Farming News Review - October 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

Significant cuts in EU farm subsidies were offered by EU Trade Commissioner Peter Mandelson at a meeting of WTO members in Brazil. However, an offer of a 51 per cent reduction in EU farm support, which would reduce farm incomes by an equivalent of 10 per cent a year, was dismissed as inadequate by the G20 group of developing countries.

CAP (etc.) support details/payments

Mariann Fischer Boel, EU agriculture commissioner, has given member states permission to pay up to 50% of the 2006 Single Farm Payment from 16 October, 6 weeks earlier than the theoretical 1 December start date.
Modulation refunds have started to be issued. Slightly more than £6 millions should be paid out.
Concern is being expressed that, without a higher level of modulation than the EU average, there will be insufficient funding for the UK Rural Development Plan as a result of the UK only being allocated 3 per cent of the EU Rural Development budget.
Meanwhile the EU Court of Auditors has criticised EU spending claiming that two great a share is paid to farmers.
DEFRA has announced that additional income payments from the 2007 Single Payment Scheme will be paid exclusively to sugar beet growers.
The Parliamentary Ombudsman is due to meet senior officials from the Rural Payment Agency in October to review the agency’s handling of the Single Payment Scheme. So far 22 farmers have lodged formal complaints with the independent watchdog.
The Rural Payments Agency has admitted that at least 26,700 of the Single Farm Payment entitlement allocations need to be double-checked because of possible errors.
The Government is facing the prospect of “disallowance” which could be the equivalent of fines ranging from 2 per cent up to 25 per cent of its Single Payment Scheme budget. “Disallowance” can be levied if EU auditors propose “financial corrections” if “control weaknesses which pose a risk to the Community budget” are discovered. A spokesman for the EU Agriculture Department confirmed that DEFRA was vulnerable to disallowance procedures and DEFRA personnel are fearing the worse.

Grants/regulations/legislation/environment

The Rural Payments Agency has amended its Cross Compliance Handbook so that landowners are no longer required to keep herd registers for graziers’ cattle where Cattle Tracing System links are in place.
The Environment Food and Rural Affairs Committee, made up of MPs, has blamed Government policies on bioenergy for losing farmers the potentially lucrative biofuels market.
Scientists from the Natural Environment Research Council believe that nitrates and phosphates from agricultural chemicals will continue to pollute groundwater and rivers for at least the next 70 years even if tight restrictions are put in place now. This is a consequence of chemicals being absorbed by chalk then being released as water permeates through.
Meanwhile scientists from Germany’s GSF Research Centre for Environment and Health believe that high temperatures and continuing drought are causing long-term damage to soils. The degradation capacity of soils can fall dramatically after drought, one of the effects being that herbicides fail to be degraded and pass into the water system.
The NFU is highlighting the need for all poultry and pig producers, which exceed a capacity threshold, to apply for Integrated Pollution Prevention and Control permits before the end of January 2007. Heavy fines and imprisonment could result for producers which operate without a permit.
An EU proposal will limit electric fencing energiser output to five joules.
The second phase of the EU’s Emissions Trading Scheme is to be expanded in the UK to cover activities at 160 installations responsible for 9.5 million tonnes of carbon dioxide.

Other matters of farm finance and tenure

The Agricultural Wages Board is to hold an extraordinary meeting to negotiate changes to the calculation of holiday pay. The NFU has threatened legal action unless changes are made to the new rules.
As a result of agreement between the NFU, CLA and Openreach, farmers will be able to negotiate extra payments for housing high quality ‘core’ fibre optic cables on their land.
Dairy farms which use the Promar costing scheme achieved an average profit of only just over £5,000, not including the Single Farm Payment, in the year to March 2006. The top 25 per cent made an average profit of £50,000 while the bottom 25 per cent incurred a loss of over £35,000.
A survey in East Anglia has revealed that profits achieved by farmers in the region in 2005 were less than two-thirds of those 10 years earlier. Including the single farm payment average profits fell to £139 per hectare, without the subsidy an average loss of £40 per hectare was incurred.

Product prices

A. Crops

With combines moth-balled for another year, the final 2006 harvest figures for UK and Europe have started to emerge. Reports indicate that average UK wheat yields have risen slightly above those of 2005 to between 8 and 8.2 t/ha but that the reduced acreage sown for the UK 2005 harvest has resulted in a total tonnage below that of last year. This, in conjunction with the variable quality and reduced yields of the European harvest and reports that Australia’s production will be way below expectation due to the driest August on record, has seen the market strengthen further over the course of the month. The premium for milling wheat has increased as the effects of the difficult harvest have been reflected in the lower quantity of the milling grade wheat available. The figures for the UK barley harvest have seen barley prices rise above £77/tonne mainly due to the reduced area sown. Oilseed rape prices have relaxed back to £160/tonne, while pea and bean prices have remained steady. Wheat sold for November movement (milling and feed) is still carrying a premium of £2, whilst selling forward to February adds a further £3 premium. Average prices in late September (£/tonne ex-farm): feed wheat 82, milling 92; feed barley 78; oilseed rape 160; feed peas and beans 79.
As main-crop harvest is now well underway, the average potato price has responded by dropping back to £120/tonne, which is still £20 above the market for same time last year. Reports so far are that yields are good where irrigation was available, but size and tuber numbers are highly variable. Increased availability of King Edwards has seen prices for the best samples dropping back to £200/tonne, whilst the prices for top grade Maris Piper are on a par at £200/tonne. Overall trade is moderate as packers start to call on contracts.

B. Livestock

The price for steers continued to rise from August’s closing levels in the first half of the month, peaking at 118p/kg lw, whilst the latter half of the month saw the price drop back again, to close at 113p/kg lw. The fluctuations are generally attributable to the numbers of animals coming to market.
Seasonality was responsible for the gentle decline in the lamb prices which ended the month at 104p/kg lw, slightly above price levels for September 2005. Worries that Bluetongue would make it to the UK have yet to come true, but outbreaks in continental Europe continue to be reported.
The average pig price remained relatively steady throughout the month, dropping marginally at the beginning of the month, but then gaining this back over the latter half, finishing at just above 109/kg dw.
With the dairy event taking place in the month, dairy farmers and the NFU have been vocal about the proposed “invoicing” strategy but this appears to have been written off as a publicity stunt by processors. No price cuts were reported in September, although Arla Foods are currently undertaking internal discussions, a matter that is cultivating speculation that a further milk price cut may follow. Milk quota prices have remained steady at 1.83ppl for 4% butterfat, as very few sales have occurred, the result of a market held in deadlock by vendors who will not sell at market value and buyers who will not offer above this.

Other crop news

While the average yield of the 2006 wheat crop is estimated to be 8.3 tonnes per hectare, up from 7.9 tonnes in 2005, the overall tonnage is estimated to be only up by 200,000 tonnes as a result of lower plantings. Barley output is expected to be significantly lower with lower plantings but static yields.
Initial results suggest the 2006 wheat harvest is of high quality with an increase in hagberg falling numbers to 355 compared to 255 in 2005. Barley results are also thought to be good but the overall results are expected to fall back when later harvested crops are taken into account.
World wheat stocks are believed to be at their lowest levels for 40 years. World production in 2006 is forecast to be down by 15 million tonnes to 593 million tonnes, much of the reduction being caused by the lower European harvest.
Despite fears of low yields and poor quality as a consequence of the hot summer, the sugar beet harvest appears to be coming in well, helped by the rains of August and September, with sugar levels about average.
Prices have rocketed for specialist lettuce as a result of disastrous growing conditions in the UK and France. Many growers have had to plough in crops as a result of hot weather in June and July followed by cool, wet conditions in August.
The Government’s Renewable Transport Fuel Obligation requires all fuel to contain at least 5 per cent renewable sources by 2010. As a consequence it has been forecast that straw availability could fall by up to 24 per cent within the next 4 years.
DEFRA has commissioned NIAB to undertake research into variety evaluation with biomass crops. The research will also examine the feasibility of a central varietal assessment system for miscanthus and short rotation coppice.
The UK’s largest supplier of classic round tomatoes, Cornerways Nursery, is to build a new 14 acre glasshouse complex in East Anglia.
The UK’s largest fresh produce company, Fresca Group, increased turnover by 20 per cent to £360 millions in the year to April 2006. However, profits fell from £9 millions to £6 millions partly as a result of problems in the banana business.
Heveco Mushrooms, the Dutch-owned multinational, has been put into administration. The company, which was the exclusive mushroom supplier to Asda, recently suffered a fire at its Thakeham plant in West Sussex.

Other livestock news

Proposals being drawn up by the EC, which could be introduced from as early as January, would result in compensation paid by member states for slaughtered animals as a consequence of disease outbreaks being limited to 75 per cent of market value. The EC has stated that member states would also be allowed to pay up to 75 per cent of consequential losses which could make up the shortfall but DEFRA has indicated that it would not take up this option.
For the first time in 6 years, the DEFRA census has reported an increase in pig numbers with the breeding herd up by 1.6 per cent in the year to June 2001. However, cattle and calf numbers fell by 3.7 per cent, sheep by 2.8 per cent.
Not surprisingly, forage stocks are lower than usual, estimates ranging from 15 to 25 per cent down on 2005. The results of a poll carried out by Farmers Weekly indicated that 74 per cent of those asked have already started feeding winter rations while 56 per cent believed they have fewer stocks than will be required.
While the outbreak of bluetongue disease in Belgium and France appears to have been contained, foot-and-mouth has materialised in Turkey and avian flu is on the increase. The UK’s first case of equine infectious anaemia, swamp fever, has occurred in Northern Ireland.
A survey undertaken by Barclays Bank has indicated that two-thirds of dairy farmers expect to increase production, mainly the group already producing over 1 million litres.
Ovasort has agreed a deal with the owners of Danish Bacon for genetic technology which allows pig breeders to pre-select the sex of new-born animals.
In the year to March 2006, Dairy Farmers of Britain increased turnover by 2 per cent to £608 millions and operating profit up 5 per cent to £25 millions.
The British Wool Marketing Board has posted a loss of over £1.2 millions for the year to April 2006.
First Milk is expected to acquire the majority of Dairy Crest’s private label cheese operations for £61 millions.
A new Dairy Technology Centre has opened at Barony College, Dumfries.

Inputs/Supply businesses

A leading expert in sustainable energy has advised that the amount of nitrogen fertilizer currently used to grow oilseed rape would have to be dramatically reduced if greenhouse gas emissions were to be reduced to levels in accordance with the certification schemes of the Renewable Transport Fuels Obligation.

Marketing

A survey of retailers undertaken by the National Consumer Council, Greening the Supermarkets, has criticised supermarkets for failing to adequately promote in-season, UK-sourced vegetables.
The volume of cheese purchased from retailers has increased by 7,000 tonnes in the past year. Pre-packed cheese has increased by 10,000 tonnes but loose cheese has fallen by 3,000 tonnes. Cheddar continues to dominate, holding 52 per cent of the market.
Asda and Morrisons are joining Sainsbury’s and Waitrose in marketing nationally Kentish Cobnuts. The crop has increased this year as a result of recent new plantings starting full cropping.
A new global trade association, The International Federation for Produce Standards, has been formed in the UK with representatives from the UK, US, Chile, Canada, Australia, New Zealand and Norway.
The Office of Fair Trading has provisionally found that six Scottish dairies have breached competition law over a period from 2000 to 2003.
Speyfruit of Elgin is to create 20 new jobs as part of an expansion of its vegetable processing business.
Meat wholesaler, John Scott Meat (Paisley) has acquired William Bosomworth from United Auctions.

Miscellaneous

Provisional results for Genus, the animal genetics firm, show turnover more than double 2004/05 at £244 millions and operating profits up to £22 millions from £10 millions the year before.
Dr Chris Atkinson has been appointed head of science at the East Malling Research Station.
Sophie Grigson, food writer and TV cook, has been appointed as the first president of the Herb Society.
Inga Crimsey is the new director general of the Royal Horticultural Society.