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Farming News Review - June 2006

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Policy issues

  1. The reshuffle of government ministers resulted in major changes at DEFRA. David Miliband replaced Margaret Beckett as secretary of state; Barry Gardiner, Ian Pearson and Lord Rooker replaced Jim Knight, Lord Bach and Elliot Morley. The only minister to keep his job is Ben Bradshaw. It has been pointed out that the new ministers represent 26 hectares of farmland, 67 sheep and no other livestock between them which augers well for the future.
  2. The expected deadline of the end of April for the conclusion of the current round of WTO talks came and went.
  3. Despite milk quotas being significantly greater than demand, the EC is to increase quotas for most of the 10 member countries that joined the EU in 2004 by 700,000 tonnes, equivalent to 0.5 percent of total EU quota.

CAP (etc.) support details/payments

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  1. The total farce surrounding the activities of the Rural Payments Agency continued throughout the month. More than 70% of claimants have been paid in full, many have received over 80% of their expected entitlement but thousands have received nothing at all; many farmers are unable to determine if the single payment received is correct, advisers are having to use computer programs to help; officials have admitted they did not discover the computer software designed to calculate single payments did not work until payments were due to be made. The deadline for submission of 2006 SP5 forms was extended to 31 May but the RPA computer closed down on 26 May for “essential maintenance”; some SP5 forms have the wrong postcode for the address of the RPA. Not surprisingly an enquiry is being conducted by the National Audit Office.
  2. Proposals from the EU Commission suggest that EU rural development funds will be allocated on an historic basis. This could adversely affect the UK and give rise to demands to increasingly modulate the single payment.
  3. The fruit and vegetable sectors of France, Italy and Greece are being forced to return more than 70 million Euros out of total funding of Euros 128 millions as a result of “abuse of Common Agricultural Policy support”.

Grants/regulations/legislation/environment

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  1. The Agricultural Waste Regulations came into force on 15 May resulting in, for example, the outlawing of the burning of silage plastic and tyres.
  2. A centre for biomass, to be operated by the Forestry Commission, is to be set up in Kent.
  3. DEFRA has, after just two days, reversed its decision to ban renderers from burning tallow.
  4. Applications for funding under DEFRA project-based schemes must be submitted by 30 June but little is thought to be left in the kitty.

Other matters of farm finance and tenure

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  1. Delays in receipt of the single payment resulted in farm borrowing increasing to a record £9.5 billions by the end of March, an 11% increase over the same period in 2005.
  2. Knight Frank is forecasting an increase in land values of up to 7% in 2006 with the highest level of demand continuing to be from “lifestyle” buyers.
  3. Most of the Limited Partnership Tenancies and short-term agreements operated by the Crown Estate in Scotland are to be converted to the new style Limited Duration Tenancies and Short Limited Duration Tenancies.

Product prices

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A. Crops

  1. Feed and milling wheat prices have both gained £5/tonne over the course of the month as a result of the 2005 harvest stock becoming low. Barley prices have risen by £4/tonne, peas and beans have risen by £1.50 while oilseed rape has remained unchanged. Traders report new crop wheat for November movement being worth £79/tonne.
  2. Average prices in late May (£/tonne, ex-farm): feed wheat 77, milling 81.50; feed barley 73.50; oilseed rape 154; feed peas and beans 80.
  3. The average potato price has continued to rise over the course of the month, gaining £8/tonne, mainly driven by processor and packing contract prices. The average price closed at £132/tonne, with prices for top grade Maris Piper dropping back slightly on April levels to £240/tonne.

B. Livestock

  1. Average steer prices, despite minor fluctuations, remained at 111p/kg lw throughout the majority of the month, closing slightly lower at 110p/kg lw.
  2. Average lamb prices bounced back from the drop in the latter half of April, remaining 10p/kg over the course of the month to close at 140p/kg lw. The fluctuating market is still being attributed to the knock-on from avian flu, as European consumers continue to favour red meat over poultry.
  3. The average pig price continued to strengthen slightly over the month, after rising back above 100p/kg in April, finishing at 102p/kg dw. Whilst the rising market is welcome, prices remain 4p/kg lower than at this time last year.
  4. Downward pressure continued on the milk price with average returns lower by 0.36p per litre. Although early in the year, quota leasing and purchase prices continue to fall with leasing 4% butterfat only 0.29ppl.
  5. Wool prices are set to drop further. The British Wool Marketing Board have announced a 6p drop in the world price indicator to 75p/kg suggesting an average producer return of 45p/kg for the 2006 clip.

Other crop news

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  1. Rain finally arrived at reasonable levels in May and this, together with warmer weather, has led to encouraging growth but disease is being carefully monitored as warm, moist conditions are ideal. Potato plantings were completed in most regions well ahead of the timing in 2005.
  2. Frontier Grain, which has a plant in Manchester producing alcohol and starches, is to start using UK-produced wheat in 2007. There is expected to be demand for about 750,000 tonnes annually, replacing maize imported from France.
  3. INEOS Enterprises has announced plans to build a “world-scale” biofuels plant in the UK, probably in central Scotland, which could provide a major market for rapeseed growers.
  4. DEFRA is to cease long-term hop research funding at Imperial College at Wye in 2007.

Other livestock news

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  1. Livestock exports restarted in early May as a result of the lifting of the export ban, with beef being shipped to Holland and Belgium.
  2. Milk output in April was the lowest for that month in the past five years.
  3. Restrictions on free-range birds in an area of Scotland, introduced in response to a case of avian flu found in a dead swan, were lifted at the beginning of May.
  4. Restrictions on a south Wales farm following an outbreak of anthrax in cattle have been lifted.
  5. A report entitled “British Chicken-What Price?”, prepared by the British Poultry Council and the NFU, claims that most poultry meat businesses are losing £25,000 a flock each year and calls for a substantial price rise from retail customers.
  6. The results of the Milk Development Council’s “Farmer Intentions Survey” indicate a continued trend towards production being concentrated in the hands of fewer producers. The 2006/07 output is expected to be 3% below the previous year while 14% of producers expect to leave the industry altogether.
  7. The Scottish council of the National Beef Association has formed a rival body, the Scottish Cattle Association.
  8. Uproar from many quarters has greeted legislation which would allow poultry to be suffocated as a means of containing an outbreak of avian flu.
  9. The Rural Payments Agency has updated the OCDS Producer Handbook.
  10. The Cwmni Cig Mon abbatoir on Anglesey has closed with the loss of 100 jobs.
  11. Grampian Foods has closed its poultry processing plant also on Anglesey, with the loss of 200 jobs.

Inputs/Supply businesses

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  1. On farm prices of nitrogen fertiliser are expected to be £155 per tonne for June rising to £170 per tonne by December. Prices are around £19 per tonne more than at the start of the 2005 season, caused mainly by higher gas costs.

Marketing

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  1. Farmgate milk prices are forecast to fall further. Arla has a market-related pricing scheme starting at the end of June; Dairy Crest is cutting the price paid to farmers who supply to its cheese factories by up to 0.5p/litre.
  2. Del Monte is to close its prepared leaf factory at Methwold, Norfolk blaming overcapacity in the market.
  3. Wool prices are expected to fall by at least 10% in 2006.
  4. Meadow Quality, the livestock marketing co-operative, has launched an on-line auction system for sheep.
  5. The Great British Carrot Campaign has been launched by growers.

Miscellaneous

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  1. Despite considerable rainfall in May, water shortages continue to threaten particularly horticultural businesses. One drought order is in force covering the Sutton and East Surrey region, similar orders have been granted to Southern and Mid Kent Water but not yet implemented. East Anglia is also beginning to be affected.
  2. British food and drink exports rose by 3% in 2005 with Ireland and France the best markets.
  3. A Soil Association report claims that organic farms generate more employment than conventional farms and that the average age of an organic farmer was seven years younger than a non-organic counterpart.
  4. NFU Mutual has announced profits of over £500 million for 2005. The insurance company is independent of the NFU but it did contribute £5 million to the farmers’ organisation.
  5. The ADAS Redesdale research farm in Northumberland is to close in 2007.
  6. Greenvale, one of the UK’s leading potato suppliers, has been awarded the Queen’s Award for Innovation.
  7. Kent-based JP Fruit Distributors was named Tesco Overall Produce Trader of the Year as well as Importer of the Year.
  8. On average, residents in Rochdale consume 1.91 units of fresh and dried fruit per day, the lowest of a list of 100 UK locations. Northern towns and cities dominated the bottom places, top was Bath with Canterbury not far behind.
  9. An estimated 41,000 Romanians and 15,000 Bulgarians are forecast to arrive to work in Britain when their countries join the EU following on from an estimated 117,000 migrant workers as a result of the 2004 enlargement.
  10. The Countess of Wessex has been elected as the next president of RASE.
  11. Well known Sussex fruit grower, and author, David Atkins, has died.

Chavereys Chartered Accountants