DEFRA and red tape

It seems hard to credit that farmers were until recently banned from carrying out simple maintenance of ditches without applying to the Environment Agency for consent.

This is an example of the ridiculous red tape that can be imposed without understanding the consequences and I welcome the news that DEFRA secretary Liz Truss has seen the error of this crazy policy.

As a result farmers across England can now undertake low-level work on their own land without needing to seek EA consent. DEFRA recognised the paperwork was an unnecessary burden on farmers and this would allow the EA to focus their efforts on wider strategic flood-risk management.

The exemption only applies to man-made ditches, land drains, agricultural drains and previously straightened watercourses but it does not apply to natural rivers.  This will be particularly welcome on the Somerset Levels where the maintenance of ditches is vital to the farming systems.

The new flood risk activity permits allow farmers to dredge and maintain ditches up to 1.5km long without needing to fill out extensive forms.

Liz Truss said the government wanted to ensure farmers had the right conditions to thrive, which would include providing them with the means to protect their land from flooding.

“That is why we are cutting red tape for our hard-working farmers,” she said, “reducing flood risk and allowing them to do low-level maintenance work without unnecessary paperwork.”

DEFRA are keen to emphasise that this empowers local people with the best knowledge of local risks of flooding to clear waterways themselves.

However, strong safeguards will still be put in place to limit the impact of some activities – for example protecting Sites of Special Scientific Interest and spawning fish.

The move to relax the rules follows successful pilot schemes run over the last couple of years which showed that farmers and landowners can carry out this work in an environmentally sensitive way.

So we have a sensible relaxation of unnecessary red tape destined to achieve very little for anyone and no doubt the EA do not have the staff to enforce such rules.


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

Heart of the South West Local Enterprise Partnership

Bureaucrats do enjoy creating clunky names and here is a fine example. But keep reading as this one has money to give away.

The Heart of the South West Local Enterprise Partnership (HotSWLEP), which covers Devon, Plymouth, Somerset and Torbay is one of 39 LEPs created across the country following the Coalition Government’s Local Growth White Paper of October 2010.   

They replaced the role of the Regional Development Agencies which were disbanded simultaneously but the LEPs have taken too long to develop anything like an effective role.
This is largely because the Government gave little or no guidance, leadership or financial support to help the LEPs develop. 

The HotSWLEP (a snappy little acronym) is a partnership managed by a voluntary board consisting of business leaders, alongside representatives from local government and educational institutions. They work together to lead and influence the economy of Devon, Somerset, Plymouth and Torbay by improving economic growth and job creation.

The HotSWLEP’s key achievement has been the award of the highest allocation of funding in the country in the second round of the Growth Deal - £65.2 million - and the LEP aims to use this to deliver transformational growth in the South West.

However, the big question for most businesses is how can we access any of this money?
In recognition of this difficulty the HotSWLEP is about to launch a new Growth Hub which will be available for all businesses, whatever size or sector, to include farmers and other rural businesses, in the Heart of the South West area.  

The Growth Hub will be a single point of contact, free at the point of access, for all businesses seeking advice and support on any issues relating to the operations and aspirations of their business and signposting to international, national or local resources. 

Enquiries can be about anything that business owners may wish to ask - whether they are looking for information on new funding opportunities from grants or loans, where to go for tax advice or help with their expansion plans, innovation or export. 

A core value of the Heart of the South West Growth Hub is to simplify the often confusing range of local and national, public and private sector business support services that are on offer in the UK, so that businesses can make an informed choice about what type of support is best for them. 

The signposting service is offered free as part of the HotSW LEP’s Growth Deal funding, and the expert business support advisors will be on hand to deal with questions themselves or refer to experts in specialist areas.

Providing a top-quality, seamless business support service is a major part of the HotSWLEP’s strategy to generate transformational economic growth through a range of initiatives that will help businesses grow, including infrastructure improvement, skills development and inward investment.

Businesses can email info@heartofswgrowthhub.co.uk or phone 03456 047 047 to register their interest. Alternatively visit the interim website and complete our business support enquiry form: http://www.heartofswgrowthhub.co.uk/register-your-interest/


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

The question of BREXIT - British Farming

BREXIT – this is a debate with a very simple question but an extremely difficult answer as the same evidence can be interpreted by both sides to come to a seemingly credible and yet totally opposite conclusion.

This is because no one has ever taken such a leap in the dark, and with all such leaps you cannot tell whether there is a feather bed or a heap of jagged rocks awaiting our landing.

For agriculture you would have thought the debate is relatively simple. UK farmers receive more than £3bn of support payments a year from the EU, more than 60 per cent of our agricultural exports go to EU countries and increasingly farmers rely on foreign workers to staff their farms.  So you would have thought that of any cohort of the UK population, farmers would want to stay in the EU.

I am surprised that farmers are not more positive about staying, despite these significant benefits.  At a farmers’ meeting I chaired at the Bath and West Showground I asked how many of them had made up their minds one way or another and less than a third put up their hands.

The main reason I think farmers are undecided is that although they benefit from support payments and open access to the largest single market in the world, they also perceive that their costs are hugely increased by the regulation and red tape they must comply with to receive these benefits.

There is absolutely no doubt that the EU does create a huge amount of pointless red tape – I appreciate this only too well having to deal with the Rural Payments Agency on a daily basis.

However I caution those who think all such red tape will miraculously disappear if we leave the EU.  First there will be a prolonged period of adjustment of our own laws as we extricate ourselves from all the EU regulations which have become embedded in UK law and we may discover our bureaucrats are equally good at creating red tape as their European equivalents.

For example, it is not the EU that has protected badgers, which in the eyes of many farmers has contributed to the devastating rise in TB in cattle in our country. This is an entirely home grown law.

So although I am sure the UK would survive the leap in the dark, we would break a few bones on the way.  The big question is how long we would have to convalesce before we can walk again, or if all goes well, break into a gentle jog.

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

Challenging times for farmers

In today’s challenging times farmers can feel locked in a very lonely place.  As the losses mount there may seem to be no obvious route out of the situation and discussing this with close family or friends might not be easy.

But it is often worth discussing your worries with someone you trust who also has an understanding of the farming industry.  Whether that is your accountant, farm consultant or land agent doesn’t really matter. The important thing is to get a fresh perspective on your business because the answers may be staring you in the face but for one reason or other are difficult to address.

Probably the first thing you need is to get a clear understanding of your fixed and variable costs so you can start to benchmark yourself against industry standards and this may help to identify where the issues lie.  

You might for example identify that you have high machinery costs which may indicate you need to consider running the farm in a different way, perhaps selling some machinery and employing contractors to carry out work you have traditionally done yourself.  This could also lead to the possibility of reducing your labour requirements which could either release family labour to earn money off the farm or simply cut your employed labour.

Or you may identify high finance costs are a problem and restructuring your debt may be a possibility.  If this is the case don’t be afraid of speaking to your bank manager.  Most of them are pleased to hear from borrowers looking to take proactive action to address difficult times.  Extending the length of a loan to reduce the level of capital repayments or paying interest only for a couple of years may help the farm through a short term cash flow problem.

These are just a few examples of things that you may identify if you take the time to look at your business closely and it often needs a trusted third party to ask you those difficult questions that will make a difference.  

The easiest thing to do is nothing, but if you want your business to prosper in the long term, carrying on doing the same as you have done for decades is rarely the answer. 

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

My chat with Prince Charles and the Grosvenor Estates manager Edwin Christian

Prince Charles takes relentless criticism and teasing in the media but his work for our countryside has earned my respect.

In 2010 he founded The Prince’s Countryside Fund to ensure a sustainable future for rural Britain and I was invited to its fifth anniversary celebrations at Highgrove, Charles’ country home near Tetbury.

My firm Carter Jonas gives financial aid to this charity which has distributed more than £6 million in grants to 135 projects benefiting 160,000 people living and working in our rural communities.

We are proud to provide this money as part of our support for the farming community and I was impressed by Charles’ profound concern over the current crisis facing our dairy industry.

As well as its normal grant application process, the charity operates an emergency fund for stricken rural communities in times of need, which last year helped farmers hit by the disastrous floods on the Somerset Levels.

During July’s National Countryside Week a further £800,000 of grants was allocated to rural projects across the UK.

Projects funded range from apprenticeships for budding hill farmers, training for young people to gain employment in the rural economy, community transport schemes in isolated rural areas and projects to educate school children about where their food comes from and why the countryside matters.


In addition, The Prince’s Countryside Fund runs a bursary project with Land Rover. All the fund’s projects focus on supporting the people who care for our countryside and make it tick.

Supporters of the fund at Highgrove included TV gardener Alan Titchmarsh, Countryfile presenter Ellie Harrison and former England rugby star Phil Vickery.

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

Milk prices continue to drop

As milk price continues to fall I was not surprised to learn that almost five per cent of dairy farmers in England and Wales have left the industry in the last 12 months leaving only 9,777 in production compared with 10,225 a year ago.

With little prospect of an increase in price on the horizon this trend is likely to continue, although I suspect the profile of the farmers leaving the industry will probably be closely correlated with the buyer to whom they are selling their milk.

This is because the gap between the price being paid on the best and worst milk contracts has widened vastly over the last year. Those farmers supplying milk to purchasers whose price reflects  the fall in world market prices have found the value of their milk plummet.  

In contrast those farmers who are lucky enough to have secured a contract with one of the big supermarkets, where the price being paid is usually linked in some way to the cost of production, have found their milk price has remained relatively firm.  For example the Dairy Crest Sainsbury contract is offering around 30.4p per litre in July compared with 19p from First Milk, a farmer owned co-op.

However, farmers on the premium supermarket contracts must not be complacent because Tesco has written to the 650 farmers in its Tesco Sustainable Dairy Group saying major industry changes have forced them to rethink their contracts.  Exactly what this will mean is not yet clear but it seems inevitable that Tesco will be looking to address the gap between the premium price they are paying for their milk and the cut price deals they are offering on the shelves as a result of fierce competition in the retail sector.

Other supermarkets which run similar programmes to Tesco such as Waitrose and Sainsbury’s have told Farmer’s Weekly that they have no plans to review their contracts.  Similarly, M&S have publicly announced their intention to continue with their Milk Pledge to pay a fair price to farmers covering their cost of production.

Tesco is feeling the pinch and looking to save costs wherever it can.  Reviewing their milk contract is an obvious target because they can secure milk from the wider market place at significantly less than they are currently paying their farmers.  


However, Tesco need to appreciate that they must treat their supply chain fairly and even if the contract is reviewed, it must still reward their suppliers appropriately for the high standards of welfare and hygiene Tesco demands, on which I am sure they will not want to compromise.

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

Europe – in or out

Europe – in or out – is a hot topic and the debate is particularly important for the UK farming community.

Having just had my annual catch-up with many clients as we have completed their Basic Payment Scheme forms, there is no doubt that the mood is generally downbeat as most farmers are struggling with the impact that low commodity prices are having on their business.

So the support payments received from Europe through the CAP have once more become a very important income stream for most farmers. Whether that is a good thing is a different question, but I suspect many farmers will be relying on such payments to make a profit this year.

This is a significant change from the last few years when commodity prices were higher and the underlying farming business was able to make a profit without support from Europe. This led a number of my clients to question the need for support payments because of all the cross compliance regulations attached to them, but I hear this radical opinion less often now.

That does not take away the immense frustration many feel about the endless red tape and regulations, many of which seem to have their roots in European legislation, although whether our own government “gold plates” these rules is a moot point.

David Cameron would ease the concerns farmers about Europe if he could cut meaningless red tape, like the “greening” rules associated with the new Basic Payment Scheme.

Then there is the issue of European workers. When I started practising in Somerset more than 25 years ago I cannot remember any non-British (and very few non- Somerset) farm workers here. The contrast today is quite extraordinary, especially on intensive dairy farms where Eastern Europeans are almost the norm.

So, before any farmers vote to get out of Europe because of all the hassle associated with regulations, they need to ask themselves some serious questions.

First, would a British government of any hue provide the same level of direct payments that farmers now receive via the EU? My hunch is they would not.

Second, how would some more intensive farms staff their holdings without the availability of a European labour force? I suspect attracting a replacement British workforce would prove significantly more expensive.

Third, do you think that rules and regulations will significantly diminish if we are outside the EU? I have my doubts as we seem perfectly capable of creating our own red tape.

Fourth, if we think the playing field is uneven when we are in the EU, do we think it will get better or worse if we are outside? I don’t think this question is very difficult to answer.

Farmers who are understandably frustrated by the endless rules and regulations coming out of Europe should think twice about voting to quit the EU because our exit would herald a challenging new world for agriculture in this country.

There is an argument that these dramatic changes would benefit the industry, as it did in New Zealand some years ago, but there would undoubtedly be significant collateral damage affecting the wider farming community.  

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

Was it an administrative error?

The farmer-owned dairy co-op First Milk hit yet more trouble last Friday as their milk suppliers failed to receive their monthly cheque as expected.

First Milk blame this on an administrative error but there are continued fears about the organisation’s financial stability which must be arousing fear among the 1,200 farmers who supply milk to the co-op.

Since the turn of the year First Milk has been rocked by a number of problems that started in January when they announced a delay in paying the monthly milk cheque by two weeks.

This sent shock waves through their membership. Then in February First Milk announced a change in the way farmers would be paid for their milk by introducing an “A and B pricing contract”.

Instead of paying farmers a single price for all the milk they produce, farmers from April 1 would receive a fixed price for the “A” milk; approximately 80 per cent of their produce and a second variable price for the “B” milk.

The “B” price is being set to reflect the short-term prices such as those on the spot and milk powder markets. This clearly introduces uncertainty for First Milk members who will not know what price they will be receiving for their milk at the end of the month.

Then in March First Milk announced its milk price for April would likely end up being around 20p/litre which is well below the cost of production.

This makes one wonder how long dairy farmers can continue to supply milk at this price, especially as other dairy farmers are being paid significantly more by other milk buyers.

In this context some farmers on the best contracts are still being paid more than 30p/litre, an incredible 10p per litre more than most First Milk producers are getting for doing more or less the same job.

Why don’t farmers change contracts? Well the answer is that it is not easy to change contracts and for some there will be no choice at all. Many of the beleaguered First Milk suppliers will have to hang on in hope of better prices to come or cease dairy farming altogether.

So with the milk price at around 20p per litre, First Milk producers are facing a difficult choice and their confidence in the management of the organisation will have not grown when their monthly milk cheque failed to hit their bank accounts last Friday.  

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

Is British farming lagging behind other countries?

The Oxford Farming Conference (OFC) often presents challenging ideas for the farming industry to consider and this year is no exception.

The OFC’s report, which was written by agricultural consultants, Andersons pulls no punches. The Chairman of the OFC, Richard Whitlock comments, “Britain has some world-class farmers, but as a whole, our farming industry is lagging behind other countries and must make bold strides to becoming more globally competitive,"

This will come as a surprise to many farmers but agricultural productivity in this country, although it has improved, has not improved at the same rate as many of our competitors. This includes many of our European neighbours such as Germany, Denmark and the Netherlands as well as other non EU countries such as New Zealand and the United States.

The report’s author identifies a number of key factors which are necessary to improve competitiveness which include:

• Halting the decline in public research expenditure on agriculture which to the contrary needs to be increased. 

• The need to spend these research funds “on near-market” research which can be put in to commercial use quickly which in turn would attract more private funds for research.

• The research will help top performers improve productivity and their techniques will filter down to other farmers more widely.

• Focus should be centred on the top and middle sectors of farm operators on the basis that those that do not seek information will always be very difficult to influence.

• Opportunities for restructuring UK agriculture through facilitated young farmer access should be improved. Younger farmers are often more strategic and visionary operators than their elders. They are also more frequently prepared to use loan, venture or external shareholder capital to expand the business.

• Farmers as with all business people should help themselves by seeking greater (non-agricultural) business acumen.

The author also identifies the receipt of direct support subsidies from the EU as a factor which hinders competitiveness because it enables farmers to retire from dairy farming for example and keep a few cattle or sheep, with this “lifestyle” being underpinned by subsidy rather than profitable farming practices. It is considered this holds back the beef and sheep sectors in particular.

The report also highlights the need to embrace wider use of “joint venture” arrangements, so as to give younger farmers the opportunity to get in the industry. Indeed, I have only been discussing such issues this afternoon where a retiring dairy farmer has entered in to a contract milking arrangement with a young farmer/contractor and because the contractor has performed so well, the farmer has invested significant sums in improving the dairy buildings and equipment to the benefit of all.

This is just one example of where such an arrangement can work, but what is clear is that in order for UK agriculture to regain its competitive edge we need to increase our agricultural research and farmers must be prepared to take on board new and innovative ideas so as to attract young farmers and new entrants in to a sustainable and profitable sector in the long term.  

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

The Common Agricultural Policy has been reformed yet again

The Common Agricultural Policy (CAP) has been reformed yet again and at midnight on 31st December 2014 it was out with the old, as the Single Payment Scheme (SPS) ceased and in with the new, as the Basic Payment Scheme (BPS) was introduced. This is the mechanism through which farmers will receive support payments via the EU.

The new scheme is also meant to be at the forefront of the Government’s drive for “digital by default”; the idea being that in the first instance every farmer was meant to be able to verify their identity online. But in reality it appears the BPS has come too soon for this online verification process which is causing frustration to the farmers who have been invited to register so far.

This must be a big headache to the Rural Payments Agency (RPA) which is tasked with implementing the BPS. Therefore the RPA has decided to open up its helpline to allow farmers to verify their identity over the telephone which will then enable the RPA to allow farmers to access their online BPS system.

Having now done this with a few clients myself I am pleased to report that the telephone verification system appears to be working well and is reasonably easy although whether the RPA will be able to cope with the volume of calls that are now likely to flood in over the coming weeks remains to be seen.

Once farmers have then accessed the RPA’s online BPS system they need to check their business details are correct, that the appropriate people are registered against the business and that the plans of their land are up to date. At present there is not much else that can be done online but with only 4 months to go until the application deadline, there is clearly still a lot of work to be done to ensure the system becomes functional in time for farmers to be able to make their claim.

Memories of the disastrous implementation of the SPS back in 2005 are etched into the memory of many a farmer and thus there is nervousness that the faltering start to the online identity verification process may be a prelude of much worse to come. However, I do hope that this time the RPA will have learnt from the mistakes of the past.

The fact that they have organised a telephone identity verification system at relatively short notice is to be commended and I just hope the RPA’s new BPS software will be similarly user friendly.  

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

The highs and lows of 2014

As 2014 draws to a close, now is the time to reflect on the highs and lows of the farming year which has proved to be a mixed bag.

The year opened with torrential rain and floods on the Somerset Levels which became international news, but as the rain stopped it gave way to one of the best periods of “growing weather” we have seen for some time. Arable crops generally yielded well, grass and maize grew strongly filling the silage clamps and barns with an abundance of good quality winter fodder.

Livestock also enjoyed the pleasant spring and summer and incredibly mild autumn, resulting in high milk production and beef cattle growing and fattening well.

However, good as the weather may have been, farmers have been buffeted by some extreme conditions on the commodity markets.

Beef farmers were the first to be hit as prices plummeted by around 20% in the first six months of the year. But since then, the market has firmed and the year ends with prices back by about 10% on a year ago with modest hope now emerging for a better 2015.

It was then the turn of arable farmers to feel the cold wind of falling world commodity markets as feed wheat prices slumped from around £170 per tonne in the spring to a low of around £100 per tonne in mid autumn. From there prices have thankfully improved somewhat, approaching £130 per tonne at the yearend.

However, the most unpleasant surprise of the year was the unexpected slump in milk prices which started reasonably gently, but in recent months has gathered pace with some dairy farmers now being paid as much as 10p per litre less than they were being paid at the start of the year. This remains a worrying situation and there will undoubtedly be casualties as the months go on and what is particularly worrying is that there does not seem to be an obvious end to this decline in milk prices.

Having said that, unlike other sectors, not all dairy farmers are suffering at the same rate because the price each farmer receives depends on the terms of the contract they hold with one of the numerous milk buyers in the market. This is demonstrated by the latest DairyCo data which shows the top monthly milk price offered in October was 36.7p per litre as compared to the bottom price of 24.98p per litre; a staggering difference for more or less the same commodity.

So, it has been a mixed year with generally good weather after a disastrously wet start but this has not been enough to offset the effects of falling commodity prices which will undoubtedly impact on farming profits in 2014. However, with oil prices also falling fast this should help reduce costs of production as we move in to 2015 thereby offsetting at least some of the effect of falling produce prices which have proved to be the dominant factor effecting farmers in 2014.  

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

Elizabeth Truss blinded by last year's stats

Last week I read a news item released from a recent government report entitled “Making the food and farming industry more competitive while protecting the environment”

The headline was that, “The UK agricultural industry is going from strength to strength in its contribution to economic growth, with new statistics revealing that increased production and prices boosted farming income to £5.6 billion last year”.

It was stated that total income from farming rose by 15%, between 2012 and 2013 as the industry stepped up its output of top-quality food.

Environment Secretary Elizabeth Truss said, “These figures underline that food and farming really is a powerhouse of the UK economy. From potatoes to poultry, our farming industry is showing that it is leading the way in producing top-quality food that is desired across the world. Our farming sector employs over 400,000 people and their success is helping us deliver the government’s long term economic plan.

We know British consumers value British food but we want UK farming to be a world-leader, exporting quality products far and wide as well as thriving on the home front. Our push for better food labelling across Europe is just one of a host of ways we are working to help this crucial sector to grow and drive growth.”

However, I do hope that Elizabeth Truss understands that this rosy picture represents a “snapshot” from the past, before the world commodity markets took a nose dive plunging many farmers in to a very different situation today from that which existed only a year ago.

It is true that in 2013 commodity prices were reasonably high and the weather in the UK was certainly better than was experienced in the very wet summer of 2012. So in general farm incomes did rise in 2013, but 2014 has proved to be a very different scenario.

First the beef sector plummeted during last spring and summer which was followed by dramatic falls in cereal prices. Both these markets have made modest recoveries in recent months but the dairy sector is in freefall, with many farmers now being paid 8-10p/litre less for their milk than they were being paid in the spring.

So I trust Elizabeth Truss is not being blinded by last year’s statistics and that she has real grasp of the difficult situation which is affecting many farmers in the UK at present. There may be little that she can do about world market prices but there are things government should do to ensure the retail giants are prevented from passing cost savings down the food supply chain in an unfair manner so as to bolster their dwindling profits at the cost of primary producers.  

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

Milk price wars

Milk prices are falling fast in the face of sharp falls in world market prices for a variety of dairy products and on the home front supermarket milk price wars are not helping either.

The big four milk processors have all announced milk price cuts for September and October which will result in many farmers receiving less than 30p per litre with those unfortunate enough to be supplying First Milk, seeing prices dropping as low as 25.1p per litre.

Prices on the online Global Dairy Trade auction run by the New Zealand based co-op, Fonterra fell again on 2nd September by 6% which means that average price has dropped by 45% since the market peaked in February this year.

Why the world markets should experience such peaks and troughs in prices has always puzzles me but in simplistic terms, I suspect as prices fall, so too will world production as some farmers cease production while those that continue will probably not try to push their cows with expensive feed stuffs to produce that extra litre because the profit is not there.

As a consequence there will come a time when world supplies reach a level that demand will start to push prices back up, but increasing milk production is not that easy. One can feed cows with concentrates but if you want to increase cow numbers, it takes at least 2.5 years from birth to bring a heifer in to the production herd.

This is obviously a significant time lag and I suspect it is this lag which is a contributory factor to the very unhelpful oscillation in dairy commodity prices because once the cows are in the herd producing milk, one cannot “turn them off” which then contributes to the oversupply and downturn in milk prices.

I am sure there are also many other contributory factors to world markets prices but what seems inevitable at present is that milk prices are on the slide and our dairy farmers will have to brace themselves for some tougher months to come which will no doubt result in some farmers exiting the industry.

This is obviously a sad prospect but it is a trend that has been ongoing for as long as I can remember. For instance in 1995 there were 28,093 producers in England and Wales but by the end of 2013 there were only 10,581. This represents a 62% fall in producer numbers over that period and it seems likely that with the latest round of milk price cuts, the rate that producers will leave the industry will increase, at least in the short term.

However, as with many clouds there may be a silver lining for those that survive because with an ever increasing share of the market, there should be the prospect of making more money when the markets do return to more profitable levels. The big question is how long that will take and how much pain businesses are prepared to take in the interim.  

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

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.

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

News from the 'Beef Summit'

Last week saw DEFRA’s Farming Minister, George Eustice chair a so called “Beef Summit” with a view to dealing with the desperate situation the British Beef Industry finds itself in. In the last year beef prices have plummeted by around 20% which is posing very real problems to beef farmers, particularly those who “finish cattle”.

What is interesting to note here is that most farmers who finish cattle, purchase animals, called “store cattle”, from other farmers usually by auction at livestock markets. Here it is argued there is fair and open competition and thus the price paid represents the true open market value of the livestock purchased.

However, once the animals have been fattened they have to be sold to the dwindling number of abattoirs who in turn sell the majority of meat to the big supermarkets. It is this processor/retailer section of the food chain where the “market” becomes much less transparent. Thus many beef finishers are finding themselves having to compete for stock in the open market and then having to sell at “fixed” prices to abattoirs without any transparent competition in the system.

It was issues such as this that stimulated the beef summit where representatives from farming organisations, processors and retailers met in Westminster to discuss the problems facing beef farmers. The outcome of the meeting was that representatives from the farming unions and the British Meat Processors Association (BMPA) will meet over the summer to discuss a code to increase transparency.

The code will cover how trading terms, abattoir specifications and penalties are communicated to beef producers. This represents one of the areas of concern facing farmers but the retail sector is also another big issue where the perennial problem of clear labelling and fair pricing of meat is important.

Farmers appreciate that markets do go up and down but if supermarkets truly want to retain beef production in this country they need to work with the industry to give some certainty as to what prices are likely to do over a period of time.

To some extent supermarkets such as Waitrose are doing this and have recently announced that they will hold prices at no less than 345p/kg for their producers through to October. Tesco has also started a promotion of beef although from the advert I have seen includes British and Irish beef which illustrates the problem of labelling where nothing ever seems as transparent as it should be – will it be British or Irish beef that you actually have on your plate?

So it seems that although some progress has been made and that a code of conduct will be a good thing, there is a lot more still to be done before British beef farmers will feel they are at least being treated fairly by the processors and retailers that dominate the food chain “upstream” from the farm gate.

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