Farming News Review - July 2008

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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

The National Farmers Union and the British Crop Production Council have both expressed disappointment at a compromise agreed in Luxembourg which shifts approval of pesticides from risk-based criteria to ones based purely on hazards. Little attention has been paid to how substances are used by operators. The NFU and the BCPC have joined the British Retail Consortium, the Food & Drink Federation and the Crop Protection Association to brief the Government on the impact of the proposals suggesting they will have a devastating effect on food availability and price.
The European Commission is expected to announce a u-turn on fresh produce classification. It is anticipated that 26 of the existing directives for the classification of fruit and vegetables will be relaxed. Minimum standards will be imposed on produce such as apples, lettuce, pears, strawberries and tomatoes. A new General Marketing Standard will be put forward to ensure the consumer has access to produce that is “sound, fair and of marketable quality”.
The European Commission has confirmed that import duties on cereals will remain suspended and will only be changed in the unlikely event of a large fall in world grain prices. The Cereal Management Committee has confirmed that no subsidies will be available to support grain exports.
Proposals to cut import tariffs on quality beef products made during the current round of World Trade Organisation talks could allow large quantities of imports into the EU and devastate the UK suckler industry according to NFU livestock chairman, Alistair Mackintosh.

CAP (etc.) support details/payments

Defra has announced targets for 2008/09 for the Rural Payments Agency. 2008 Single Payment Scheme targets are payment in full for 75 per cent of valid claims by 31 January 2009 and 90 per cent by 31 March 2009. Other targets include recording 98 per cent of notifications of births, deaths and movements of cattle on the Cattle Tracing System within 14 days; a 10 per cent reduction in administering the RPA; to minimise EU disallowance risks.
The Rural Payments Agency has achieved its target of making 96 per cent of all Single Farm Payments by 30 June.
The Rural Payments Agency has approved two software packages which will enable 2009 Single Farm Payment claims to be submitted on-line.

Grants/regulations/legislation/environment

A stakeholder group chaired by Sir Don Curry has outlined three policy options to counter the possible negative environmental impacts of removing set-aside. Option 1 includes the existing 1m protection zone alongside watercourses, a new GAEC condition requiring a percentage of cultivated land to be in “environmental management”; Option 2 includes a new GAEC condition requiring wider buffer strips with a permanent green cover alongside all permanent and seasonal watercourses; Option 3 includes a new GAEC condition requiring 6m buffer strips with permanent green cover alongside all watercourses and a percentage of land to be in environmental management.
The cross-party Environment Food and Rural Affairs committee has said Defra must implement the “flawed” Nitrates Directive to ward off EU legal proceedings. However, it advised that Defra must limit the financial burden of compliance on farmers who were illequipped to meet further costs.
The Bio-energy Infrastructure Scheme has been set up to assist the biomass industry in order for the UK to meet an EU commitment for 20 per cent of heat and energy production to be from renewable sources by 2020. The deadline for applications is 5 August for businesses and 5 September for producer groups. Grants of up to £200,000 are available.
Funding provided by Defra and the EU through the Regional Development Programme for England has resulted in grants of up to £20,000 per business being available to Yorkshire livestock farmers to invest in new technology that makes better use of their waste, energy and water resources.
Prince Charles has launched his Cambrian Mountains Initiative aimed at ensuring the sustainability of farmers and communities in the Mid-Wales region.

Other matters of farm finance and tenure

The 2008 Agricultural Wages Order, which comes into effect in October, will result in the lowest paid workers getting a 4 per cent increase in basic pay taking it to 1p over the National Minimum Wage. Other grades will see increases of 4.3 per cent.
The Scottish Government has questioned the need for the Scottish Agricultural Wages Board in the wake of recent changes to employment law that govern agricultural wages.
The Grant Thornton – Barclays Commercial Bank 2008 Food Consolidation Index has reported that producers are facing unprecedented pressure in the face of rising costs and supermarket demands. The fresh produce sector, which accounts for 14 per cent of food sales, accounted for 23 per cent of business failures and 11 per cent of mergers in the two years to April 2008.
The latest report from Plimsoll Publishing reveals that zero growth, sliding profits and escalating debt have pushed a third of the fresh produce industry to the brink of failure.
A report by the University of Exeter, Duchy College and Cumulus Consultants estimates that predicted reductions in Single Payment Scheme payments will cause farm business incomes on the average cattle or sheep hill farm in South West England to fall by a third by 2013.
The Agricultural Mortgage Corporation has launched the UK Land and Farm property website – www.uklaf.co.uk - to provide farmers with a one-stop shop for all their needs related to finding land and rural property in the UK. The website will bring together properties of three acres or more from 50 of the UK’s national and regional agents.
Nine Scottish government agencies and quangos are to create Scotland’s Environmental and Rural Services in an initiative to dramatically cut the burden of red tape on Scottish farms.
The rate of growth in farmland values slowed dramatically in the second quarter of the year according to Savills. The rate of increase fell from 17 per cent in the first quarter to 8 per cent.

Product prices

A. Crops

The world’s 2008/09 harvest forecasts for wheat continue to be reviewed and amended; the most recent release being by the US Department of Agriculture. Predictions remain that this will be a record year (production up 8.5% on 2007/08 to 662Mt). However, world market news points to a returning level of volatility: lack of rain in Northern Europe and Scandinavia early in the month is expected to suppress yields; too much rain in France is threatening quality; overall the EU harvest is expected to be above 130Mt for 2008/09; drought concern in Eastern Australia is reducing as rain has started to arrive whereas rain and flooding threatens the US maize crop. Despite these market forces, prices held far more stable throughout June. Meanwhile the price of oil has continued to soar, adding more concern over the costs of crop related inputs. Futures prices, LIFFE wheat and MATIF rape in particular, have shown an overall increase over the course of the month, but in the latter stages values were dropping back. In Late June LIFFE wheat, for delivery in November 2008 and November 2009, was trading at £147 and £154 respectively. Average prices in late June (£/tonne ex-farm): feed wheat 145, milling wheat 172; feed barley 123; oilseed rape 341; feed peas and beans 182.
Average potato prices continued to strengthen, albeit only to a small extent, over the course of the month. Quality samples not already under contract are increasingly hard to locate meaning buyers are looking further afield to satisfy demand. However, they are still not interested in the poorer quality 2007 crop samples available. As the end of the 2007 harvest packing season approaches, packers are dealing mainly with contracted deliveries. New crop and salad potatoes continue to increase market through flow as more regions are now lifting. July is still the earliest expected date for set-skin samples of maincrop. Progress reports in respect of the current growing crop suggest that overall yields will be down, as low tuber numbers are being observed; tuber size is therefore expected to be a market driver. Average prices in late June sat at £187/tonne, up £5/tonne on prices in May and £59 up on prices a year earlier. The free market price at the end of June was £215/tonne, up £15/tonne on last month and up £90 on June 2007. In late June, with old crop trading all but finished, Maris Piper were achieving between £150 and £200/tonne, with quality samples getting up to £240/tonne; King Edwards were obtaining between £200 and £220/tonne; Desiree prices stood at £180 to £200/tonne; best quality obtaining £220/tonne. Estima prices still cover the largest spread, between £130 and £220/tonne; with high baker, grade 1 samples now slightly down at £280/tonne.

B. Livestock

The price of beef improved steadily over the course of June from its starting position of 149p/kg lw. Prices fluctuated marginally day to day, but in late June prices sat at 154p/kg lw. Average prices at the end of June sat 48p/kg higher than those in June 2007.
UK average lamb prices, after opening the month at May’s peak of 193p/kg lw, dropped back to 165p/kg lw. However in the latter stages of the month prices started to rise once more. Prices in late June sat 65p/kg above prices a year earlier.
The average pig price showed more of an improvement in June. Prices closed the month at 127p/kg lw, up 5p/kg on May prices and 17p/kg on prices a year. The full effect of high red meat prices is yet to pass on to pork and bacon, but the strong Euro is still supporting UK producers as foreign product remains expensive.
The average farmgate milk price for April (reported in June) has declined sharply, with the average price dropping 0.86ppl to sit at 24.91ppl; just over 7.4ppl above prices in April 2007. Dairy Crest and Arla each reported liquid milk price increases from 1 June of 0.3ppl (in addition to the 0.5ppl already announced last month) as a result of Morrisons’ 1ppl shelf price increase. Milk prices may see short term volatility as the European milk futures exchange (EUMIX) is set to open in August. Clean milk quota holdings (4% butterfat) were being traded in late June for 0.90ppl, 0.10ppl up on prices in May.

Other crop news

COPA-COGECA have predicted increases in this year’s European harvests of wheat of 19 million tonnes to 130 million tonnes; maize up by 25 per cent to 59 million tonnes; oilseed rape up by 7 per cent to 26 million tonnes. However, protein crops are expected to fall by 60,000 tonnes to 2.7 million tonnes.
A global increase in corn prices has been forecast as a result of severe flooding in Iowa and Illinois. Three million acres of planted corn has been devastated and planting on a further two million acres has been prevented. The two states produce up to a third of the world’s traded wheat.
The Organisation for Economic Cooperation and Development has forecast that wheat prices will fall by 28 per cent by 2018 down from this year’s expected peak of £161.15 per tonnes to £117.15.
Grainfarmers has unveiled a new £1.5 million deep water grain export facility at Southampton primarily to support milling wheat exports to the Mediterranean.
The NFU and British Sugar have agreed that the two beet pricing options offered to growers would be available until August 15 rather than July 11 as originally proposed by the processor.
A small scale field trial at the University of Leeds designed to develop a genetically modified potato has been destroyed by activists.
The contaminants panel of the European Food Safety Authority has revealed that the average consumer eating 400g of mixed vegetables and fruit a day would not exceed the acceptable daily intake for nitrate.
Cold weather in April has resulted in the UK asparagus yield falling to about 60 per cent of expectations.
A Which? panel of 120 blind tasters sampled strawberries from Tesco, Asda, Sainsbury’s, Morrisons, Waitrose and Marks and Spencer and found that the visual and eating qualities of conventionally grown and organic produce were similar but there was a huge discrepancy in price. Organic fruit was double the price of standard varieties with premium produce almost treble.
The Soil Association has claimed that more than 90 per cent of the strawberries tested by the Pesticides Safety Directorate contained pesticides while 80 per cent contained a “cocktail” of pesticides.
Rootstock Club, launched by East Malling Research, Horticultural Development Company and the International New Varieties Network, has been charged with breeding, developing, distributing and commercialising new generations of rootstock material able to withstand the effects of climate change.

Other livestock news

Defra epidemiologists believe a low pathogenic version of avian flu may be circulating unidentified on British farms. Poultry farmers have been warned to consider the possibility that any disease that fails to respond to treatment may be low pathogenic avian flu.
Under the National Control Plan, UK egg producers will be required to reduce salmonella in the laying flock by 10 per cent over the next 3 years. To achieve this producers must test one of their flocks between 22-26 weeks of age and every 15 weeks thereafter. An official test supervised by either Animal Health or Egg Marketing inspectors must be conducted once a year.
A potential shortage of pork is forecast with the news that the latest sow culling figures show a 40 per cent increase in the past 6 months. Since January 102,000 sows have been culled compared to 77,000 in the whole of 2007.
The Organisation for Economic Cooperation and Development has reported that beef and pigmeat prices are set to rise by 20 per cent and over the next decade.
Waitrose has committed to buy all of its fresh pork and bacon from British farmers by the end of 2008.
Latest figures for bovine TB indicate the number of cattle culled in the first 4 months of 2008 is up by 40 per cent over the same period in 2007 to over 14,000. The number of new confirmed cases was up by 15 per cent.
Professor Lord Krebs, who recommended the Randomised Badger Culling Trials, has warned that a mass badger culling policy in hotspot areas in the South West and South Wales will offer no guarantee of a reduction of bovine TB incidence in cattle. He quotes a reported 15 per cent increase of incidences in the Republic of Ireland in 2007 despite “scorched earth culling”.
Dr Chris Oura, bluetongue expert at the Institute for Animal Health, has stated there is no evidence to support rumours emanating from the continent that the bluetongue vaccine is causing infertility problems in sheep.
The OIE, the global organisation for animal health, has granted the UK the same BSE status as the rest of Europe. The UK is now “controlled risk”, the same category as most beef exporting countries including Brazil and the US.
Milk production was down 125m litres on 2007 levels in the first 10 weeks of the 2008/09 quota year, a drop of 1.7m litres per day, a record low. The forecast is for production to be 1.7-1.9 billion litres below quota.
As part of the M&S “Milk Pledge”, Marks & Spencer is to pay its producers an extra 0.9ppl to help with the potential new Nitrate Vulnerable Zones legislation which is estimated to cost the average dairy farm at least £40,000.
The validity of Defra’s tabular valuation system is to be tested in the High Court this month. The NFU is calling for a system that pays fairer compensation to owners of high value cattle.
The weakening of the pound against the euro has resulted in payment rates for the Older Cattle Disposal Scheme falling to £229.51 per head.
Lamb sales in Scotland have increased by 11 per cent over the past year to £30 millions.
The Scottish Association of Meat Wholesalers has warned that plans to move the funding of the Meat Hygiene Service on to a full-cost recovery basis will result in a trebling of meat inspection costs in Scotland by 2011.
United Auctions is to amalgamate the Perth and Kildean markets on a single site at Hill of Drip in Stirling.
Premier Livestock Auctions is to close the Yeovil market blaming disease outbreaks and a diminishing national herd.

Inputs/Supply businesses

The NFU has launched an Inputs Price Monitor to compare and publish common expenditure such as fuel, fertiliser and pesticides.

Marketing

In 2007 UK food exports rose 9.1 per cent with sales exceeding £11 billions. Poultry meat exports exceeded £200 millions; beef exports rose by 36 per cent; dairy products exports rose by 12 per cent to £805 millions. New member states show the greatest rates of UK export growth with Slovakia recording 112 per cent and Estonia 45 per cent.
A study undertaken by PricewaterhouseCoopers, which incorporates the views of retail and consumer goods business leaders, has found that, to capitalise on sustainability, retailers and their suppliers need to bring more sustainable products to the market at a lower or zero premium to standard items. Consumers have reached the point where they increasingly expect sustainable attributes to be an inherent part of the products and services they buy.
Research has recorded that the farm shop sector has grown by 15 per cent in the past year, the fastest growing retail sector.
Dairy UK and the Dairy Council are to link up with the Association of Cereal Food Manufacturers in a campaign to highlight the role breakfast cereal and milk can play in providing people with essential daily nutrients.

Miscellaneous

Vion, owned by the Dutch Farmers’ Union, has bought Grampian Country Food Groups for £350 millions. The deal includes St Merryn Meat, McIntosh Donald and Welsh Country Foods. The UK arm of Vion will be headed by Peter Barr, former chairman of the Meat and Livestock Commission.
Poultry processor Moy Park has been bought for £348 millions by Marfrig, one of Brazil’s leading food companies.
Parripak Foods, a Bedfordshire-based supplier of freshly prepared vegetables to the readymeal market, has acquired Gretna-based Solway Veg Ltd.
Reducing operation costs by more than £1 million helped increase Milk Link’s profits by 8 per cent to £30.5 millions.
Deere and Company is to invest $35 millions to increase combine harvester manufacturing in Illinois by 30 per cent.
NFU Mutual profits fell from £384 millions in 2006 to £101 millions in 2007 partly as a result of last summer’s floods and storms.
Awards in the Queen’s Birthday Honours include John Page, Home Grown Cereals Authority (OBE); Ian Campbell, services to the pig industry (MBE); Melanie Hall, NFU South West (MBE).