Farming News Review - February 2006

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Policy issues

1. There have been widespread-and continuing-reactions to the EU budget deal agreed in December. Of particular concern has been the inclusion of the UK’s proposal allowing member states to apply voluntary modulation up to 20%, with no match-funding by governments. (This would be additional to the 5% compulsory EU modulation; the UK is currently the only country with national modulation). Furthermore, the agreed budget for 25 states will have to accommodate Bulgaria and Romania when they join in 2007 with no additional funding, reducing Single Payments by a further 8% through the Financial Discipline mechanism. Total cuts in UK payments could therefore be as high as 38% by 2012: over 50% in real terms if inflation at say 2.5% a year is allowed for.
2. EU agriculture commissioner Mariann Fischer Boel has criticised the UK government’s insistence on including the up to 20% voluntary modulation as part of the budget deal, thereby “raiding” single payments to make up for the one-third shortfall created in the agreed budget in the amount earmarked for rural development. She said she saw it as a first step towards renationalising the CAP, thus creating unequal conditions for farmers in different member states.
3. However, Marianne Bohl has also resurrected the idea of capping individual payments – to possibly a maximum 300,000 euros (just over £200,000 at prevailing euro: £ exchange rates) in any future review. This concept has been rejected several times in the past, opposed especially by the UK and Germany (there being many very large farms in the previous East Germany).
4. W.T.O. (Doha Round) trade talks have resumed, in Switzerland. EU trade commissioner Peter Mandelson has said at the outset that the EU will offer no further concessions on agriculture unless other countries improve their own offers. He says calls to dismantle the Common Agriculture Policy were misplaced; it would leave much of European agriculture unsustainable; any further reforms must “go at a pace which is manageable”.
5. Lord Haskins has called for all export subsidies to be phased out, import tariffs to be significantly reduced and the CAP to be renationalised. He argues that the single payment should become a “social payment” reserved for smaller, poorer, older farmers and environmental and rural development issues should be dealt with at an individual national level.
6. Austria has taken over the EU presidency. It says it will make biomass a priority.
7. Export subsidies on live cattle shipped from the EU to slaughterhouses in the Middle East have been stopped. The EU Commission has put forward proposals to end all export refunds for live animals.
8. A formal EU vote on ending the ban on exports of British beef should take place on 7th March. Even if agreed (and France, Germany and Italy are still expressing reservations) approval by the European Parliament is required and could take up to another month.

CAP (etc.) support details/payments

1. Anger is mounting over the delay in the delivery of the single payments in England. The NFU Council agreed a unanimous vote of no confidence in the Rural Payment Agency’s ability to deliver. The RPA’s chief executive and minister Lord Bach were cross-examined by the House of Commons’ Environment, Food and Rural Affairs select committee, which subsequently published a highly critical interim report, accusing Lord Bach of complacency, which he said he hotly resented. He said payments would definitely begin by the end of February and 96% of the total sum would be paid by the end of March – as he had promised a year ago; if full payments were not possible at least a major part would be paid. Meanwhile, agricultural borrowing in England is rising significantly and the impact on associated businesses is mounting.
2. The first auction of single farm payment entitlements in Scotland has taken place. Most standard entitlements went for close to 2.5 times their gross value.
3. Miscalculations have been detected in a number of the awards notified by the Rural Payments Agency under the single payment national reserve. Farmers are being advised to check their notifications carefully and act immediately if errors are detected or suspected.
   

Grants/regulations/legislation/environment

1. Organic Aid Scheme payments have been increased in Scotland. Ongoing maintenance payments will increase substantially (e.g. doubling for arable land), with conversion payments rising by relatively small amounts. Rural Stewardship (RSS) payments have also been revised: some up, some down.
2. In Wales, the Tir Mynydd hill farming scheme will cease in two years’ time; the current Rural Development Plan finishes at the end of this year; consultation has begun on the strategic direction of rural development policy.
3. Defra is to employ dedicated advisers in 40 catchment areas in England to cut water pollution, at a cost of £25 million over two years; called the England Catchment Sensitive Farming Delivery Initiative.
4. New food hygiene legislation came into force on 1st January. All farms that grow, use or sell crops direct for feed are affected.
5. Helen Phillips has been appointed the chief executive of the new body Natural England. She is currently director for Wales at the Environment Agency.
   

Other matters of farm finance and tenure

1. Continuing complications and delays regarding the national reserve and transfer of entitlements are holding back planned sales of farmland.
2. An adjudication scheme has been developed backing up the Code of Good Practice for agri-environment schemes and diversification projects drawn up by the Tenancy Reform Industry Group (TRIG). Tenants who want to diversify but cannot get their landlord’s permission will be able to have their case heard by a new disputes panel. The scheme will be operated by the Royal Institution of Chartered Surveyors. The decisions will not however be legally binding. Defra is to fund the scheme for four years.
3. The independent food inspection and verification company EFSIS has been bought by SAI Global, an international assurance business based in Sydney, for £5.6 million.

Product prices

A. Crops

1. Average combinable crop prices increased by only a pound or two per tonne between mid-December and the end of January. The milling wheat premium fell even further – to about £6/tonne.
2. Average prices in late January (£/tonne, ex-farm): feed wheat 66, milling 72; feed barley 66; oilseed rape 136; feed peas 76.50, feed beans 76. Potatoes: £102, compared with £92.50 in mid-December.
3. Generally speaking, UK ex-farm prices for 2005 top fruit have been very poor, owing to large surpluses.

B. Livestock

1. Average finished steer prices slumped from 106/kg lw in mid-December to 99p/kg lw in late January.
2. Finished lamb prices fell from 104p/kg lw to 100p/kg lw over the same period.
3. Pig prices drifted down a little further, to average just over 101p/kg dw.
4. There were no changes of any note in ex-farm milk prices during January, even though supermarkets raised their retail prices by around 2.2ppl (1.25p/pint).
   

Other crop news

1. With no extreme weather conditions in the UK during January, growing crops are looking generally well. However, fears are increasing over the shortage of rainfall in south-east England.
2. The Home-Grown Cereals Authority has published a new Barley Growth Guide; available on www.hgca.com.
3. EU sugar beet contract tonnages for 2006 are to be cut – probably by 10 to 15% - because of a large surplus and limited scope for exports. The cuts will be for one year only.
4. A planning inspector has ruled that the 99 acres of polytunnels and 45 mobile homes to house 250 workers at a strawberry farm in Surrey needed planning permission. The farm’s owners are likely to appeal against the decision. The inspector however added that this was not a test case, because of the special circumstances of the farm: it is in green belt and adjoins an acre of outstanding natural beauty.
5. British Sugar has announced that work has begun to construct a bioethanol production plant at Wissington, Norfolk. It should come on stream early next year. A three-year supply contracts deal has been agreed with the NFU, offering growers a minimum price for surplus beet, increasing as the value of ethanol rises. The plant will take sugar from the 2006-07 harvest that would formerly have been used for non-quota or C sugar for export.
6. Green Spirits Fuel, a subsidiary of Wessex Grain, has received planning approval to construct a bioethanol from wheat plant at Henstridge, near the Somerset-Dorset border. Building should start later this year. Production should begin in 2007 and be at full capacity (100,000 tonnes of fuel a year from 340,000 tonnes of wheat) by harvest 2008.
7. Farm commissioner Mariann Fischer Boel has confirmed that a new EU initiative will shortly be launched to encourage biofuel production. The Commission adopted a Biomass Action Plan in December, aimed at doubling the use of bio-energy sources by 2010.
8. At the Oxford Farming Conference Lord Oxburgh said processing arable crops into biofuels is relatively inefficient compared with using straw and green waste. Others were quick to disagree.
9. Crisp manufacturer Golden Wonder has been placed into administration. It lost nearly £11 million in 2004 and made large losses again in 2005. The blame is placed on loss of market share because of increasingly strong competition, particularly from Walkers.
10. The decision by planners that the polytunnels and mobile homes at Tuesley Farm, near Godalming in Surrey, needed planning permission (see January MFU, VI.4) has caused consternation throughout the UK soft fruit industry. An appeal to the High Court against this decision would be very expensive. The NFU and others are considering what action might be taken.
11. The area of hops in the UK fell by a further 21% (by 287 ha (709 acres) to 1,071 ha (2,646 acres)) between 2004 and 2005. The area has fallen by 41% since 2002. The total yield in 2005 was a record low. The 2005 price barely reached £16/kg.
12. East Malling Research, in Kent, made a small surplus in 2005, thus reversing the losses made when it was part of Horticulture Research International.
13. Sad news of recent deaths relating to the fruit industry in south-east England: Alan Firmin, top fruit grower near Maidstone in Kent, with a large national transport and storage business, aged 87; Piers Tippett, of the specialist blackcurrant family in Essex, and Andrew Bardsley, top fruit grower and packer, both aged only 46; and Jack Woodward, adviser, ex-ADAS, aged 81.
    

Other livestock news

1. UK milk production continued below profile in December. Quota (4% BF) is down to 0.19ppl to lease, 3.9ppl to buy.
2. The NFU says it and its members will not co-operate with Defra on pre-movement bovine TB testing until the government announces a cull of badgers in affected areas. Farmers For Action is following suit.
3. A smallholder in Devon has made national media news by refusing to allow her pedigree Dexter bull calf to be slaughtered after it was found to be a TB reactor. Two other farmers, in Worcestershire, have also refused to comply.
4. A campaign has been launched to control and eradicate bovine viral diarrhoea (BVD) in cattle.
5. A Defra-commissioned report by independent consultants London Economics recommended that the national subsidy for school milk should be discontinued, because the funds were an inefficient use of public money. A dairy industry summit was held to discuss the issue. Subsequently minister Lord Bach confirmed that the subsidy will in fact continue. The cost to the UK Treasury is £1.5 million, the remainder of the £7.2 million total cost being paid by the EC.
6. The Organic Milk Supplies Cooperative (OMSCo) has produced a first report on the organic milk market, to provide an objective assessment of current and future supply and demand. A good rate of growth in demand is forecast but it warns against too rapid an increase in supply.
7. The robotic milking herd trial at the Gelli Aur College Dairy Development Centre in Carmarthenshire is to be discontinued, because it is losing money. The unit was set up three years ago, at a cost of £120,000.
8. Several people have died in Turkey from avian flu. The EC has offered grants of 80 million euros to help the world fight against the disease (most will go to Asian and African countries) plus another 20 million for further research. Developers of the first vaccine for UK poultry are urging Defra to include vaccination in its contingency plans.
9. In March the English Beef and Lamb Executive (EBLEX) will be launching a £5.5 million three-year beef promotional campaign to coincide with the end of the Over Thirty Months Scheme.
10. The British Pig Executive (BPEX) is to spend £10.5 million on a strategy to improve the English and Welsh pig industries. It has produced “The Road to Recovery 2006-2009” outlining the proposed strategy. BPEX is also to spend £200,000 on a campaign to promote the healthiness of pork.
11. The EC has confirmed that the final four growth promoters available to farmers in Europe have been banned since 1st January.
12. 100 wild boar escaped from a farm in Devon; 60 of them proved very difficult to capture. Animal extremists were suspected of releasing the boars.
13. Peter Morris has become chief executive of the National Sheep Association, John Thorley having retired from that position: he will continue as a part-time adviser.
    

Inputs/Supply businesses

1. The European Court of Justice has rejected compulsory exact declaration of feed ingredients in rations but still requires ingredients to be listed, with approximate percentages.
2. The Scotmin Nutrition Group, a family-owned manufacturer of feed supplements and specialist products, based in Ayr, has been acquired by the Buccleuch Group, which is forming a new agricultural supply division.
3. Cebeco Seeds Innovations, the European plant breeding business with a UK operation based near Downham Market in Norfolk, has changed its name to Innoseeds.
4. Total UK tractor registrations over 40hp fell by 11.1% in 2005 compared with 2004, to 13,301 units.

Marketing

1. Dairy Crest and Lactalis both strongly denied the possibility of a takeover; (ref. January MFU, IX.1). Lactalis has recently bought a controlling share in the big Italian cheese processor Galbani.
2. Robert Wiseman Dairies is said to be very close to signing a deal that will enable a £30 million “super-dairy” to be built close to Bridgwater, Somerset, near the M5. Outline planning permission has been given. The developer of the land involved is dairy farmer Derek Mead.
3. Dairy company Arla Foods is to close its Sheffield Park, East Sussex dairy; 250 jobs will be lost. Farmers will be unaffected: their milk will go to other dairies.
4. Lloyd Maunder, the meat processing business in Willand, Devon, is to stop processing lamb as from 24th February. It lost its Sainsbury’s contract in March last year. Many farmers could struggle to find alternative outlets but St. Merryn Foods has urged producers to contact its Premier Lamb business in the South West or its Merthyr Tydfil plant in South Wales.
5. Lewes Farmers, the 120-member input purchasing and crop marketing group in East Sussex, has formed a partnership agreement with the Suffolk co-operative, Framlingham Farmers.
6. Centaur Grain has extended its marketing agreement with Velcourt, for the three years 2006-2009. It has appointed Malcolm Parkinson as its managing director.
7. The Wynnstay Group has purchased Quins Farm Supplies, based in Newton in Powys.
   

Miscellaneous

1. There will be two other candidates for the presidency of the NFU as well as the incumbent, Tim Bennett: current deputy president Peter Kendall and the Farmers For Action leader, David Handley. Competing for deputy president will be Peter Kendall, Meurig Raymond and Derek Mead and, for vice president, Meurig Raymond, Richard Haddock, Gwyn Jones, Michael Seals and Paul Temple.
2. There will be three candidates for vice president of NFU Scotland: David Houghton, Bob Howat and Jim McLaren. John Kinnaird is serving a second and final two-year term as president.
3. Dai Davies, a Carmarthenshire milk producer, has been elected president of NFU Cymru. He succeeds Peredur Hughes, who has retired.
4. The New Year Honours included OBEs for recently retired chief executive of the NSA, John Thorley, NFU Cymru retired president Peredur Hughes and British Potato Council chairman David Walker.
5. A Wiltshire farmer received a speed camera ticket for driving his six-year old tractor at 85mph in South Wales. He denied it ……