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
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 farm agency. Show all posts
Showing posts with label farm agency. Show all posts
Wednesday, 24 June 2015
Monday, 23 June 2014
Farm borrowings increase by almost 9%
Latest figures released by the Bank of England indicate that Farm borrowings have increased by almost 9% in the year to April 2014, reaching a new record high of £15.2bn. Farm borrowing has also risen in the last two year; by 10% to April 2012 and 9% to April 2013.
The question is whether this is a sign of a sector under pressure causing cash flow difficulties or whether it is a sign of confidence giving rise to new investment; my guess is that it is a bit of both.
Livestock farmers, particularly beef fattening units, will be struggling at present and they may well find their finances are being stretched as beef prices have plummeted in recent months. These farmers will be increasing their level of indebtedness because of the difficult market.
On the other hand many dairy farmers, who have seen good milk prices over the last year, may be investing in their farms with cautious confidence in the future.
There is no doubt we are seeing a lot of interest from farmers who are looking to borrow money to purchase land. However, the problem is that land is changing hands at prices of up to £10,000 per acre or more and even at historically low interest rates, the annual cost per acre of this borrowing can be eye-watering and it is significantly higher than the rental value of the land.
As a general rule banks are keen to lend money to farmers, not least because the value of agricultural land has more than doubled since 2007. However they are also very conscious that borrowings must be affordable and this is often the stumbling block for some farmers who may be capital asset rich but whose profits may be very modest indeed.
Having said that, there are some very good lending rates available in the market at present. For example the specialist “farmer’s” bank, the Agricultural Mortgage Corporation (AMC) is currently offering 0.8% off their standard lending rates for certain qualifying capital investments on farms.
The AMC is able to fund this discount because of money they have secured from the European Investment Bank. The idea is to encourage farmers to develop farm improvement projects, examples of which include new or improved crop storage and processing facilities, livestock housing, parlours, farm shops and other diversifications as well as wind turbines and solar panels.
If anyone is interested in looking at the availability of this funding for a project they may have in mind they are invited to contact me for free initial advice.
The question is whether this is a sign of a sector under pressure causing cash flow difficulties or whether it is a sign of confidence giving rise to new investment; my guess is that it is a bit of both.
Livestock farmers, particularly beef fattening units, will be struggling at present and they may well find their finances are being stretched as beef prices have plummeted in recent months. These farmers will be increasing their level of indebtedness because of the difficult market.
On the other hand many dairy farmers, who have seen good milk prices over the last year, may be investing in their farms with cautious confidence in the future.
There is no doubt we are seeing a lot of interest from farmers who are looking to borrow money to purchase land. However, the problem is that land is changing hands at prices of up to £10,000 per acre or more and even at historically low interest rates, the annual cost per acre of this borrowing can be eye-watering and it is significantly higher than the rental value of the land.
As a general rule banks are keen to lend money to farmers, not least because the value of agricultural land has more than doubled since 2007. However they are also very conscious that borrowings must be affordable and this is often the stumbling block for some farmers who may be capital asset rich but whose profits may be very modest indeed.
Having said that, there are some very good lending rates available in the market at present. For example the specialist “farmer’s” bank, the Agricultural Mortgage Corporation (AMC) is currently offering 0.8% off their standard lending rates for certain qualifying capital investments on farms.
The AMC is able to fund this discount because of money they have secured from the European Investment Bank. The idea is to encourage farmers to develop farm improvement projects, examples of which include new or improved crop storage and processing facilities, livestock housing, parlours, farm shops and other diversifications as well as wind turbines and solar panels.
If anyone is interested in looking at the availability of this funding for a project they may have in mind they are invited to contact me for free initial advice.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Wednesday, 18 June 2014
"Green Measures" will be introduced
Last week saw DEFRA announce the long awaited rules on Ecological Focus Areas (EFAs) which are part of the so called “Greening Measures” which will be introduced as part of the new Basic Payment Scheme (BPS) which replaces the existing Single Payment Scheme.
The Greening Measures will be worth 30% of a farmer’s support payment and in addition to the EFAs farmers will be required to observe rules on crop diversification and the retention of permanent pasture(at a national level) but it is the EFA rules which are causing most concern. This is because within a month or so farmers will be staring this year’s harvest and will be hoping to replant next year’s crops almost immediately but without knowing the EFA rules, this will be difficult.
In simple terms the new rules will require arable farmers with over 15 hectares of crops to “set aside” 5% of their land in to EFAs. The big question has been what these EFAs will involve and last week it became clear there will be five options. These will include land lying fallow, buffer strips, ‘catch and cover crops’ used to manage soil fertility and quality and Nitrogen Fixing Crops such as legumes and hedgerows.
The first option to leave land fallow is obviously costly for farmers in terms of loss of income and the government are also concerned about the loss of production at a time when we have falling rates of self sufficiency of home grown food. However, this is a straightforward and relatively easily monitored prescription.
The ease of administering the new system and proving to Europe that we have systems in place to monitor claims and payments is a real concern to the Rural Payments Agency, being the body charged with delivering the BPS. They remember the disaster that engulfed them when the Single Payment Scheme was introduced in 2005 and they do not want to see anything like that happen again.
Therefore, the inclusion of hedgerows as an EFA will no doubt be of concern to the RPA because in order to monitor this they will effectively have to digitally map every hedgerow which will be an enormous task between now and 1st January 2015 which is the start of the new BPS.
As a result DEFRA have warned in there press release that, “ To ensure that the RPA can process all claims accurately, farmers taking the hedgerow option may be requested to submit claims earlier and may need to expect payments later. This is because hedgerows will need to be digitally recorded and verified by the RPA to meet EU requirements and avoid the risk of penalties for farmers or the taxpayer”.
So, although matters have been clarified I think it will take a little while before the implications of the new EFA options are fully understood although the clock is ticking and farmers will need to make a decision on which prescriptions they intend to employ to within the next few months if they are not to jeopardise 30% of their agricultural support payments next year.
The Greening Measures will be worth 30% of a farmer’s support payment and in addition to the EFAs farmers will be required to observe rules on crop diversification and the retention of permanent pasture(at a national level) but it is the EFA rules which are causing most concern. This is because within a month or so farmers will be staring this year’s harvest and will be hoping to replant next year’s crops almost immediately but without knowing the EFA rules, this will be difficult.
In simple terms the new rules will require arable farmers with over 15 hectares of crops to “set aside” 5% of their land in to EFAs. The big question has been what these EFAs will involve and last week it became clear there will be five options. These will include land lying fallow, buffer strips, ‘catch and cover crops’ used to manage soil fertility and quality and Nitrogen Fixing Crops such as legumes and hedgerows.
The first option to leave land fallow is obviously costly for farmers in terms of loss of income and the government are also concerned about the loss of production at a time when we have falling rates of self sufficiency of home grown food. However, this is a straightforward and relatively easily monitored prescription.
The ease of administering the new system and proving to Europe that we have systems in place to monitor claims and payments is a real concern to the Rural Payments Agency, being the body charged with delivering the BPS. They remember the disaster that engulfed them when the Single Payment Scheme was introduced in 2005 and they do not want to see anything like that happen again.
Therefore, the inclusion of hedgerows as an EFA will no doubt be of concern to the RPA because in order to monitor this they will effectively have to digitally map every hedgerow which will be an enormous task between now and 1st January 2015 which is the start of the new BPS.
As a result DEFRA have warned in there press release that, “ To ensure that the RPA can process all claims accurately, farmers taking the hedgerow option may be requested to submit claims earlier and may need to expect payments later. This is because hedgerows will need to be digitally recorded and verified by the RPA to meet EU requirements and avoid the risk of penalties for farmers or the taxpayer”.
So, although matters have been clarified I think it will take a little while before the implications of the new EFA options are fully understood although the clock is ticking and farmers will need to make a decision on which prescriptions they intend to employ to within the next few months if they are not to jeopardise 30% of their agricultural support payments next year.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 2 June 2014
Progress since last winter's floods
Last week, as the agricultural correspondent of this paper, I was privileged to be invited by James Heappey, the Conservative candidate for Wells, to meet the Secretary of State for the Environment, Food and Rural Affairs, Owen Paterson MP.
Mr Paterson was in the area to visit the Bath and West Show and to investigate what progress has been made in the aftermath of last winter’s devastating floods on the Somerset Levels.
Having never met Mr Paterson before, my overriding impression was of a man who is committed to and knowledgeable about rural issues. He was questioned hard by a small group of farmers, landowners and rural professionals and he demonstrated that he had an in depth knowledge of a variety of subjects although the conversation was dominated by the ongoing impact that TB is having on so many livestock farmers in this area.
On this subject Mr Paterson was quite clear that the culling of badgers will remain part of the ongoing policy to eradicate the disease in cattle. The culling will continue in the two pilot areas in west Somerset and Gloucestershire and in the longer term he would like to see these areas extended widely throughout the counties which are badly affected by the disease.
He did also emphasise the need for continued bio-security measures in cattle which already involves a strict testing regime and culling of infected animals but this alone, he explained, will simply not eradicate the disease.
Other measures including vaccination of both cattle and badgers may become part of the strategy in the future but further research in to diagnostic tests and vaccinations and changes to European legislation will be required before such measures can be employed widely and cost effectively.
On the matter of flooding, which was another hot topic, he emphasised the need for local farmers, landowners, the Internal Drainage Boards, County and District Councils, the Environment Agency and conservation organisations to work in partnership to set up a Rivers Board to manage the rivers and other waterways in the long term to prevent a repeat of last winter’s problems.
He was keen to know how the EA was getting on with the initial dredging works on the Parrett and the Tone which has been funded by government. He was concerned that such work should not be held up by local bureaucracy, whether that be because of unnecessary health and safety or environmental hurdles but equally he emphasised the point that in the longer term it will be up to local organisations to sort this out for themselves.
He noted that in other parts of the country such as in Lincolnshire, landowners and farmers seemed to work well in partnership with the EA and he saw no reason why such arrangements cannot be put in place more effectively on the Somerset Levels. It seemed to me he was clearly setting down some parameters for the future in that although government have been willing to help with funds to “pump prime” the initial capital works, the ongoing responsibility will fall to local organisations to work much more effectively going forward with each other.
So, all in all, it was a fascinating insight in to the thinking of government at a high level and I came away with the feeling that we at least had someone in charge who understood the needs of the countryside which is a far cry from the dark years of Margaret Beckett’s leadership of DEFRA under the last Labour government.
Mr Paterson was in the area to visit the Bath and West Show and to investigate what progress has been made in the aftermath of last winter’s devastating floods on the Somerset Levels.
Having never met Mr Paterson before, my overriding impression was of a man who is committed to and knowledgeable about rural issues. He was questioned hard by a small group of farmers, landowners and rural professionals and he demonstrated that he had an in depth knowledge of a variety of subjects although the conversation was dominated by the ongoing impact that TB is having on so many livestock farmers in this area.
On this subject Mr Paterson was quite clear that the culling of badgers will remain part of the ongoing policy to eradicate the disease in cattle. The culling will continue in the two pilot areas in west Somerset and Gloucestershire and in the longer term he would like to see these areas extended widely throughout the counties which are badly affected by the disease.
He did also emphasise the need for continued bio-security measures in cattle which already involves a strict testing regime and culling of infected animals but this alone, he explained, will simply not eradicate the disease.
Other measures including vaccination of both cattle and badgers may become part of the strategy in the future but further research in to diagnostic tests and vaccinations and changes to European legislation will be required before such measures can be employed widely and cost effectively.
On the matter of flooding, which was another hot topic, he emphasised the need for local farmers, landowners, the Internal Drainage Boards, County and District Councils, the Environment Agency and conservation organisations to work in partnership to set up a Rivers Board to manage the rivers and other waterways in the long term to prevent a repeat of last winter’s problems.
He was keen to know how the EA was getting on with the initial dredging works on the Parrett and the Tone which has been funded by government. He was concerned that such work should not be held up by local bureaucracy, whether that be because of unnecessary health and safety or environmental hurdles but equally he emphasised the point that in the longer term it will be up to local organisations to sort this out for themselves.
He noted that in other parts of the country such as in Lincolnshire, landowners and farmers seemed to work well in partnership with the EA and he saw no reason why such arrangements cannot be put in place more effectively on the Somerset Levels. It seemed to me he was clearly setting down some parameters for the future in that although government have been willing to help with funds to “pump prime” the initial capital works, the ongoing responsibility will fall to local organisations to work much more effectively going forward with each other.
So, all in all, it was a fascinating insight in to the thinking of government at a high level and I came away with the feeling that we at least had someone in charge who understood the needs of the countryside which is a far cry from the dark years of Margaret Beckett’s leadership of DEFRA under the last Labour government.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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