Basic Payment Scheme

West Country farmers and landowners are worried that the current level of cashflow coming from the Basic Payment Scheme will not be maintained after 2020.

They welcomed the announcement by Philip Hammond, the new Chancellor, that funding under the Common Agricultural Policy will stay - at least in the short term.

This appears to mean that the current level of payments being made under the BPS will be maintained until 2020, which coincides with the lifetime of this EU scheme. What is not clear is whether the domestic rules relating to this scheme will change following our departure from the EU.

Mr Hammond also confirmed that any structural and investment projects signed off before the Autumn Statement at the end of November, “even when these projects continue beyond the UK’s departure from the EU”, will continue to be funded. This should include all projects paid through the Rural Development Programme for England such as agri-environment schemes.

Again this is good news for farmers and landowners committed to long term agreements, many of which still have up to ten years to run. But what will replace these schemes? We need urgent clarity on the future of agri-environment schemes beyond November.

Unsurprisingly, Mr Hammond’s announcement was welcomed by leaders of farming and countryside organisations as good news for the short term.

A National Farmers Union statement said: “This should mean that farmers can count on receiving the Basic Payment Scheme through to 2020, and that agri-environment schemes already in place are guaranteed through to their conclusion,” while NFU president Meurig Raymond added: “I hope that this short-term certainty will help to deliver longer-term confidence. This is exactly what farm businesses need now.”

Similarly Ross Murray of the Country Land and Business Association (CLA) explained: “This will provide a significant degree of reassurance to farmers and other landowners across the country.

“We have been clear, since the start of the EU referendum campaign, that this is the first decision ministers had to make to reassure rural businesses in the event of a Brexit vote. It is therefore a strong signal that will give confidence to businesses considering their future in a difficult agricultural market.”

So, in the short term, this provides farmers and landowners some degree of certainty and gives government breathing space to develop UK agricultural policies which will be fit for purpose.

But it is a pity the government did not start planning for a post-Brexit vote until after the referendum.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

EU referendum - Impact on the land market

Arable farmers in particular are desperate to see more sun because sunshine at this time of year is so important to help their crops yield heavily.

June was a relatively dull month and July did not look summery till this week so there are concerns that yields will be down on last year, which is almost inevitable because last year was in general a bumper harvest - albeit crop prices were low. 

On the upside the weakening pound following the EU referendum has helped protect UK farmers from recent falls in wheat prices on world markets as UK wheat has become comparatively cheap. 

This weakening of sterling on the foreign exchange markets is generally good news for farmers because it makes imports more expensive and UK exports more competitive.  This has generally helped UK commodity prices such as beef, lamb or cereal. 

Indeed the exchange rate is probably the single most important factor impacting on the profitability of farmers in the UK and so in the short term at least, the effect of the referendum is good news although the longer term impacts of an exit from the EU is far more difficult to predict.

So what impact is all this uncertainty having on the land market?  Well, early indications are that Brexit has had little if any immediate effect.  Having seen a surge in land values over the last decade, farmland prices had started to ease a little over the last six months as the impact of the massive slump in commodity prices affected farm incomes. 

But with commodity prices firming a little and concern that other commercial and residential asset values are likely to slip, farmland may once again become a more attractive investment for farmers and investors alike.

And with interest rates looking destined to fall this is making borrowing money as cheap as I have ever seen.  For example fixed term rates of up to seven years offered by the Agricultural Mortgage Company have fallen below the Bank of England Base Rate, which must surely indicate that the money markets are anticipating a rate cut.

So, in the short term the outlook for farming has become a little brighter and lets hope our late arriving summer weather stays.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Farmers and landowners to engage in the most important period of change in a generation

We find ourselves in a state of post-traumatic political shock following the referendum but whatever happens in Westminster it is the impact on real people that matters.

If we get it right, this could be a golden opportunity to forge agricultural and environmental policies that suit the UK.

But the risks are high as that prosperity will not depend only on new domestic policies but also on the success or otherwise of our negotiations about future relations with the EU and the wider world.

Therefore, now is the time for farmers and landowners to engage in what is will be the most important period of change in a generation and I set out below my take on some of the important issues identified by the NFU on which your opinion will be required.

•    Access to the EU single market; whether we like it or not the EU will continue to be our single biggest trading partner for agricultural produce for the foreseeable future.  Can we afford to jeopardise this relationship?

•    Currently we benefit from more than 50 trade agreements with countries around the world. Failure to replicate these quickly will be a problem.

•    Allied to the above is what access we are prepared to give to imports from the rest of the world? Some Brexiteers are supporters of real “free trade”, going it alone outside the single market. Is that what we really want or should imports be controlled to keep them in line with our standards of production?

•    Migration was obviously a key issue in the referendum but again we need to think very carefully about this.  Many farms need access to full-time and seasonal migrant labour in order to survive.  A points-based immigration policy that only allows skilled workers to come to the UK will not provide the workers required to keep our farms going but equally it seems free access for unskilled workers will not satisfy many who voted to leave.  This is a very difficult “square to circle” and the interaction of immigration policy with the negotiations for access to the EU single market is likely to be the biggest headache for our new political leaders.

•    On a more positive note leaving the EU does give us the opportunity to develop a new domestic agricultural policy which is adapted to our needs. However, our farmers will need an assurance that as part of this package they will still receive support so they can compete on a level playing field with our EU neighbours who will remain our principal competitors.

•    We also need to develop a rural development policy which focuses on enhancing our competitiveness and re-invigorate the agri-environmental schemes, on which we lead the EU but which have been devalued by changes to the Common Agricultural Policy. This gives us an opportunity to work with environmental organisations to devise better schemes that are workable for farmers and provide real benefit for our wildlife.

•    Finally we need a root and branch reform of European regulation and a re-assessment of the UK’s approach to issues such as GM crops.  This will be controversial in some quarters but we need to re-assess the balance between scientific evidence and the precautionary principle which is currently deployed in the EU.

Clearly there will have to be compromise which is not going to keep everyone happy, but whatever happens the NFU, CLA and other industry leaders need your input now in to this vital debate so they can enter into meaningful dialogue with government over the coming months and years.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk