Spot Light on Farm Incomes

The profit of UK farming recovered in 2019 after the drought-affected 2018 year.  The latest estimates for Total Income from Farming (TIFF) released by Defra show an increase of 6% in real terms, leaving profit for the industry at £5,278m.

TIFF is the total profit from all UK farming businesses for the calendar year.  It shows the return to all entrepreneurs for their management, labour and capital invested.  The main reason for the rise in profitability was an increase in arable output.  The overall sales of arable crops rose by 6%, with wheat leading the way with a 16% increase in output value.  This was largely a ‘bounce-back’ from the lows of 2018. Overall livestock output was close to year-earlier levels, as were costs.  The chart shows the historic TIFF figures, plus our forecast for the current 2020 year and 2021.

Whilst we are only partway through the 2020 year it seems highly likely that the lack of autumn plantings will affect output from harvest 2020.  There are also likely to be some Covid-19 effects such as reduced beef prices and dairy farm incomes affected for certain producers.  Whilst this will be offset by lower costs, we currently forecast a decline in farm profitability for the year of 10%.  Towards the end of the year there may be market disruption as the Transition Period comes to an end – depending on whether a trade deal has been concluded with the EU or not.  Some of these trade effects may well linger into 2021 which is why there is a (tentative) forecast for another decline.

Productivity

Alongside the TIFF figures, Defra also published estimates of Total Factor Productivity (TFP) for 2019.  This measures how well inputs are converted into outputs and thus gives an indication of the efficiency and competitiveness of the farming industry.  It is one of the measures that Defra looks at closely, as it tries to improve the performance of UK agriculture.  The figures for 2019 show a significant uptick with TFP increasing by 4% between 2018 – 2019.  This was largely caused by an increase in the volume of outputs (up 3.8%) with a small decline in the amount of inputs used (-0.2%).
Although this is encouraging, any one year’s figures need to be viewed with some caution – the series tends to fluctuate on an annual basis, and it is the trend over a longer period that is more important.  UK agriculture shows an improvement in productivity, but the rate of increase is slow.  Since the figures began in 1973 the annual average increase is around 1%.  From 2000 to 2019 is has been at a lower level of 0.7% per year. 

 

 

 

Farming in Focus InBrief – June 2020

  • With the unfortunate cancellation of the physical Cereals Event this year due to Covid-19 we are unable to invite you to our stand at the show.  However, we are still keen to share with you our thoughts on the prospects for UK arable farming and present the information we usually have on our boards.  Therefore, we will be conducting a virtual ‘tour of the stand’ on Monday 8th June.  The presentation will be led by Richard King and there will be an opportunity to post questions during the session.  The Briefing will commence at 4.00pm and will run until approximately 4.20pm.  To reserve your place please follow this link –  https://attendee.gotowebinar.com/register/2375741569447559436.  Please note that places are limited.  We hope that you will be able to join us.
  • The Government has added to the schemes available to help businesses cope with the effects of the Coronavirus outbreak.  The new Bounce Back Loan Scheme (BBLS) opened on 4th May.  Unlike the Coronavirus Business Interruption Loan Scheme (CBILS), the Government will guarantee 100% of the loan under BBLS, as opposed to 80%.  This means that the banks providing the loans have a much lower requirement to undertake due-diligence on the application.  Loans of between £2,000 and £50,000 are available.  The Self-Employed Income Support Scheme (SEISS) is now also available which will be of interest to many self-employed farmers, and the Coronarvirus Job Retention Scheme (Furlough) has been extended until the end of October.  However, from August the scheme will alter.  
  • Following intense lobbying, the Government has announced targeted support for dairy farmers affected by the Covid-19 outbreak.  Businesses in England and Wales which have seen their income drop by more than 25% during April and May will be able to claim under the scheme.  The support will be equal to 70% of the lost income for these months, up to a maximum of £10,000.  More details on the scheme, including how to apply, are still awaited.   Please speak to a consultant if you require advice on any of these schemes outlined.
  • The UK has set the tariffs that have to be paid on imports entering the UK after the end of the Brexit Transition Period when it will replace the EU Common External Tariff (CET).  If there is no trade deal in place with the EU by the end of the Transition, then these tariffs will also apply to imports from the EU as from 1st January 2021.  The new tariff regime represents somewhat of a U-turn from earlier Government policy as UK farming will continue to receive protection from cheaper global imports, differing substantially from the big reductions initially proposed in March 2019.  Most of the tariffs under the CET have been maintained at pretty much the same levels, but converted from Euros into Sterling.   Effectively, the protection around the UK market will be kept at the same level as it was around the EU Single Market.
  • The Agriculture Bill passed its remaining stages in the House of Commons in May.  An attempt by some Conservative MPs to get an amendment included in the legislation that would have made imports of food meet UK standards on animal welfare, the environment and food safety, was defeated by 328 votes to 277 and the Bill itself passed by 360 votes to 211.  It now passes to the House of Lords.
  • The Government has confirmed that the domestic Renewable Heat Incentive (RHI) scheme will remain open until 31st March 2022, however the non-domestic element will close on the 31st March 2021.  The Government has issued a consultation (closing date 7th July) on future support for low-carbon heating.
  • This month’s Spot Light feature examines the latest trends in the UK’s Total Income from Farming (TIFF). Click here for more information. 

Farming in Focus InBrief – May 2020

  • 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 enquiries@theandersonscentre.co.uk
  • England has joined Wales in extending the 2020 BPS application deadline to 15th June.  However, in both countries, land must be at the claimant’s disposal on 15th May and the entitlement transfer deadline is also 15th May.  The period for amending claims without penalty moves to 30th June with an absolute deadline of final submission of applications and claims (but with penalties) of the 10th July.
  • In England, the annual revenue claim deadline date for Environmental Stewardship and Countryside Stewardship has also been extended by a month to 15th June.  However, new Countryside Stewardship applications for 1st January 2021 start date remain 1st May and 31st July for Higher and Mid-Tier respectively.
  • The next round of the Woodland Carbon Guarantee Scheme will open from 8th – 19th June in England.  This scheme allows those planting woodlands to sell carbon credits to the Government at a guaranteed price up to 2055.
  • The expression of interest window for Glastir Woodland Creation is now open and will close on 12th June.  Also in Wales, Farming Connect will be opening the next application round for accredited courses on 9th May, this will close on 26th June. The Welsh Government has also announced, the claim deadline for the Glastir Small Grants – Landscape and Pollinators 2019, has been extended until 30th September 2020. 
  • The Government has stated that there will be no extension to the end of the Brexit Transition Period beyond 31st December 2020.  Speaking on the 16th April a Government spokesman stated “we will not ask to extend the Transition.  And, if the EU asks, we will say no.  Extending the Transition would simply prolong the negotiations, prolong business uncertainty, and delay the moment of control of our borders.”  The negotiations themselves restarted on the 15th April by videoconference.  There is still wide divergence between the sides as the deadline for extending the Transition Period (30th June) looms.
  • The Government has launched a new website, ‘Pick for Britain’ aimed at recruiting British workers for harvesting and processing roles, mainly in the horticulture sector. The aim is to encourage workers on furlough, students and others to fill the estimated 80,000 seasonal fruit and veg vacancies through the summer months.  The site can be found at – https://pickforbritain.org.uk/.  Although there has been significant initial interest from potential workers, this seems not to have yet translated into large numbers of people on farm.  The expectations of employees and employers appear to be mismatched.  Workers are often discouraged by the location of jobs, conditions and pay.  Employers seem dubious about the skills and motivation of UK staff and would prefer their traditional East-European workers. 
  • The Government has produced its key findings from the review of the AHDB.  Its response suggests the levy board’s activities should be structured around ‘market development’ and ‘improving farm performance’.  Levy payers should also be allowed to vote on a 5 year plan for each sector.
  • The Welsh Government has published draft legislation that would make the whole country a Nitrate Vulnerable Zone (NVZ).  This would impose new restrictions on the storage and spreading of slurry, manure and nitrogen fertiliser, including closed periods for applications.
  • Sales of fungicides containing the active ingredient epoxiconazole will end on 31st October 2020.  Product already on farm can continue to be used until 31st October 2021.

Spot Light on: Covid-19 Impacts on Farming

There has, of course, been only one topic that has dominated everything else over the past few weeks.  This article provides some initial thoughts on how the pandemic might affect agriculture and the wider economy. 

Short Term

  • The Consumer:  Supermarket shelf-stripping has been a consequence of both panic buying and a requirement to replace the food usually purchased via food service, restaurants, coffee shops etc.  Consequently, the demand from retailers for most goods including milling wheat for bread and biscuits has rocketed; the broiler kill rate has gone up sharply and the demand for other meats has also increased.  Total food requirements should not change overall, but it is taking a while for these supply lines to re-route to where the food is needed.
    However, eating habits in the home differ from the restaurant or food service.  With no eating out, consumption of expensive cuts of beef and lamb and ‘top-end’ cheeses such as Stilton have fallen sharply.  We would expect more demand for chicken and lower priced pig and beef meat for burgers and sausage style foods. 
  • Prices: Commodity prices move when demand and supply are not aligned.  Expect some volatility.  Overall trends may take some time to establish according to how the supply chain manages the flow of goods and how the consumer changes their habits. However, an added challenge for the UK agri-food sector is the near disappearance of the food services segment due to the lockdown. This has meant that demand for some products (e.g. steak meat) has imploded and whilst retail demand has increased for some products (e.g. mince), this does not adequately compensate for the loss of value in steak meat. As a result, beef prices have been falling. Similar trends are also affecting the dairy sector where the loss of food services and catering trade is having a major negative impact on spot prices, with prices as low as 15ppl reported. 

Medium Term

  • The Farmer:  Farmers are relatively good ‘self-isolators’ already.  Most should be able to ‘carry on farming’ with the majority of farms operating as usual as long as supplies get through.  However, staff absences could lead to livestock welfare issues and diversified business’ dependent on general public foot fall could be hard hit.
  • Farm Workers:  Access to casual migrant labour is going to become a big issue if travel bans remain in place over the summer.  Appeals have started to go out for British workers to work on farms, both locally and nationally. 
  • Supply Chain:  Many food processing operations are labour intensive and cannot be done at home.  The flow of cash has also already slowed, with many firms hoarding cash and not paying each other.  Expenditures that are not short-term-critical are also being postponed.  Profitable businesses unable to turn their profits into cash will struggle in coming weeks and months.  Some supermarkets have committed to pay small manufacturers more quickly than usual.
  • Trade:  Cross-border restrictions do not apply to goods.  However, some supply-chain glitches are already emerging, people going into self-isolation, shipping containers not where they are supposed to be etc.  Whilst bulk imports are still available, smaller items such as minerals and medicines are showing signs of delays.

Long Term

  • Policy:  The severe shortages of food availability in the shops, and the images of desperate panic-buying shoppers might encourage Defra, and Government more widely, to rethink its policies on food security.  Might Defra consider that more home-produced goods could be a strategic benefit?
  • Supply Chains:  Following the horsemeat scandal of 2013, some food supply chains decided to shorten their linkages, sourcing from fewer and more local outlets.  Perhaps this will do the same. 
  • Wider Economy:  The Bank of England has cut the interest rate down to an all-time low of 0.1%.  It will also embark on another round of quantitative easing.  These measures, along with the rising Government debt, and a flight to the ‘safe haven’ of the Dollar have all seen the Pound weaken.  In the short-term, weak Sterling is good for farming.  Longer-term, it tends to be inflationary across the whole economy.  Industries will also look towards Government to support the rebuilding of the UK economy when this calms down.  This could be a huge cost, and hinder investment.

 

 

A Monthly Briefing for UK Farmers – April 2020

  • 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 enquiries@theandersonscentre.co.uk
  • The Government has introduced a number of initiatives to support businesses as a result of COVID-19, these include;
    • Business Interruption Loan Scheme to provide loans of up to £5m, with no interest payable for the first 12 months.  Applications are made through the banks.
    • One-off cash grant of £10,000 to all businesses qualifying for the Small Business Rate Relief.  This will be made automatic, through Local Authorities.  Useful for farming enterprises which have diversified into the leisure sector and pay business rate
    • The Coronavirus Job Retention Scheme is open to any employer and covers the wage cost of any worker ‘furloughed’ – sent home due to there being no work for them.  Up to 80% of their wages are paid by the Government, up to a monthly limit of £2,500.
    • The self-employed scheme to pay 80% of the average monthly trading profits over the last 3 years.  It is only open to those with a trading profit of less than £50,000 per year.  Funds will be in one single payment in June covering the three months of the scheme (March-May). 
    • VAT payments due between 20th March and 30th June are deferred.  Businesses have until the end of the 2020/21 tax year to pay.  The return still needs to be made though.
    • Self-Assessment Tax payments due in July will be deferred until 31st January 2021.

Please call one of our consultants if you wish to discuss any of the above initiatives or require a farm budget to approach your bank.  Contact details for consultants can be found on the main website.

  • The 2020 Basic Payment Scheme claim window is now open. In England the deadline for submissions without penalties remains 15th May 2020 (there is strong pressure mounting to have this extended by a month).  Wales has recently announced it has extended the deadline for SAFs to be submitted by one month until 15th June 2020.  Consequently the entitlement transfer deadline has also been extended in Wales from 30th April to 15th May 2020.  Entitlement transfers in England remain 15th May deadline.
  • England, (Scotland) and Wales have all now confirmed that the Crop Diversification rule (two and three crop rule) will not apply for the BPS 2020.  Ecological Focus Area (EFA) requirements remain.
  • All 2020 BPS payments will be made in Sterling, there will not be an option to be paid in Euros this year.  The exchange rate to convert Euro denominated entitlements to Sterling is expected to be the same rate as in 2019; €1=0.89092.  There seems a strong chance that the 2020 payment will also set the ‘start point’ for payments during the Agricultural Transition.
  • In England, the Countryside Productivity Small Grants Scheme (CPSG) Round 2 claim deadline has been extended to mid-night on 31st July 2020.  Due to COVID-19 issues, suppliers are finding it difficult to deliver equipment by the original 31st May deadline.
  • In Wales, the BPS 2019 Support Scheme and the Glastir 2019 Support scheme have re-opened.  These are available to those who have not received either a full payment under the 2019 BPS and/or the 2019 Glastir Entry or Advance, or a payment under the previous Support Schemes.  Eligible claimants will receive 70% of their estimated BPS payment or 50% of their expected Glastir payment.  These are opt-in schemes and applications must be submitted by 17th April 2020 via RPWales online.  A reminder that the Farm Business Grant in Wales closes on 10th April 2020.

Spot Light on: Future Farm Policy

Defra has published a policy statement outlining its plans for farm support in England.  This is to accompany the Agriculture Bill as it enters the Committee stage in Parliament.  A summary is given below.


The plans for the ‘Agricultural Transition’ as set out in the original Statement of September 2018 remain unchanged.  Direct payments (i.e. BPS) will be phased-out starting in the 2021 year, with 2027 being the last year any will be made.  The phasing process is still unknown with only the first year’s deductions being set (see table).  Again, these are unchanged from what has been announced previously.  A few new points emerge from the document;

  • deductions in future years will depend on the funding required for other elements of the Government’s plans.
  • delinking of payments from land will occur during the Transition.  This will happen from 2022 at the earliest.  Once this is done, there will be no link between land occupation and payments, and entitlements will disappear – there will just be a right to support for the business or individual claiming in a reference period.  There will be no requirement for that business to carry on farming.  A consultation is promised on the mechanics of delinking
  • when delinking occurs, there will be no link between land and subsidy, so the cross-compliance regime will end at this point.  Defra plans to bring in an alternative regulatory regime.
  • the option to allow the delinked payments to be capitalised into a one-off lump sum is still being considered.

As Direct Payments are phased-out, various new schemes will be introduced.  The main replacement for the BPS in England will be Environmental Land Management (ELM).  The shape of the new scheme is becoming clearer, it contains strong echoes of the previous Environmental Stewardship (ES) scheme with an entry level, broad-and-shallow, tier and higher level options.  Underpinning the scheme is the idea that land managers will only be paid for ‘public goods’.  Six key categories of public goods have been set out; clean air, clean & plentiful water, plants & wildlife, beauty heritage & engagement, hazard protection and climate change, with the latter two coming more to the fore than previous schemes.  The current plan is for ELMS to be based on a three-tier model;

  • Tier 1 – a broad (and shallow) offer available to all farms. Likely to have a menu of options and be managed online.
  • Tier 2 – this will require more intensive management from farmers. It is likely that a whole-farm plan will have to be drawn up (possibly by accredited advisors).  The focus will be on rewarding farmers for positive management such as biodiversity, flood management, carbon storage, landscape heritage etc.
  • Tier 3 – this aims to get groups of landowners to work together to deliver widespread change.

As well as annual payments there will also be capital grants available.  Payment rates are yet to be set.  However, unlike previous EU schemes they will not be limited to ‘income foregone’.  Therefore, payments may be set at more attractive levels.  Pilots will start in 2021 continuing through to 2024, the intention is for the scheme to be rolled out in full in 2025.

Aside from ELM, the policy Statement sets out other initiatives which may be available for farmers and foresters, these include; advice, a change to farm regulation, farm diversification via the UK Shared Prosperity Fund, animal health & welfare, and productivity support.

Just from this brief summary, it is hopefully clear that Defra has big plans now that it is free to set English farm policy.  Although it will not all happen overnight, there is still a large shopping list of initiatives.  There will be a question of whether Defra (and the wider Government) has the capacity to deliver them all, and deliver them well.  

A Monthly Briefing for UK Farmers – March 2020

  • The window for Countryside Stewardship (CS) applications in England opened on 11th February, for agreements which will commence on 1st January 2021.  This covers Higher Tier, Mid-Tier, Hedgerows & Boundaries Grants and the Wildlife Offers. The deadlines for each scheme are set out below.  The schemes are now being run under domestic legislation rather than EU rules, however there are no major changes, although the new UK regime should make record keeping and inspections less onerous.

  • Further information and the new manuals are available on the GOV.UK website at https://www.gov.uk/government/collections/countryside-stewardship-get-paid-for-environmental-land-management . With the BPS starting to be phased out from 2021 and the ELM not being fully rolled out until 2025 (see later article) is it worth having another look at what the CS can offer? * also includes Wildlife Offers paper application
  • The 2020 BPS application window in England is expected to open online on 12th March, with those who still wish to make a paper claim receiving their application forms shortly after this date.  The Land Use screen is already available for those who wish to check the information is correct ahead of their application. However, note that the mapping update work is expected to continue until around 10th  In Wales, the Single Application Form (SAF) 2020 was available from 2nd March, guidance and information is available online.  The deadline without penalties is the usual 15th May.  A reminder that RPWales must be notified of the transfer and lease of entitlements by 30th April (15th May in England), for them to be used for a 2020 claim.
  • The Government is consulting on what tariffs to impose once the Brexit Transition Period ends on the 31st This is key for UK farming, as it sets the level of protection the industry has from low-cost agricultural imports from the rest of the world.  For the past 40 years, UK farming has benefited from the EU Common External Tariff (CET), but after Brexit, the Government has to implement its own trade policy.  The consultation can be found at – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/863880/Approach_to_MFN_Tariff_Policy.pdf.  
  • The Government’s plan for a post-Brexit immigration scheme look set to cause problems for farming and the wider food chain.  Free movement of labour for EU citizens will end on the 31st December 2020.  From that point, potential immigrants from the EU and the rest of the world will be treated in the same way.  There will be a points system that will require immigrants to speak English, have a job offer, and that job to pay more than £25,600 p.a. This threshold can be lowered in some cases i.e. if the job is in a ‘shortage occupation’.  It seems unlikely that any farming jobs will be included on this list.
  • George Eustice has been promoted to Secretary of State for Environment, Food and Rural Affairs.  Mr Eustice was previously a junior Minister (Minister of State) in Defra, responsible for agricultural matters.  Victoria Prentis has been appointed as the new Parliamentary Under Secretary of State for Defra and will take on Mr Eustice’s agricultural role within the department.
  • The AHDB has released its latest version of the Nutrient Management Guide; RB209. The main changes to the revision include new recommendations for the use of Phosphate in arable crops.
  • At the time of writing Defra had not announced any derogation to the three crop rule.  It is worth reiterating that fallow land is classed as a ‘crop’ and that spring and winter varieties are also treated as separate crops based on the variety grown and not the date when sown.  In addition where a crop has been planted but subsequently fails it can be counted as the original crop (field records will need to be kept if evidence is required on inspection).  Lastly, for those who will struggle to get anything or very little drilled, there are also exemptions to the Crop Diversification rules; where more than 75% of the arable area is left fallow (or is used for temporary grass or planted with leguminous crops) the three crop rule does not apply.

EU Agrees Mercosur and Vietnam Trade Deals

On 28th June, twenty years to the day that negotiations started, the EU and Mercosur reached a political agreement on a substantial free trade deal.  The EU estimates that, when fully implemented, the deal will reduce tariffs its exporters face by approximately €4 billion.  On a busy weekend for Cecilia Malmström, EU Trade Commissioner, the EU also signed the free trade agreement with Vietnam which had been largely negotiated in 2018.  Both deals are meant to send a message that, with the backdrop of the US-China trade dispute and the increased friction likely to result from Brexit, that the EU is open for business and keen to conclude trade deals with other global partners.   These announcements follow similar recent deals with Japan and Canada.  From an agri-food perspective, the Mercosur deal is attracting most attention as it could have significant implications for sectors such as beef, poultry and sugar.

EU-Mercosur Trade Deal

The details of the Mercosur deal are complex.  In summary, the South American trade-bloc, consisting of Brazil, Argentina, Uruguay and Paraguay, would see tariffs removed on 92% of all its imports to the EU over a period of 10 years.  Focusing on the agri-food sector, tariffs will be cut on 82% of imports coming from Mercosur, with remaining agri-food imports subject to more partial liberalisation.  Notably, this includes beef where a quota of 99,000 tonnes will be permitted to be exported to the EU at preferential rates.  This will be implemented over a five-year period.  Additional volumes of imports will also be allowed of poultrymeat (180,000 tonnes) and pigmeat, (25,000 tonnes), with import restrictions on sugar and ethanol also eased.

From an EU export perspective, tariffs will be eliminated on 91% of its total exports and 95% of agri-food exports.  The dairy sector in particular will benefit from improved market access, with a quota of 30,000  tonnes for cheese, 10,000 tonnes for skim-milk powder and 5,000 tonnes for infant milk formula (Mercosur tariffs are currently at around 28% for dairy products).  These volumes will be phased-in over 10 years.   Whilst improved market access for dairy was welcomed in some quarters, market experts opined that demand for dairy products in the Mercosur market is quite lethargic and is hampered by high inflation, sluggish economic growth and a volatile political environment. 

Mercosur has also committed to protecting the Geographical Indications of 357 EU food and drink products.  The EU is also keen to point out that its food standards on Sanitary and Phytosanitary (SPS) matters would not be compromised in any way.  The EU-Mercosur deal also has a Sustainable Development chapter which commits both parties to upholding their Paris Climate Accord commitments

European beef, poultry, sugar and ethanol producers are expected to come under increased pressure from cheaper imports from South America as a result of this proposed deal.  The agreement has already attracted condemnation from the EU’s farming lobby with organisations such as Copa-Copega and the Irish Farmers’ Association (IFA) complaining that agriculture had been sold out to facilitate a wider deal.  Tellingly, the EU Commission also announced a €1 billion fund to help farmers to adjust to the market disturbances that could be potentially caused by the EU-Mercosur trade deal which indicates that there will be a significant impact on European farmers.

The feedback from the EU farming and food industry points to trouble ahead because, as our previous article on 26th June noted, the agreement thus far has only been at the political level and a number of hurdles remain.  Firstly, it will be translated into legal text before being put forward for ratification by EU Member States and the European Parliament.  Like the EU-Canada (CETA) agreement, there can still be several twists and turns in the process and the deal could be scuppered by a Member State or by a regional Parliament such as Wallonia.  Already, there is significant pressure being exerted on the Irish Government not to back the deal and it is anticipated that there will be similar calls elsewhere.

Any on-farm effects from this deal remain some way off, and in any case would be phased in over several years.  By the time this happens, the UK is likely to have left the European Union, so the impact of this particular deal might be negligible.  That said, the EU-Mercosur deal increases the competitive threat of South American products in European markets.  It is also likely to offer a template for any future trade deals between the UK and Mercosur which the UK is likely to prioritise post-Brexit. 

EU-Vietnam Trade Deal

This pact will eventually see duties removed on 99% of the EU’s imports from Vietnam.  Whilst the formal text has been approved by the European Commission, it still requires ratification by the European Council (representing the EU Member States) and by the European Parliament.  This is expected later this year.

From an agri-food export perspective, Vietnam with its population of around 95 million represents a fast-growing South East Asian market.  Its dairy industry is valued at approximately £5 billion and it currently imports 80% of this demand.  Average incomes have also been rising thereby driving demand for beef and pork products in particular, although the US and New Zealand account for the vast majority of these imports.

As with Mercosur, the UK’s pending exit from the EU means that it may not benefit significantly from this deal.  That said, much will depend on the length of the transition (implementation) period arising from the eventual Brexit deal and the UK’s access to third country market that have free-trade deals with the EU as part of this.  However, the South East Asian market is lucrative and the UK needs to prioritise the development of such markets as it resumes its independent trade policy.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

Arable Market Thoughts

It never rains, it always pours!  By early June, some were concerned about the dry soil conditions, by the end, the concern was flooding.  Most of the crops that had been flattened have picked up, but not all, increasing the risks of Fusarium.  Combinable crops now require sunshine to help them ripen with good quality and bushel weights.

The other thing that has fallen over this month (which we had been warning would happen) is the premium that the old crop wheat carried over new crop.  Sooner or later the two crop prices have to merge, and they did this decisively in June.  In fact old crop long-holders will be feeling frustrated by the chart clearly showing July 2019 futures values in January of £180 now being worth £145.  Also, new crop wheat prices have taken a sharp turn upwards, now clearly ahead of old crop.  This will encourage any buyers to take short term cover and close the gap.  Farmer sellers with adequate storage might be tempted to carry the grain over if it is in satisfactory condition.

Globally, the wheat crop is overall healthy and abundant, with expectations from the International Grains Council that it will outstrip consumption to leave slightly higher stocks this coming season.  This has helped explain the price falls in the market.  Maize though, the main combinable crop in the world, is thought abundant but not likely to match annual demand, so stock levels are expected (by the IGC) to decline again this year.  This will be the third decline since 2016/17 from 363 to 284 million tonnes; a substantial fall.

Soybean stocks are also thought likely to return a small decline in physical stock level after the 2019/20 season, although only by 1 million tonnes.  This is a tiny change after such a sharp rise in stock from 25 million tonnes to the current 53 million in only six years.  The question of how much oilseed rape will be grown in the UK is concerning many; whilst we have reported the poor OSR conditions on many farms this year, we have not pointed out that other arable farmers are quietly very happy with the condition of theirs. Some has been grubbed and replaced, other fields are looking excellent.

Bean crops are largely looking good throughout the country, and with new crop reaching good prices, perhaps now is the time to book some in.  Currently, we would expect bean crops to outperform their overall dismal performance from last year.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

Cabbage Stem Flea Beetle

Many will have noticed there are considerably fewer bright yellow fields than last year, and some a much paler shade of yellow than their owners will have wanted.  Evidence suggests that in the UK a slightly lower amount of oilseed rape was planted last autumn than previous the year.  A considerable proportion did not have a good start, possibly in part as a result of the very dry soil conditions at the time, but also the concerns of Cabbage Stem Flea Beetle (CSFB).  This a meant an unknown quantity, but perhaps 8% of the national crop, written off before winter.

That which made it to the spring, is also in rather poor condition now, with another 5-10% being written off largely in the central and Western parts of England.  This will either be replaced with another crop or fallowed, or in some cases, left in poor condition, its owner resigned to the fact it will probably generate a poor yield.  It is concerning that reports are emerging that CSFB is having a damaging effect on the emerging sugar-beet crop too.  It is too early to speculate on yield impact, but we will continue to monitor this situation.

Ironically, reports from Lincolnshire suggest some bee-keepers are concerned there is insufficient OSR to supply enough nectar to produce honey from their hives.  Perhaps the loss of Neonicotinoids has had adverse impacts even on the insects that the ban was designed to protect.

What the impact of CSFB on OSR in the British farmer’s rotation in future might be is unclear, but many growers and agronomists have suggested their rotations and crop recommendations will not include OSR for at least three years.  The OSR area is in long-term decline; its area topped out in 2012 and has fallen every year since then apart from once.  In 2019 we could harvest the lowest rape area since 2004, and possibly the smallest crop since then too.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

Land & Rental Values

Latest results from the RICS/RAU Land Survey reveal a mixed picture for farmland values.  The data covers the second half of 2018 and shows the Transaction-Based Measure falling back considerably to below the benchmark £10,000 per acre level.  The average price for H2 2018 was £9,571 per acre (£23,650), some 16% down on the first half of the year and 8% lower than the corresponding period in 2017.

The Transaction-Based measure can be quite variable as the number of sales is relatively small (and the series also includes sales with a residential element).  The Opinion-Based measure is a hypothetical estimate of surveyors of a bareland price for agricultural land.  This has moved in the opposite direction for the second half of last year to £7,638 per acre (£18,873 per Ha).  Within this, arable land values recorded a small decline, but pastureland experienced an increase.

RICS/RAU Rural Land Values 1998-2018

Looking ahead, contributors to the survey suggest uncertainty in the marketplace is affecting demand with a net balance of -16 expecting demand to rise.  In contrast, they are expecting more land to come to market over the next year, a net balance of +6.  No data is available on contributors’ price expectations for the coming year.

The Survey also includes information on land rents in England and Wales.  All categories recorded an increase in the second half of 2018, compared to the first six months of the year.  The results are in the table below:

Farm Rents in England & Wales – RICS/RAU
 Half YearArable (£/acre)Pasture (£/acre)
AHA 86ATA 95AHA 86ATA 95
H1 2017751465394
H2 2017781415893
H1 2018761445793
H2 20188014960104

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

How Has Farming Changed Since the UK was Last Outside the EU?

UK farming will soon be operating outside the European Union for the first time since we joined the, then, EEC in 1973. In preparation for its round of Spring Seminars, Andersons the Farm Business Consultants have looked into the archives to compare UK farming 46 years ago with today’s sector. The table below shows some key indicators for the agricultural sector. (All financial figures are in real terms at 2017 prices.)

At the farm level, the industry is smaller in monetary terms and less profitable (although land values are much higher). However, the wider food chain has done an impressive job in boosting food exports and feeding households cheaply. Food self-sufficiency has not changed greatly. For those advocating a completely free-trade approach to food after Brexit, it is interesting that food self-sufficiency was close to 30% in the 1930s – the last time it was tried. The industry is also doing ‘more with less’, in terms of people, land and animals.

Clearly, UK farming is a very different industry to that of the early 1970’s. However, there is also an argument that being part of the Common Agricultural Policy for 40 plus years has held the sector back from what it might have achieved. The next decade or two seems set to unleash even greater change.

There is some trepidation about what the future might hold for farming. One of the ways to reduce uncertainty is to gain the best understanding of the current situation and possible future direction. Andersons are running a series of Seminars at thirteen venues around Great Britain in March, looking at the prospects for UK agriculture in greater detail. This includes the opportunities post-Brexit and the issues the sector needs to tackle, whatever sort of Brexit emerges. For more information please go to www.theandersonscentre.co.uk/Seminars

Ends

No. of words: 444

Author: Richard King

Date: 13th February 2019

This news release has been sent from Andersons, the Farm Business Consultants Ltd, Old Bell House, 2 Nottingham Street, Melton Mowbray, Leicestershire LE13 1NW. For further information please contact Michelle Turnbull on +44 (0) 1362 688761 or +44 (0) 7904 436288.