According to Carter Jonas’ recent assessment of the rural property market, farmland remains an above inflation investment with prices increasing by 2.5 per cent in the second half of 2014 alone.
However this national figure disguises a growing regional variation, with values in the south and east of England achieving as much as £14,000 per acre while the South West witnessed sales averaging about £9,000 per acre.
The supply of land remains restricted, with a total of only 120,000 acres being openly marketed across the UK in 2014, a 15 per cent decrease from the previous year.
However, in contrast the volume of off-market sales rose significantly during 2014, accounting for a third of all Carter Jonas transactions across the country as buyers and sellers of large blocks of land are increasingly seeking private deals.
This trend is expected to continue and will help to sustain the growth in capital values which is forecast for 2015.
But, the picture is not an even one across or within regions because local demand and land quality are becoming increasingly important.
Isolated blocks of poor quality land in areas of little demand are not experiencing capital growth and in flood hit areas for example, capital values may be less than half of the average price in the region.
In contrast large blocks of land of 1,000 acres or more are proving most attractive, with this market being driven by cash rich investors in particular, where the inheritance tax relief available on agricultural land often makes it an attractive investment.
Despite this, farmers represented for the highest proportion of buyers on transactions completed by Carter Jonas during 2014 at 28 per cent, closely followed by “lifestyle” buyers (24 per cent) and investors (20 per cent).
The “halo effect” surrounding London remained significant and is expected to build momentum during 2015 as capital continues to flow from high earning individuals working in the City or even from abroad.
This effect is particularly prevalent in the country house market with properties up to about 50 acres, although holdings with larger parcels of land continue to benefit, albeit to a lesser extent.
The RICS/RAU Rural Land Market Survey for the second half of last year also shows demand for farmland continues to outpace supply and drive up prices.
However with land prices rising and rent for farm business tenancies remaining broadly stable, the investment yield on agricultural land has fallen to match its all time low of 1.6%.
Anecdotal evidence from RICS surveyors suggests that the recent fall in commodity prices may be tempering the pace of demand, particularly for smaller blocks, in all parts of the country.
However, with demand for land from outside the farming community still strong and the supply of land tight, it seems that despite the fall in farming profitability, the price of farmland will on average remain firm during 2015.
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 rural development. Show all posts
Showing posts with label rural development. Show all posts
Monday, 9 February 2015
Monday, 26 January 2015
Farmers to be allocated entitlements
Farmers should be aware of one unexpected consequence of the introduction of the new Basic Payment Scheme (BPS) which seems inherently unfair and is as a consequence of a “one off” rule that will be implemented this year only.
Under the new scheme farmers will be allocated “entitlements” which they need to use to claim against their land. One entitlement will need to be matched against one hectare of qualifying land in order to make an effective claim. The new BPS entitlements will be derived from the old Single Payment Scheme (SPS) entitlements that a farmer already holds.
Under the old scheme, farmers were able to hold more entitlements than land; they could not claim on the spare entitlements but provided they used them every other year they could hold on to them. However in the first year of the BPS any “spare” entitlements will be confiscated without compensation which for most farmers will not have a significant impact.
For those farmers who take on extra land in 2016 this may be a problem if they are not able to acquire the matching number of entitlements from the outgoing farmer because the supply of spare entitlements will be restricted to those farmers who can no longer claim on all some of their own land next year. This may be because they have built a solar park on their land or sold land for development for example.
But, there is one group of farmers where the new rule will have an unexpected consequence and that is farmers whose land may be affected by an infrastructure project in 2015. Such projects are often temporary in nature and may involve a water company installing a new sewer or water pipe for example. Here land will be temporarily taken out of production along the route of the pipe and where contractor’s compounds or pipe stores are required.
In such instances farmers will generally not be allowed to claim on the affected land because it will not comply with the myriad of “cross compliance” rules which are a feature of the both the old SPS and BPS. However, if this land cannot be claimed on in 2015, the farmer will permanently lose the matching entitlements even though the loss of land has only been temporary and has been at the behest of a third party out of the farmer’s control.
I have enquired whether these circumstances could be considered as “force majeure” thereby exempting a farmer from losing entitlements but I am informed this is not permitted. Therefore farmers affected by schemes that will result in a temporary loss of land this year will incur a permanent loss of the equivalent number of entitlements. This will not happen in future years because the ongoing rules allow entitlements to be used every other year.
Therefore if any farmers are likely to be affected by such a scheme please do to contact me and for free advice on this subject.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Under the new scheme farmers will be allocated “entitlements” which they need to use to claim against their land. One entitlement will need to be matched against one hectare of qualifying land in order to make an effective claim. The new BPS entitlements will be derived from the old Single Payment Scheme (SPS) entitlements that a farmer already holds.
Under the old scheme, farmers were able to hold more entitlements than land; they could not claim on the spare entitlements but provided they used them every other year they could hold on to them. However in the first year of the BPS any “spare” entitlements will be confiscated without compensation which for most farmers will not have a significant impact.
For those farmers who take on extra land in 2016 this may be a problem if they are not able to acquire the matching number of entitlements from the outgoing farmer because the supply of spare entitlements will be restricted to those farmers who can no longer claim on all some of their own land next year. This may be because they have built a solar park on their land or sold land for development for example.
But, there is one group of farmers where the new rule will have an unexpected consequence and that is farmers whose land may be affected by an infrastructure project in 2015. Such projects are often temporary in nature and may involve a water company installing a new sewer or water pipe for example. Here land will be temporarily taken out of production along the route of the pipe and where contractor’s compounds or pipe stores are required.
In such instances farmers will generally not be allowed to claim on the affected land because it will not comply with the myriad of “cross compliance” rules which are a feature of the both the old SPS and BPS. However, if this land cannot be claimed on in 2015, the farmer will permanently lose the matching entitlements even though the loss of land has only been temporary and has been at the behest of a third party out of the farmer’s control.
I have enquired whether these circumstances could be considered as “force majeure” thereby exempting a farmer from losing entitlements but I am informed this is not permitted. Therefore farmers affected by schemes that will result in a temporary loss of land this year will incur a permanent loss of the equivalent number of entitlements. This will not happen in future years because the ongoing rules allow entitlements to be used every other year.
Therefore if any farmers are likely to be affected by such a scheme please do to contact me and for free advice on this subject.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Wednesday, 3 December 2014
Taking Stock
Last week saw three different professional firms come together at the Bath and West to address the problems currently facing the dairy industry as milk prices have plummeted in recent months.
The seminar entitled “Taking Stock” was hosted by land agents, Carter Jonas, the Shepton Vets and the Farm Consultancy Group (FCG). The aim of the event was to assess the strategies farmers can employ to survive the current difficult trading period and in general, despite the current problems the message was reasonably up beat.
The overriding message that came across from all three firms was the importance of a farmer understanding his business inside out and managing all aspects to keep costs of production under control.
In the last year or so, while milk prices were reasonably high it seems some farms may have taken their eye of the ball in this respect and Hollie Savage of Carter Jonas and James Shenton and Phil Cooper of the FCG all emphasised the need for farmers to analyse their business carefully, benchmarking their costs of production against competitors so as to identify where improvements can be made.
Similarly Paddy Gordon of Shepton Vets explained the importance of a farmer understanding all aspects of the herd’s health and importance of using your vet to provide regular consultancy advice rather than just calling the vet when an animal falls ill. In so doing Paddy illustrated how the cost of regular advice will be far outweighed by an increase in profits as mastitis can be brought under control and pregnancy rates increased.
Tom Ireland from Carter Jonas addressed other opportunities in relation of renewable energy issues in particular where he explained that there are still significant opportunities for farmers, although obtaining planning consent and locating an appropriate grid connection remain significant obstacles. However he also emphasised that as subsidies begin to fall, the profitability of a renewable energy installation will become increasingly reliant on understanding the farms energy needs and matching that to the electricity generated. This is because it will be increasing important to use your own electricity rather than exporting it to the grid because this will produce a much higher return.
So in conclusion, although it was acknowledged that some dairy farmers may leave the industry, the speakers were confident that the majority will survive. However, in order to receive a sensible return for the massive financial and time commitment required to run a successful dairy farm, hard work alone will not be enough; farmers will need a thorough understanding of their business and act to control costs in particular.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
The seminar entitled “Taking Stock” was hosted by land agents, Carter Jonas, the Shepton Vets and the Farm Consultancy Group (FCG). The aim of the event was to assess the strategies farmers can employ to survive the current difficult trading period and in general, despite the current problems the message was reasonably up beat.
The overriding message that came across from all three firms was the importance of a farmer understanding his business inside out and managing all aspects to keep costs of production under control.
In the last year or so, while milk prices were reasonably high it seems some farms may have taken their eye of the ball in this respect and Hollie Savage of Carter Jonas and James Shenton and Phil Cooper of the FCG all emphasised the need for farmers to analyse their business carefully, benchmarking their costs of production against competitors so as to identify where improvements can be made.
Similarly Paddy Gordon of Shepton Vets explained the importance of a farmer understanding all aspects of the herd’s health and importance of using your vet to provide regular consultancy advice rather than just calling the vet when an animal falls ill. In so doing Paddy illustrated how the cost of regular advice will be far outweighed by an increase in profits as mastitis can be brought under control and pregnancy rates increased.
Tom Ireland from Carter Jonas addressed other opportunities in relation of renewable energy issues in particular where he explained that there are still significant opportunities for farmers, although obtaining planning consent and locating an appropriate grid connection remain significant obstacles. However he also emphasised that as subsidies begin to fall, the profitability of a renewable energy installation will become increasingly reliant on understanding the farms energy needs and matching that to the electricity generated. This is because it will be increasing important to use your own electricity rather than exporting it to the grid because this will produce a much higher return.
So in conclusion, although it was acknowledged that some dairy farmers may leave the industry, the speakers were confident that the majority will survive. However, in order to receive a sensible return for the massive financial and time commitment required to run a successful dairy farm, hard work alone will not be enough; farmers will need a thorough understanding of their business and act to control costs in particular.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 17 November 2014
Quietly confident about the introduction of the BPS
DEFRA has recently published its latest update on the CAP reform rules which surround the introduction of the new Basic Payment Scheme (BPS) next year.
It is ironic that farmers are being urged by DEFRA not to delay registering themselves for the new Basic Payment Scheme (BPS), and yet the registration rollout programme itself has been delayed. With the memories of the disastrous introduction of the Single Payment Scheme (SPS) back in 2005 still heavily imprinted on the mind of most farmers and land agents, one hopes the current delay is not a portent of things to come.
However, a DEFRA spokesman has commented, “We have learned a lot of lessons from the past. What happened in 2005 is still in everyone’s mind – but that is not going to happen again”. Indeed having met a number of the senior Rural Payments Agency team myself earlier in the year, I genuinely think they have a much better grasp of what is required than was the case back in 2005.
Therefore I am quietly confident that the introduction of the BPS will go better than its predecessor scheme, but equally farmers should not underestimate the time that may be required getting registered on the new system and then learning how to use the online mapping tools and the new application process.
The most important initial step will be for farmers and land agents to verify their identity on line. This will involve logging on to the Gov.uk Verify website where your identity will be verified by one of five third-party identity assurance providers.
In order to do this farmers will be asked a number of questions about their personal circumstances and finances and to make this process go smoothly you will need either a current driver’s licence or passport and details of at least two of the following; bank account/credit card, personal loan or mortgage, gas or electricity bill, mobile phone contract or voter registration information.
It is understood that if you have all the necessary information to hand the registration process can be relatively simple and will only take 10 minutes or so but if not you will be directed to a telephone helpline and in extremis you will be able to contact a digital support centre, the nearest of which in this area is currently in Exeter.
However, unlike when the SPS was introduced in 2005, DEFRA has recognised the importance of the professional advisors who for many years have played a vital role in assisting farmers complete their application forms. Thus, with everything now having to be submitted online, DEFRA is encouraging professionals, such as land agents like myself, to help farmers get set up for the new digital era which is upon us whether we like it or not.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
It is ironic that farmers are being urged by DEFRA not to delay registering themselves for the new Basic Payment Scheme (BPS), and yet the registration rollout programme itself has been delayed. With the memories of the disastrous introduction of the Single Payment Scheme (SPS) back in 2005 still heavily imprinted on the mind of most farmers and land agents, one hopes the current delay is not a portent of things to come.
However, a DEFRA spokesman has commented, “We have learned a lot of lessons from the past. What happened in 2005 is still in everyone’s mind – but that is not going to happen again”. Indeed having met a number of the senior Rural Payments Agency team myself earlier in the year, I genuinely think they have a much better grasp of what is required than was the case back in 2005.
Therefore I am quietly confident that the introduction of the BPS will go better than its predecessor scheme, but equally farmers should not underestimate the time that may be required getting registered on the new system and then learning how to use the online mapping tools and the new application process.
The most important initial step will be for farmers and land agents to verify their identity on line. This will involve logging on to the Gov.uk Verify website where your identity will be verified by one of five third-party identity assurance providers.
In order to do this farmers will be asked a number of questions about their personal circumstances and finances and to make this process go smoothly you will need either a current driver’s licence or passport and details of at least two of the following; bank account/credit card, personal loan or mortgage, gas or electricity bill, mobile phone contract or voter registration information.
It is understood that if you have all the necessary information to hand the registration process can be relatively simple and will only take 10 minutes or so but if not you will be directed to a telephone helpline and in extremis you will be able to contact a digital support centre, the nearest of which in this area is currently in Exeter.
However, unlike when the SPS was introduced in 2005, DEFRA has recognised the importance of the professional advisors who for many years have played a vital role in assisting farmers complete their application forms. Thus, with everything now having to be submitted online, DEFRA is encouraging professionals, such as land agents like myself, to help farmers get set up for the new digital era which is upon us whether we like it or not.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 3 November 2014
Continue to be battered by bad news
Dairy farmers continue to be battered by bad news as the milk price continues to tumble although it is not an even playing field across the many different milk supply contracts on offer.
Worst hit at present appear to be farmers supplying First Milk which is a farmer owned co-op whose suppliers/members seem to be badly exposed to the world milk commodity prices which also continue to fall. Suppliers of First Milk have received the unwelcome news that the price for their liquid milk and manufacturing contracts will be falling by 1.4p/litre and 1.8p/litre respectively in December to 22.7p/litre for liquid and 24p/litre for manufacturing milk.
Many of the other milk buyers have also announced cuts including Arla, which has reduced the price for its farmers on their “direct supply” contract by 3p. These farmers are not Arla members and perhaps as a consequence of this, Arla has chosen reduce their price milk rather than that paid to its members, explaining that the direct supply milk was surplus to retail demand and was therefore only attracting commodity prices.
Thus, although all farmers will be affected by the fall in milk prices some farmers are being disproportionately badly affected. In light of this it seems to me that getting on the right milk contract is probably one of the most important business decisions many dairy farmers should be considering and I cannot see how farmers supplying a buyer such as First Milk will survive for any length of time with a milk price as low as 22.7p/litre.
Indeed I would imagine this must bring in to question the sustainability of First Milk as a business because I can only imagine many of their suppliers, despite being owners of the business as well as suppliers, will be seriously looking at their options, whether that be looking to switch to another milk purchaser, or perhaps even stopping dairy farming altogether.
The Chairman of First Milk, Jim Paice who previously served as farm minister in DEFRA during the peak of the milk price protests in 2012, blamed the price cuts on a drop in returns for liquid milk and cheese in the past month.
“With cheese specifically, this impacts not only on what we are selling now, but on the price that we can sell our cheese stocks for in the future,” added Jim Paice.
But even so, it must be galling for First Milk members to see other dairy farmers still being paid nearer 30p than 20p/litre for producing exactly the same product.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Worst hit at present appear to be farmers supplying First Milk which is a farmer owned co-op whose suppliers/members seem to be badly exposed to the world milk commodity prices which also continue to fall. Suppliers of First Milk have received the unwelcome news that the price for their liquid milk and manufacturing contracts will be falling by 1.4p/litre and 1.8p/litre respectively in December to 22.7p/litre for liquid and 24p/litre for manufacturing milk.
Many of the other milk buyers have also announced cuts including Arla, which has reduced the price for its farmers on their “direct supply” contract by 3p. These farmers are not Arla members and perhaps as a consequence of this, Arla has chosen reduce their price milk rather than that paid to its members, explaining that the direct supply milk was surplus to retail demand and was therefore only attracting commodity prices.
Thus, although all farmers will be affected by the fall in milk prices some farmers are being disproportionately badly affected. In light of this it seems to me that getting on the right milk contract is probably one of the most important business decisions many dairy farmers should be considering and I cannot see how farmers supplying a buyer such as First Milk will survive for any length of time with a milk price as low as 22.7p/litre.
Indeed I would imagine this must bring in to question the sustainability of First Milk as a business because I can only imagine many of their suppliers, despite being owners of the business as well as suppliers, will be seriously looking at their options, whether that be looking to switch to another milk purchaser, or perhaps even stopping dairy farming altogether.
The Chairman of First Milk, Jim Paice who previously served as farm minister in DEFRA during the peak of the milk price protests in 2012, blamed the price cuts on a drop in returns for liquid milk and cheese in the past month.
“With cheese specifically, this impacts not only on what we are selling now, but on the price that we can sell our cheese stocks for in the future,” added Jim Paice.
But even so, it must be galling for First Milk members to see other dairy farmers still being paid nearer 30p than 20p/litre for producing exactly the same product.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Tuesday, 2 September 2014
What to do to comply with the new Basic Payment Scheme rules?
As harvest draws to a close and cultivations in readiness for sowing next year’s crops are well under way, farmers still face considerable uncertainty as to what they will need to do in order to comply with the new Basic Payment Scheme (BPS) rules.
As most readers will be aware the Single Payment Scheme, which is the existing EU support scheme for farmers, will be replaced by the BPS from 1st January next year and in so doing farmers will need to comply with a whole raft of new rules, many of which seem to me to be entirely pointless. However, compliance with these new rules will be necessary if farmers are not to lose out on support payments next year.
It seems likely that with many agricultural commodity prices at low levels, these EU support payments will be even more important next year in order to balance the books. However it is frustrating that following the publication of the latest update from DEFRA on the new rules, there are still many questions left unanswered.
In particular some of the rules surrounding Ecological Focus Areas (EFAs), that form part of the “Greening” measures which will affect many arable farmers, are not entirely clear. Under these rules, farmers with more than 15 hectares of “Arable Land” may have to put 5% of their arable land in to an EFA.
The simplest way to do this is to “set aside” 5% of the Arable Land as “fallow”. But care is required to understand both the definition of “Arable Land” land and what will qualify as “fallow”. I do not have space to deal with these complexities here but suffice it to say one can end up with some rather counterintuitive results, which for example will allow temporary pasture to qualify as fallow provided it is not cropped or grazed between 1st January and 30th June. It seems to me this will achieve absolutely nothing of benefit for either farmers or the environment.
Another option is using hedges as a means of claiming the 5% EFA. However, the rules in relation to hedges seem even more confusing. At present it seems clear that if a hedge is bordered directly by arable land in the ownership of one farmer, then the hedge can be claimed. However, if the hedge borders permanent pasture, a road or a neighbour’s land on the other side, it is not clear whether this hedge can be used to contribute to the EFA and if so to what extent.
Further guidance is awaited on this and many other points of detail from DEFRA and so my advice to farmers is to keep things as simple as possible in the first year of the new scheme and plan next year’s cropping on the “knowns” rather than waiting for DEFRA to define the “unknowns”.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
As most readers will be aware the Single Payment Scheme, which is the existing EU support scheme for farmers, will be replaced by the BPS from 1st January next year and in so doing farmers will need to comply with a whole raft of new rules, many of which seem to me to be entirely pointless. However, compliance with these new rules will be necessary if farmers are not to lose out on support payments next year.
It seems likely that with many agricultural commodity prices at low levels, these EU support payments will be even more important next year in order to balance the books. However it is frustrating that following the publication of the latest update from DEFRA on the new rules, there are still many questions left unanswered.
In particular some of the rules surrounding Ecological Focus Areas (EFAs), that form part of the “Greening” measures which will affect many arable farmers, are not entirely clear. Under these rules, farmers with more than 15 hectares of “Arable Land” may have to put 5% of their arable land in to an EFA.
The simplest way to do this is to “set aside” 5% of the Arable Land as “fallow”. But care is required to understand both the definition of “Arable Land” land and what will qualify as “fallow”. I do not have space to deal with these complexities here but suffice it to say one can end up with some rather counterintuitive results, which for example will allow temporary pasture to qualify as fallow provided it is not cropped or grazed between 1st January and 30th June. It seems to me this will achieve absolutely nothing of benefit for either farmers or the environment.
Another option is using hedges as a means of claiming the 5% EFA. However, the rules in relation to hedges seem even more confusing. At present it seems clear that if a hedge is bordered directly by arable land in the ownership of one farmer, then the hedge can be claimed. However, if the hedge borders permanent pasture, a road or a neighbour’s land on the other side, it is not clear whether this hedge can be used to contribute to the EFA and if so to what extent.
Further guidance is awaited on this and many other points of detail from DEFRA and so my advice to farmers is to keep things as simple as possible in the first year of the new scheme and plan next year’s cropping on the “knowns” rather than waiting for DEFRA to define the “unknowns”.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Tuesday, 26 August 2014
47 farmers aided by The Royal Bath and West of England Society
The Royal Bath and West of England Society have announced the great news that it has helped 47 farmers, by paying out well in excess of £300,000 from the Somerset Farm Recovery Fund.
The recovery fund was launched earlier in the year following a initial generous donation made by a local farming family who were so concerned by the difficulties being experienced by some farmers following the devastating floods.
The Society thanked everyone who has made a contribution to the fund from the first donation made by the farming family referred to above to members of the general public and those who generously donated prizes to raise funds via an online auction. In particular they also thanked Somerset Community Foundation and their Chief Executive John Sargent for all their help with the fund.
John Alvis, chairman of the Somerset Farm Recovery Fund, said: “The generosity of the general public, together with the match funding from the Somerset Community Foundation, has provided much-needed financial support for those struggling to put their lives and businesses back on an even keel. No-one should be in any doubt as to the difference this fund has made.”
Applications for grant aid were invited from farmers whose livelihoods had been affected by the floods and where they had suffered a loss of production and it is great news that the money which was collected has been so speedily and effectively distributed.
As living proof of the effectiveness of the scheme, one recipient wrote, “We are overwhelmed by the generosity of people and the support we have been given. The arrival of the cheque has saved our business and for that we are most earnestly grateful.”
However, although the worst may be over, some farmers will still suffer shortages of fodder over the coming winter while in the long term, efforts are still being made to tackle the needs of the levels and moors for the benefit of future generations.
In this context another fund called The Somerset Levels Relief Fund is approaching various organisations and charitable trusts to secure funding for a 20 year action plan drawn up by Somerset County Council in conjunction with other stakeholders and interested parties.
Edwin White, chairman of the Society’s agricultural policy group, said: “The Society has not taken its eye off the ball in securing funding for the long-term future of the levels.
“In the meantime, through the kindness and generosity of so many individuals and organisations, in just over four months we have been able to collect and distribute a large amount of money to where it was needed.”
So all in all this is a good news story and the Royal Bath and West of England Society should be proud of the pivotal role they have played and continue to play in support of our local farming communities on the Levels.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
The recovery fund was launched earlier in the year following a initial generous donation made by a local farming family who were so concerned by the difficulties being experienced by some farmers following the devastating floods.
The Society thanked everyone who has made a contribution to the fund from the first donation made by the farming family referred to above to members of the general public and those who generously donated prizes to raise funds via an online auction. In particular they also thanked Somerset Community Foundation and their Chief Executive John Sargent for all their help with the fund.
John Alvis, chairman of the Somerset Farm Recovery Fund, said: “The generosity of the general public, together with the match funding from the Somerset Community Foundation, has provided much-needed financial support for those struggling to put their lives and businesses back on an even keel. No-one should be in any doubt as to the difference this fund has made.”
Applications for grant aid were invited from farmers whose livelihoods had been affected by the floods and where they had suffered a loss of production and it is great news that the money which was collected has been so speedily and effectively distributed.
As living proof of the effectiveness of the scheme, one recipient wrote, “We are overwhelmed by the generosity of people and the support we have been given. The arrival of the cheque has saved our business and for that we are most earnestly grateful.”
However, although the worst may be over, some farmers will still suffer shortages of fodder over the coming winter while in the long term, efforts are still being made to tackle the needs of the levels and moors for the benefit of future generations.
In this context another fund called The Somerset Levels Relief Fund is approaching various organisations and charitable trusts to secure funding for a 20 year action plan drawn up by Somerset County Council in conjunction with other stakeholders and interested parties.
Edwin White, chairman of the Society’s agricultural policy group, said: “The Society has not taken its eye off the ball in securing funding for the long-term future of the levels.
“In the meantime, through the kindness and generosity of so many individuals and organisations, in just over four months we have been able to collect and distribute a large amount of money to where it was needed.”
So all in all this is a good news story and the Royal Bath and West of England Society should be proud of the pivotal role they have played and continue to play in support of our local farming communities on the Levels.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 28 July 2014
Milk prices are dropping
Despite the beautiful weather, there are clouds overhead as far as many farmers are concerned. Milk purchasers are dropping their milk price, the value of arable crops continue to fall and beef prices, although they appear to have stabilised, are still around 20% down on the price achieved a year ago.
Milk prices appear to be falling because of increased production here in the UK and falling dairy commodity prices across the world. Dairy farmers have certainly seen reasonably good returns in the last 18 months or so but the tide appears to have turned; for instance Dairy Crest has announced a 1.1p per litre reduction on their standard price from 1st September while Arla has announced a 0.94p per litre drop from August.
Arable farmers appear to be facing even tougher times as grain markets continue to fall. There are a number of factors affecting such prices which include a general expectation of heavy crops this harvest and strong sterling which is making British exports less competitive. There is talk of lower yields in the US where some crops have been hit by drought which may reverse the fall in prices but to counter that the Russian grain harvest is forecast to increase. But, at present it appears to be the supply side of the market which is outstripping demand, hence prices are depressed.
As far as the beef sector is concerned, significant losses have already been made by some beef fattening units which bought expensive “store” cattle a year or so ago and now those cattle are ready for slaughter, the finished beef price has fallen to such a level that farmers are unable to recoup the cost of feeding the animals over the last year.
However, there is cautious optimism that the price of beef has at least levelled out and there are the odd signs that prices may start to gently improve but this is not a moment too soon for most beef farmers, who like arable farmers in particular, will find 2014 a very testing year.
Whether we are entering an era of lower commodity prices is not clear; we hear many people talking about the need to feed more mouths across the world and how this should provide a secure future for farmers, but this has not been borne out by the experience of many farmers over the last year or so. What seems clear to me is that farmers must become used to large fluctuations in world commodity markets and as a consequence they will need to make good use of their profits in the good years in order to survive the lean ones.
Milk prices appear to be falling because of increased production here in the UK and falling dairy commodity prices across the world. Dairy farmers have certainly seen reasonably good returns in the last 18 months or so but the tide appears to have turned; for instance Dairy Crest has announced a 1.1p per litre reduction on their standard price from 1st September while Arla has announced a 0.94p per litre drop from August.
Arable farmers appear to be facing even tougher times as grain markets continue to fall. There are a number of factors affecting such prices which include a general expectation of heavy crops this harvest and strong sterling which is making British exports less competitive. There is talk of lower yields in the US where some crops have been hit by drought which may reverse the fall in prices but to counter that the Russian grain harvest is forecast to increase. But, at present it appears to be the supply side of the market which is outstripping demand, hence prices are depressed.
As far as the beef sector is concerned, significant losses have already been made by some beef fattening units which bought expensive “store” cattle a year or so ago and now those cattle are ready for slaughter, the finished beef price has fallen to such a level that farmers are unable to recoup the cost of feeding the animals over the last year.
However, there is cautious optimism that the price of beef has at least levelled out and there are the odd signs that prices may start to gently improve but this is not a moment too soon for most beef farmers, who like arable farmers in particular, will find 2014 a very testing year.
Whether we are entering an era of lower commodity prices is not clear; we hear many people talking about the need to feed more mouths across the world and how this should provide a secure future for farmers, but this has not been borne out by the experience of many farmers over the last year or so. What seems clear to me is that farmers must become used to large fluctuations in world commodity markets and as a consequence they will need to make good use of their profits in the good years in order to survive the lean ones.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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, 8 July 2014
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.
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
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, 11 June 2014
Market trends for the price of farm commodities
Looking at market trends for the price of farm commodities when compared to a year ago does not make for particularly happy reading. The Farmers Weekly magazine publishes these figures each week and when compared to the prices achieved a year ago most commodities are significantly down.
I have written about beef prices before which have fallen sharply. The price quoted in the Farmers Weekly for last week was 345p per Kg deadweight which is down 50p per Kg on the price achieved this time last year although in this area I am reliably informed that one would struggle to achieve 325p per kg in this area. This indicates that the price being achieved for beef across the country varies significantly and we do not seem to be well placed in this area to achieve the highest prices.
These low prices have stimulated the Farmers For Action (FFA) group to launch protests at meat processing plants in the Midlands where there is concern about the amount of Polish beef being imported and processed in this country.
However, it is not only beef which has seen prices fall in the last year. Arable crops have also dropped sharply in value with Winter Wheat down from £180/tonne to £147/tonne and oilseed rape down from £380/tonne to £268/tonne. At today’s prices, profit margins for arable farmers are likely to be squeezed hard although on the reverse side of this particular coin, this should mean the cost of cereal based feed stuffs for livestock will fall.
In contrast lamb prices have remained steady while milk prices are well ahead of those being achieved this time last year but the trend in milk price is now distinctly downwards as the industry is hit by a number of milk purchasers cutting their farmgate milk prices.
For example, Dairy Crest has cut its liquid milk price by 1.25p/litre from July and Arla has dropped it direct-supplier price by 1.5p/litre. Similarly, earlier last week First Milk reduced its manufacturing contract price by 1.15p/litre.
All these price cuts have come on the back of falling world dairy commodity prices where Fonterra’s Global Trade Auction saw prices fall by 4.2% on 3rd June which is the eighth drop in a row for these auctions. Having said that, cheddar cheese prices rose by 8% and skimmed milk powder by 2.1% and so although milk prices are falling sharply at present there is hope they will stabilise and not fall to the desperately low prices which were witnessed two years ago which forced farmers to take direct action, blockading milk processing plants across the country including here in Somerset.
So what can we read in to all these “tea leaves” – well probably not a great deal other than the fact that markets do go up and down and farmers are exposed to the vaguaries of world markets now more than they have been at any time since the end of the Second World War. Therefore in order to survive, successful farmers will always need to keep their costs under control so as to make money in the good times and survive the hard times because market volatility is most definitely here to stay.
I have written about beef prices before which have fallen sharply. The price quoted in the Farmers Weekly for last week was 345p per Kg deadweight which is down 50p per Kg on the price achieved this time last year although in this area I am reliably informed that one would struggle to achieve 325p per kg in this area. This indicates that the price being achieved for beef across the country varies significantly and we do not seem to be well placed in this area to achieve the highest prices.
These low prices have stimulated the Farmers For Action (FFA) group to launch protests at meat processing plants in the Midlands where there is concern about the amount of Polish beef being imported and processed in this country.
However, it is not only beef which has seen prices fall in the last year. Arable crops have also dropped sharply in value with Winter Wheat down from £180/tonne to £147/tonne and oilseed rape down from £380/tonne to £268/tonne. At today’s prices, profit margins for arable farmers are likely to be squeezed hard although on the reverse side of this particular coin, this should mean the cost of cereal based feed stuffs for livestock will fall.
In contrast lamb prices have remained steady while milk prices are well ahead of those being achieved this time last year but the trend in milk price is now distinctly downwards as the industry is hit by a number of milk purchasers cutting their farmgate milk prices.
For example, Dairy Crest has cut its liquid milk price by 1.25p/litre from July and Arla has dropped it direct-supplier price by 1.5p/litre. Similarly, earlier last week First Milk reduced its manufacturing contract price by 1.15p/litre.
All these price cuts have come on the back of falling world dairy commodity prices where Fonterra’s Global Trade Auction saw prices fall by 4.2% on 3rd June which is the eighth drop in a row for these auctions. Having said that, cheddar cheese prices rose by 8% and skimmed milk powder by 2.1% and so although milk prices are falling sharply at present there is hope they will stabilise and not fall to the desperately low prices which were witnessed two years ago which forced farmers to take direct action, blockading milk processing plants across the country including here in Somerset.
So what can we read in to all these “tea leaves” – well probably not a great deal other than the fact that markets do go up and down and farmers are exposed to the vaguaries of world markets now more than they have been at any time since the end of the Second World War. Therefore in order to survive, successful farmers will always need to keep their costs under control so as to make money in the good times and survive the hard times because market volatility is most definitely here to stay.
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
Tuesday, 27 May 2014
Subsidy for large scale solar projects are changing
Last week the government announced a consultation on changes to the subsidy system for large scale solar projects of over 5MW capacity which would equate to a site of about 30 acres. Originally it was planned that the current subsidy system which is involves so called Renewable Obligation Certificates (ROCs) was going to be phased out by 2017 but the latest proposal is to phase out ROCs for the large scale developments by 31st March 2015.
I suspect the primary reason for this is that there has been a huge expansion in solar development and as the general public have started to see these projects popping up in the countryside, support for such projects has started to dwindle.
The initial phase of the fund was worth up to £5000, but towards the end of April the government announced that the level of grant would be increased to £35,000 and the deadline for making an application was also extended 27 June 2014.
The government has committed £10m to this fund and it is understood money is still available and so farmers are urged to consider making a claim. The initial claim process was quite onerous but it is understood the requirements have been relaxed to some extent to make it more practical to make a claim.
It should also be understood that if a farmer has already made a successful claim under the first phase of the grant process, he or she is still eligible to make a claim under the second phase up to a cumulative total of £35,000.
The grant is aimed at the cost of restoring flood affected land back to agricultural production and concentrates on four key areas. These include the restoration of productive grassland, the restoration of productive arable and horticultural land, restoring farm vehicle access to fields and improvements to agricultural drainage.
Therefore the cost of employing a contractor to sort out damaged soil structure and re-seed the land with a perennial grass seed mix would be eligible for grant aid.
It seems likely that many farmers have decided to just get on with restoring their land to production without making an application for grant aid but Rural Surveyor, Arthur Chambers from Carter Jonas’ Wells office, “Urges farmers to consider taking advantage of any funding which may be available to help those affected by the wettest winter on record”
Arthur goes on to say, “This is an opportunity which should not be missed and with only a month before the grant scheme closes, anyone interested in making a claim is encouraged to contact their preferred agent.” Arthur can be contacted on 01749 677667.
I suspect the primary reason for this is that there has been a huge expansion in solar development and as the general public have started to see these projects popping up in the countryside, support for such projects has started to dwindle.
The initial phase of the fund was worth up to £5000, but towards the end of April the government announced that the level of grant would be increased to £35,000 and the deadline for making an application was also extended 27 June 2014.
The government has committed £10m to this fund and it is understood money is still available and so farmers are urged to consider making a claim. The initial claim process was quite onerous but it is understood the requirements have been relaxed to some extent to make it more practical to make a claim.
It should also be understood that if a farmer has already made a successful claim under the first phase of the grant process, he or she is still eligible to make a claim under the second phase up to a cumulative total of £35,000.
The grant is aimed at the cost of restoring flood affected land back to agricultural production and concentrates on four key areas. These include the restoration of productive grassland, the restoration of productive arable and horticultural land, restoring farm vehicle access to fields and improvements to agricultural drainage.
Therefore the cost of employing a contractor to sort out damaged soil structure and re-seed the land with a perennial grass seed mix would be eligible for grant aid.
It seems likely that many farmers have decided to just get on with restoring their land to production without making an application for grant aid but Rural Surveyor, Arthur Chambers from Carter Jonas’ Wells office, “Urges farmers to consider taking advantage of any funding which may be available to help those affected by the wettest winter on record”
Arthur goes on to say, “This is an opportunity which should not be missed and with only a month before the grant scheme closes, anyone interested in making a claim is encouraged to contact their preferred agent.” Arthur can be contacted on 01749 677667.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 19 May 2014
Changes in the subsidy system for solar projects
Last week the government announced a consultation on changes to the subsidy system for large scale solar projects of over 5MW capacity which would equate to a site of about 30 acres. Originally it was planned that the current subsidy system which is involves so called Renewable Obligation Certificates (ROCs) was going to be phased out by 2017 but the latest proposal is to phase out ROCs for the large scale developments by 31st March 2015.
I suspect the primary reason for this is that there has been a huge expansion in solar development and as the general public have started to see these projects popping up in the countryside, support for such projects has started to dwindle.
It has been significantly easier to obtain planning consent for Solar parks than for wind turbines for example and as a result the scale of solar developments across southern Britain in particular has probably taken everyone by surprise, hence the government’s latest consultation.
After 31st March 2015, large solar projects will have to bid competitively for funding against all other forms of renewable energy production through a scheme called “Contracts for Difference” (CfD). As solar production is generally regarded as one of the less efficient forms of renewable energy production, it remains to be seen how well solar energy will compete for funding through this new scheme.
However, what this demonstrates is that the renewable energy sector, which is heavily reliant on subsidy, is a risky sector to be involved in because the government has a track record of chopping and changing its policy. These changes may be as a result of public pressure or the realisation the level of subsidy being offered is inappropriate, but for whatever reason this makes planning a renewable energy project very difficult.
It seems likely that if the ROCs are removed in March next year that we will see a headlong rush to develop out all the sites which are capable of being developed over the next year and so don’t be surprised to see a significant increase in the number of solar parks being developed in the coming months.
I am sure there will be many readers who will be pleased to hear that it is likely the development of large scale solar parks may now be curtailed but equally one cannot help wondering where our electricity will be coming from in 5 years time as many coal fired power stations are being decomissioned. Fracking is likely to be the next big source of energy and so perhaps all the antis need to be careful what they wish for. Maybe a few more wind turbines would not be a bad idea after all.
I suspect the primary reason for this is that there has been a huge expansion in solar development and as the general public have started to see these projects popping up in the countryside, support for such projects has started to dwindle.
It has been significantly easier to obtain planning consent for Solar parks than for wind turbines for example and as a result the scale of solar developments across southern Britain in particular has probably taken everyone by surprise, hence the government’s latest consultation.
After 31st March 2015, large solar projects will have to bid competitively for funding against all other forms of renewable energy production through a scheme called “Contracts for Difference” (CfD). As solar production is generally regarded as one of the less efficient forms of renewable energy production, it remains to be seen how well solar energy will compete for funding through this new scheme.
However, what this demonstrates is that the renewable energy sector, which is heavily reliant on subsidy, is a risky sector to be involved in because the government has a track record of chopping and changing its policy. These changes may be as a result of public pressure or the realisation the level of subsidy being offered is inappropriate, but for whatever reason this makes planning a renewable energy project very difficult.
It seems likely that if the ROCs are removed in March next year that we will see a headlong rush to develop out all the sites which are capable of being developed over the next year and so don’t be surprised to see a significant increase in the number of solar parks being developed in the coming months.
I am sure there will be many readers who will be pleased to hear that it is likely the development of large scale solar parks may now be curtailed but equally one cannot help wondering where our electricity will be coming from in 5 years time as many coal fired power stations are being decomissioned. Fracking is likely to be the next big source of energy and so perhaps all the antis need to be careful what they wish for. Maybe a few more wind turbines would not be a bad idea after all.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Wednesday, 7 May 2014
The British bull market on the turn...
The bull market in British Agriculture may now be on the turn. As the wider economy starts to improve commodity prices look as though they are easing.
As predicted a few weeks ago, milk prices are beginning to fall – whether this is due to falling world markets or supermarket milk prices wars is not clear, but this week alone we have seen Arla drop their milk price by 1.27p/litre while Muller Wiseman has dropped its price by 1.6p/litre and First Milk by 2p/ litre from 2nd June.
Similarly beef prices are easing. The deadweight price for beef has dropped to around 355p/kg which is over 40p/kg less than a year ago while beef prices in the supermarkets have continued to increase, reducing the proportion of the retail price received by farmers from 60% this time last year to just over 51% today.
As far as arable farmers are concerned, wheat prices have also fallen from around £190/t a year ago to under £165/t today and oilseed rape prices by £70/t, from £374/t a year ago to £304/t today.
So it seems all sectors are feeling a chill breeze although it has to be remembered prices are falling from record levels in some instances. Even so one begins to wonder whether we are beginning to see a trend in reduced agricultural commodity prices as the world economy starts to pick up in the wake of the dramatic events of 2007/08 which shook the financial industry to its core.
It is often said that the agricultural economy is counter-cyclical to the wider economy and so after seven years of famine in the latter, maybe we are about to enter a similar period in the former. This may be being alarmist but there is definitely a feeling that we have seen the best of commodity prices for the time being.
This is also a reflection of the fact that the price farmers receive for their produce in this country is now very heavily influenced by world commodity markets. For instance the political instability we have seen in the Ukraine in recent months has to an extent bolstered the price of wheat as traders in world markets have reacted to fears that these troubles may impact on the supply of wheat from the Ukraine which is one of the world’s significant wheat producing areas.
So, a farmer’s profitability is only in part dictated by their skill in animal and crop husbandry or their general business acumen; it is the state of world markets and the vagaries of foreign exchange markets which is likely to have as great if not greater influence on the success or otherwise of a farming business.
As predicted a few weeks ago, milk prices are beginning to fall – whether this is due to falling world markets or supermarket milk prices wars is not clear, but this week alone we have seen Arla drop their milk price by 1.27p/litre while Muller Wiseman has dropped its price by 1.6p/litre and First Milk by 2p/ litre from 2nd June.
Similarly beef prices are easing. The deadweight price for beef has dropped to around 355p/kg which is over 40p/kg less than a year ago while beef prices in the supermarkets have continued to increase, reducing the proportion of the retail price received by farmers from 60% this time last year to just over 51% today.
As far as arable farmers are concerned, wheat prices have also fallen from around £190/t a year ago to under £165/t today and oilseed rape prices by £70/t, from £374/t a year ago to £304/t today.
So it seems all sectors are feeling a chill breeze although it has to be remembered prices are falling from record levels in some instances. Even so one begins to wonder whether we are beginning to see a trend in reduced agricultural commodity prices as the world economy starts to pick up in the wake of the dramatic events of 2007/08 which shook the financial industry to its core.
It is often said that the agricultural economy is counter-cyclical to the wider economy and so after seven years of famine in the latter, maybe we are about to enter a similar period in the former. This may be being alarmist but there is definitely a feeling that we have seen the best of commodity prices for the time being.
This is also a reflection of the fact that the price farmers receive for their produce in this country is now very heavily influenced by world commodity markets. For instance the political instability we have seen in the Ukraine in recent months has to an extent bolstered the price of wheat as traders in world markets have reacted to fears that these troubles may impact on the supply of wheat from the Ukraine which is one of the world’s significant wheat producing areas.
So, a farmer’s profitability is only in part dictated by their skill in animal and crop husbandry or their general business acumen; it is the state of world markets and the vagaries of foreign exchange markets which is likely to have as great if not greater influence on the success or otherwise of a farming business.
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
Monday, 24 March 2014
Price of milk cut
Three weeks ago Tesco cut its price of milk from £1.39 to £1 for four pints and since then Sainsbury’s and Co-op have followed, matching the price already offered by Asda, Lidl and Aldi. This price is equivalent to 44p per litre.
Then, a fortnight ago Morrisons not only announced it had made a £176m loss in the year to 2 February but also that it was planning to take Lidl and Aldi head on. This new policy is evidenced by their announcement that they will be cutting the price of their two litre “Meadow Park” pack to an equivalent of 42p per litre which it claims will make it the cheapest price on offer.
This was followed last week by and announcement from Sainsbury’s that its sales excluding fuel had dropped by 3.1% in the last three months. This is a substantial fall and what this seems to indicate is that despite the reported strength of the economy, we as consumers are still looking for good value and supermarkets as a whole have to be extremely competitive to maintain their market share.
This is of course good news for consumers because it means supermarkets are having to squeeze their margins to maintain sales but what concerns me for British agriculture is that it will not be long before the supermarkets will look to transfer some of their pain down the supply chain to farmers and other suppliers.
At present this does not appear to be happening in that the price farmers are being paid for their milk is at an all time high although this is partly because the price of milk products on world markets has also been very strong. However, there are signs that the tide may be moving in the other direction as indicated by recent auctions held by New Zealand based dairy co-operative, Fonterra. These auctions are a good indicator of world dairy commodity prices and at their last auction the global dairy price index dropped by 5.2%.
So with global dairy markets beginning to drift and a supermarket price war in progress, dairy farmers should perhaps prepare themselves for lower milk prices in the months to come. Having said that, the best dairy farms are making good money at present and should continue to do so provided they keep a close eye on their costs and ensure that their milk production system is aligned with the requirements of their milk contract.
Then, a fortnight ago Morrisons not only announced it had made a £176m loss in the year to 2 February but also that it was planning to take Lidl and Aldi head on. This new policy is evidenced by their announcement that they will be cutting the price of their two litre “Meadow Park” pack to an equivalent of 42p per litre which it claims will make it the cheapest price on offer.
This was followed last week by and announcement from Sainsbury’s that its sales excluding fuel had dropped by 3.1% in the last three months. This is a substantial fall and what this seems to indicate is that despite the reported strength of the economy, we as consumers are still looking for good value and supermarkets as a whole have to be extremely competitive to maintain their market share.
This is of course good news for consumers because it means supermarkets are having to squeeze their margins to maintain sales but what concerns me for British agriculture is that it will not be long before the supermarkets will look to transfer some of their pain down the supply chain to farmers and other suppliers.
At present this does not appear to be happening in that the price farmers are being paid for their milk is at an all time high although this is partly because the price of milk products on world markets has also been very strong. However, there are signs that the tide may be moving in the other direction as indicated by recent auctions held by New Zealand based dairy co-operative, Fonterra. These auctions are a good indicator of world dairy commodity prices and at their last auction the global dairy price index dropped by 5.2%.
So with global dairy markets beginning to drift and a supermarket price war in progress, dairy farmers should perhaps prepare themselves for lower milk prices in the months to come. Having said that, the best dairy farms are making good money at present and should continue to do so provided they keep a close eye on their costs and ensure that their milk production system is aligned with the requirements of their milk contract.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 10 March 2014
Out of the blue... a rural planning policy
Last year, quite out of the blue, the government published a consultation document that has largely been ignored by the popular press but which may turn out to be one of the most fundamental reforms we have seen in rural planning policy in recent years.
Amongst other things, the government proposed that the conversion of up to 450 square metres of redundant farm buildings in to up to three houses of no more than 150 square metres each would be allowed under permitted development rules. Indeed it was further proposed that existing buildings could be demolished and a brand new house built on the same footprint.
Anyone who has been involved in trying to obtain planning consent to convert a redundant barn to a house or to build a new dwelling altogether in the countryside, will find the concept of such development being allowed through the permitted development regime, quite flabbergasting. Accordingly many observers had expected the proposals to be significantly modified.
Since the consultation ended last October, there had been deafening silence from government until last week when in response to parliamentary questions, Planning Minister Nick Boles reassured MPs that, “The Government is well aware of the arguments being put forward to exempt National Parks and Areas of Outstanding Natural Beauty from proposals to introduce permitted development rights for redundant agricultural buildings.” This raised speculation that in other areas outside these protected zones, that the Government may be minded to go ahead with the proposed changes.
And so when Nick Boles delivered a written statement to Parliament on 6th March it was not entirely a surprise when he wrote, “These reforms will make better use of redundant or under-used agricultural buildings, increasing rural housing without building on the countryside. Up to 450 square metres of agricultural buildings on a farm will be able to change to provide a maximum of 3 houses.”
He also went on to write, “We recognise the importance to the public of safeguarding environmentally protected areas, so this change of use will not apply in Article 1(5) land, for example national parks or areas of outstanding natural beauty. However, we expect national parks and other local planning authorities to take a positive and proactive approach to sustainable development, balancing the protection of the landscape with the social and economic wellbeing of the area”.
Nick Boles also explained that a “prior approval” process will be required where issues such as highways matters and flood risk will be taken in to account. There may also be other requirements or consequences of taking advantage of these new rules and so we await the detailed rules with interest which should be published by early April when the new regime is due to come in to force.
Possible requirements which were muted in the consultation document were that other permitted development rights would be withdrawn for a period of years thereby making it more difficult to erect a farm building elsewhere on a holding that has taken advantage of the new rules.
Not withstanding this, these new rule changes will present a significant opportunity for many farm businesses and if anyone would like further advice on the matter please do not hesitate to contact James Stephen on 01749 683381.
Amongst other things, the government proposed that the conversion of up to 450 square metres of redundant farm buildings in to up to three houses of no more than 150 square metres each would be allowed under permitted development rules. Indeed it was further proposed that existing buildings could be demolished and a brand new house built on the same footprint.
Anyone who has been involved in trying to obtain planning consent to convert a redundant barn to a house or to build a new dwelling altogether in the countryside, will find the concept of such development being allowed through the permitted development regime, quite flabbergasting. Accordingly many observers had expected the proposals to be significantly modified.
Since the consultation ended last October, there had been deafening silence from government until last week when in response to parliamentary questions, Planning Minister Nick Boles reassured MPs that, “The Government is well aware of the arguments being put forward to exempt National Parks and Areas of Outstanding Natural Beauty from proposals to introduce permitted development rights for redundant agricultural buildings.” This raised speculation that in other areas outside these protected zones, that the Government may be minded to go ahead with the proposed changes.
And so when Nick Boles delivered a written statement to Parliament on 6th March it was not entirely a surprise when he wrote, “These reforms will make better use of redundant or under-used agricultural buildings, increasing rural housing without building on the countryside. Up to 450 square metres of agricultural buildings on a farm will be able to change to provide a maximum of 3 houses.”
He also went on to write, “We recognise the importance to the public of safeguarding environmentally protected areas, so this change of use will not apply in Article 1(5) land, for example national parks or areas of outstanding natural beauty. However, we expect national parks and other local planning authorities to take a positive and proactive approach to sustainable development, balancing the protection of the landscape with the social and economic wellbeing of the area”.
Nick Boles also explained that a “prior approval” process will be required where issues such as highways matters and flood risk will be taken in to account. There may also be other requirements or consequences of taking advantage of these new rules and so we await the detailed rules with interest which should be published by early April when the new regime is due to come in to force.
Possible requirements which were muted in the consultation document were that other permitted development rights would be withdrawn for a period of years thereby making it more difficult to erect a farm building elsewhere on a holding that has taken advantage of the new rules.
Not withstanding this, these new rule changes will present a significant opportunity for many farm businesses and if anyone would like further advice on the matter please do not hesitate 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
Monday, 20 January 2014
World Commodity Markets Are Strong
With farming becoming ever more reliant on world markets, farmers will be interested to learn that several organisations have reported that world commodity markets are strong and are expected to remain so for some years to come.
First, the United Nations Food and Agriculture Organisation (FAO) has recently published its latest monthly Food Price Index which showed that overall 2013 produced the third highest figure on record, almost equal to 2012 but about approaching 9% off the previous highest figure for 2011. The index is a measure of the monthly change in international prices of a basket of five food commodities, being cereals, sugar, oil, meat and dairy.
However, the total figure hides the fact that there was significant variation in the performance of the various commodities with dairy and meat reaching all time highs for the year while cereals were down by about 7% on the value for 2012 and oils index reached a four year low. These figures have been reflected in the fortunes of our farmers at home where dairy farmers in particular have seen milk prices rise sharply in the last year.
The second piece of encouraging news comes from the EU, where the Commission has published its annual report which attempts to model commodity prices in the medium term – in this instance over the next ten years. Such predictions have to be taken with a pinch of salt in that they are produced by computer generated models but even so the expectation is that commodity prices will remain firm.
But, it has to be remembered high prices do not always translate in to high profits and farmers must ensure they keep a careful eye on costs in particular because letting costs run away will eat in to profits. Further, there will always be price volatility and taking advantage of the highs and not getting caught out by the lows in commodity markets will be important. This is particularly relevant for arable farmers where crops can be stored and sold at different times of the year or even sold on “futures” markets while dairy farmers for example have to take whatever price is on offer at that time because liquid milk is perishable and cannot be stored.
Thus, compared to the lows of the late 1990s and early 2000s it seems farmers can look forward to the next few years with optimism but as we have seen in recent years, many external factors such as the weather can have a significant effect on an individual farmer’s fortunes. Therefore although the future looks reasonably bright no one can complacent and as ever it will the best run businesses which will thrive.
First, the United Nations Food and Agriculture Organisation (FAO) has recently published its latest monthly Food Price Index which showed that overall 2013 produced the third highest figure on record, almost equal to 2012 but about approaching 9% off the previous highest figure for 2011. The index is a measure of the monthly change in international prices of a basket of five food commodities, being cereals, sugar, oil, meat and dairy.
However, the total figure hides the fact that there was significant variation in the performance of the various commodities with dairy and meat reaching all time highs for the year while cereals were down by about 7% on the value for 2012 and oils index reached a four year low. These figures have been reflected in the fortunes of our farmers at home where dairy farmers in particular have seen milk prices rise sharply in the last year.
The second piece of encouraging news comes from the EU, where the Commission has published its annual report which attempts to model commodity prices in the medium term – in this instance over the next ten years. Such predictions have to be taken with a pinch of salt in that they are produced by computer generated models but even so the expectation is that commodity prices will remain firm.
But, it has to be remembered high prices do not always translate in to high profits and farmers must ensure they keep a careful eye on costs in particular because letting costs run away will eat in to profits. Further, there will always be price volatility and taking advantage of the highs and not getting caught out by the lows in commodity markets will be important. This is particularly relevant for arable farmers where crops can be stored and sold at different times of the year or even sold on “futures” markets while dairy farmers for example have to take whatever price is on offer at that time because liquid milk is perishable and cannot be stored.
Thus, compared to the lows of the late 1990s and early 2000s it seems farmers can look forward to the next few years with optimism but as we have seen in recent years, many external factors such as the weather can have a significant effect on an individual farmer’s fortunes. Therefore although the future looks reasonably bright no one can complacent and as ever it will the best run businesses which will thrive.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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