Author: Caroline Ingamells

Spotlight on Fertiliser and CO2

The nitrogen fertiliser market has been in turmoil during September which has resulted in knock-on effects into the wider food chain.  The root cause is the surge in natural gas prices.  This has been caused by low stocks (the UK has very little storage), high demand (partly due to the lack of wind, reducing renewables output) and constrained supply (lower availability from Russia and the Middle East).  The effects are being seen in the consumer market with some energy supply firms going bust as the Government price cap leaves them having to supply energy at below the cost of buying it.  Over the short-to-medium term, energy bills (electricity, gas and oil) will all rise.

Natural gas is the major feedstock of ammonium nitrate (AN) production.  As prices have risen it has become uneconomic to manufacture fertiliser and, on the 17th September, CF fertilisers announced it would be shutting its two UK plants.  Yara has already reduced output at its Hull plant.  The cost of AN rose to around £500 per tonne.  Aside from the price, availability is likely to be just as much an issue, with little product on the market and orders not being taken.

The CF plants supply around 60% of the UK’s carbon dioxide – generated as a by-product.  The gas has a variety of uses in the food chain including stunning poultry and pigs prior to slaughter, displacing air in food packaging and carbonating beer and soft drinks.  The interruption in supply had the potential to cause major disruption.  The Government stepped-in and offered financial incentives for CF to restart its plants for a three-week period from the 21st September.  It appears that only the Billingham plant and not the one at Ince will reopen.  After this period, it is hoped that high prices will encourage the market to deliver new supplies of CO2.

Forecasters do not believe that gas prices will fall anytime soon.  This suggests that fertiliser production in the UK and Europe will remain constrained for a number of months.  Although additional tonnages are coming in from other places, this is likely to be in limited amounts.  Therefore, it seems fertiliser prices may well remain high at least for the remainder of this season.

 

 

 

 

Farming Focus InBrief – September 2021

  • Andersons’ consultants are continuing to support their clients during the pandemic. If you require any advice, please contact your  usual consultant, or the office on 01664 503200 or email [email protected].
  • The deadline for applications to the Sustainable Farming Scheme (SFI) Pilot has been extended until 30th September 2021 (originally 1st September).  The Pilot is for those who expressed an interest in the scheme earlier in the year.  Furthermore, Defra continues to make amendments to the online guidance for the SFI Pilot.  There seems to be a lot of guidance, we think the best place to start and ‘navigate’ from is https://www.gov.uk/government/collections/sustainable-farming-incentive-pilot-guidance. The extension might suggest that not as many have signed-up to the scheme as Defra hoped.  If you expressed an interest in the scheme earlier in the year and would like help with applying, do not hesitate to contact one of our consultants.
  • Farmers in Scotland could receive 95% of their 2021 BPS payment as early as September.  Once again, Scotland has announced it will be running a National Basic Payment Support Scheme.  This will mean loan offers will be made, calculated at 95% of a claimant’s anticipated BPS payment including the Greening amount, capped at a maximum of £133,638 (€150,000).  Letters will be sent out in batches, with the first set arriving from mid-August.  Similar to the scheme in 2020, those wishing to make use of the scheme will need to opt in.  Balance payments will be made from December 2021 when the payment window opens. In Wales, the aim is to make a BPS advance payment of 70% of the estimated claim value from 15th October 2021.  Payment will be made automatically subject to submission of an eligible BPS claim and the necessary supporting documents.  Balancing payments will be made from 15th December subject to completion of the full validation of the claim.  In England there has been no announcement regarding ‘early’ payment.  As in previous years payments are expected to commence on 1st December 2012
  • Covid and Brexit disruptions are impacting on costs and availability in some parts of the economy. Rising costs of steel and timber from global demand and restricted production are also affecting building projects.  Globally, costs for containers and bulk shipping have risen considerably.  At home a shortfall of HGV drivers is causing problems.  An existing shortfall has been exacerbated by EU drivers leaving due to a combination of Brexit and Covid.  Covid has also delayed HGV driving tests meaning few new drivers are coming through.  High-profile shortages such as Nando’s chicken and McDonalds milkshakes have already been reported (although the former is as much about a shortage of poultry processing staff as transport issues).  There are few reports of deliveries to and from farms being affected, but it will be an area of concern over the coming months.  It may be advisable not to let stocks on farm run too low as orders may take longer to arrive than usual and haulage of grain or livestock may have to be booked earlier.
  • Higher Tier Countryside Stewardship agreement holders with 5-year options ending on 31st December 2021 and further 10 or 20-year options (called CS 5 in 10 Agreements) could be offered a replacement agreement under domestic regulations. These will run for 10 or 20 years and although not completely clear, it appears the options coming to their 5-year end will be extended so this land continues to be managed environmentally.  NE will carry out initial assessments to see if an agreement is suitable for a replacement.  If this is deemed to be the case, the RPA will write to agreement holders inviting them to apply.  It will be possible to terminate a replacement agreement early, without penalty, at the end of an agreement year if a place in ELM has been secured. 
  • Defra has confirmed the Catchment Sensitive Farming initiative is to be expanded to cover the whole of England by March 2023. The programme gives farmers support to reduce air and water pollution.  Some funding via CS is only available with support from a Catchment Sensitive Farming Officer (CSFO) and if the land is in a priority catchment area.  It is unclear whether this announcement will mean the whole of England now falls within this category and these grants are available to all. There will be extra funding for more NE advisors to be available to help farmers implement practical solutions to reduce pollution.  But it will also fund 50 new EA inspectors to carry out an increased number of farm inspections.
  • The Farm Business Grant (FBG) opened in Wales on 1st September 2021 for expressions of interest.  The closing date is 1st October and successful applicants will have four months in which to purchase and claim for items.  The FBG provides a 40% contribution towards capital items which have been pre-identified to improve technical, financial and environmental performance.  A budget of £2m is available under this round.
  • A reminder that the Future Farm Resilience Fund is now open. If you would like a one-to-one farm resilience review and report carried out by one of our consultants and access to online skills and training, including resilience planning webinars all for free get in touch with one of our consultants. Places are limited.     More information can be found at https://www.eventbrite.co.uk/o/ricardo-future-farming-resilience-fund-29430290977
  • FPC Future, an agritech event, takes place on 4th November at the Lincolnshire Showground. With its exhibition, conference and tours of the University of Lincoln, it seeks to provide growers with all the agritech information they need. This event should be of interest to those looking at opportunities in the fresh produce sector as well as ascertaining how new technologies could boost productivity by helping their workforce to become more efficient. Registration is free – www.fpcfuture.co.uk

This month’s Spotlight looks at the latest the latest situation regarding the spreading of organic manure this autumn and the impact of the Farming Rules for Water.   Click Here for further information.

If you would like more detail on the topics covered above as well as additional articles on UK farm business matters, why not subscribe to Andersons’ AgriBrief Bulletin? Over the course of each month, we give a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, and its implications for farming and food businesses. Please click on the link below for a 90-day free trial:

https://agribrief.co.uk/

 

Spotlight on Autumn Manure Spreading

Recently there has been a lot of talk about the Farming Rules for Water and specifically the spreading of organic manure in the autumn.  The issue is, under Rule 1, when organic manure is applied to agricultural land, the application must not exceed the needs of the soil or crop on the land and must not give rise to a significant risk of agricultural diffuse pollution.  This effectively makes autumn and winter spreading on a lot of farms impossible.  For example, if spreading can only take place if there is a crop need, this would mean grass, which is dormant at this time of year, would have no crop need and therefore spreading cannot take place.  The rules are not new, but it appears the EA note has highlighted the issue to the industry and perhaps indicates a more robust approach to enforcement from the EA.

However, for this autumn, the Environment Agency (EA) has released a Regulatory Position Statement (RPS) on the application of organic manure.  This means if the conditions of the RPS are followed it will be possible to have a plan to apply organic manure to agricultural land that may exceed the needs of the soil or crop on that land.  But importantly, the plan must not cause a risk of pollution.  Those using the RPS will still need to show that applications do not exceed the requirements of the crop for the whole duration of its growing cycle.  Farmers must also be able to show that using the RPS is the only option and it has not been feasible to store the organic manure at the place of production or use.  They must also demonstrate that it has not been possible to store the manure off-site or send it to an AD plant or other effluent treatment plant.

Following lobbying from the NFU, the EA updated its guidance further on 25th August to include a ‘hierarchy’ of actions:

1).  If you can follow Rule 1 of the Farming Rules for Water, then you do not need to use the RPS – carry on with your planned activities.

2).  If you can follow the conditions in the RPS – tell the Environment Agency you are using the RPS as described in the ‘contact’ section (see below) and carry on with your activities.

3).  If you cannot comply with the conditions in the RPS, email  [email protected] or call 03708 506 506 (general enquiries).  The Environment Agency will assess the risk of your activities.  For this autumn, it will allow activities that will not cause significant risks (significant risk may result from repeated applications to the same field or spreading close to protected sites, such as Natura 2000 sites). You must not start your activities until the Environment Agency confirms you can do so.

Contact details for the EA and full guidance can be found at https://www.gov.uk/government/publications/spreading-organic-manure-on-agricultural-land-rps-252/spreading-organic-manure-on-agricultural-land-rps-252.  The RPS will be withdrawn on 1st March 2022, unless there is a further extension.  This is only a short term ‘fix’ to the problem, which will arise again next autumn.  Many in the industry have raised concerns as to how practical the rules are.  A move to more storage and spring and summer spreading looks like the only solution, but this will take time and money.  If you are having difficulties adhering to the rules or require further clarification, please contact one of our consultants for advice.

 

 

 

 

Farming Focus InBrief – August 2021

  • Andersons’ consultants are continuing to support their clients during the pandemic. If you require any advice, please contact your  usual consultant, or the office on 01664 503200 or email [email protected].
  • The Future Farm Resilience Fund opens this month (August) in England and will run until March 2022. It is designed to provide business support to farmers during the early years of the Agricultural Transition.  Nineteen organisations have been awarded funding to deliver a variety of business support, which will be free of charge.  This initial phase will be fed-in to design the final scheme which will run from 2022 to 2024.  Andersons, in partnership with Ricardo are one of the organisations delivering support and will offer one-to-one farm resilience reviews, resilience planning webinars and access to online skills and training.  If you would like some free business support to help plan for the future, more information can be found at https://www.eventbrite.co.uk/o/ricardo-future-farming-resilience-fund-29430290977 or contact one of our consultants to sign up.
  • Defra has confirmed the new Farming Investment Fund (FIF) will open for applications in October this year. This is for capital items and is expected to be similar to the previous Countryside Productivity Small Grant scheme, where a 40% grant was available for pre-identified capital items.
  • A new Welsh Agriculture Bill is to be laid before the Senedd this autumn.  It will contain the powers to enact the new Sustainable Farming Scheme (SFS).  The Welsh Government has suggested the new support scheme should start in 2024 (although this is not 100% certain).  The Bill is unlikely to give details of how the SFS will work in practice, this is still being worked on.  Instead, it will set the legal framework under which the scheme will operate.
  • It was announced by the AHDB at the Cereals Event that the levy board was working in collaboration with Defra to produce an industry-standard carbon calculator for farming.  The aim is to have a tool available for the start of 2023. There is a plethora of different carbon calculators being used in UK farming at present, all with different methodologies and producing different results.  In addition, an industry group has been granted funding to develop a Farm Soil Carbon Code.  This would be similar to the existing Woodland and Peatland Codes, providing a set of formal protocols that would allow farmers to quantify and verify reduced greenhouse gas emissions and/or soil carbon capture as a result of adopting regenerative farming practices.  The lack of a formal standard is one of the issues holding back the development of a market in carbon offsetting in farming.
  • Defra and Natural England have announced the potential creation of two new AONBs, plus the extension of two existing ones.  The new ones are a Yorkshire Wolds AONB and a Cheshire Sandstone Ridge AONB.  The extensions are to Surrey Hills and the Chilterns.  Unhelpfully, the statement (see https://www.gov.uk/government/news/natural-england-announces-landmark-new-programme-for-protected-landscapes) gives no details on the precise areas to be covered by the designations.  A consultation is promised later in the year.
  • The second part of the National Food Strategy has been released. Whilst the recommendation of a sugar and salt tax made headline news, other recommendations directly affect farming more.  Such as guaranteeing the budget for Agricultural payments until at least 2029 and ring fencing some of the money to put towards schemes which would fund taking out of production 20% of the least productive land to create environmentally friendly landscapes.
  • British Sugar has announced the beet price for the 2022 season will be a minimum of £25.   This compares to £21.10 being paid for the current crop (under one-year contract terms).  The idea behind the company releasing an ‘indicative’ price before negotiations are complete seems to be to persuade growers to keep beet in the rotation as they plan their cropping decisions. The NFU is holding out for a higher contract price.  In recent years a contract price has not been announced until September.
  • According to the AHDB’s 2021 Planting and Variety Survey, GB winter wheat plantings have recorded a year-on-year rise of 26% to 1,742K hectares.  Every region recorded a rise in plantings. In contrast, the total GB barley area has recorded an 18% year-on-year fall to 1,119K hectares as growers ‘correct’ their rotations from their enforced spring cropping regime last season.  The winter barley area rose 15% to 350K hectares, with spring barley plantings recording a 28% fall on the year to 769K hectares; still quite historically high.  58% of the GB barley area is of a malting variety. The area of oats has risen by 1%, whilst OSR plantings have fallen by a further 15% since last year.  This makes the cropped area the lowest since 1989 (including spring OSR).  Ironically, crops look good this year and those growing it look like being rewarded with a high gross margin so it may encourage a small resurgence of OSR for 2022.
  • The UK potato crop escaped the storms which hit mainland Europe, but conditions are ideal for blight. New crop prices have been supported as stocks have been slow to the market.  Easing of Covid-19 restrictions has seen an increase in demand for processing and chipping potatoes.  The warm weather has helped demand for salad, but less so for maincrop packing types.  The loss of data from AHDB means it is difficult to know the area planted in the UK.  World Potato Markets initially assumed a 5% decline, but it may be less.  Any decline would result in one of the smallest crops ever; an average yield would mean a crop of just over 5mt.  Planting in Germany, France, Belgium and the Netherlands is estimated to be down by 4.5% to less than 500,000ha, with up to 20,000ha impacted by storms, although some should be salvageable.

This month’s Spotlight looks at the latest information released on the Sustainable Farming Incentive (SFI).  This is the first component of ELM. This initial phase of SFI will open for applications in 2022 Click Here for further information.

If you would like more detail on the topics covered above as well as additional articles on UK farm business matters, why not subscribe to Andersons’ AgriBrief Bulletin? Over the course of each month, we give a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, and its implications for farming and food businesses. Please click on the link below for a 90-day free trial:

https://agribrief.co.uk/

 

Spotlight on Sustainable Farming Incentive 2022

More details have been announced on the Sustainable Farming Incentive (SFI); the first component of Environmental Land Management (ELM) and the one most farmers should be able enter.  These details are different to the SFI Pilot for which those who expressed an interest are now drawing up an Agreement.  These details are for the ‘main’ scheme which will open in spring 2022 for applications to this first phase.  The scheme will then gradually expand until all elements are available from 2024/25 onwards.  Between 2022 and 2024, the SFI will run alongside existing schemes (e.g. Countryside Stewardship).  Farmers will be able to choose which schemes to participate in and can participate in multiple schemes if they wish, but they will not be paid twice for the same action.

SFI 2022

In this initial phase, the SFI will concentrate on soils and introduce the first element of the Animal Health and Welfare Pathway which will be available under SFI.  There will just be four Standards within SFI 2022, these are:

  • Arable and Horticultural Soils Standard
  • Improved Grassland Soils Standard
  • Moorland and Rough Grazing Standard
  • Annual Health and Welfare Review

The payment rates and the standards outlined below are indicative, the final versions will be available by November 2021 following further refinements and feedback from farmers and stakeholders.  The most up-to-date information can be found at; https://www.gov.uk/government/publications/agricultural-transition-plan-june-2021-progress-update

The Arable & Horticultural Soils Standard and the Improved Grassland Soils Standard – Farmers will be rewarded for management practices which improve the soil structure and soil organic matter.  With the aim of promoting clean water, improving climate resilience, biodiversity and food production.  There will be three ambition levels for each of the soil standards.  The indicative rates are:

Moorland and Rough Grazing Standard – Farmers will be rewarded for assessing the range of habitats and features present on their moorlands.  This has the aim of identifying the pressures on them and also the risks posed by wildfires.  For 2022 there will only be an Introductory level; higher levels of ambitions are planned for later in the Agricultural Transition.  No indicative payment rate has been announced for this Standard.  The plan is for this Standard to be developed further during the summer with farmers and stakeholders.  It will be finalised by November 2021 along with a payment rate.  This Standard will be available to all Moorland farmers, including those already taking part in Countryside Stewardship.

Annual Health and Welfare Review – This is the initial phase of the Animal Health and Welfare Pathway.  It will involve a Defra-funded yearly visit from a vet.  It is initially planned to be available for three years.  The review will include;

  • Data collection to benchmark against the national herd/flock and to track progress on the holding
  • Actions to improve biosecurity, including training, capital investment, changes to farm management practices (unclear whether this will include additional funding)
  • A review of medicine usage.  Including uploading medicines to an e-medicines recording hub
  • Recommendations to improve health and welfare and signposts for further support to help make changes.
  • Diagnostic testing for priority diseases – Bovine Viral Diarrhoea (BVD), Porcine Reproductive and Respiratory Syndrome Virus (PRRS) and for sheep, parasitic resistance to anthelmintic treatments.

Payments are expected to range from £269-£775.  The main difference in the rate is due to the costs of the diagnostic tests which vary across the species.

More Standards – More Standards will be added to the SFI between 2022 and 2024.  Priority will be given to those Standards which make the most significant contribution to the environment, climate and animal health & welfare outcomes and those that have multiple benefits.  Consideration will also be given to how each Standard extends the opportunity to more types, location and sizes of farm.  The Standards which are currently under consideration are;

 

·        agroforestry standard ·        farm woodland standard
·        hedgerows standard ·        dry stone walls standard
·        arable and horticulture land standard ·        heritage standard
·        waterbody buffering standard ·        farmyard infrastructure standard
·        improved grassland standard ·        orchards and permanent crops standard
·        low and no input grassland standard ·        peat soils standard

 

All our consultants are keeping abreast of the new schemes, if you would like to discuss anything with them do not hesitate to contact a member of the team.  We will continue to keep you updated as we learn more information.

 

 

 

Farming Focus InBrief – July 2021

  • Andersons’ consultants are continuing to support their clients during the pandemic. If you require any advice, please contact your  usual consultant, or the office on 01664 503200 or email [email protected].
  • The UK and Australia have agreed the outline terms of an historic free-trade agreement – the first all-new deal signed by the UK since it left the EU.  As such, it is seen by many as an important precedent for future trade deals, particularly concerning agriculture.  Whilst the deal has been announced, it is an agreement in principle and subject to further negotiations on the legal text. There is an eventual aspiration to fully liberalise Australian goods entering the UK market.  However, there are lengthy adjustment periods for most agricultural products – up to fifteen years for beef and lamb. But the UK grazing livestock and sugar sectors in particular will be exposed to increased competition from Australia in the long-term.  Additional competitive pressure is likely to emerge when the likes of New Zealand and others strike trade deals with the UK.  Of course, having generous quota access with eventual full liberalisation does not necessarily mean that Australian imports will reach these levels, particularly as there is plenty of demand in Asia-Pacific and the UK is a long way from Australia.  But the access offered to Australia is sizeable and of concern to British farming, particularly as it is the first of several trade deals.
  • Further details of the Sustainable Farming Incentive (SFI) pilot scheme are now available. Those who submitted an Expression of Interest in the pilot will be shortly asked to make an application.  The pilot agreements will commence in October 2021 and continue until late 2024.  If you expressed an interest and would like advice on drawing-up an application, please contact one of our consultants.
  • The new England Woodland Creation Offer (EWCO) is now open.  The EWCO is available in addition to the Woodland Creation and Maintenance grant provided under the Countryside Stewardship scheme.  It supports the creation of a range of woodland types, but it will have more emphasis on the environmental and public benefits of woodlands. Sizes range from a minimum of 1ha per application with 0.1ha blocks. Capital grants covering the standard costs of buying and planting a tree, up to a maximum cap of £8,500 per ha is available – this compares to a maximum of £6,800 per ha under the Woodland Creation and Maintenance grant via the CS.  Maintenance payments for 10 years and further ‘Additional Contributions’ of between £400 and £2800 per ha are also available.
  • Tenants will be able to challenge their Landlords’ refusal to allow them to enter into land management agreements under new regulations which came into effect from the 21st June.  It applies to 1986 Agricultural Holdings Act (AHA) tenancies only.  Tenants can apply to arbitration to vary the terms of the tenancy, or to gain Landlord’s consent, to enter one of the new financial assistance schemes (such as ELM) or to comply with a statutory duty (e.g. erecting a slurry store to be NVZ compliant).  The regulations apply to England with equivalent Welsh ones expected later in the year.
  • The first estimates of Total Factor Productivity (TFP) for 2020 (unsurprisingly) show a sharp decline compared with 2019.  TFP measures how well inputs are converted into outputs and thus gives an indication of the efficiency and competitiveness of the farming industry.  After a significant increase in 2019 (+4%), TFP has fallen back further by 6.7% in 2020.  The decrease was mainly due to a -6.3% decline in the overall levels of production but there was also a small 0.5% increase in the volume of inputs. The main driver was the drop in crop output of -12.4%.  Cereals decreased by -26% due to the challenging weather.  OSR and sugar beet experienced declines of -41% and -23% respectively. The overall livestock output declined by -0.6%.
  • Reports from the Royal Institution of Chartered Surveyors (RICS) and the Royal Agricultural University (RAU) show the Weighted Average farmland price for the full year 2020 was £10,390 per acre (£25,674 per Ha).  This is a hefty 20% rise over the two surveys combined for 2019, where the price was £8,602 per acre (£21,257 per Ha).  The Weighted Average Value excludes those sales which have been identified as having a residential value of more than 50% and a regional adjustment is also made.
  • Bovine TB cattle vaccination trials commenced in June in England and Wales with the aim of rolling out cattle bTB vaccinations by 2025.  This would be a ‘game changer’ and cannot come soon enough, particularly for those that live with the drudgery of constantly testing. The Government has also said it will end issuing new licenses for intensive badger culls as from 2022.  Many farmers will be disappointed to hear this, especially as even under the Government’s own admission it has led to a ‘significant reduction’ in the disease. 

This month’s Spotlight looks at the forecasts for Andersons’ Meadow Farm model. Click Here for further information.

If you would like more detail on the topics covered above as well as additional articles on UK farm business matters, why not subscribe to Andersons’ AgriBrief Bulletin? Over the course of each month, we give a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, and its implications for farming and food businesses. Please click on the link below for a 90-day free trial:

https://agribrief.co.uk/

 

Spotlight on Andersons’ Meadow Farm

The Andersons Centre’s mixed lowland farm model ‘Meadow Farm’ has been updated.   The table below shows the final results for 2019/20 and 2020/21, and an estimate for the current year, and an early forecast for 2022/23.

The 2019/20 year was affected by low livestock prices, particularly for beef.  But the beef price recovered throughout 2020 and is currently very strong.  The lamb price also continued to perform well throughout the year and with a Free Trade Agreement (FTA) negotiated with the EU, prices this spring have exceeded expectation.  Meadow Farm sells all its finished cattle from August to October and lambs from July, with all having left the farm by the end of December.  Therefore, it didn’t fully capitalise on the very high lamb prices seen in the first quarter of 2021.  Even so, as the table shows, the livestock gross margin in 2020/21 was the strongest it has been for some time.  After a tough winter and spring, it looked like the arable results from harvest 2020 would be poor.  However, as a result of the rise in crop prices seen through autumn 2020 the gross margin strengthened.  Overheads fell, in part due to a drop in the fuel price, but also because of a decline in machinery and property depreciation.

With such a poor year in 2019/20 the proprietors of Meadow Farm did not invest in any big pieces of machinery.  But such low levels of reinvestment are not sustainable.  The result being the combined margin from production for 2020/21 is the strongest it has been for a number of years, however the margin from production is still negative and it still takes the BPS and CSS payments to provide profit.

Looking ahead to the rest of the current 2021/22 year, livestock prices are expected to remain good, but not quite at the levels of 2020/21 once averaged over the whole year, especially the lamb price.  The arable gross margin is budgeted to remain similar as a drop in crop price is compensated by better yields.  Overheads reduce, due to lower machinery depreciation, but some of the machinery will soon need replacing.  The margin from production is not as good as 2020/21 but is still better than recent history.  2021/22 is the first year of the Agricultural Transition and the BPS is reduced by 5%, but the addition of this still leaves a good profit for the business relative to other years.

The final column is the first (tentative) forecast for 2022/23.  Livestock prices are expected to drop back further, likewise arable prices and yields are expected to be more ‘normal’.  Overheads rise due to increased fuel prices and a small machinery purchase means the depreciation increases.  The margin from production is not as good as the last couple of years and the BPS is reduced by 20%, meaning the business surplus is back to 2019/20 levels.  The proprietors of Meadow Farm are hoping the new Sustainable Farming Incentive can recoup some of the ‘lost’ BPS.

Meadow Farm is typical of many livestock holdings in England, it is a notional 154 hectare (380 acre) beef and sheep farm in the Midlands.  It consists of grassland, with wheat and barley for livestock feed.  There are 60 spring-calving suckler cows with all progeny finished, a dairy bull beef enterprise and a 500 breeding ewe flock.  The business is subsidy-dependent, but with direct payments decreasing from 2021 it will need to adapt; maybe through restructuring to reduce its overheads, which are fundamentally too high, or perhaps by taking advantage of the new ELM scheme, or possibly a combination of both.

If you would like advice as we transition away from the BPS our consultants are ready to help, do not hesitate to contact one of us.

 

 

 

 

 

Farming Focus InBrief – May 2021

  • Andersons’ consultants are continuing to support their clients during the pandemic. If you require any advice, please contact your  usual consultant, or the office on 01664 503200 or email [email protected].
  • The UK Government has set challenging new targets for the reduction of greenhouse gases (GHG). This is likely to have implications for agriculture as one of the economic sectors that is seen both as part of the problem, and the solution, when it comes to battling climate change.  The UK had a previous commitment to reduce emissions by 68% compared to 1990 figures by 2030.  The target has now been extended to a 78% cut by 2035.  The eventual aim is for the UK to be ‘net zero’ by 2050. 
  • New Regulations to protect water from pollution came into force in Wales from 1st April 2021.  The rules, put the whole of Wales into a Nitrate Vulnerable Zone (NVZ).  The Water Resources (Control of Agricultural Pollution) (Wales) Regulations 2021, apply to all land, but transitional periods have been provided for certain requirements where land was previously not within an NVZ. Full guidance can be found via  https://gov.wales/sites/default/files/publications/2021-03/water-resources-control-of-agricultural-pollution-wales-regulations-2021-guidance-for-farmers-and-landmanagers.pdf
  • The RPA has announced expiring Countryside Stewardship (CS) agreement holders may be offered a new five-year Agreement, instead of one-year extensions.  So called ‘Mirror Agreements’ will be available for Mid and Higher Tier agreements which are due to expire on 31st December 2021.  The new Mirror agreements will be offered under domestic CS regulations and subject to the 2022 manual.  One-year CS extensions will no longer be offered.
  • The RPA has given some updated information on Countryside Stewardship (CS) inspections, especially for agreements which commenced from 1st January 2021.  CS (and Environmental Stewardship) agreements which started prior to this date must still meet EU rules for inspections.  But for CS agreements starting on or after 1st January 2021 UK domestic rules apply and the RPA has changed ‘Inspection’ to ‘Environmental Outcome Site Visit’. In 2021 there will be two approaches to the ‘Environmental Outcome Site Visit’;
    • Whole Agreement – will look at all the options in the agreement
    • Campaign – this will just look at certain options which have been chosen for the year. For 2021, these are;
      • Buffer Strips – SW1 and SW4
      • Grassland Options – GS1, GS2, GS7 & GS17
      • Boundary Options – BE3
  • Defra has announced Organic Higher Level Stewardship (OHLS) agreements will now be eligible for one year extensions.  Originally it had said extensions would not be available for Organic ELS/HLS agreement holders. 
  • The much-delayed consultation on the delinking of the BPS and lump-sum payments has been postponed again.  It has now been put back due to the ‘purdah’ period ahead of the Local Elections.  It will not appear before the 7th May.
  • The International Grains Council (IGC) has released its first full supply and demand projection for the 2021/22 year.  This shows 63mt more grain production than last year at 2,287mt (a 2.8% increase).  But with consumption increasing by 54mt this only stops the decline in stock levels. The level of grain stocks entering the new marketing year is the lowest for four years – this is what is fueling the global price rises.  The figures are marginal at this stage of the year, the current concerns over the dry weather, or the arrival of rain in the key grain growing areas of the world could have major swings in the availability of grains for the coming year, and prices.
  • British Sugar believes total sugar production is likely to be just over 1mt in 2021; 10% higher than in 2020.  The reason is a reversion to more normal yields after virus yellows disease caused a drop of 25% in crop output last year.  The cold weather in February reduced aphid numbers which spread the disease. Crop plantings this spring are down 10% on the 2020 area of 103,000 Ha, but higher yields are expected to more than compensate for this.
  • Commodity and farmgate milk prices remain good. The average Global Dairy Trade (GDT) index stood at $4,110 at the event held at the end of April. Closer to home, a further 1.4ppl increase in May for Arla member suppliers sees the co-operative leading the way on milk price.  However, the cold, dry weather is continuing to curtail grass growth and production.
  • Finished beef and lamb prices continue to exceed expectations. The deadweight beef price has passed the £4/kg price for the first time.  And, after declining monthly since the middle of 2020, pig prices have started to increase.

This month’s Spotlight looks at Farm Business Income,  for England for the past year. Click Here for further information.

If you would like more detail on the topics covered above, why not subscribe to Andersons’ AgriBrief Bulletin? Over the course of each month, we give a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, and its implications for farming and food businesses. Please click on the link below for a 90-day free trial:

https://agribrief.co.uk/

 

Spotlight on Farm Business Income

Farm Incomes in England show a mixed picture for the past year.  The main sectors almost all show big changes on the previous year, but in varying directions.  The winners were Grazing Livestock and Poultry whilst the Arable sectors, Dairy and Pigs all showed large declines in returns.

The data comes from the Farm Business Survey (FBS).  Just released, are forecasts for Farm Business Income (FBI) for the 2020/21 year (the years run approximately from Feb to Feb).  Final figures will be released in November.  FBI is effectively farm profit.  The full set of statistics can be found at https://www.gov.uk/government/statistics/farm-business-income.

As seen in the table above, both Cereals and General Cropping farms are estimated to show big falls in FBI compared to the previous year.  This is perhaps not surprising as the latest figures cover the 2020 harvest which saw reduced planted areas and lower yields.  Dairy farm profits have been affected by higher costs, notably feed, even though milk prices were largely stable during the year.

Livestock farms both in the lowlands and uplands have benefitted from much improved prices for beef and sheep.  Pig producers had lower sale values.  Coupled with rising feed prices this has resulted in a big downwards swing in FBI.  Poultry farms have also had to face increased feed prices.  In this case however, these have been offset by better egg and broiler values.

If you are interested in getting a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, click on the link below for a 90-day free trial of Andersons’ AgriBrief Bulletin:

https://agribrief.co.uk/

 

 

 

Farming in Focus InBrief – April 2021

  • Andersons’ consultants are continuing to support their clients during the pandemic. If you require any advice, please contact your  usual consultant, or the office on 01664 503200 or email [email protected].
  • The application window for Basic Payment Scheme claims has now opened in all parts of Great Britain. The deadline for submission without incurring a penalty is 17th May this year, as 15th May falls on a Saturday.  The biggest change in the scheme is the removal of most of the Greening requirements (Ecological Focus Areas are still required in Scotland).  This should make the process of claiming somewhat easier.  The entitlement usage rule, which used to mean, at least once in every two years all entitlements needed to be used in a single claim, has also been abolished.  Meaning unused entitlements will not be removed from claimants. In England, the annual revenue claims under Countryside Stewardship and Environmental Stewardship are also open.   Again, the deadline is the 17th  If you need advice on completing your 2021 BPS application or an Agri-environment revenue claim, please contact your usual consultant or 01664 503200 or email [email protected].
  • Morrisons has pledged to be the first supermarket to be supplied by net-zero farms.  The supermarket has said it will work with its 3,000 suppliers to help them become zero carbon emitters by 2030.  Waitrose has also committed to be supplied by net zero farms by 2035.  Morrisons expects eggs will be the first products to reach this status and this could be as early as 2022.  Lamb, fruit, vegetables, pork and beef will then follow. The retailer’s Livestock and Produce Teams will initially work with a small number of their suppliers to create net zero carbon farm ‘models’.  Once these ‘blue prints’ have been established they will be rolled out across all of the retailer’s suppliers to enable all food to be produced in a climate friendly way.
  • The Farm Business Grant opened in Wales on 1st March.  This is the 8th Expression of Interest EoI) for the scheme which pays up to 40% towards the cost of specific capital items which have been pre-identified to improve the economic and environmental performance of the business.  Applications are made via RPW Online.  The deadline for EoI is 9th April 2021.  Further information is available via: https://gov.wales/farm-business-grant-rules-booklets
  • The Swedish company Oatly, that produces alternatives to dairy products from oats, plans to open its first UK factory in 2023.  The facilities which will be based in Peterborough, Cambridgeshire will initially produce 300 million litres of oat drinks per year, increasing to a capacity of 450 million litres.  According to the company it will use oats from across the UK which will be a boost for the domestic crop, which has seen a resurgence in recent years.
  • Cereals 2021 will now be held on June 30th – July 1st this year.  Under the Government’s lockdown exit strategy, restrictions are due to end on 21st June, organisers have therefore decided to move the event from the original June 9th -10th in order to accommodate the maximum number of visitors and exhibitors.  The event will continue to be held at Boothby Graffoe, Lincolnshire with the format remaining the same as in previous years.
  • The Budget, on the 3rd March continued support for the economy to cope with the effects of the Covid-19 pandemic whilst making the first, tentative, steps towards rebuilding the public finances. The economic outlook is set to improve later this year as lockdown measures are gradually unwound.  The UK economy is forecast to have shrunk by 9.9% in 2020 – the largest contraction for 300 years.  The latest forecast from the Office of Budget Responsibility (OBR) indicates that the economy will rebound with 4% growth in 2021 followed by an increase of 7.5% the year after.
  • The effect of Brexit can be seen in sharply reduced trade volumes with the EU. The Office for National Statistics (ONS) recently published UK trade data for January 2021.  Unsurprisingly this has revealed significant drops in food and live animals trade with the EU; there has been a 64% drop in exports to the EU, whilst imports from the EU have fallen by 24%.  More time is needed before definitive conclusions can be drawn, however.  The situation has improved since January and traders who are well-organised are getting through the EU border controls.  It will be mid-year before a definitive picture will emerge as agri-food trade is often lower during January to March.  Trade should recover somewhat but probably not to the same levels as before.  The significant decline in EU imports also presents opportunities for domestic suppliers to capture a greater proportion of the UK market, particularly in perishable agri-food products.  This will mean that there will be winners as well as losers as a result of Brexit.

This month’s Spotlight looks at the Sustainable Farming Incentive (SFI) pilot scheme, it gives details of the different ‘Standards’ and payment levels released by Defra; a first look at this component of ELM. Click Here for further information.

If you would like more detail on the topics covered above, why not subscribe to Andersons’ AgriBrief Bulletin? Over the course of each month, we give a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, and its implications for farming and food businesses. Please click on the link below for a 90-day free trial:

https://agribrief.co.uk/

 

Spotlight on Sustainable Farming Incentive (SFI)

Details have been published on the Pilot phase of the Sustainable Farming Initiative (SFI).  This gives a first indication of what this component of Environmental Land Management will look like in terms of payment rates and requirements.  However, this is just a stage in the development of the scheme and the final details may well alter.

Defra is looking for ‘several hundred’ farmers to take part in this Pilot phase.  The window to submit an Expression of Interest opened on 15th March and closes on 11th April.  Defra will select farms so that they get a representative sample across English agriculture.  Those selected will be notified by 24th May and will be asked to make a formal application from that date, with agreements set to begin in October.  Pilots are expected to run until 2024.  Details of how to register an Expression of Interest can be found via – https://www.gov.uk/government/publications/sustainable-farming-incentive-expression-of-interest.  The EOI is submitted through the Rural Payments system.  It is a very simple process.  Those who want to be considered just have to select the farm type that covers the majority of their land and declare they are eligible (see below) to be considered.

Those looking to apply must be currently claiming the BPS and have management control of the land until 2024.  The land to be entered into the Pilot must not be in an existing agri-environmental scheme (i.e. Countryside Stewardship – CS).  The idea seems to be to test the scheme with farmers who are not used to being in a scheme.  It also means there is no overlap with existing CS provisions.  It is intended that, when the SFI is launched in 2022 (see below) it will be available on land in existing CS agreements but, presumably, won’t pay twice for the same actions.   

For the Pilot there will be eight ‘Standards’, each with three ‘Levels’ – Introductory, Intermediate and Advanced.  The payments rise for the higher levels, but a greater level of intervention is expected.  The tables below summarise payments and the actions required.  At present, payment levels are based on existing CS calculations.  These may change before the SFI 2022 is launched.  Payments will be monthly in arrears.  It is not known whether this will be carried into the ‘proper’ SFI. 

It is possible to have more than one Standard operating on the same parcel of land (e.g. the Grassland Standard and the Grassland Soils Standard).  Different Levels can be chosen for different Standards – i.e. it is possible to enter as Introductory in one, whilst going for Advanced in another.  Other Standards are likely to be introduced in future – Peat soils, Unenclosed uplands (i.e. Moorland), Common land and Animal Health & Welfare.

From looking at the actions in the table it will be seen that there is still a degree of uncertainty on what is required.  Many of the prescriptions are currently vague e.g. ‘provide resources for birds and insects’, without giving details of what exactly needs to be provided and in what quantities. 

Those entering the Pilot will be expected to provide Defra with information about how the scheme works.  It is estimated that this might take 10-15 hours per month.  There will be an expectation that a Land Management Plan will be drawn up over the lifetime of the agreement and that participants will take part in workshops, interviews surveys etc.  There will be additional payments (not yet disclosed) on top of the Standards payments to compensate for this.  There are also likely to be Capital payments under the scheme.  Although not stated, it seems likely that these will be similar to those seen under the present CS Capital Grants Scheme.  

What is learnt from the Pilots will help design the full Sustainable Farming Incentive scheme.  More information on the SFI 2022 is promised for summer 2021.  It should open for applications in ‘mid 2022’.

For more details see – https://www.gov.uk/government/publications/sustainable-farming-incentive-scheme-pilot-launch-overview/sustainable-farming-incentive-defras-plans-for-piloting-and-launching-the-scheme

Why Get Involved in the Pilot?

Taking part in the Pilot will mean getting involved in Environmental Land Management (ELM) at the earliest opportunity.   Although more detail is needed on the prescriptions, at first glance, they do not look too onerous and many businesses will already be undertaking some of these actions as a part of ‘good practice’ or will be able to with small changes to their farming practices.  With payments being made monthly in arrears, some income will be recouped almost immediately.  For a Countryside Stewardship application made this summer, no payment will be received until December 2022 at the very earliest.  Those taking part in the pilot, will also be able to give feedback and have some input in improving the scheme for the future.  Those making an EOI should know if they are successful or not in time to put in a Countryside Stewardship Mid-Tier if not selected.

How can Andersons Help?

Our consultants have up to date information on all the current farming support schemes and the new ones which are being introduced during the Agricultural Transition.  If you would like to discuss the SFI Pilot or any of the other schemes which are being introduced as we transition away from BPS payments to ELM, please contact one of our consultants.  All contact details can be found in the ‘Our People’ section on The Andersons Centre Website or call the office on 01664 503200 or email [email protected].

If you are interested in getting a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, click on the link below for a 90-day free trial of Andersons’ AgriBrief Bulletin:

https://agribrief.co.uk/

 

 

 

English Farm Support

Now the UK is no longer part of the EU, the Common Agricultural Policy (CAP) no longer applies.  Each of the Devolved nations are free to set their own agricultural support.  In England this will see a period of radical change in support – known as the Agricultural Transition.  Over the next 7 years the Basic Payment will be phased out, so that by 2028 there will be no direct payments.  This will be replaced mainly via a new Environmental Land Management (ELM) scheme but their will be other funding available to help increase agricultural productivity, animal welfare, skills & training.  Andersons has produced a concise guide to the changes in English Farm Support as a result of the Agricultural Transition. This can be found via Future Farm Support