The value of this year’s Single Payment Scheme (SPS) payments was set last week at 77.7 pence per Euro which is the lowest rate for 7 years. The Single Payments, which are defined in Euros, are converted to Sterling in order to be paid to British farmers, based on the Euro/Sterling exchange rate on 30th September.
This will come as unwelcome news to farmers who are already facing difficult trading conditions as wheat prices have plummeted to around £100 per tonne while milk prices continue to fall with most dairy farmers now being paid below 30 pence per litre for their milk and some as little as 25 pence per litre. At these prices farmers will be losing money and with European support payments also falling farmers are facing a tough year ahead.
It is estimated the Single Payment received by farmers this year will be approximately 12% less than last year which is in part due to the exchange rate referred to above but also due to other deductions.
These other deductions include 10% compulsory modulation and a 12% transfer from direct payments (Pillar 1) to rural development (Pillar 2). Together these total 22% which is 3% higher than the deductions imposed in 2013. In addition there is also a 1.6% cut in the UK CAP budget and the European Commission’s Financial Discipline Mechanism (FDM) will also be imposed on those farmers receiving more than 2000 Euros. The FDM rate is currently proposed to be 1.3% although this could vary up or down.
NFU vice-president Guy Smith commented, “For many farmers, looking at increasingly tight cashflow projections in the face of plummeting commodity prices, news that SPS payments are also going to be down will feel like another unwelcome turn of the financial screw.
“Farmers should always be wary of crying ‘wolf’ too early but many of us are getting nervous that there might be some serious financial difficulties on the horizon at the moment,” he said.
So, farmers are definitely feeling the pinch and this was evident at the Dairy Show held at the Bath and West showground on 1st October. Although the show itself appeared to be a great success there were definitely a lot of worried dairy farmers around although opinion appeared to be divided as to how to deal with the falling milk prices. Some favoured direct action while others seemed resigned to the fact that world commodity prices have fallen sharply and this was the primary driver as to why prices have fallen sharply.
However I think all were agreed that they need to be treated fairly by the various milk purchasers so as to ensure farmers are not taking an unfair proportion of the burden imposed on the whole industry by the fall in world commodity prices. It is clarity on this particular point which I think needs to be sorted urgently.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
A property blog written and authored by our specialist blogging team, discussing all and any matter relating to the residential, rural and commercial property markets.
Showing posts with label Single Payment Scheme. Show all posts
Showing posts with label Single Payment Scheme. Show all posts
Monday, 6 October 2014
Monday, 21 July 2014
Arable prices at their lowest for years
As harvest begins, arable prices have fallen to their lowest levels for some years. “Farmers Weekly” figures for last week show feed wheat trading at around £132/t as compared to £162/t a year ago, and similarly feed barley trading at £107/t as compared to £140/t and Oilseed Rape at £235/t compared to £320/t.
In this area I have only seen winter barley being harvested to date although having been in Oxfordshire last Friday I did see combines rolling in the first fields of oilseed rape. It is too early to comment on crop yields but with prices where they are, farmers will need a bumper harvest to prevent significant losses.
Anecdotal evidence from the farmers I have spoken to indicate that although the crops look good, some have suffered from the very wet winter which has impacted yields, particularly on the wetter land while crops on more free draining land have fared better.
In addition to concerns over commodity prices and yields, farmers are also faced with another raft of decisions to be made concerning next year’s cropping which need to be addressed very soon. This is because next year will see the introduction of new rules for European support payments as the Single Payment Scheme is replaced by the new Basic Payment Scheme.
Allied to this scheme are a raft of new “greening measures” to which I have alluded in previous articles. These measures require arable farmers to observe new rules concerning crop diversification and the introduction of so called “Ecological Focus Areas” (EFAs).
Complying with these rules will be predictably complicated and what is clear is that farmers will need to make decisions very soon while the detailed rules are only just emerging. This is further complicated by the fact that the EFA rules will also impact on the payments received by some farmers under existing agri-environment schemes.
In addition many arable farmers who farm land on a “contract farming” basis will now need to treat these areas as a separate holding from their own land. This may sound simple to the uninitiated but it has the potential to threaten the viability of some long standing contract farming arrangements. As a consequence there will need to be detailed discussions between the landowner and contractor in the coming weeks if the payments due under landowner’s Basic Payment Scheme claim in 2015 are not to adversely be affected.
So, after a reasonably good run over the last few years arable farmers are faced with not only low commodity prices but also rule changes from Brussels which will make things more complicated and expensive with no obvious upside for anyone.
If farmers or landowners require advice on this matter they are welcome to contact James Stephen on 01749 683381.
In this area I have only seen winter barley being harvested to date although having been in Oxfordshire last Friday I did see combines rolling in the first fields of oilseed rape. It is too early to comment on crop yields but with prices where they are, farmers will need a bumper harvest to prevent significant losses.
Anecdotal evidence from the farmers I have spoken to indicate that although the crops look good, some have suffered from the very wet winter which has impacted yields, particularly on the wetter land while crops on more free draining land have fared better.
In addition to concerns over commodity prices and yields, farmers are also faced with another raft of decisions to be made concerning next year’s cropping which need to be addressed very soon. This is because next year will see the introduction of new rules for European support payments as the Single Payment Scheme is replaced by the new Basic Payment Scheme.
Allied to this scheme are a raft of new “greening measures” to which I have alluded in previous articles. These measures require arable farmers to observe new rules concerning crop diversification and the introduction of so called “Ecological Focus Areas” (EFAs).
Complying with these rules will be predictably complicated and what is clear is that farmers will need to make decisions very soon while the detailed rules are only just emerging. This is further complicated by the fact that the EFA rules will also impact on the payments received by some farmers under existing agri-environment schemes.
In addition many arable farmers who farm land on a “contract farming” basis will now need to treat these areas as a separate holding from their own land. This may sound simple to the uninitiated but it has the potential to threaten the viability of some long standing contract farming arrangements. As a consequence there will need to be detailed discussions between the landowner and contractor in the coming weeks if the payments due under landowner’s Basic Payment Scheme claim in 2015 are not to adversely be affected.
So, after a reasonably good run over the last few years arable farmers are faced with not only low commodity prices but also rule changes from Brussels which will make things more complicated and expensive with no obvious upside for anyone.
If farmers or landowners require advice on this matter they are welcome to contact James Stephen on 01749 683381.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Tuesday, 22 April 2014
Rural Payments Agency's online system
Last week saw a worrying glitch in the Rural Payment Agency’s (RPA’s) online system for claiming Single Payments, the application deadline for which is approaching on 15th May.
I for one was unable to log on to the system over the weekend of 12th and 13th of April and it is understood the problem persisted for some, well on in to the week. On contacting the RPA on Monday 14th April I was told that the problem was not in fact to do with the RPA’s own online system, which I hasten to add is generally excellent, but it concerned a problem being experienced by the “Government Gateway”.
At the time of writing it is not clear whether the problem has been conclusively resolved but what this does highlight is the potential fragility of relying entirely on online systems. This is of particular concern for the RPA who are intending to extend their reliance such systems when the new Basic Payment Scheme replaces the current Single Payment Scheme (SPS) in 2015.
The problems recently experienced were annoying but not catastrophic, but if they had occurred very much closer to the application deadline, the financial consequences of not getting the SPS application submitted on time could have been far more serious.
I am not suggesting we revert to the old paper forms but as our reliance on computers increases so too does our vulnerability to system failures or perhaps more worryingly online fraud of one form or another and in this context many farmers are probably quite exposed. This is because, for older farmers in particular, although many realise embracing computers is now a necessary evil , whether that be to deal with VAT returns or SPS applications, they are not familiar with the online “antics” of some fraudsters which are likely to be more familiar to younger or more frequent users.
Therefore, the government and RPA in particular are urged ensure that the government’s policy of “digital by default” does not leave elderly “non digital” farmers out in the cold and ensures the systems are robust so that all users are able to access the online systems at all times. After all the whole point of digital by default is to increase the efficiency and cost effectiveness of the delivery of schemes such as the SPS and if the systems are unreliable this will lead to frustration and potentially significant financial losses.
I for one was unable to log on to the system over the weekend of 12th and 13th of April and it is understood the problem persisted for some, well on in to the week. On contacting the RPA on Monday 14th April I was told that the problem was not in fact to do with the RPA’s own online system, which I hasten to add is generally excellent, but it concerned a problem being experienced by the “Government Gateway”.
At the time of writing it is not clear whether the problem has been conclusively resolved but what this does highlight is the potential fragility of relying entirely on online systems. This is of particular concern for the RPA who are intending to extend their reliance such systems when the new Basic Payment Scheme replaces the current Single Payment Scheme (SPS) in 2015.
The problems recently experienced were annoying but not catastrophic, but if they had occurred very much closer to the application deadline, the financial consequences of not getting the SPS application submitted on time could have been far more serious.
I am not suggesting we revert to the old paper forms but as our reliance on computers increases so too does our vulnerability to system failures or perhaps more worryingly online fraud of one form or another and in this context many farmers are probably quite exposed. This is because, for older farmers in particular, although many realise embracing computers is now a necessary evil , whether that be to deal with VAT returns or SPS applications, they are not familiar with the online “antics” of some fraudsters which are likely to be more familiar to younger or more frequent users.
Therefore, the government and RPA in particular are urged ensure that the government’s policy of “digital by default” does not leave elderly “non digital” farmers out in the cold and ensures the systems are robust so that all users are able to access the online systems at all times. After all the whole point of digital by default is to increase the efficiency and cost effectiveness of the delivery of schemes such as the SPS and if the systems are unreliable this will lead to frustration and potentially significant financial losses.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 31 March 2014
The last year of the Single Payment Scheme
This year is the last year in which farmers will receive EU support via the Single Payment Scheme and the deadline for completing this year’s application is beginning to loom on the horizon. This process should be reasonably straightforward provided there have been no major changes in the area of land being farmed but the impact of the reforms to the support system which will come in to force next year, need to be considered now.
This is because the new scheme, which will be known as the Basic Payment Scheme (BPS), includes new rules relating to so called “greening measures” which will need to be complied with in order that the farmer receives the payments in full. To the uninitiated the rules may seem reasonably straightforward, but in practice they are complicated and small changes in cropping patterns can have a major effect on whether or not the greening measures come in to force.
In simple terms the greening measures involve two main elements. First there is a requirement to introduce various levels of crop diversification if you farm over 10 hectares of arable land and second one has to introduce “ecological focus areas” (EFAs) amounting to 5% of your arable land if one farms over 15 hectares of arable land.
However, it is not as simple as that in that there are also a raft of exemptions which relate to the area of temporary or permanent grassland and how this area relates to either the total area of the farm or the arable area of the farm. These exemptions significantly complicate the application of the new scheme, particularly on relatively small mixed farms, many of which exist here in the West Country.
As a result farmers need to prepare themselves this year so that they know what crops need to be planted and in what proportions this autumn so as to be able to comply with the new rules.
As an example, last week I analysed one client’s cropping pattern and discovered that if he retained one particular field in grass next year rather than planting it to a crop, he could avoid both the crop diversification and EFA rules. If on the other hand he was to plant a crop in the land, my client would have had to comply with both the crop diversification and EFA rules.
What this means is that farmers need to plan carefully now for next year so as to minimise the impact of the new rules on their farming system, otherwise a relatively small change in cropping pattern could have a significant impact on their ability to comply with the new scheme rules next year and hence receive their support payments.
This is because the new scheme, which will be known as the Basic Payment Scheme (BPS), includes new rules relating to so called “greening measures” which will need to be complied with in order that the farmer receives the payments in full. To the uninitiated the rules may seem reasonably straightforward, but in practice they are complicated and small changes in cropping patterns can have a major effect on whether or not the greening measures come in to force.
In simple terms the greening measures involve two main elements. First there is a requirement to introduce various levels of crop diversification if you farm over 10 hectares of arable land and second one has to introduce “ecological focus areas” (EFAs) amounting to 5% of your arable land if one farms over 15 hectares of arable land.
However, it is not as simple as that in that there are also a raft of exemptions which relate to the area of temporary or permanent grassland and how this area relates to either the total area of the farm or the arable area of the farm. These exemptions significantly complicate the application of the new scheme, particularly on relatively small mixed farms, many of which exist here in the West Country.
As a result farmers need to prepare themselves this year so that they know what crops need to be planted and in what proportions this autumn so as to be able to comply with the new rules.
As an example, last week I analysed one client’s cropping pattern and discovered that if he retained one particular field in grass next year rather than planting it to a crop, he could avoid both the crop diversification and EFA rules. If on the other hand he was to plant a crop in the land, my client would have had to comply with both the crop diversification and EFA rules.
What this means is that farmers need to plan carefully now for next year so as to minimise the impact of the new rules on their farming system, otherwise a relatively small change in cropping pattern could have a significant impact on their ability to comply with the new scheme rules next year and hence receive their support payments.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Wednesday, 11 December 2013
The Rural Payments Agency
The Rural Payments Agency (RPA) has reported that it has successfully paid Single Payments to 95,600 farmers in England on the first day of the payment window being 2nd December this year. This is the best the RPA has ever achieved since the Single Payment Scheme was introduced in 2005 and it is a far cry from the chaos and delays which were experienced by many farmers in the early years of the scheme.
Indeed the payments made on 2nd December exceed the RPA’s own payment targets, which is good news for farmers, many of whom in the livestock sector in particular are still reliant on these subsidies in order to make a profit.
However, there is a concern that with the forthcoming reform of the CAP which will come in to force in 2015 that the RPA does not take its eye off the ball. It is imperative the RPA makes sure that as far as possible the progress that has been made in recent years is not squandered when the new scheme is introduced.
There is hope that the new scheme will be easier to administer because the government has sensibly decided to roll over the existing “entitlements” in to the new scheme. This will mean farmers will not have to go through a fresh registration process under the new scheme but there will no doubt be many other complications which may have the potential to cause problems.
The entitlements are important because in order to claim the area based support payments under the Single Payment Scheme and the new successor scheme, farmers need to match the number of entitlements they hold with an equivalent area of qualifying farmland. Therefore, as a result of the decision to roll over existing entitlements in to the new scheme, the value of entitlements has appreciated from around £200/entitlement to around £300/entitlement because there is now certainty that they will be around until 2020 which is when the CAP will next come under review.
Accordingly, those farmers with spare entitlements may consider selling them sooner rather than later because under the new scheme it is understood that any entitlements which are not claimed in 2015 will be confiscated without compensation. These entitlements will be put in to the National Reserve for distribution to other claimants, the rules for which are as yet unknown.
Further, any claimants with less than 5 hectares of land will no longer be allowed to claim in the new scheme which means they may wish to offload their entitlements now even though this would preclude them from making a claim in 2014.
So, it seems just as the RPA have got to grips with the existing Single Payment Scheme after 9 years of trying, there is a danger things could go awry as a new scheme is introduced in 2015. However, I hope the roll over of entitlements will make this process much more manageable than it was in 2005 although that does not mean to say the RPA or farmers should be complacent. The new scheme will present both opportunities for some and dangers for others and farmers will need to keep abreast of developments as the detail of the new scheme rules start to emerge over the coming months.
Indeed the payments made on 2nd December exceed the RPA’s own payment targets, which is good news for farmers, many of whom in the livestock sector in particular are still reliant on these subsidies in order to make a profit.
However, there is a concern that with the forthcoming reform of the CAP which will come in to force in 2015 that the RPA does not take its eye off the ball. It is imperative the RPA makes sure that as far as possible the progress that has been made in recent years is not squandered when the new scheme is introduced.
There is hope that the new scheme will be easier to administer because the government has sensibly decided to roll over the existing “entitlements” in to the new scheme. This will mean farmers will not have to go through a fresh registration process under the new scheme but there will no doubt be many other complications which may have the potential to cause problems.
The entitlements are important because in order to claim the area based support payments under the Single Payment Scheme and the new successor scheme, farmers need to match the number of entitlements they hold with an equivalent area of qualifying farmland. Therefore, as a result of the decision to roll over existing entitlements in to the new scheme, the value of entitlements has appreciated from around £200/entitlement to around £300/entitlement because there is now certainty that they will be around until 2020 which is when the CAP will next come under review.
Accordingly, those farmers with spare entitlements may consider selling them sooner rather than later because under the new scheme it is understood that any entitlements which are not claimed in 2015 will be confiscated without compensation. These entitlements will be put in to the National Reserve for distribution to other claimants, the rules for which are as yet unknown.
Further, any claimants with less than 5 hectares of land will no longer be allowed to claim in the new scheme which means they may wish to offload their entitlements now even though this would preclude them from making a claim in 2014.
So, it seems just as the RPA have got to grips with the existing Single Payment Scheme after 9 years of trying, there is a danger things could go awry as a new scheme is introduced in 2015. However, I hope the roll over of entitlements will make this process much more manageable than it was in 2005 although that does not mean to say the RPA or farmers should be complacent. The new scheme will present both opportunities for some and dangers for others and farmers will need to keep abreast of developments as the detail of the new scheme rules start to emerge over the coming months.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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