Monday, 17 November 2014

Quietly confident about the introduction of the BPS

DEFRA has recently published its latest update on the CAP reform rules which surround the introduction of the new Basic Payment Scheme (BPS) next year.

It is ironic that farmers are being urged by DEFRA not to delay registering themselves for the new Basic Payment Scheme (BPS), and yet the registration rollout programme itself has been delayed. With the memories of the disastrous introduction of the Single Payment Scheme (SPS) back in 2005 still heavily imprinted on the mind of most farmers and land agents, one hopes the current delay is not a portent of things to come.

However, a DEFRA spokesman has commented, “We have learned a lot of lessons from the past. What happened in 2005 is still in everyone’s mind – but that is not going to happen again”. Indeed having met a number of the senior Rural Payments Agency team myself earlier in the year, I genuinely think they have a much better grasp of what is required than was the case back in 2005.

Therefore I am quietly confident that the introduction of the BPS will go better than its predecessor scheme, but equally farmers should not underestimate the time that may be required getting registered on the new system and then learning how to use the online mapping tools and the new application process.

The most important initial step will be for farmers and land agents to verify their identity on line. This will involve logging on to the Verify website where your identity will be verified by one of five third-party identity assurance providers.

In order to do this farmers will be asked a number of questions about their personal circumstances and finances and to make this process go smoothly you will need either a current driver’s licence or passport and details of at least two of the following; bank account/credit card, personal loan or mortgage, gas or electricity bill, mobile phone contract or voter registration information.

It is understood that if you have all the necessary information to hand the registration process can be relatively simple and will only take 10 minutes or so but if not you will be directed to a telephone helpline and in extremis you will be able to contact a digital support centre, the nearest of which in this area is currently in Exeter.

However, unlike when the SPS was introduced in 2005, DEFRA has recognised the importance of the professional advisors who for many years have played a vital role in assisting farmers complete their application forms. Thus, with everything now having to be submitted online, DEFRA is encouraging professionals, such as land agents like myself, to help farmers get set up for the new digital era which is upon us whether we like it or not.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381

Monday, 10 November 2014

Latest update on the CAP reform

DEFRA has recently published its latest update on the CAP reform rules which surround the introduction of the new Basic Payment Scheme (BPS) next year.

There are still areas of uncertainty but the long awaited rules concerning hedges and how they can be used to contribute to a farmer’s “Ecological Focus Area” (EFA) requirement have been clarified.

Any farmer who has more than 15 hectares of arable land will have to “set aside” 5% of their arable land as an EFA. There are some exemptions to this rule for farmers with a high proportion of grass but if these exemptions do not apply farmers will have to incorporate the appropriate EFAs in to their farming system.

There are five different types of EFA:

1.Fallow land
3.Buffer Strips
4.Catch crops and cover crops
5.Nitrogen fixing crop

It is the rules concerning hedges which have been exercising farmers’ minds in this area because they are an obvious ecological resource which many would like to use towards their EFA requirements and now the rules have been clarified in what appears to be a reasonably sensible manner.

Basically every metre length of hedge is to be regarded as providing 10 sqm of EFA and so farmers will need to measure the length of qualifying hedges on their land to calculate the deemed EFA area. But importantly DEFRA have also clarified the definition of what will be considered to be a hedge and which hedges will qualify as an EFA.

As far as the definition of a hedge is concerned, there are no maximum or minimum width or height limits but the hedge must be more than 20m long and there must be less than 2m from the ground to the lowest leaves. Gaps of up to 20m, including gateways are allowed in hedges.

However, not all hedges will qualify as an EFA. It is only those hedges which are on or adjacent to arable land in the farmer’s control that will qualify although hedges which are separated from the arable land by an ineligible feature under the BPS rules, such as a ditch of more than 2m wide or a hard track will not qualify. If the hedge is separated from the arable land by a fence only the hedge will qualify.

If the farmer is responsible for farming both sides of the hedge, even if one side is in permanent pasture, then the full 10 sqm per m length of hedge can be claimed but if the other side of the hedge is farmed by another farmer then only 5 sqm can be claimed. If the other side of the hedge is a road, the farmer can make a full claim.

Finally DEFRA had originally stated that using hedges to contribute to a farmer’s EFA requirements may result in a delay in the farmer receiving payment of the BPS in 2015. However, DEFRA have now said there may not be delays as they are looking into an ‘approach’ to prevent this. What this will be we do not know but it seems DEFRA are backtracking a little on their previous warning.

Therefore, although there is still plenty of work to be done before the first BPS claims can be made next year, some of the crucial detail is beginning to become clear.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381

Tuesday, 4 November 2014

Our ping-pong recovery

It was exactly three years ago when I was advised that ‘being on the brink is the new normal’ for what, at the time, was the foreseeable future. In 2011, many weren’t willing to assign a specific number of years to ‘the foreseeable future’ but I think we can say that, three years on, we are back from the brink, economically.

Yet as many economic and financial commentators judge, the country is still in a strange state of being where one set of indicators suggesting positive news is offset by another giving a gloomier gloss to our recovery. Yes, the economy is growing but there will be a shortfall on the deficit above £100 billion by the end of this year.

One Eurozone economist recently characterised the UK’s growth as ‘the wrong type of growth’. Much like the seasonal ‘leaves on the line’, it’s probably the best explanation for the feed of ping-pong, back and forth, contradictory economic data this autumn and the balancing act those politicians charged with running the country are having to perform day-in and day-out as our recovery plays out.

Perhaps the bruising economic experience the UK has endured since 2008 has changed our perceptions of what amounts to recovery. Pre-crisis, debt-levels being 40 per cent of national output were considered high but now it’s 80 per cent which is the trigger point at which the credit rating agencies talk about withdrawing our triple AAA status.

The shortfall on the deficit by this year’s end would have been considered big in times past at 6-7 per cent of national output but it is not as big as it was at its 9-10 per cent peak in 2008/2009.

In October, published figures recorded that unemployment had fallen below the 2 million mark for the first time in six years. But in this current tax year of 2014/15, income tax receipts are up by just 0.1 per cent yet outlay on social benefit payments has gone down.

Wage inflation runs at just 1 per cent at this point in our recovery but the Bank of England is anticipating 3 per cent wage inflation by the end of next year and therefore tax receipts will be up.

It may feel like a heavy trudge through the recovery now but many analysts are convinced there is good news in the pipeline and, thankfully, the wisest market operators will always invest for the long term.

Before that, we have the General Election in May and all bets are off that the Chancellor of the Exchequer’s Autumn Statement – scheduled for early December – will be anything else but a necessary political and economic balancing act of ‘Austerity Lite’. There is likely to be further squeezing of public expenditure but the pinch will not be as nippingly sore as it was in the early years of this administration.

In this ping-pong recovery of ours – in which we are growing faster than Germany - whether it’s politics which is the foil to economics or vice versa, balancing is not an act: it is the reality.

Much as we did in 2011, we are going to have to accept this new reality of our recovery for the foreseeable future.

Will Mooney MRICS

Commercial, Cambridge

Monday, 3 November 2014

Continue to be battered by bad news

Dairy farmers continue to be battered by bad news as the milk price continues to tumble although it is not an even playing field across the many different milk supply contracts on offer.

Worst hit at present appear to be farmers supplying First Milk which is a farmer owned co-op whose suppliers/members seem to be badly exposed to the world milk commodity prices which also continue to fall. Suppliers of First Milk have received the unwelcome news that the price for their liquid milk and manufacturing contracts will be falling by 1.4p/litre and 1.8p/litre respectively in December to 22.7p/litre for liquid and 24p/litre for manufacturing milk.

Many of the other milk buyers have also announced cuts including Arla, which has reduced the price for its farmers on their “direct supply” contract by 3p. These farmers are not Arla members and perhaps as a consequence of this, Arla has chosen reduce their price milk rather than that paid to its members, explaining that the direct supply milk was surplus to retail demand and was therefore only attracting commodity prices.

Thus, although all farmers will be affected by the fall in milk prices some farmers are being disproportionately badly affected. In light of this it seems to me that getting on the right milk contract is probably one of the most important business decisions many dairy farmers should be considering and I cannot see how farmers supplying a buyer such as First Milk will survive for any length of time with a milk price as low as 22.7p/litre.

Indeed I would imagine this must bring in to question the sustainability of First Milk as a business because I can only imagine many of their suppliers, despite being owners of the business as well as suppliers, will be seriously looking at their options, whether that be looking to switch to another milk purchaser, or perhaps even stopping dairy farming altogether.

The Chairman of First Milk, Jim Paice who previously served as farm minister in DEFRA during the peak of the milk price protests in 2012, blamed the price cuts on a drop in returns for liquid milk and cheese in the past month.

“With cheese specifically, this impacts not only on what we are selling now, but on the price that we can sell our cheese stocks for in the future,” added Jim Paice.

But even so, it must be galling for First Milk members to see other dairy farmers still being paid nearer 30p than 20p/litre for producing exactly the same product.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381