Farming News Review - September 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

DEFRA has been ordered by the Treasury to cut its budget by over £200 millions largely as a result of the cost of managing the Single Payment debacle. Doubts are rising regarding the Government match-funding Environmental Stewardship schemes without which domestic modulation rates could increase. The Environment Agency has been forced to bear the biggest share of the cuts.
A number of countries, led by Australia, have tried to kick start the WTO talks but the European Commission believes that no progress can be made and that no deal can occur before 2009.
Mariann Fischer Boel, EU Farm Commissioner, has told a farming conference in Finland that the 2008 review of CAP will only be for the purpose of ensuring the 2003 reforms were working but that radical reform will take place in 2013.

CAP (etc.) support details/payments

Current estimates are that over 4,500 claimants have still not received any money from the Rural Payments Agency for the Single Farm Payment, representing 4 per cent of all claimants. Just over 97 per cent of the total fund has now been paid.
The Rural Payments Agency has admitted that it has overpaid 1,300 farmers by over £20 millions. Instead of sending farmers the top-up 20 per cent, the RPA sent out the full amount meaning that 180 per cent of the entitlement had been paid. Plans to recover the overpayments have been put into effect.

Grants/regulations/legislation/environment

An independent review of livestock movement controls, commissioned by DEFRA, has called for the creation of Livestock Movement Units enabling farmers to move animals between holdings of their own land without have to notify Trading Standards. The rules for cattle and sheep would be unified.
In areas of England and Wales at high risk of pollution, the Veterinary Medicines Directorate and the Environment Agency are considering banning sheep dip.
Carwyn Jones, the Welsh Assembly rural affairs minister, has announced new measures to tackle bovine tuberculosis in Wales, increasing the annoyance of farmers’ leaders in England where plans for badger culling have been put on hold. Farming and veterinary organisations have presented a joint statement to DEFRA suggesting how the government should tackle the problem.
The dry weather has forced the Environment Agency to introduce irrigation restrictions in parts of East Anglia, with some areas experiencing a complete ban.
The Regulation Action Group, comprising industry specialists brought together by the NFU, has been formed in Scotland to address the issue of red tape in the farming industry.
While DEFRA has announced that it is on target to have 60 per cent of farmland covered by Entry-Level Stewardship by the end of 2007, some farmers in Countryside Stewardship and Environmental Sensitive Area schemes are not transferring to the new arrangements when existing schemes expire. Upland farmers are said to be particularly affected, finding the new schemes too inflexible.
A report by Scottish Natural Heritage has stated that farmland is essential for the survival of a third of Scotland’s vulnerable wildlife and more than half of its bird species.
A report from the University of East Anglia’s Climatic Research Unit, following a study of 21 rural estates including 4 in the UK, advises that landowners are unprepared for the negative impacts of climate change.
The Suffolk Hop Company, a new co-operative hop venture, has been established with the help of RES funding of £499,000.

Other matters of farm finance and tenure

The Bank of England increased base rate by 0.25 per cent to 4.75 per cent. Cost to farmers is estimated to be £20 millions in a year.
In the second quarter of the year agricultural lending fell by 1.5 per cent to £9.4 billions, mainly as a result of receipt of the single payment. However, this was still 7 per cent higher than the same period in 2005. Of the increase of £615 millions, DEFRA claim that £77 millions represents outstanding support payments.

Product prices

A. Crops

With this month’s weather patterns keeping many farmers from packing their combines away for the year, wheat prices have risen as the market anticipates lower yields and quality from the 2006 crop. With up to 15% of the UK wheat harvest still to be harvested, expect more volatility in the coming month. Milling wheat prices continued to increase as traders interpreted the difficult harvest as a sign that less wheat would achieve milling grade. Initial estimates of EU yields for other crops continue to be revised downwards which, in conjunction with quality concerns in Poland and Germany, has seen barley prices pass £72/tonne and oilseed rape rise to £165/tonne. Pea and bean prices have strengthened further. Wheat sold for November movement (milling and feed) currently carries a £3 premium, whilst selling forward to February doubles that premium. Average prices in late August (£/tonne ex-farm): feed wheat 79, milling 89; feed barley 72; oilseed rape 165; feeds peas and beans 79.
The average potato price, after initially continuing the rise seen at the end of July, levelled and held steady at £153/tonne. High demand for King Edwards has seen prices achieved for the best samples topping £260/tonne, whilst the prices for top grade Maris Piper remain at £220/tonne. Overall trade is low as packers hold out for more 2006 crop to reach the market.

B. Livestock

The price reduction seen at the end of July became sharper in the first half of August, seeing the average price of steers drop back to 106/Kg lw, a move attributable to a combination of the increased number of animals coming to market and the return of ‘British’ weather. The latter half of the month saw the price bounce back, to end the month at 112p/Kg lw.
The first days of the month saw average lamb prices continued to fall at the concerning rate set in July, finally levelling off at 107p/Kg lw. By the end of August the price had picked up slightly and levelled out at 110p/Kg lw, a similar level to prices for August 2005.
The average pig price continued to strengthen, adding a further 1.5p/Kg, finishing at just below 109p/Kg dw. Traders are claiming that higher prices are due to the European summer holiday season, particularly in Germany and Spain where pork is favoured.
Price cuts by dairy processors have pushed the dairy industry further still in the same month that the Milk Development Council announced that their market indicators showed increases; the ‘Actual Milk Price Equivalent’ rose by 0.7p to 17.8ppl and the ‘Cheese Value Equivalent’ also rose by 19ppl. Nine processors (Dairy Crest, Caernarfon, Belton Cheese, Parkham Farms, Dairy Farmers of Britain, Paynes Dairies, Milk Link, Caledonian Cheese and Westbury Dairies) announced cuts of between 0.8ppl and 0.22ppl. Milk quota prices have steadied at 1.83ppl for 4% butterfat at a time of the year when quota has historically gained in value. Lower butterfat holdings achieved as low as 1.70ppl.

Other crop news

Results of this year’s harvest are extremely variable. Yields are down on light land, better on heavy land and good in Scotland. However, the wet August has caused harvesting problems, particularly in eastern England and, by the end of the month, nearly half of Yorkshire had yet to be combined. A lot of crops have gone down, the moisture content has risen rapidly and Hagbergs have been plummeting.
The hot weather has affected yields throughout Europe, not just in the UK. The European Commission is expecting wheat yields to be down by 4 per cent, winter barley 2 per cent, maize 5 per cent and potatoes 4 per cent.
Yields of vining peas in England are expected to be down on average by as much as 40 per cent this year, in some areas, overall the crops is expected to be down by 20 per cent. Yields in Scotland have held up well, however, the PGRO considers that any potential increase in acreage in Scotland will be limited by the shortage of processing facilities.
Vegetable yields have been seriously affected by the hot weather. Yields of early cauliflower crops are down by as much as 40 per cent and the forecast for sprouts is causing concern. Supplies of potatoes are expected to be heavily hit, Maris Piper is the worst affected variety, un-irrigated crops in East Anglia are thought to be “disastrous”. Yields in Lincolnshire are down by as much as 20 per cent.
The NFU has agreed details of the compensation package with British Sugar as a result of the closure of the York and Allscott factories. The NFU has described the package as “probably the best deal in Europe” but many growers, particularly those in the West Midlands and Yorkshire, believe the offer to be “derisory”.
A new three-year inter-professional agreement has been drawn up between the NFU and British Sugar.
Sales of raspberries are expected to be up by 24 per cent over 2005, prices are up by 6.7 per cent.
Early estimates suggest that this year’s Gala apple crop could be up by 7 per cent on last year’s record. Braeburn is expected to be up 22 per cent, Conference pears up 21 per cent, Comice 60 per cent but Cox is only expected to produce an average crop.
Harvesting of English hops has started, overall yields are expected to be down by up to 15 per cent but there has been relatively little adverse effect on the crop from the hot weather.
BASF has applied to the Government for permission to conduct field trials of genetically modified potatoes in the UK next year.

Other livestock news

A strong outlook for beef in the period up to 2013 has been forecast by the European Commission. Beef production is expected to fall by 450,000 tonnes, about 5 per cent, as a result of CAP reform while consumption should remain at present levels. The UK is expected to suffer one of the biggest falls as a result of subsidies being decoupled from production. The EU is expected to become increasingly dependent on South American imports. The National Beef Association has described the report as “garbage”.
Milk output fell again in July resulting in the UK being 265 millions litres below profile in 2006/07.
A report produced by the Milk Development Council suggests that reducing UK milk production will have little effect on producer prices and could simply open the market to imports. The report advises that dairy farm profitability is dependent upon efficiency and innovation in the whole supply chain.
Meanwhile the Dairy Group believes that commodity markets will improve over the next six months as a result of hot weather in Europe, the US and New Zealand and that reversal of recent price cuts is likely.
While First Milk cut its producer price by 0.75ppl with effect from 1 August, Milk Link has announced it is increasing its organic milk price by 1.75ppl making the premium for organic 10ppl.
Bluetongue has been discovered for the first time in northern Europe in the Netherlands. The disease had previously only been associated with tropical African climates but has recently extended to southern Europe. DEFRA has begun blood testing all cattle and sheep imported from northern Europe over the past two months.
The UK pig herd has fallen by 50% since 1998 but the decline appears to have been halted with the June 2006 census showing a 1 per cent increase in in-pig sow numbers and a 3.3 per cent increase in in-pig gilt numbers.
DEFRA has announced a review of the British Wool Marketing Board in view of the introduction of decoupled subsidies and a global decline in wool prices.
Stockmen UK has been launched as a new association to represent professional herdsmen in the UK.

Inputs/Supply businesses

Expected month-on-month price rises for nitrogen have not fully materialised as a consequence of the steadying of gas prices but significant price rises are expected in October.

Marketing

According to research by Mintel, the sales value of the UK poultry market, comprising chicken, turkey, duck and goose, has increased by 16 per cent since 2001 despite only a 2 per cent increase in volume.
The same research firm has announced that sales of free range, barn and organic eggs increased by 24 per cent in the period 2002-2005 and now exceed sales of eggs from caged hens.
Milk Link, the dairy co-operative, increased profits by 20 per cent to £7.6 millions in 2005/06 despite a fall in turnover of 12% to £575 millions. However, the “profit” includes a £13.6 millions levy on members.

Miscellaneous

A report published by the University of Reading has revealed that the average farm devoted £2,410 worth of labour in 2004/05 on uncompensated maintenance of the countryside.
A study of the UK fresh produce industry undertaken by Plimsoll Publishing has found that 18 per cent of companies are at risk of financial collapse. Half of the 1,500 businesses surveyed only achieved break even but the other half are said to be thriving.
A report by the British Market Research Bureau has revealed that 61 per cent of shoppers are not concerned which country their produce comes from. However, 52 per cent think the UK should import less food to limit the environmental impact.
“Better Woodlands for Wales”, a new Forestry Commission Wales grant scheme, has been unveiled by the Welsh Assembly. It replaces the Commission’s Woodland Grant Scheme.
According to the Soil Association, UK sales of organic food and drink rose by 30 per cent last year compared with only 3 per cent for the whole UK food and drink sector.
In the past two years more than 50,000 migrant workers have arrived from Eastern Europe to work in UK agriculture according to Home Office figures.
The Cauldron Foods plant in Portishead, Somerset, which specialises in the production of vegetarian meals, is to close next year with the loss of 200 jobs. Production is to be transferred to Methwold, Norfolk.
Thomas Wheatley-Hubbard has been elected as chairman of Royal Agricultural Society of England.
Travers Legge CBE, former Farmers Weekly editor, has died, aged 87.