Farming News Review - January 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

After a series of proposals by Tony Blair, each rejected by other member states, further concessions finally led to an agreement on the EU budget for the seven years from 2007. The UK relinquished £7 billion (£1 billion a year) of its budget rebate in return for a review of EU expenditure, including farm subsidies, in three years’ time and additional aid from the UK, France, Germany and Italy for the new central and eastern European member states. Tony Blair has been heavily criticised for giving up part of the rebate and agreeing to pay 60% more to the budget with no assurance that France and other member states will agree to any changes at all to the 2003 CAP reform at the review in three years’ time. France (President Chirac) is claiming victory. Chancellor Gordon Brown is said to be furious at not being consulted before Blair’s final “climbdown”; the agreement will necessitate large cuts from 2008 in government spending on schools, hospitals etc.
Trade ministers from 149 countries met in Hong Kong for the sixth ministerial meeting of the World Trade Organisation’s “Doha Round”. With earlier negotiations having failed to reach agreement, notably on agriculture, little progress was expected. In the event an agreement was signed by all nations, but it was timid and generally regarded as very disappointing: it covered minor changes to trade rules, including an end to EU export subsidies by 2013 and an aid package for the poorest nations, but details were left vague. The next WTO meetings will be in Geneva in the spring. Tony Blair wants a new summit meeting of the G8 and five leading developing countries in the new year.
Towards the end of a two-week United Nations conference on climate change held in Montreal, the US agreed, at the eleventh hour, to participate in further non-binding talks on measures to cut greenhouse gas emissions, having raised objections throughout the meetings and even staging a walk-out in an attempt to collapse negotiations. A timely speech by Bill Clinton appeared to have had a crucial effect. Margaret Beckett represented the UK and the EU at the talks and was widely praised for the role she played.
A joint paper from Defra Secretary Margaret Beckett and Chancellor Gordon Brown, entitled “A Vision of the CAP”, has been published on the Treasury website. It stresses what they consider to be the high cost of the CAP to taxpayers and consumers and call for an end to all subsidies and protection within 10 to 15 years. The report fails to acknowledge the recent reform and is heavily criticised by the NFU as being a one-sided polemic. Sir Don Curry says he is “deeply concerned” by the tone of the report.
Defra has produced a discussion document, called “Partners for Success”, in which it promises to reduce red tape on farming and give clearer guidance on forthcoming legislation. It includes reviewing assurance schemes to end duplication, simplifying the information requested in the June census and reducing the numbers of inspections. However, it also considers the prospect of farmers being charged an animal disease levy.
A new pressure group was launched on 12th December to challenge the NFU. Called the “Better NFU”, it is being co-chaired by Somerset dairy farmer and NFU council member Derek Mead and Farmers for Action chairman David Handley, with the financial backing of Mr Mead and the millionaire environmentalist Zac Goldsmith. It intends to field candidates at the NFU presidential elections in February. NFU president Tim Bennett said he took great offence at the group’s allegation that the NFU was not doing its job, claiming many recent successes.
The new Conservative leader David Cameron has decided on his “Shadow Defra” team. In the Commons: Secretary of State for Environment, Food and Rural Affairs, Peter Ainsworth; Environment, Greg Barker; Agriculture and Rural Affairs, James Paice; Agriculture and Fisheries, Bill Wiggin. In the Lords: Environment, Food & Rural Affairs, The Duke of Montrose; Environment, Lord Dixon-Smith; Food and Rural Affairs, Baroness Byford. The previous conservative Agriculture spokesman, Owen Paterson, (who created a record by asking over 600 parliamentary questions on a single subject (bovine TB)), has been moved to a Shadow Transport post.
The UK’s food trade deficit rose to £13,440 million in 2004: well over double the level twelve years ago, in 1992: £5,880 million.

CAP (etc.) support details/payments

All Single Payment Scheme applicants in England have been sent a Soil Protection Review form, which has to be completed to meet cross-compliance requirements. The aim is for the review to be completed by 1st September 2006 and implemented from 1st January 2007.
Scottish farmers received a number of reminders during December that they only had until the end of the month to apply to the 2005 Scottish Beef Calf Scheme, as a high percentage who were eligible had not claimed. The scheme is part of the Scottish CAP reform package.
The 2005 crop supplements under the Single Payment Scheme will be slightly different from those given in the November issue of the MFU. The conversion rate used for these is not, as expected, the 30th September figure (68.195p). The energy crops supplement uses the average December 2004 figure (approx. 69.41p) and the proteins supplement the average June 2005 level (approx. 66.91p). The net amounts after modulation (£/ha) are therefore:
Proteins: England £35.32, Scotland £34.77, Wales £35.51
Energy Crops: England £29.67, Scotland £29.70, Wales £29.83

Grants/regulations/legislation/environment

There is to be a reduction of £1.3 million in the Welsh agricultural budget, which will affect 2007 payments under the Tir Mynydd scheme, which has replaced Hill Livestock Compensation Allowances. One estimate is that the average payment will be cut by around £100. With costs constantly increasing, considerable concern has been expressed.
Two modifications have been made to the Higher Level Scheme. Farmers can apply for a “cattle grazing supplement” worth up to £35/ha and can obtain up to £70/ha for grazing a breed of cattle classified by Defra as “at risk”.
The Environment Agency has issued new guidance on its website to help farmers prepare for the new waste management regulations that take effect early in 2006. A helpline has been set up (0845 603 3113).
The RSPB has brought a 295 ha (730 acre) Wiltshire arable and sheep farm, for about £2.5 million. It is to be its first major chalk grassland nature reserve. The RSPB has 180 reserves, covering some 130,000 ha (320,000 acres).
Polytunnels and planning permission: see VI.4.

Other matters of farm finance and tenure

In Chancellor Gordon Brown’s pre-budget speech he announced a 23% increase in the duty on red diesel (up by 1.22ppl to 6.44ppl), though freezing the duty on standard fuel. However, he said the government is considering 100% first-year enhanced capital allowances for plants producing bioethanol, biodiesel and biogas. He said also that the government was pressing ahead with a planning gain supplement from 2008 on land and buildings with planning permission for development.
The Home-Grown Cereals Authority has been awarded £500,000 to improve price risk management in the arable sector.
Savills reports that land values in England rose by 10% during 2005. It says the average rose from £2,230/acre (5,510/ha) in 2004 to £2,450/acre (£6,055/ha) in 2005. It puts prime arable at £2,800/acre and average arable £2,550/acre.
The average cost of grain haulage has risen by 4.5% this year compared with 2004; (Home-Grown Cereals Authority).

Product prices

A. Crops

Cereals prices rose a little towards the end of November and into December. Oilseed rape prices have fallen again. Feed wheat prices for the 2006 harvest crop are currently some £4/tonne above those for the 2005 crop: around £64 to £65/tonne ex-farm at harvest; harvest prices for the 2007 crop are currently around £70/tonne. The expected increases are at least partially due to the anticipated extra demand for bioethanol etc. Weather problems in the Ukraine may cut Black Sea imports in 2006/7 substantially.
Average prices in mid-December (£/tonne,ex-farm): feed wheat 65, milling 72; feed barley 64; oilseed rape 132; field peas 75, field beans 74.
Potato prices are averaging £92.50/tonne, with the usual wide variations for quality.

B. Livestock

Beef prices have continued to rise. Finished steers averaged 106p/kg lw in mid-December, which is 10% above the same time last year.
Finished lamb prices continue to fluctuate. The average mid-December price, at 104p/kg lw, is 5% below at the same a year ago; an increase in supply is blamed for the lower price.
Pig prices have crept up a fraction: to average between 101.5 and 102p/kg dw.

Other crop news

The minimum beet prices under the reformed sugar regime have been announced. From 2005 to 2009-2012 they are approximately and consecutively as follows, with the euro worth 68p: £29.65, £22.35, £20.25, £18.15, £17.95. How the compensation is to be paid is yet to be decided: it may be confined to beet growers or it may be included, and “spread”, in the single payment.
Construction work has started on Greenenergy’s £13.5 million biodiesel production plant at Immingham; it is due for completion in late 2006. The intention is to process over 150,000 tonnes a year of UK-grown oilseed.
It is hoped that construction of the UK’s first major bioethanol plant, at Henstridge in Somerset, close to the Dorset border, could begin next summer. Green Spirit Fuels (founded by Wessex Grain in July 2005) would be offering three-to five-year wheat contracts to supply the £50 million plant with about 330,000 tonnes a year.
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.
It is reported that more Braeburn is now being planted in the UK than any other apple variety. Some predict that it could replace Gala as the second widest home-grown dessert apple. Cox, which has yielded exceptionally well this year, (but prices have fallen accordingly), still represents about 60% of home-grown apple sales. Braeburn (including imported) accounts for about 20% of UK sales.

Other livestock news

It now looks certain that in the current UK milk year production will again be below quota. Quota values therefore continue very low: 0.2ppl to lease, 5ppl to buy (both at 4% BF).
Defra has announced plans for a 12-week consultation on the principle of culling badgers in areas affected by a high incidence of bovine TB; culling could begin in badly affected counties as soon as next June. The government will also introduce pre-movement testing and adopt a new compensation scheme for cattle affected by TB, brucellosis and enzootic bovine leukosis.
The government predicts that the number of cattle slaughtered in attempting to control TB could nearly treble from the current 23,000 a year to 66,000 by 2010, increasing the bill for compensation and testing to nearly £150 million a year.
An interim report by the Independent Scientific Group overseeing the Randomised Badger Culling Trials concludes that culling badgers can reduce TB incidence in culled areas but increase its prevalence in adjoining areas. It therefore suggests having a few, much larger culling areas rather than many smaller areas.
Assured Food Standards has confirmed that there will be a joint dairy-beef assurance scheme available to dairy farmers, under the National Dairy Farm Assured Scheme, from 1st January.
The payment rates for the Older Cattle Disposal Scheme, which starts on 23rd January for UK cattle born before August 1996, are as follows in euros per head: 2006, 360; 2007, 324; 2008, 292. At 68p per euro the amounts in sterling are £245, £220 and £198 respectively.
The EU is providing £2.2 million to finance a range of schemes aimed at boosting beef production in Wales.
New sheep movement rules have been introduced aimed at satisfying the EC that the UK’s system of identification and tracing is strong enough to justify a permanent exemption from double tagging. All movements of sheep and goats outside a 5-miles radius will have to be recorded.
The purchase by Genus of Sygen (which includes the Pig Improvement Company) has been confirmed.
Any farmers keeping 50 or more poultry birds must register their flocks on a new Defra database by 28th February, to help the government prepare for any future disease outbreak.

Inputs/Supply businesses

Grainfarmers is to close its 30-year old Larkwhistle seed plant at Micheldever. It will concentrate its certified seed production in future at the plant it opened at the Honey Pot Lane site in Lincolnshire last January. It says this action is caused by the decline in certified seed sales as farmers increasingly use farm-saved seed. Grainfarmers UAP southern England seeds sales and its administration team will stay at Larkwhistle.
An exemption that allowed older varieties of cereals and potatoes to avoid having to pay royalties on farm-saved seed has been overturned by a House of Commons committee. The NFU says it will contest this ruling.
The Health and Safety Executive says the number of pesticide-related incidents in the UK in the year to 31st March 2005 fell by 54 to 150. The largest complaints category from the public concerned spray drift.
BOCM PAULS has sold its Shepshed Mill in Leicestershire to independent manufacturer Geo L White, a Derbyshire farmer as well as feed producer. Whites will close its 70,000 tonne ruminant plant (Clarence Street Mill) in Burton on Trent; it had already planned to do so, having sold the site for development, intending to invest in a new plant on a greenfield site. Shepshed Mill will continue to produce pig and poultry feeds for BOCM PAULS’ existing local customers.
EU feed trade body FEFAC has officially launched its European Feed Manufacturers Code, which harmonises existing national feed manufacturing codes and will help the industry meet the requirements of the new Feed Hygiene Regulation.
A new Fertiliser Industry Assurance Scheme has been launched by the Agricultural Industries Confederation, to cover all aspects of manufacture and distribution from factory to farm.

Marketing

It is reported that the French dairy company Lactalis has held detailed talks with Dairy Crest concerning a possible £800 million takeover. If this came about it would create Britain’s largest milk and cheese producer, with 60% of the cheese market. Referral to the Competition Commission would be almost certain.
Cornwall Farmers has now bought Countrywest Trading: (see Dec.MFU, IX.5).
3 Tesco supported and gave £25,000 towards the Fresh Produce Consortium’s fruit and vegetable “Eat in Colour” campaign.
The chairman of Waitrose, Sir Stuart Hampson, has promised a number of initiatives to boost considerably the profile of farmers and UK agriculture in its stores. Sir Stuart is current president of the Royal Agricultural Society of England (RASE).
Cheshire-based trade Murray Vernon has called in the administrators, while continuing to trade at least for the time being. The company sells dairy products at home and abroad.

Miscellaneous

The NFU vacated its Central London HQ in Shaftesbury Avenue in mid-December, moving to its new site at the NAC in Stoneleigh. It will retain a small London office, with six permanent staff, in Smith’s Square, next to Defra’s Nobel House.
According to a new economic impact assessment study the Royal Bath and West Society’s showground generates £164 million a year for the rural economy; this includes £38 million from the annual show and £65 million from other events at the site.
Imperial College, together with Kent County Council and Ashford Council, have unveiled plans to develop a £1 billion world-class science park, employing some 12,500 people, at Wye over the next 25 years, stunning both the College staff and the village’s inhabitants. At the College, following the cessation of agriculture and horticulture teaching and research and most of the sciences, the main current activities are the teaching of the relatively new degree in Applied Business Management – to several hundred students, in association with the University of Kent at Canterbury, research in environmental studies, the EU, plant sciences and agrarian development overseas, a major distance learning programme, and continuation of the Farm Business Survey. Hence the college remains highly active – if very different from yesteryear.