2007, two price increases were reported. Dairy Crest and Robert Wiseman announced 0.2ppl and 0.4ppl respectively, adding weight to the prediction. Meanwhile, Arla’s internal talks regarding the purchase by its Danish/Swedish parent are being interpreted as good news; its official announcement to the Stock Exchange resulted in a 12% increase to the Arla share price. Milk quota prices dropped back at the start of the month but gained some of this back in the latter half. Clean quota closed at 1.78ppl for 4% butterfat but this is based on a small number of transactions. Many vendors are still refusing market value offers in the hope that prices will rise.

Other crop news

Drought in the southern hemisphere has resulted in the Australian Wheat Board cutting its crop estimate to 12-13 million tonnes, about 50 per cent of a normal crop. The Argentinian wheat yield is thought to be down by 1.5 million tonnes to 13 million tonnes. The International Grains Council estimates world production to be 19 million tonnes less than in 2005.
The English apple season has started well with Tesco reporting sales 50 per cent higher than at the same time last year and prices up by 15 per cent.
At a meeting in the House of Commons, Prime Minister Tony Blair agreed to consider NFU proposals concerning the use of sugar beet as a feedstock for the biofuels sector.
An application by BASF to conduct trials of genetically modified potatoes seems likely to receive Government approval.
The Scottish Crop Research Institute has bred the first new potato species to be grown in the UK for 400 years. The potato has been grown by Greenvale and is being marketed by Tesco and Sainsbury stores.
A proposed oilseed rape crushing factory by DMF Biodiesel has been approved by planners. It is expected to crush up to 250,000 tonnes of rapeseed a year, almost double the entire Scottish crop.
Angus Soft Fruits has joined forces with Dutch business The Greenery to grow its AVA strawberries in Holland. Apart from meeting demand in Northern Europe, the facility will extend the growing season for marketing in the UK.
Boston-based Naturally Best (Packing) Limited has been acquired by Albert Bartlett & Sons of Airdrie, making the company the UK’s largest root-vegetable grower.
Jamaica Producers Group has acquired the organic food manufacturer, Simply Organic Limited, shortly after having sold its 65 per cent stake in JP Fruit Distributors (JPFD) Limited to Dole Food Limited for £22.3 millions.

Other livestock news

The European Commission has dropped proposals to cut animal disease compensation following condemnation from Governments and farming organisations across Europe.
UK dairy companies are to be subject to inspection by the European Commission Food and Veterinary Office with effect from November 21. The move follows claims that the Food Standards Agency failed to address alleged shortcomings at Bowland Dairy Products in Lancashire. The business concerned refutes the allegations, which concern the level of antibiotics in milk, and intend to challenge the ruling, banning sale of its curd cheese, before the European Court of First Instance. As a consequence, the Food Standards Agency has issued guidelines which mean that all milk which fails an initial antibiotic test must be incinerated.
European Commission Food Safety Commissioner, Markos Kyprianou, following a visit to Brazil to review residues in beef and poultry, has announced that no further measures will be taken against the Brazilian meat industry, much to the annoyance of farm lobby organisations.
The latest survey by the NFU and the RABDF suggests that dairy farmers are 0.78ppl worse off this year as a result of increases in energy costs, additional feed requirements and reduced milk yields as a consequence of drought conditions.
Arla Foods has changed its method of remunerating members of its Milk Partnership. A core milk price of 18.2 ppl will be fixed until March 2007 but will be supplemented by a variable amount related to returns from the commodity cream market.
The size of the UK dairy herd has fallen by 1 per cent in the year to June, mainly as a result of a 3 per cent fall in the English herd. In Wales the numbers increased by 5 per cent, Scotland and Northern Ireland both increased by 1 per cent.
Members of the Organic Milk Supplies Co-operative who supply organic milk to Tesco are to have the costs of inspections paid for by the multiple.
The National Pig Development Centre, funded by the British Pig Executive, has been launched at the University of Leeds. The centre will create the largest facility for pig research, development and knowledge transfer in the UK and will combine researches from the Universities of Leeds and Newcastle and the Veterinary Laboratories Agency.
The National Primestock Show and Sale, to be held at Stafford County Showground on November 18-19, is to include live pig classes for the first time in over 20 years.
The NFU, the British Poultry Council and the British Egg Industry Council are together calling for a three year waiver on IPPC fees.
Members of First Milk have confirmed a proposal to acquire the facilities of Dairy Crest at Aspatria and Haverfordwest in addition to the cheese-packing and whey processing plants in Wrexham.
DEFRA has arranged the supply of 10 million doses of avian flu vaccine from pharmaceutical company Intervet in the event of either the H5 or H7 strains of the disease occurring in the UK.
Milk output was short of the profile for September by 23 million litres leaving the year as a whole 333 million litres short.
In the first eight months of 2006, DEFRA bovine TB figures show a 14 per cent drop in new incidents and a 16 per cent fall in confirmed new cases. However, one person has died and five others were affected after contracting bovine TB over an 18 month period in the West Midlands.
Meanwhile Sir Don Curry, chairman of the Sustainable Food and Farming Delivery Group, has claimed that bovine TB is “the one single issue that is holding back development on many farms.”
An outbreak of Newcastle Disease in East Lothian has resulted in the culling of 14,000 birds, mainly grey partridge, and the creation of a protection zone.
Bluetongue disease control zones have been extended by European Commission vets further into Germany. To date, 650 cases have been confirmed.

Inputs/Supply businesses

The Pesticides Initiative Programme has been prolonged until July 2008 and will receive additional funding of £3.4 millions. Research undertaken by ADAS, Silsoe Research Institute and Ecopt, on behalf of DEFRA, has concluded that Ammonium Nitrate remains the best nitrogen fertiliser for use in the UK. The only realistic alternative, Urea, would lead to an increase in emissions of ammonia into the atmosphere.
A proposed joint venture between Kemira GrowHow and Terra Industries is to be reviewed by the Office of Fair Trading.

Marketing

Assured Food Standards, which runs the Red Tractor campaign, has been awarded a “Golden Gramia” for its Red Tractor Day in April by the Grocery Advertising and Marketing Industry.
A report from the IGD, “International Demand Planning and Forecasting” claims that creating demand for products yet failing to properly plan to meet that demand is costing the food and grocery industry millions of pounds, the effect being that consumers will desert products which are temporarily unavailable.

Miscellaneous

The Agricultural Wages Board has reversed its recent decision on holiday pay. The Transport and General Workers Union is to seek legal advice concerning the legitimacy of the ruling.
The Nutrition Strategy Group has been set up by The Food Standards Agency and the Department of Health, bringing together representatives of consumer and health groups and also industry.
The Royal Agricultural Society of England is to take full control of the 2007 Royal Show having recently co-managed the event with Haymarket Events.
At the 2006 Horticulture Week Awards, Writtle College was awarded the “Most Outstanding Commitment to Education and Training.”
John Bridge has been appointed chair designate of the new integrated national Levy Board UK.
Milk Marque, the former dairy co-operative, has bought Community Foods, one of the market leaders in the UK organic and health-food sector.
Countrywide Farmers, the farmer-controlled business, has reported pre-tax profits of £200,000 in the year to May compared with a £3m loss in 2005.