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 – June 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].
  • UK farm profits fell by 20% in real terms between 2019 and 2020 based on latest Defra Total Income from Farming (TIFF) data. TIFF measures aggregate profitability of all UK farming businesses for the calendar year. The main reason for this decline was a 15% fall in the value of crop output. Income from diversification declined by almost 25%. Livestock sector output was broadly flat whilst costs declined in real terms. Looking to 2021, there are good prospects for a recovery with crops looking in good condition and prices, for crops and livestock, looking generally good (with 1-2 exceptions).
  • The Queen’s Speech which sets out the Government’s legislative agenda for the forthcoming Parliamentary session included a number of bills of relevance to the farming and rural sector. The most notable is the Environment Bill which is planned to be passed before the end of the year. Three Animal Welfare Bills are also planned which will include provisions to ban live animal exports for slaughter or fattening. A Planning Bill is set to include provisions for the ‘zoning’ of sites for development and plans to increase the numbers of homes built.
  • The farming industry has come together to call on the Government to protect the agricultural sector under any Free-Trade Agreement (FTA) with Australia. The farming sector is asking that some tariff and tariff rate quota restrictions remain whilst UK standards (environment, labour, food safety and animal welfare) are maintained. Some within Government are pushing for tariff-free and quota-free trade. Whilst imports from Australia are currently small in many cases, the deal sets an important precedent for future trade deals with the likes of the US and Brazil.
  • Plans for nature restoration and woodland creation have been unveiled as part of the Government’s plans to tackle climate change, address biodiversity challenges and help to deliver its net-zero commitment. The England Wood Creation Offer (EWCO) is due to open for applications shortly and replaces the Woodland Carbon Fund. It will be administered by the Forestry Commission and support will be available for diverse woodland types, from a minimum of 1 Ha per application. Payment rates are not yet published. From 2024, EWCO will transition into ELM and EWCO agreement holders will be able to transfer across to ELM at agreed points without penalty. 
  • The UK organic farming land area grew marginally in 2020. Latest Defra estimates put the organic land area at 489,000 Ha, up 0.8% on 2019. This accounts for 2.8% of the UK farmed area on agricultural holdings. It is mostly permanent pasture (62%) and temporary grassland (20%) with cereals accounting for 9% of area. Grazing livestock numbers on organic farms are down with sheep 13% lower and cattle numbers down by 9%. Pig numbers were down marginally (-0.6%) whilst poultry numbers rose by 2%. 
  • AHDB restructuring, due to the votes by the horticultural and potato sectors to end their levies, means that it is seeking to make around 140 staff redundant (30% of workforce). The majority will be in the two sectors concerned but it is also looking to make wider efficiency savings.
  • Wheat prices have fallen by £20/t since their highs of early May and currently stand at around £172/t. This is driven by improved weather conditions globally and projected records for cereals yields in the US. Feed barley has also slipped in line with the wheat price. Malting barley premiums are mixed. Growing and ripening conditions are ideal for barley across Europe. 
  • Chinese imports of maize look set to continue at high levels for 2021/22 marketing year. Historically, it has imported 5-6 million tonnes annually. In 2020-21, it imported 25 million tonnes. Some analysts believe it has already booked a similar amount for the year ahead. This could tighten global supply in 2021/22 and push the whole grain price matrix higher. 
  • UK farmgate milk prices remain good with further rises reported in May. Arla has announced a further 0.44ppl rise for member suppliers from 1st June. Several other suppliers have also increased their prices including: Muller (+1ppl for non-aligned suppliers); First Milk (+0.5ppl); Meadow Foods (+1.25ppl); Yew Tree Dairy (+2ppl); Freshways (+2.5ppl from July) and; Medina Dairy (+2.7ppl from 1st July). 
  • Finished beef and lamb prices have cooled somewhat in recent weeks. In early May, the deadweight beef price passed the 400 p/kg price for the first time.  For week ending 29th May, the GB all prime average price stood at 394 p/kg, returning to early April levels. These prices are still strong however. Whilst the orders from the catering sector have risen there is some evidence that retail orders have dropped slightly. Deadweight pig prices have continued to increase, with EU-spec SPP currently at nearly 152.8 p/kg.

This month’s Spotlight looks at Defra’s consultation on Lump Sum and Delinking of BPS in England. 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 Lump Sum and Delinking of BPS

The long-awaited Defra consultation on Lump Sum payments and Delinking of the BPS has finally been published.  The consultation seeks views on who should be eligible for the Lump Sum payments and how these and Delinked payments should be calculated.

Lump Sum Payments

These will be offered to those who wish to exit the industry.  Defra’s intention is that there will be a one-off application window in 2022 with no scope to apply after that.  Proposed conditions and eligibility rules include:

  • Only those who claim the BPS will be eligible, it is an exit scheme and therefore there will be no age restrictions.  To prevent recent entrants from leaving with a lump sum, Defra is proposing that applicants must have made their first Direct Payment (BPS) claim in 2015 or earlier.
  • The BPS applicant would have to give up their land in England.
    • An owner/occupier would have to sell and/or rent out their land, or transfer by gift.  The proposal is if an owner/occupier decides to rent out their land this must be via an FBT and for a minimum of five years.
    • A Tenant must surrender their tenancy, this can be a Farm Business Tenancy (FBT) or An Agricultural Holdings Act (AHA) tenancy.  AHA tenants will also be eligible if they pass on their tenancy under a succession.
    • Those receiving a Lump Sum would be able to retain occupation of their residential and commercial property and up to 5% or 5ha (whichever is the smaller) of their land.
  • All English BPS entitlements held by the applicant would be cancelled, including any that have been leased-in from another farmer.  Those that have been leased-out would be cancelled at the end of the lease.  This could present a problem where a Landlord has leased or Transferred entitlements to a Tenant with an obligation to return to the Landlord – will the Landlord accept the Surrender if he will be left with land without any entitlements? 
  • It will be an all-or-nothing scheme – it will not be possible for applicants to keep some entitlements and take a partial Lump Sum payment.
  • If a Lump Sum payment is received, the farm business cannot claim any further direct payments (BPS).  This includes any Directors of a Limited Company and all Partners of a Partnership.  If any recipient enters into a new land management agreements (or adds land to an existing agreement) such as Countryside Stewardship or ELM, during the Agricultural Transition, the Lump Sum payment will have to be repaid.
  • The tax treatment of Lump Sum (and Delinked) payments is currently being discussed with HMRC and guidance is expected shortly.  This will be crucial to how attractive the ‘offer’ is to many farmers – i.e. will the payment be taxed as capital or income.

With regard to the actual payments, Defra expects to be able to fund all the eligible applications it receives and therefore it will not be a competitive scheme.  There will be no rules on what the lump sum can be spent on.  The amount a claimant will receive will be;

Lump sum Reference Amount   X   2.35

A 2.35 multiplier means the payment will be approximately equivalent to the amount a farmer could have received in Direct Payments for 2022 to 2027 under the phasing out of the BPS.  The Reference Amount will be the average value (if more than one year is used) of BPS received (for English entitlements) before any penalties or progressive reductions have been applied in a Reference Period.   Defra is asking for views on the Reference Period, but is proposing a three-year average based on 2018, 2019 and 2020 BPS years.

There is a proposed payment cap of £100,000, meaning a maximum Reference Amount (average BPS claim) of about £42,500 would not be affected by the cap.  There will be measures put in place to deal with changes to farm businesses since the start of the reference period (‘mergers and scissions’) and also to prevent artificial changes to businesses to claim payment.

Full rules for the Lump Sum scheme are promised by the end of October this year.  This is to allow time for farmers to consider the merits of the scheme (and potentially Tenants to negotiate with Landlords) before applications are invited in ‘early 2022’.

Defra has clearly said exiting farmers will have to give up their entitlements.  It has also stated that it intends to end the New and Young Farmers National Reserve scheme (offering free entitlements) from 2022, meaning from next year we could already see land which will not have any entitlements over it.  On the face of it, it looks like new entrants will be losing out, which seems strange as part of the reason for the Lump Sum encourage new and young entrants by freeing-up land.  Defra has said the proposal will create ‘more lasting opportunities for new entrants to access land’ and in the press release it has said it is working on a scheme with industry leaders, local councils, land owners and new entrants on a New Entrants Scheme.  This will be available in 2022 with details expected to be published later this year.

Delinked Payments

These are expected to be introduced in 2024 and will mean businesses can reduce the area they farm or even cease farming and they will still receive payments for the rest of the Transition Period.  Delinking will not be optional.  Delinked payments will be made to those who were receiving a BPS payment in a Reference Period (see below) and in 2023 (if the Reference Period is earlier than this).   Defra has said Tenants who received BPS during the Reference Period, and still farm at the end of it should be eligible to receive the delinked payment. Again, this throws up questions about Tenancies which end during the Agricultural Transition; it seems to suggest that the Tenant will receive the Delinked payment and the Landlord will not have a payment to ‘give’ to a new Tenant.

The actual payments will be calculated for each year from 2024 to 2027 based on the BPS payments made to the applicant in the Reference Period less the progressive reductions for each year.  Defra is asking for views on the Reference Period.  It is proposing the average of 2018 to 2020 (the same as the Lump Sum) for ease, but acknowledges a longer period, which includes 2021 and 2022 would take account of more business changes.

Defra acknowledges that Delinking payments means there will no longer be an annual BPS claim, meaning it loses data on land use.  Having no link between payments and land also means  cross-compliance will no longer operate.  These points are not part of this consultation, indicating there will be another consultation later.

The consultation is open from 19th May until 11th August.  The  full consultation document can be found at https://consult.defra.gov.uk/agricultural-policy/lump-sum-and-delinked-payments-england/supporting_documents/lumpsumexitschemedelinkedpaymentsconsultation.pdf.  Responses can be made online via https://consult.defra.gov.uk/agricultural-policy/lump-sum-and-delinked-payments-england/

Whilst the detailed scheme rules for the Lump Sum will not be known until October, those potentially wanting to take advantage of it should be having discussions with the relevant parties (bankers, advisors, landlords, etc.) sooner rather than later.  

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 Incomefor 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-interestThe 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

 

 

Farming in Focus InBrief – February 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 Environment Bill has passed the Committee stage in the House of Commons.  It now moves on to the House of Lords.  However, due to a lack of Parliamentary time, the passage of the Bill will be delayed until the start of the next session in May. It is now expected to become law in the autumn.
  • All parts of Great Britain have published their cross-compliance guidance for 2021. In all countries the requirements are pretty-much identical to those for 2020.  The main change is how the rules and inspections are enforced – with Brexit there is now more flexibility on how the inspection regime operates.  The English guidance can be found at – https://www.gov.uk/guidance/cross-compliance-2021; the Welsh version at – https://gov.wales/cross-compliance-2021Defra has also published a useful list of what is required at a cross-compliance inspection this can be found at Cross compliance inspections: information needed for an inspection – GOV.UK (www.gov.uk)
  • The Seasonal Agricultural Workers Scheme (SAWS) will be extended to 30,000 places for 2021. The Government has announced the Pilot scheme, which ran with 2,500 places in 2019, and 10,000 in 2020 will be extended, and expanded, for the coming year, but the numbers still fall short of the estimated 80,000 seasonal workers required.
  • Defra has launched a consultation on the rules surrounding Gene Editing (GE) which could see approvals made easier. It is Defra’s view that organisms produced by GE or by other genetic technologies should not be regulated as GMOs (as is the case now under retained EU legislation) if they could have been produced by traditional breeding methods.  Brexit allows the UK to change this legislation.  The consultation can be found via https://consult.defra.gov.uk/agri-food-chain-directorate/the-regulation-of-genetic-technologies/. Responses by Wednesday 17th March 2021.
  • Defra has authorised the emergency use of neonicotinoids on sugar beet seed in 2021.  The authorisation is for the use of Syngenta’s Cruiser SB seed treatment in England only, once a threshold for virus levels has been reached.  The emergency authorisation has strict conditions attached including:
    • the application rate will be below the normal commercial rate
    • no flowering crop is to be planted within 22 months of the sugar beet crop, with no oilseed rape crop to be planted within 32 months  of the sugar beet crop
    • an industry-recommended herbicide programme must be followed to limit flowering weeds in and around the sugar beet crop.
  • The UK sugar industry faces increased competition after it was confirmed the Government’s proposed Autonomous Tariff Quota allowing imports of 260,000 tonnes of raw sugar per year without having to pay the UK’s import tariff of £280 per tonne will be enacted.  This is likely to increase price pressure in the UK market as low-cost cane sugar competes with UK beet.  The Government argues that this volume will merely replace sugar imports from the EU.  With the Brexit deal, however, then EU sugar can continue to come into the UK tariff-free too.
  • With the UK-EU Trade and Cooperation Agreement (TCA) (Brexit trade deal) in place, attention is shifting towards Free Trade Agreements (FTAs) with non-EU countries. The TCA was largely about protecting what was already in place – i.e. the significant trade between the UK and the EU. Therefore, the agreement largely preserves the status quo and has had little effect (so far) on markets.  Attention is now turning to the new deals the UK might sign with other countries.  This would see a change in the trading environment – and an effect on prices.  From an agricultural perspective, the most notable of these are the US, Australia and New Zealand. The negotiations which are most likely to conclude in 2021 are those with Australia and New Zealand.  Both countries are major exporters of beef and lamb, dairy products and wine.  Admittedly, imports of beef and lamb from both countries into the UK and EU have been below historic levels recently (supporting current strong prices).  This is mainly a function of a greater emphasis being placed on the Asia-Pacific region, particularly China which is struggling with African Swine Fever.  However, if the UK agrees an FTA with these countries it will lower trade barriers significantly and make the UK a more attractive destination.  Longer-term, it is inevitable that the UK will seek FTAs with other countries.  Chief amongst these would be Mercosur, which includes Brazil and Argentina – two farming powerhouses.
  • Vydate has not been re-authorised for use in the UK as from 31st December 2020.  The pesticide, can no longer be used, sold or distributed in the UK.  The decision was made just one week before authorisation ended and only gives until February 28th 2021 to dispose of any product.
  • Defra has announced the Countryside Productivity Small Grants Scheme Round 3 claim deadline has been extended by two months.  Applicants now have until midnight on the 31st May 2021 to buy and install all their items, and submit their claim for payment.
  • Country Stewardship (CS) applications are expected to open shortly. Whilst ELM is being piloted the CS scheme will remain open to new applications and those that go into CS will not be penalised if ELM is ‘better’. The RPA has stated ‘no-one in a CS agreement will be unfairly disadvantaged’ as the transition to ELM takes place.  Those who enter a CS agreement from 2021 onwards will be able to end their agreement, at agreed points, where they have secured a place in ELM.  A new objective for CS from 2021 will be air quality, with the aim to reduce ammonia emissions from agriculture.  Under a new Capital Grants offer, existing options that improve air quality such as slurry store covers or planting tree shelter belts are expected to be available as a stand-alone capital agreement, in priority areas, together with two new capital items – automatic floor scrapers and low emission flooring for livestock housing.  Further details are expected in the new CS 2021 manual, which is expected shortly and we hope to be able to feature this in next month’s Farming in Focus Spotlight.  With BPS payments starting their phase out this year, many are taking another look at CS.  Our consultants are experienced in drawing up applications which ‘work’ for their clients.  If you would like to discuss a CS application, please find the ways to contact us at the beginning of this briefing note.

This month’s Spotlight looks at the recently released Farm Business Income figures.  These are broken down by farming sector and for each one, into 4 profit areas, showing just how reliant the land based sectors are on the BPS money. 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 Incomes

Defra has released its revised Farm Business Income (FBI) figures for 2019/20.  Taken from the English Farm Business Survey (FBS), the data shows FBI for various standard farm types.  FBI can be thought of as equivalent to the ‘Net Profit’ measure widely used in accountancy.  These results update the provisional ones released earlier in the year.  The FBS works on Feb/March year ends so the period being reported covers harvest 2019 and the 2019 BPS.  The full release can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/944352/fbs-businessincome-statsnotice-16dec20.pdf   In the chart below, the first column for each sector shows the average FBI from 2011/12 to 2015/16.  The next four columns show the FBI for the subsequent years, broken down into four ‘profit centres’.  The final, light blue column is Andersons’ estimate for the current 2020/21 year.  As can be seen, only Dairy, LFA Grazing and Specialist Pigs and Poultry farms saw an increase in returns in 2019/20 compared to the year before.

Source:Defra

When looking at the breakdown of where the profit comes from for the years 2016/17 to 2019/20, red is profit from farming, orange represents the returns from the BPS, green is agri-environment scheme profit, and purple represents diversification.  For all the land based enterprises (Cereals, General Cropping, Dairy and Grazing Livestock) it can clearly be seen what a high percentage of profit currently comes from the BPS.   For the two Grazing Livestock farm types the return from agriculture is consistently negative; it takes part (or all) of the Basic Payment to return these farms to profit.  This is of real concern when looking ahead to the removal of direct support which is commencing this year.  Of course, FBI is only an average for the sector.  The range in performance across farms is vast, and the more efficient units are likely to have made a much better return than these average values show.  Unfortunately, the opposite is also true. 

Have you got a plan to ensure your farm business will remain profitable as the BPS reduces over the next seven years?  Or do you need help and advice on what may be available, whether that is through capital investment to improve the productivity on your farm or are you looking to replace some of the ‘lost’ BPS money by entering into a Countryside Stewardship or ELM agreement.  All our consultants have access to the most up-to-date information on all the future schemes and are experienced in making good quality applications. If you would like some advice  please contact your usual consultant, or the office on 01664 503200 or email [email protected].

Finally, we have made some initial estimates of 2020/21 FBI, shown in light blue on the chart.  These show the Grazing Livestock farm types seeing significant improvement mainly due to the better livestock prices experienced since spring 2020, but these are from a pretty low base.  Dairy farms are also forecast to see a further increase on the back of solid milk prices and a decline in costs.  Lower cereal and other crop output from harvest 2020 are forecast to impact on Cereal and General Cropping farm profits.

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 – January 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 first forecast of Total Income from Farming (TIFF) by Defra shows farm profits in 2020 fell by over 20% to £4.151bn compared with £5.278bn in 2019. Crop output, in monetary terms, is down 13% compared to 2019.  Livestock output is forecast to rise slightly.  We had been predicting a 10% drop, so the level of decrease comes as a bit of a surprise.  However, the first Defra forecasts have a history of quite large revisions, so the figure could yet settle closer to our estimate (£4.7bn) when the ‘first estimate’ is published in May next year. 
  • The Agricultural and Horticultural Development Board (AHDB) has published a new 5-year strategy (see https://ahdb.org.uk/strategy) and is asking ley-payers to comment on the proposals by the end of January. The AHDB will focus on two main areas.  The first is assisting levy-payers on-farm.  This will be through using data and analysis to help them make better decisions, investing in R & D and promoting knowledge exchange to get best-practice out onto farms.  The second focus area is promoting produce – both in new markets abroad but also domestically.
  • The RPA paid 95% of English farmers their 2020 BPS on 1st December.  This equates to £1.671bn (up some 40% on the amount paid on the first day in 2019).  The Agency also started paying Countryside Stewardship and Environmental Stewardship revenue payments for 2020.  There will only be one payment under these schemes this year rather than split payments as in the past.  The Welsh Government paid 94.6% (93.5% in 2019) of farm businesses either their full BPS or the BPS Support Payment (estimated 90%) during the first week of the 2020 payment window.  This equates to over £219.3m being paid to more than 14,900 claimants.
  • The Welsh Government has set out plans to replace the BPS with its Sustainable Farming Scheme (SFS).  However, those eager for scheme details still have to wait. The Agriculture (Wales) White Paper sets out the intentions for primary legislation and provides the basis of the Agriculture (Wales) Bill.  The full White Paper can be found at https://gov.wales/sites/default/files/consultations/2020-12/agriculture-wales-bill-white-paper.pdf. A consultation will run until 25th March 2021.  The Agriculture (Wales) Bill is planned to be put before the Senedd in summer 2022.  It will provide the framework for future policy with secondary legislation providing the detail.  Included will be the provisions to establish Sustainable Land Management (SLM) as the ‘overarching principle’ for future agricultural policy.  The proposal is to replace the BPS and Glastir with the Sustainable Farming Scheme (SFS).  However, the White Paper does not offer a time-line for this transition, but the Welsh Government has requested a ‘sunset’ clause, so legacy CAP schemes will end in 2024.  No scheme details or payment rates have been included, but the aim is to make payments by ‘rewarding’ farmers for the delivery of outcomes rather than compensation for the costs of inputs.  A Farm Sustainability Review will be required for each farm.
  • The EU has extended the recognition of the UK’s organic standards and six organic certification bodies until the end of 2021.  Without this approval, UK produce would not have been able to be sold in the EU as ‘organic’ after 31st December 2020.  This is a short-term reprieve, so does not provide long-term certainty for UK organic exporters.  
  • The AHDB’s Early Bird cropping intentions survey shows the wheat area is forecast to bounce back by 28% to 1,815,000ha in 2021; similar to 2019 levels. Winter barley is also expected to increase by 24% to 394,000ha.  OSR continues its decline by another 18% to 318,000ha, the smallest since 1986.  The spring barley area is forecast to reduce back to more normal levels, by 30% to 767,000ha.  The pulse area may rise by 7% to 257,000ha as growers switch from OSR.
  • British Sugar now believes production this year will be 25% lower than last at 900,000 tonnes. It has also announced the one-year contract bonus has been triggered for 2019 and eligible growers should have received 2.6p/t in December from the processor.
  • The AHDB’s first production estimate for this 2020 year’s potato harvest is 5.318mt, up 3.1% on 2019. Average yields were 46.2t/ha, the highest since 2017.  The levy board is forecasting demand to be 4% higher in 2020 than 2019, with fresh sales outweighing the decline in out-of-home sales.
  • The English and Welsh Governments have issued a consultation on banning the export of live animals for slaughter and fattening.  The Governments are also consulting on wider proposals to improve animal welfare in transport.  The consultation can be found at; https://consult.defra.gov.uk/transforming-farm-animal-health-and-welfare-team/improvements-to-animal-welfare-in-transport/ It closes on 28th January 2021.

This month’s Spotlight looks at the recently agreed UK-EU Post Brexit Trade Deal and Implications for UK Agriculture. 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/