Category: News

Lump Sum Payments

English farmers will be able to take their future BPS payments in a ‘lump sum’ retirement payment this year.  Defra has (finally) released its response to the consultation undertaken last year.  This was originally expected in the autumn, but has been repeatedly delayed.  The response re-affirms the option will be available this spring and sets out the rules in more detail.  Precise scheme rules will only be known when the secondary legislation to enact the scheme is passed.  But we probably now know enough for sensible business decisions to be made.  More details have also been released on the ‘decoupling’ of BPS payments which was consulted on at the same time.

Lump Sum Payments

A summary of the scheme is as follows;

  • The Lump Sum scheme will open in April 2022 and run until 30th September 2022.  More detail will be provided at this time, including how businesses that have changed through mergers and splits will be treated.  It will not be a competitive scheme – anyone who meets the criteria will get the payment.  It is envisaged that the Lump Sum is only going to be available in 2022 – if it is not applied for this year, the opportunity will be lost.   BPS claimants will be able to request a statement setting out how how much Lump Sum they are eligible for.
  • Lump Sum payments would be made in November 2022 (or as soon as the requirements of the scheme on land transfers – see below – have been met).
  • To qualify, applicants must have made a BPS claim in May 2018.  There will be exemptions for those that have inherited a farm or succeeded to an AHA tenancy since 2018 as well as rules on mergers and splits of businesses between 2018 and now.
  • The payment will be based on the average BPS paid in the three years 2019, 2020 and 2021 (the reference period).  The figure for 2021 will be before any Agricultural Transition deductions.  This average sets the ‘reference amount’.  This will be capped at £42,500 (this is equivalent to around 185 hectares or 460 acres).  There will be a standard multiplier of 2.35 to arrive at the value of the lump sum.  Therefore the payment will be limited to £100,000.
  • If the applicant has already reduced their entitlements compared to the reference period, their lump sum will be reduced proportionally
  • Those who take up the Lump Sum will not be able to apply for any new agreements under other support schemes such as the SFI or CS.  The Lump Sum will need to be paid back if these schemes are entered into.
  • Applicants must give up their farmland if they apply to the scheme.  They can keep residential and commercial property, non-agricultural land and up to 5 hectares of agricultural land.  The land that must be transferred is that which was held on the 17th May 2021.  If some of this has already been transferred, the transfer meets scheme rules, and the applicant has kept the entitlements, this would be eligible for the lump sum payment.
  • The transfer of land includes sale, granting a tenancy (which must be for more than 5 years), gifting it, or relinquishing a tenancy.  Where there is an AHA with succession rights, the transfer to a successor will be eligible for the scheme.  It will also be possible to put land held at the 17th May 2021 into woodland planting and claim the Lump Sum.  Sole traders will not be able to transfer to a spouse or civil partner.
  • Applicants will have until 31st May 2024 to complete their transfer (useful if notices have to be given on tenancies or sales negotiated).  It will be possible to apply for the Lump Sum this year and still claim the BPS in 2022 or 2023 if the transfer is not complete.  Any BPS payments made in 2022 or 2023 would be deducted from the Lump Sum – it would be treated as a ‘prepayment’ on the Lump Sum.  
  • The rules on Partnerships and Limited Companies have been made more flexible since the original proposal.  Where Partners or Shareholders (either singly or jointly) have at last a 50% interest in a business they will be able to apply for the Lump Sum.  All entitlements held by the business would be cancelled.  However, any remaining Partners or Shareholders will be able to enter into new land management agreements.
  • The tax treatment of the Lump Sum payment has been clarified.  Legislation will be introduce to ensure that the payments are treated as capital rather than income.  Therefore, they will be taxed under Capital Gains Tax (or Corporation tax for companies) and be eligible for CGT reliefs.  This treatment will also apply to any ‘interim’ BPS payments still claimed in 2022 and 2023 whilst the transfer of land is being sorted-out.

To help with ‘generational renewal’, Defra is also planning a New Entrants scheme.  More details are promised later in the spring.

De-Linking

As previously outlined, this will not happen until 2024.  It appears that a claim (of some sort) will have to be made at May 2023.  This might mean some claimants keep hold of the minimum claim area of 5 Ha in 2023 just to preserve the right to De-Linked payments.  Defra has announced that the reference period for these payments will be the years 2020, 2021 and 2022 (a different reference period to the Lump Sum).  The average of these years will set the reference amount.  This amount will be simply multiplied by the annual deduction to get the payment for the years 2024, 2025, 2026 and 2027.   It can therefore be seen that, if a farmer made a claim in 2020 and 2021, but has subsequently given up (most of) the land, they will still get two-thirds of the payment relating to that land in the four years from 2024.  De-linked payments will be treated as revenue for taxation purposes.  Whether delinked payments can be inherited or transferred is not yet known.

With the delinking of payments, entitlements will have no further use – the 2023 year will be the last time they are used.  If entitlements have been purchased (or inherited) there may be a loss for Capital Gains Tax after 2023.

Also, the cross-compliance system will come to an end.  Defra promises an update shortly on the future regulation of the agricultural sector.

For further information and advice please do not hesitate to contact one of our consultants.

Land Use Change Opportunities for Farmers

The coming years will see ever-greater competition for the use of land in the UK. As the main occupiers of such a scarce resource, farmers will be presented with new opportunities to generate revenue. This is one of the messages from Andersons Spring Seminars that will be taking place in March.

Although it may not seem like it, the majority of the UK’s land area of just over 24m hectares (Ha) is still primarily used for agriculture. As the graphic below shows, over threequarters of the country (18.6 mHa) is still comprised of ‘farmland’.

Farmers have been using their land for more than food production for many years. This includes diversification and managing land for the environment – either as part of a scheme or simply because that is what they choose to do. However, new demands on land bring a wider range of options. Issues include;

  • Rough Grazing: this has relatively low productivity in terms of agriculture and there will be pressure on this land to help address climate change – notably through increased tree planting and the regeneration of peatland. However, this land is often the most valued in terms of landscape and public access and balancing this with alternative land uses may be difficult.
  • Carbon Farming: many people in agriculture are hoping that they can be paid for carbon reductions that they can generate through existing commercial farming. However, to demonstrate a permanent reduction in CO2, a permanent change in land use may be required. Again, this could be tree planting (e.g. Woodland Carbon Guarantee Scheme), or a shift from arable to grassland for example. There is also the question of the wisdom in selling ‘carbon credits’ when farming may need them itself to reach its net zero targets. Further land use change may come from areas being devoted to producing clean energy solar panels, energy crops etc.
  • Nutrients: the amount of nitrates and phosphates in water is of concern in many catchments. Developments that might add to the nutrient load are often blocked by Planners. Farmers who reduce their own emissions can unlock these developments – for a price.
  • Biodiversity: the Environment Act brings into law (in England) the concept of Biodiversity Net Gain. Developers may be looking for off-site biodiversity to meet their new legal requirements. Alongside this is the long-standing suite of agri-environmental schemes operated by the various UK Governments to improve the farmed environment. Lastly, at the extreme, we are increasingly seeing wealthy individuals or groups looking to access agricultural land to ‘re-wild’ it.
  • Public Access: the Covid outbreak has reconnected many people with the British countryside. There may be opportunities for landowners to exploit this – perhaps not through the access itself, but supply services to those enjoying the countryside.

The difficult part for farmers is turning these opportunities (many of which are still in their infancy) into cash. The Government will be the buyer-of-last-resort for many of them through schemes such as Environmental Land Management. However, this may not be lucrative enough to replace declining income streams like the BPS. Private buyers of ‘land management’ may have deeper pockets and be more flexible in their requirements. Farmers may have to work harder to satisfy these customers than they would with Government schemes however.

Overall, farmers will need to adopt a more entrepreneurial mindset and see their land as a resource that can be maximised in a number of ways, rather than just through farming.

Andersons Spring Seminars are running at thirteen venues around Great Britain in March, looking at the prospects for UK agriculture in greater detail. For more information please go to www.theandersonscentre.co.uk/Seminars

Farming Focus InBrief – February 2022

  • If you require advice from one of our consultants, do not hesitate to contact them by email or phone.  If you do not have their details please contact the office on 01664 503200 or email [email protected]
  • Defra has released two policy papers giving more information on the Local Nature Recovery (LNR) and the Landscape Recovery (LR).  These are the other two components of ELM, the first being the Sustainable Farming Incentive (SFI) scheme.  The LNR will pay for locally targeted actions to ‘make space for nature alongside food production’.  More details can be found at – https://www.gov.uk/government/publications/local-nature-recovery-more-information-on-how-the-scheme-will-work. The LR is for landowners and managers who want to take a more ‘radical and large-scale approach’ to producing environmental and climate goods on their land.  Agreements are expected to be long term; 20-years plus.  Defra will work with project managers to negotiate bespoke agreements.  See – https://www.gov.uk/government/publications/landscape-recovery-more-information-on-how-the-scheme-will-work. Piloting will take place over the next 2 years with both schemes due to be fully in place by late 2024.  These two schemes will not be for the majority of farmers, the SFI will be the component for most who continue to farm commercially. 
  • The Countryside Stewardship revenue payment rates have been revised.  Most (over 100) have been increased, although a few (less than ten) have been reduced.  All the new rates can be found at https://www.gov.uk/government/publications/countryside-stewardship-revenue-payment-rates-from-1-january-2022/countryside-stewardship-payment-rates-for-revenue-options-from-1-january-2022.
  • The Improving Farm Productivity grant is now open for applications.  It is the second theme under the Farming Transformation Fund (the first one was Water Management).  The grant will pay up to 40% of the costs for robotic or autonomous equipment and systems to aid crop and livestock production including the installation of slurry acidification equipment. The minimum grant is £35,000 and the maximum is £500,000.  There is a two-stage application process between 19th January and 1st March 2022.  For further information see https://www.gov.uk/guidance/farming-transformation-fund-improving-farm-productivity-grant.
  • Providers of the Future Farming Resilience Fund have been given until September to deliver support (originally March). The 19 providers have been given a six-month extension, although, not all have taken up all of this time and they can only take on a limited number of businesses so those interested should apply sooner rather than later.  The Andersons Centre (TAC), through Ricardo, will provide support until June. The advisors offer support in different ways.  Some are delivered via workshops or webinars; TAC offers free one-to-one business reviews and plans. We only have a few places left, please contact us to book a place or see https://www.eventbrite.co.uk/o/ricardo-future-farming-resilience-fund-29430290977
  • The Welsh Government is looking for farmers to take part in the co-design process of the new Sustainable Farming Scheme (SFS).  It will take place in the summer of 2022 and requires farmers to provide ‘opinions on the practicality of proposed actions underpinning the SFS and the wider scheme structure and processes’.  Details of the SFS are due to be published in the first half of 2022 alongside the Welsh Agriculture Bill.  Once the co-design process has been undertaken the final SFS will be announced in 2023.  More details can be found at – https://gov.wales/register-have-your-say-wales-future-farming-scheme.
  • The Seasonal Agricultural Workers Scheme (SAWS), now just called the Seasonal Workers Scheme, will continue for 2022 with the same number of places as last year (30,000), although this can be increased by 10,000 if necessary.  But it will then taper down in 2023 and 2024 and disappear completely by 2025.
  • Defra has granted an emergency authorisation (dependent on 9 conditions) of Syngenta’s Cruiser SB seed treatment on sugar beet crops, in England, for the control of Yellow Virus for 2022.
  • Defra is putting in place new legislation which should mean plant-based research and development using Gene Editing (GE) will be able to take place more easily. The legislation will apply to GE plants only (not animals).  GE is seen as a powerful tool to tackle food security, climate change and biodiversity loss through breeding plants that are resistant to diseases and climate change.  GE is different to GMO, it is used to create new varieties, similar to those which would have been produced more slowly through conventional breeding processes, by manipulating the coding to speed up the development of desirable traits, in contrast to GMO, where genes have been transferred between species (transgenic). 

This month’s Spotlight looks at the latest developments in Biodiversity Net Gain (BNG)  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 Biodiversity Net Gain (BNG)

More details on the operation of Biodiversity Net Gain (BNG) have been released.  This may seem incidental to agriculture, but it potentially opens up a new income stream for land managers.  An impact assessment published by Defra alongside a consultation indicates that the annual market for BNG offsets may be in the region of £135m and require up to 10,000 Ha of land (see the market analysis here – http://randd.defra.gov.uk/Default.aspx?Menu=Menu&Module=More&Location=None&ProjectID=20608).

In summary, BNG is a new policy being introduced in England under the Environment Act.  It requires any development to deliver 10% more biodiversity after the development has been done than was present beforehand.  Whilst it is possible to deliver some of the ‘after’ biodiversity through measures on the site itself such as ponds and tree planting, in many cases compensating biodiversity will need to be sourced away from the development site – the concept of biodiversity offsets.  When Planning Permission is being applied for, the application will have to submit a biodiversity gain plan with the application.  There is a calculator (the Biodiversity Metric 3.0) that is used to work out the ‘before’ and ‘after’ biodiversity.  A market will develop in biodiversity offsets to meet developers’ needs.  Any biodiversity created must be guaranteed for 30 years.  Conservation covenants are seen as a keyway of ensuring this.

Whilst the Environment Act provides the overall legislative framework, the scheme details need to be filled-in by Secondary legislation.  This is what is being consulted on.  One important announcement is that BNG will not become mandatory until November 2023 – therefore the market for land owners will not be fully developed in the short term (although some firms are already active and trying to set up a ‘bank’ of BNG offsets).  Another important date is that only habitats created after 30th January 2020 can be used as offsets.

One unresolved issue is the interaction of all the various ‘land management’ initiatives.  For example, could a landowner create a habitat to sell the biodiversity offsets, but then also sell the carbon credits, nutrient balances or any other environmental ‘service’.   This also applies to land entering a Defra scheme under ELM – could this also pick up BNG credits?  The consultation indicates Defra is ‘minded’ to allow BNG offsets and other markets to co-exist as long as any outcomes paid for are ‘distinct and additional’.  This builds on Defra’s payments principles under ELM schemes where it seems ‘stacking’ of payments will be allowed as long as different agreements do not ‘pay for the same thing twice’.  Although this seems positive for landowners the precise interpretation of these rules is still not clear and may not become so until both ELM and BNG scheme rules are published.  

The consultation on BNG runs until 14th April 2022.  The documents can be found at https://www.gov.uk/government/consultations/consultation-on-biodiversity-net-gain-regulations-and-implementation.

Farming Focus InBrief – January 2022

  • If you require advice from one of our consultants, do not hesitate to contact them by email or phone.  If you do not have their details please contact the office on 01664 503200 or email [email protected]
  • A reminder that the first round of the Farming Equipment and Technology Fund (the small-scale Farming Investment Fund (FIF)) closes on 7th January.   In addition, the first theme of the larger scale scheme, the Farming Transformation Fund closes on 12th January for grants to fund Water Management.  However, Defra has now published the manual for the second theme, Improving Farm Productivity.  This can be found at https://www.gov.uk/guidance/about-the-improving-farm-productivity-grant.  The focus for this round is robotic or autonomous equipment and systems to aid crop and livestock production and also the installation of slurry acidification equipment.  The window to express an interest in this grant is due to open in mid-January.  The manual has been published now to give potential applicants time to consider their proposals.
  • Revised figures for Total Income from Farming (TIFF) for 2020 show total aggregate profits for farming were £5.121bn (real terms, 2020 prices).  This is an 8% drop from This is much better than initially reported.  The revision is largely down to farm diversification being less affected by Covid in 2020 than first estimated and the volume of seeds, fertilisers and sprays used in the year was lower than thought.  We had been forecasting that 2021 TIFF would be higher than 2020.  This is still the case, although the uplift in last year’s figures means the ‘rebound’ will be less pronounced.  Even so, it seems possible that aggregate UK farm profits for this year could reach the £6bn level which is at the upper end of the range of the recent decade.  With the large cost increases seen in recent months, it seems likely that 2022 will drop back again. 
  • The UK-Australia Free Trade Agreement (FTA) was signed in December.  It is the first trade agreement negotiated independently by the UK in nearly 50 years and will set a precedent for other agreements.  The UK farming sector, particularly grazing livestock and sugar beet will be more exposed to competitive pressure from Australian imports in the long-term. The deal will now go before both the UK and Australian Houses of Parliament for further scrutiny and ratification. It could come into force as soon as mid-2022, but the process might take longer. 
  • The Government has published a review of how secure the nation’s food supply is – the UK Food Security Report (UKFSR).  The Agriculture Act requires such a review at least every three years and this is the first comprehensive study of the topic since the UK Food Security Assessment in 2010.  As the report itself states, food security is ‘a complex and multi-faceted issue’.  As such, the UKFSR does not come up with a simple answer such as ‘we are fine’ or ‘there’s a problem here’.  It is arranged around five themes with broad conclusions drawn under each heading.  The report runs to over 300 pages and presents a wide range of statistics plus case studies and qualitative analysis.  Overall, however, it paints a picture of the UK’s food security being reasonably robust.  For more details see – https://www.gov.uk/government/statistics/united-kingdom-food-security-report-2021.
  • The English cross-compliance guidance for the 2022 scheme year has been published.  It can be found at https://www.gov.uk/guidance/guide-to-cross-compliance-in-england-2022.  In summary, there have been no changes for 2022 so the rules remain the same as in the past couple of years.   The Welsh Government has also published its cross-compliance rules for 2022 (see https://gov.wales/sites/default/files/publications/2021-12/cross-compliance-verifiable-standards-2022.pdf). Again, these effectively show no change.
  • The Bank of England raised UK Base Rates from 0.1% to 0.25% on the 16th December.  This is in response to rapidly rising inflation with the year-on-year increase in prices accelerating from 3.1% in September to 5.1% in November (CPI measure).  Even with the threat of the Omicron variant to economic activity, many economic forecasters are predicting further base rate increases in 2022 as inflation pressure continues.  Rates of 1% by the end of 2022 look possible.
  • The Government has confirmed exports of British lamb to the US will resume in 2022.  The ‘Small Ruminants Rule’ which has been in place in the US for over 20 years, bans the imports of lamb from countries where scrapie has been identified.  After extensive evaluations, the USDA has amended this rule, which effectively means UK processors will be able to ship lamb to the US as from next year.  The amended rule came into force as from 3rd January and paves the way for Defra, DIT, and the UK food safety authorities to work with their counterparts in the US to complete the final steps. This will be a welcome boost to sheep farmers in the UK, the US market is forecast to be worth £37m over the first five years.  The news comes after President Biden committed to lifting the ban on British lamb back in September.
  • A reminder that the Future Farm Resilience Fund is now open. If you would like a one-to-one farm resilience review and report carried out by one of our consultants and access to online skills and training, including resilience planning webinars all for free get in touch with one of our consultants. Places are limited.  More information can be found at https://www.eventbrite.co.uk/o/ricardo-future-farming-resilience-fund-29430290977.

This month’s Spotlight looks at the latest figures for our Friesian 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 Friesian Farm

The latest figures for our Friesian Farm model illustrate the rapidly changing fortunes of dairy farming as milk prices and costs both move sharply upwards.

Friesian Farm is a notional dairy business milking a little over 200 cows.   It has been used to track the fortunes of British dairy farming for well over a decade.  It has a year-round calving system, like most of the UK industry, but it is trying to maximise yield from forage.  The farm comprises 130 hectares (of which 60 hectares are rented on an FBT).  The proprietor provides labour along with one full time worker (plus casual/relief).  The table below shows the farm’s actual results for the two previous milk years (April to March), a budget for the current 2021/22 year, then a forecast for 2022/23.  

The figures are averages for an entire milk year.  For the current 2021/22 year, this means milk prices are not as high as presently seen, as, for a large portion of the year values were lower.  By the same token, whilst costs have risen (winter concentrate feed being a big element) the biggest rises have only been over the last few months.  In particular, fertiliser for the year was bought last spring at far lower values.  This means the returns for the current milk year look likely, on average, to be good.

It is in the following year that cost increases are really seen.  This is not just in areas such as feed, fertiliser, fuel and electricity, but also in costs such as labour, property repairs and machinery purchase.  Even with a higher milk price, returns are much reduced.  The effect of the Agricultural Transition in England can also be clearly seen with the pence per litre value of the BPS declining.

Budgeting ahead is currently difficult due to the fast-moving situation with costs and prices.  However, it is fairly clear that more testing times for dairy profitability lie ahead unless the cost situation quickly turns around.

Spotlight on the Sustainable Farming Incentive 2022

Defra has announced more details on how the Sustainable Farming Incentive (SFI) will operate in 2022 and the years after.

Standards and Rates

The SFI 2022 will contain four Standards – Arable & Horticultural Soils, Improved Grassland Soils; Moorland & Rough Grazing and Animal Health and Welfare.  The payment rates and the actions required have been updated since the first announcement back in July 2021, the table below summarises these;

 

There will be no capital payments under SFI2022, but these will be added later.

Scheme Rules

The following general SFI rules will apply to all the 2022 Standards and any additional ones added later (see below);

  • applicants for the SFI must be current BPS claimants.  This restriction will be dropped in future to let other land managers enter.
  • SFI agreements will last for 3 years.  There will be a 12 monthly review of agreements at which point more land can be added, additional standards incorporated or the ambition level within standards raised.  During the 3 year agreement farmers will only be able to reduce ambition levels or coverage in exceptional circumstances – therefore the flexibility in agreements is only one way.
  • payment levels will be fixed for the three-year period at the prevailing level when the agreement starts.  They may be adjusted subsequently as more experience of the scheme develops.  Payment will be quarterly in arrears (i.e. more frequent than current schemes).
  • the SFI will operate on a land-parcel basis.  Standards can be signed-up for on a field-by-field basis rather than the whole farm having to be entered.  It appears that different fields can have different ambition levels under the same Standard.
  • land must be under the ‘management control’ of the applicant.  This is taken to be the the Tenant under let situations.  There will be no requirement for Tenants to gain Landlord’s permission to enter the SFI.  Where a tenancy has less than 2 years to run this land will not be allowed in the SFI.  As a transitional measure, land with 2-3 years remaining on its lease will be allowed in.
  • Land already in Countryside Stewardship (or other existing schemes) can also be entered into into the SFI as long as the prescriptions do not overlap or conflict.  This in unlikely for the Soils Standards as they are asking for different actions than CS.  It is also stated that land entered into the SFI can be used for biodiversity offsets or other private agreements.
  • Common land will be able to enter the SFI through group agreements.  A ‘single entity’ (e.g. the Commons Association) will be required to submit the application.
  • a 10-week application window for the SFI will open in 2022.  The precise timing of this will be given in the New Year (although it is stated it won’t clash with the BPS).  Given the statement from Defra that it would like to ‘make the first SFI payments before the end of the year’ this seems to indicate SFI applications after May.  In future years, probably from 2024 onwards, applications will be possible year-round
  • the monitoring of agreements is stated to be ‘simpler, fairer and more proportionate’ than previous EU schemes.

Future SFI

Whilst only indicative at present, Defra has set out when further Standards may be added to the SFI;

  • 2023:  Nutrient Management; Integrated Pest Management; Hedgerows.
  • 2024:  Agroforestry; Low & No Input Grassland; Moorland & Rough Grazing (all levels); Water Body Buffering; Farmland Biodiversity
  • 2025:  Organic; On-farm Woodland; Orchards & Specialist Horticulture; Heritage; Dry Stone Walls

It is possible other Standards will be included as well.  It is notable that in the list above there is no Arable Land Standard or Improved Grassland Standard – both of which were in the Pilot scheme.  Possibly they have been subsumed into ‘Farmland Biodiversity’ or they may have been deemed too unattractive.  

The full details can be found via the Defra website at https://www.gov.uk/government/publications/sustainable-farming-incentive-how-the-scheme-will-work-in-2022

 

 

 

Farming Focus InBrief – December 2021

  • If you require advice from one of our consultants, do not hesitate to contact them by email or phone.  If you do not have their details please contact the office on 01664 503200 or email [email protected]
  • The Farming Investment Fund (FIF) is now open. It is designed to help farmers invest in new technology and equipment.  The scheme is similar to the previous Countryside Productivity Scheme including two elements – for small and large investments.  The Farming Equipment and Technology Fund is the small-scale scheme.  This pays a fixed amount for specific items of equipment (usually 40% of the cost). Min. grant £2,000, max. £25,000.  The full list can be seen at  – https://www.gov.uk/guidance/farming-equipment-and-technology-fund-round-1-manual/annex-3-eligible-items-specification-and-grant-amount. This round of funding is open until the 7th January 2022.   The Farming Transformation Fund is for larger items of spending with grants of between £35,000 and £500,000 (again, based on a 40% grant rate). The grant funds projects in three areas; Water Management (open now), Improving Productivity (opening later this year) and Adding Value (opening early next year). Full details can be seen at https://www.gov.uk/guidance/farming-investment-fund
  • The latest Farm Business Income (FBI) figures show a surprising rise.  The data shows the profit for an average full-time farm in each of the main sectors of English farming.  The data is for the 2020/21 year (March to Feb) which covers the 2020 harvest, 2020 BPS payments and the first months of the Covid outbreak. All sectors, apart from General Cropping and Poultry showed higher year-on-year  profits.  And, overall, FBI rose by 5% on the year.
  • The Environment Bill finally received Royal Assent on the 9th November 2021.  The Act is likely to have a long-term impact on farming for many years.  However, the effects will not be immediate, detailed provisions (in most cases) will need to be introduced through secondary legislation.  One of the main areas to impact agriculture will be the setting of long-term, legally enforceable, targets (for Government) for the improvement of air quality, water, waste reduction and biodiversity.
  • Details of how the BPS Lump Sum payment and Delinking are to work were expected in October, but Defra has announced these will now be delayed and has said they will be available ‘by the end of 2021’.  As the Lump Sum exit scheme is expected to open in 2022 and is only supposed to be a ‘one-off’ this will give anyone hoping to take advantage of this and their advisors very little time to get to grips with the detail and understand the rules. 
  • The results from the annual Early Bird Survey of UK planting intentions for harvest 2022 shows a rise in both the OSR and wheat area. The former by 13% to 345,000 ha, with the latter up by only 1.5% to 1.81m ha (1.82m ha 2019 levels).  The fallow area also shows an increase, but surprisingly, given the price of N, the area planted to pulses is forecast to decline by 5%.  Both the oat and barley areas are also expected to fall.  The total barley area intended to be planted is down by 4%. However, winter barley is expected to increase, but spring barley plantings are forecast to fall by a larger amount (-8%).  It is worth highlighting at this stage these figures represent intentions, rather than confirmed plantings.  Spring acreages are still very much open to change, dependent on the price of both outputs and inputs (especially this season). 
  • There have been multiple reported cases of Avian Flu over the last month and a number of 3km Protection Zones and 10km Surveillance Sites have been put in place across the country.  It is now a legal requirement for all bird keepers across the UK to keep their birds indoors and to follow strict biosecurity measures in order to limit the spread of the disease. All the latest information can be found at https://www.gov.uk/guidance/avian-influenza-bird-flu
  • The Welsh Government has announced a 12-week consultation period on proposed changes to the Bovine TB eradication programme.  The full consultation, which can be found at https://gov.wales/sites/default/files/consultations/2021-11/refreshed-tb-consultation-document.pdf
  • A reminder that the Future Farm Resilience Fund is now open. If you would like a one-to-one farm resilience review and report carried out by one of our consultants and access to online skills and training, including resilience planning webinars all for free get in touch with one of our consultants. Places are limited.  More information can be found at https://www.eventbrite.co.uk/o/ricardo-future-farming-resilience-fund-29430290977

This month’s Spotlight looks at the latest detail and payment rates for the Sustainable Farming Incentive 2022 (SFI 2022).  This is the initial element of the SFI and will be available next year  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/

 

Farming Focus InBrief – November 2021

  • If you require advice from one of our consultants, do not hesitate to contact them by email or phone.  If you do not have their details please contact the office on 01664 503200 or email [email protected]
  • The English BPS payment rates for 2021 have been published by Defra. The gross rates have increased slightly but the effect of the Agricultural Transition will see farmers receive less than last year.  All payments are being reduced by at least 5% (shown in the table below as the ‘net’ figures).  Those with a payment over £30,000 will face larger deductions – up to 25% on amounts over £150,000.
  • The Welsh Government paid the vast majority of farmers an advance of 70% on their 2021 BPS payments on the 15th October.  Around 97% of claimants received the advance.  The balancing payments will be sent from the 15th December.
  • In the second Budget of 2021, the Chancellor set out the Government’s tax and spending plans with the twin aims of stabilising the Government’s finances post-Covid and promoting the ‘levelling-up agenda’. The latest economic forecasts predict economic growth in 2021 will be 6.5%.  Growth in 2022 is put at 6.0% before falling to 2.1% in 2023.  The biggest economic issue in 2022 looks set to be inflation.  The forecast for CPI is a rate of 2.3% for 2021.  For 2022 the OBR has a central forecast of 4% and there is a strong chance it could be as much as 5%. There was relatively little in the budget that directly impacts farming.  The rise in the National Living Wage plus the 1.25% supplement on National Insurance will further push up labour costs and the Annual Investment Allowance has been kept at £1m.
  • Ahead of COP 26, the UK set out how it will deliver on its commitment to reach net zero emissions by 2050 in its Net Zero Strategy: Build Back Greener. It sets out plans across all sectors of the UK economy.  But instead of measures to cut meat and dairy as previously recommended by the Climate Change Committee and the National Food Strategy, the emphasis is on getting farmers to sign up to the new ELM scheme, improve efficiencies in the sector, restore peatlands and increase the planting of woodlands.
  • The UK and New Zealand have announced an agreement in principle on a Free Trade Deal (FTA).  The deal is similar in nature to the UK-Australia trade deal announced back in June and like the Australian FTA, the UK-NZ FTA is subject to further negotiations on the legal text.  Whilst there is an eventual aspiration to fully liberalise agri-food trade, there are adjustment periods for several agri-food products which the UK deems to be sensitive – notably beef, lamb and dairy products.
  • It is reported that the fertiliser producer, CF Industries, will continue to operate its plants in the UK after buyers of carbon dioxide (CO2) agreed to pay higher prices.  The deal operates until January.  This means that ammonium nitrate manufacture will continue for at least the next couple of months (ironically, now as a by-product of CO2 production).  Although this eases some of the concerns about availability, fertiliser prices are likely to be high given gas prices.
  • What is claimed to be Europe’s largest oat processing facility is being built in the East Midlands.  Sited next to Camgrain’s existing store between Corby and Kettering, the plant will supply oat-based ingredients for the food and drink industry.  The mill will be run by ‘Navara Oat Milling’, a three-way joint venture between Frontier Agriculture, Camgrain, and Anglia Maltings Holdings (AMH).  The plant is due to open in 2023.
  • Arable prices are high due to tight markets. The dry conditions experienced by S America last year are continuing and the ongoing La Niña could cause low wheat output from the region again this year.  UK wheat production has recovered but with low stocks, domestic supply will be  OSR supplies are also very low with prices about £215/t more than a year ago.  Only supplies of barley outweigh demand.
  • The Welsh Government has launched a consultation on changes on how to identify, register and report livestock movements together with the proposed implementation of Bovine Electronic Identification (EID).  Responses to the consultation need to be submitted by 2nd January 2022.  The full consultation can be found at https://gov.wales/changes-livestock-identification-registration-and-movement 
  • The problems in the pig sector remain critical. Prices are falling at a time when costs are soaring.  Brexit and Covid have compounded staff shortages, particularly of skilled butchers, which continues to affect throughput in processing plants.  Labour issues have seen some processing plants cutting back output by 25% per week since August.  The result being pigs remaining on farm, taking up room, and eating expensive feed. The Government appears to have finally recognised the industry has hit a crisis point and, in a move welcomed by the sector, it has announced a support package to include; Private Storage Aid, a Temporary Visa system and a Levy Holiday.
  • A reminder that the Future Farm Resilience Fund is now open. If you would like a one-to-one farm resilience review and report carried out by one of our consultants and access to online skills and training, including resilience planning webinars all for free get in touch with one of our consultants. Places are limited.  More information can be found at https://www.eventbrite.co.uk/o/ricardo-future-farming-resilience-fund-29430290977

This month’s Spotlight looks at the Animal Health & Welfare Pathway.  The first element of this is the Annual Health and Welfare Review which will be available in 2022 and will pay for farmers’ own vets to carry out a yearly Review including diagnostic testing for priority diseases.  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 Animal Health & Welfare Pathway

Under the new Animal Health and Welfare Pathway farmers will receive a fully funded annual visit by their own vet.  The Animal Health and Welfare Pathway aims to improve the health and welfare of English farmed animals by controlling and eventually eliminating endemic diseases.  The Annual Health and Welfare Review, which is due to be launched in spring 2022 as part of the Sustainable Farming Incentive (SFI 2022), will be the first element of the Pathway.

The Review will consist of a yearly visit by the farmer’s own vet for the lifetime of the Pathway (planned to initially be 3-years).  The vet will carry out diagnostic testing for priority diseases – Bovine Viral Diarrhoea (BVD), Porcine Reproductive and Respiratory Syndrome Virus (PRRS) and for sheep, parasitic resistance to anthelmintic treatments.  Grants are expected to range from £269-£775.  The main difference in the rate is due to the costs of the diagnostic tests which vary across the species.

The vet will also provide farmers with tailored advice and management to improve the health and welfare of their animals.  Having completed this first step, farmers will continue along the Pathway supported by Animal Health and Welfare grants which will be launched later in 2022.  These could include capital grants to improve the sustainability and reduce the environmental impact of the business or increase animal welfare.

Vets will also collect data. This will be used for benchmarking, to increase the health and welfare of the farmer’s own herd/flock, but it will also be shared with Defra so it can get a better understanding of the health and welfare of the national and regional herds/flock.  This information will then be used to inform and develop future policy to ensure it is targeted in the right areas.  There will be a review of on farm medicine usage and farmers are likely to be expected to upload medicines to an e-medicines recording hub

The Review will initially only be available to commercial cattle, pig and sheep farmers in England who are currently eligible for the BPS.  Eventually, it will be open to all livestock farmers above a minimum threshold – 50 pigs, 20 sheep or 10 cows.  The application process is currently being tested, but should be simple, either online or via a telephone call.

The Review is just the first element of the Pathway, a payment by results programme is also in the planning stages, which will reward farmers for achieving higher welfare outcomes by supporting the ongoing costs involved in delivery.

 

 

 

 

Farming Focus InBrief – October 2021

  • If you require advice from one of our consultants, do not hesitate to contact them by email or phone.  If you do not have their details please contact the office on 01664 503200 or email [email protected]
  • Scotland, Wales and Northern Ireland have all recently announced updates to their future farm policies, although none have given any clear proposals for new schemes or timings. However, we do know, in all the regions the BPS will continue in the short term whilst plans continue to be developed and consulted on.  Furthermore, the Welsh Government has confirmed the BPS will continue until 2023. It has also said existing Glastir contracts coming to an end in December 2021 will be given a two-year extension until the end of 2023 with the Farming Connect Programme continuing until March 2023.  The new Sustainable Farming Scheme which will replace the BPS and Glastir is expected to launch fully in 2025.
  • The UK Government has, once again, delayed the implementation of border controls on agri-food imports from the EU.  The postponement is blamed on the combined effects of the Covid-19 pandemic and food supply-chain issues, but it is equally a result of the Hard Brexit the Government negotiated.  Many of the checks and paperwork requirements were due to be fully implemented from the 1st October, but have been delayed until the New Year or later. This effectively retains the lop-sided situation where UK exports to the EU are subject to the full range of EU checks, whilst imports from the EU are currently allowed into our market with far fewer restrictions. 
  • Defra is giving a ‘heads-up’ that the Countryside Stewardship Facilitation Fund will open in England for a 6th round in December.  The fund supports facilitators, either individuals or organisations, to bring farmers and foresters together to produce landscape-scale Countryside Stewardship agreements.  A total of £2.5m will be available under the latest round, which will close to applications on 19th January 2022.  Further details expected soon.
  • The sugar beet price for the 2022 crop will be £27 per adjusted tonne.  This is a significant increase over the price for this year’s crop of £21.10 and £22.00 on the one-year and three-year contracts respectively.  This will be a flat-rate price, with no market related bonus as has been available recently. The fact that the announcement comes so late highlights the difficulty the two parties had in reaching a price agreement.  With buoyant prices for alternative crops and growing costs rising, a sizeable uplift was required to keep the area planted up.  The Virus Yellows insurance scheme, will continue for 2022.
  • Defra has given Rothamsted Research permission to run field trials on wheat that has been genome edited. The trials will be on CRISPR-edited wheat, which has been designed to have reduced levels of the naturally occurring amino acid, asparagine.  Asparagine turns into acrylamide when bread is baked or toasted which has been found to cause cancer in rodents and is considered as ‘probably carcinogenic’ to humans and is therefore a huge problem for food manufacturers.  It is expected the Government will propose allowing gene editing to be used commercially in the UK for both crops and livestock, following a consultation held this year.
  • Arable markets remain firm. Over 6m tonnes of wheat have already been traded with the EU, over 50% more than this time last year, pushing prices upwards.  Demand from China is fuelling buying from speculators, which in turn is increasing the volatility in the market.  Furthermore, there are reports Russia may impose an export tax on its grains, making global supply tighter.  Dry weather in Canada has reduced yields there, fuelling OSR prices.  Barley prices are also good, just a £7 per tonne discount to wheat with milling oats about £20 per tonne above feed oats.
  • The GDT average price index experienced a significant rise in September after consecutive declines since April and is now back above the $4,000 mark at $4,011. There is a general upturn in the global dairy commodities market, although still a little way off levels seen in the spring.  A ‘fly in the ointment’ could be a slow-down in demand from China but reports of a shift in demand from other parts of Asia and the Middle East could compensate for this.  Domestic Farmgate milk prices remain strong.  The average farmgate milk price for August is 31.24ppl, 11% more than last year.  But production has been falling due to poor grass growth.  The AHDB expects production to run below year earlier levels until the New Year.  Although the milk price is good, feed prices remain high meaning the milk to feed price ration will not encourage more production.  Rising labour and energy costs are also squeezing margins.
  • Farmgate beef and sheep prices remain strong. The GB all prime cattle deadweight average stands about 40ppkg above last year’s level.  The GB deadweight NSL SQQ is in the region of 60ppkg above 2020 prices and over £1 per kg higher than the 5-year average.  Supporting prices is tight supply.  The prime cattle and cow kills were both down by 4% and 5% respectively for the period January to August compared with 2020.  The UK monthly sheep meat production has been below last year and the 5-year average for every month so far this year, with July and August experiencing particularly sharp year-on-year declines.  In the period January to August, the lamb kill totals 7,255,200 head, almost 900,000 less than for the same period in 2020. 
  • A reminder that the Future Farm Resilience Fund is now open. If you would like a one-to-one farm resilience review and report carried out by one of our consultants and access to online skills and training, including resilience planning webinars all for free get in touch with one of our consultants. Places are limited.  More information can be found at https://www.eventbrite.co.uk/o/ricardo-future-farming-resilience-fund-29430290977
  • FPC Future, an agritech event, takes place on 4th November at the Lincolnshire Showground. With its exhibition, conference and tours of the University of Lincoln, it seeks to provide growers with all the agritech information they need. This event should be of interest to those looking at opportunities in the fresh produce sector as well as ascertaining how new technologies could boost productivity by helping their workforce to become more efficient. Registration is free – www.fpcfuture.co.uk

This month’s Spotlight looks at the situation regarding the surge in gas prices and the knock on effect on the fertiliser market and the wider food chain.   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 Fertiliser and CO2

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

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

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

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