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
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 economy. Show all posts
Showing posts with label rural economy. Show all posts
Wednesday, 3 December 2014
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
Monday, 12 May 2014
Falling beef prices - serious concern for the livestock sector
The fall in the beef price being received by farmers is becoming a serious concern for the livestock sector.
Over the last few years beef prices have steadily risen peaking at over £4/kg deadweight but in the last six months in particular this trend has reversed and as a result many beef farmers are facing significant losses.
The price of beef has dropped by over 10% during the last twelve months while the price of beef on the supermarket shelves continues to stay firm or edge upwards which is causing British beef farmers significant concern.
This time last year the average price of a “standard steer” was £404p/kg which compares to a price of £362p last week and the price quoted by abattoirs to farmers continues to fall week on week.
What this means in real terms is that an beef animal weighing say £350kg deadweight will be worth £150 less this year than last year and because the margins on beef production are very low at the best of times, it seems likely beef fattening units in particular are going to face some significant losses over the coming months.
Indeed without support payments from Europe most livestock farmers in this country would simply not make a profit anyway and with such payments looking likely to reduce as we move in to the future many beef farmers will have to seriously examine the viability of their business model.
The problem is not helped by the fact that the retail outlets are dominated by the supermarkets which always brings in to question whether there is a fair market place between the many small farmers and the few big retailers. This is exacerbated by the fact that the number of abattoirs in this country is also dwindling, which further impacts on a farmer’s ability to influence the price they can achieve.
It is also interesting to learn that many of the abattoirs are owned by Irish firms and whether this influences the amount of Irish beef which is imported in to this country is open to question. Having said that Irish beef farmers are also struggling and so it may just be the low price of Irish beef which is influencing imports.
But what is clear is that on the supermarket shelves, British beef is often sold alongside Irish beef with no obvious distinction. Accordingly the NFU has called on retailers to stop mixing British and cheaper Irish beef on their shelves and to consider promotions to reignite consumer demand.
Over the last few years beef prices have steadily risen peaking at over £4/kg deadweight but in the last six months in particular this trend has reversed and as a result many beef farmers are facing significant losses.
The price of beef has dropped by over 10% during the last twelve months while the price of beef on the supermarket shelves continues to stay firm or edge upwards which is causing British beef farmers significant concern.
This time last year the average price of a “standard steer” was £404p/kg which compares to a price of £362p last week and the price quoted by abattoirs to farmers continues to fall week on week.
What this means in real terms is that an beef animal weighing say £350kg deadweight will be worth £150 less this year than last year and because the margins on beef production are very low at the best of times, it seems likely beef fattening units in particular are going to face some significant losses over the coming months.
Indeed without support payments from Europe most livestock farmers in this country would simply not make a profit anyway and with such payments looking likely to reduce as we move in to the future many beef farmers will have to seriously examine the viability of their business model.
The problem is not helped by the fact that the retail outlets are dominated by the supermarkets which always brings in to question whether there is a fair market place between the many small farmers and the few big retailers. This is exacerbated by the fact that the number of abattoirs in this country is also dwindling, which further impacts on a farmer’s ability to influence the price they can achieve.
It is also interesting to learn that many of the abattoirs are owned by Irish firms and whether this influences the amount of Irish beef which is imported in to this country is open to question. Having said that Irish beef farmers are also struggling and so it may just be the low price of Irish beef which is influencing imports.
But what is clear is that on the supermarket shelves, British beef is often sold alongside Irish beef with no obvious distinction. Accordingly the NFU has called on retailers to stop mixing British and cheaper Irish beef on their shelves and to consider promotions to reignite consumer demand.
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
Tuesday, 22 April 2014
Rural Payments Agency's online system
Last week saw a worrying glitch in the Rural Payment Agency’s (RPA’s) online system for claiming Single Payments, the application deadline for which is approaching on 15th May.
I for one was unable to log on to the system over the weekend of 12th and 13th of April and it is understood the problem persisted for some, well on in to the week. On contacting the RPA on Monday 14th April I was told that the problem was not in fact to do with the RPA’s own online system, which I hasten to add is generally excellent, but it concerned a problem being experienced by the “Government Gateway”.
At the time of writing it is not clear whether the problem has been conclusively resolved but what this does highlight is the potential fragility of relying entirely on online systems. This is of particular concern for the RPA who are intending to extend their reliance such systems when the new Basic Payment Scheme replaces the current Single Payment Scheme (SPS) in 2015.
The problems recently experienced were annoying but not catastrophic, but if they had occurred very much closer to the application deadline, the financial consequences of not getting the SPS application submitted on time could have been far more serious.
I am not suggesting we revert to the old paper forms but as our reliance on computers increases so too does our vulnerability to system failures or perhaps more worryingly online fraud of one form or another and in this context many farmers are probably quite exposed. This is because, for older farmers in particular, although many realise embracing computers is now a necessary evil , whether that be to deal with VAT returns or SPS applications, they are not familiar with the online “antics” of some fraudsters which are likely to be more familiar to younger or more frequent users.
Therefore, the government and RPA in particular are urged ensure that the government’s policy of “digital by default” does not leave elderly “non digital” farmers out in the cold and ensures the systems are robust so that all users are able to access the online systems at all times. After all the whole point of digital by default is to increase the efficiency and cost effectiveness of the delivery of schemes such as the SPS and if the systems are unreliable this will lead to frustration and potentially significant financial losses.
I for one was unable to log on to the system over the weekend of 12th and 13th of April and it is understood the problem persisted for some, well on in to the week. On contacting the RPA on Monday 14th April I was told that the problem was not in fact to do with the RPA’s own online system, which I hasten to add is generally excellent, but it concerned a problem being experienced by the “Government Gateway”.
At the time of writing it is not clear whether the problem has been conclusively resolved but what this does highlight is the potential fragility of relying entirely on online systems. This is of particular concern for the RPA who are intending to extend their reliance such systems when the new Basic Payment Scheme replaces the current Single Payment Scheme (SPS) in 2015.
The problems recently experienced were annoying but not catastrophic, but if they had occurred very much closer to the application deadline, the financial consequences of not getting the SPS application submitted on time could have been far more serious.
I am not suggesting we revert to the old paper forms but as our reliance on computers increases so too does our vulnerability to system failures or perhaps more worryingly online fraud of one form or another and in this context many farmers are probably quite exposed. This is because, for older farmers in particular, although many realise embracing computers is now a necessary evil , whether that be to deal with VAT returns or SPS applications, they are not familiar with the online “antics” of some fraudsters which are likely to be more familiar to younger or more frequent users.
Therefore, the government and RPA in particular are urged ensure that the government’s policy of “digital by default” does not leave elderly “non digital” farmers out in the cold and ensures the systems are robust so that all users are able to access the online systems at all times. After all the whole point of digital by default is to increase the efficiency and cost effectiveness of the delivery of schemes such as the SPS and if the systems are unreliable this will lead to frustration and potentially significant financial losses.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 7 April 2014
Banks keen to lend to farmers
Banks are still keen to lend to farmers although the process of getting loans approved can still be quite tortuous as anyone who has recently tried to arrange a loan will be well aware.
However from my recent experience either valuing farms for banks or in helping farmers make loan applications for the Agricultural Mortgage Corporation (AMC), it is clear that competition between all the High Street banks is fierce and we often see “bidding wars” as each bank looks to undercut the other’s cost of borrowing.
The reason banks are keen to lend to farmers is because they generally have a very strong capital base which has been bolstered in recent years by the rise in farmland values. For example in this area we have seen the average value of land rise from around £3000 per acre in 2006 to around £7500 per acre today which is in stark contrast to the residential property market. However revenue returns on farms have not always matched the rise in capital values and this can be the stumbling block, with most banks now more concerned with the serviceability of borrowing than the loan to value ratio.
But in general this is good news for farmers as is the fact that some lending institutions such as the AMC have recently secured additional funding from the European Investment Bank (EIB) which means that for certain loans they can offer discounts on their standard margins of 0.8% which is a significant figure in these days of historically low interest rates.
Such discounts are unfortunately not available for the purchase of land or the restructuring of borrowing but they are available for investment in buildings and other equipment. Therefore if anyone is thinking of carrying out such work they should not only contact their existing bank manager but also consider contacting their local AMC agent to see if they can help.
As AMC agents and valuers, my firm Carter Jonas, like many others is experienced in helping farmers and landowners through the often complicated process of convincing the bank’s credit team that the applicant is a worthy of taking up the proposed loan and in my experience it is the “early bird” that often catches the worm. Therefore if you think you may have a project that would attract the EIB funding farmers are advised to contact their local AMC agent or call me for free initial advice.
However from my recent experience either valuing farms for banks or in helping farmers make loan applications for the Agricultural Mortgage Corporation (AMC), it is clear that competition between all the High Street banks is fierce and we often see “bidding wars” as each bank looks to undercut the other’s cost of borrowing.
The reason banks are keen to lend to farmers is because they generally have a very strong capital base which has been bolstered in recent years by the rise in farmland values. For example in this area we have seen the average value of land rise from around £3000 per acre in 2006 to around £7500 per acre today which is in stark contrast to the residential property market. However revenue returns on farms have not always matched the rise in capital values and this can be the stumbling block, with most banks now more concerned with the serviceability of borrowing than the loan to value ratio.
But in general this is good news for farmers as is the fact that some lending institutions such as the AMC have recently secured additional funding from the European Investment Bank (EIB) which means that for certain loans they can offer discounts on their standard margins of 0.8% which is a significant figure in these days of historically low interest rates.
Such discounts are unfortunately not available for the purchase of land or the restructuring of borrowing but they are available for investment in buildings and other equipment. Therefore if anyone is thinking of carrying out such work they should not only contact their existing bank manager but also consider contacting their local AMC agent to see if they can help.
As AMC agents and valuers, my firm Carter Jonas, like many others is experienced in helping farmers and landowners through the often complicated process of convincing the bank’s credit team that the applicant is a worthy of taking up the proposed loan and in my experience it is the “early bird” that often catches the worm. Therefore if you think you may have a project that would attract the EIB funding farmers are advised to contact their local AMC agent or call me for free initial advice.
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
Wednesday, 11 December 2013
The Rural Payments Agency
The Rural Payments Agency (RPA) has reported that it has successfully paid Single Payments to 95,600 farmers in England on the first day of the payment window being 2nd December this year. This is the best the RPA has ever achieved since the Single Payment Scheme was introduced in 2005 and it is a far cry from the chaos and delays which were experienced by many farmers in the early years of the scheme.
Indeed the payments made on 2nd December exceed the RPA’s own payment targets, which is good news for farmers, many of whom in the livestock sector in particular are still reliant on these subsidies in order to make a profit.
However, there is a concern that with the forthcoming reform of the CAP which will come in to force in 2015 that the RPA does not take its eye off the ball. It is imperative the RPA makes sure that as far as possible the progress that has been made in recent years is not squandered when the new scheme is introduced.
There is hope that the new scheme will be easier to administer because the government has sensibly decided to roll over the existing “entitlements” in to the new scheme. This will mean farmers will not have to go through a fresh registration process under the new scheme but there will no doubt be many other complications which may have the potential to cause problems.
The entitlements are important because in order to claim the area based support payments under the Single Payment Scheme and the new successor scheme, farmers need to match the number of entitlements they hold with an equivalent area of qualifying farmland. Therefore, as a result of the decision to roll over existing entitlements in to the new scheme, the value of entitlements has appreciated from around £200/entitlement to around £300/entitlement because there is now certainty that they will be around until 2020 which is when the CAP will next come under review.
Accordingly, those farmers with spare entitlements may consider selling them sooner rather than later because under the new scheme it is understood that any entitlements which are not claimed in 2015 will be confiscated without compensation. These entitlements will be put in to the National Reserve for distribution to other claimants, the rules for which are as yet unknown.
Further, any claimants with less than 5 hectares of land will no longer be allowed to claim in the new scheme which means they may wish to offload their entitlements now even though this would preclude them from making a claim in 2014.
So, it seems just as the RPA have got to grips with the existing Single Payment Scheme after 9 years of trying, there is a danger things could go awry as a new scheme is introduced in 2015. However, I hope the roll over of entitlements will make this process much more manageable than it was in 2005 although that does not mean to say the RPA or farmers should be complacent. The new scheme will present both opportunities for some and dangers for others and farmers will need to keep abreast of developments as the detail of the new scheme rules start to emerge over the coming months.
Indeed the payments made on 2nd December exceed the RPA’s own payment targets, which is good news for farmers, many of whom in the livestock sector in particular are still reliant on these subsidies in order to make a profit.
However, there is a concern that with the forthcoming reform of the CAP which will come in to force in 2015 that the RPA does not take its eye off the ball. It is imperative the RPA makes sure that as far as possible the progress that has been made in recent years is not squandered when the new scheme is introduced.
There is hope that the new scheme will be easier to administer because the government has sensibly decided to roll over the existing “entitlements” in to the new scheme. This will mean farmers will not have to go through a fresh registration process under the new scheme but there will no doubt be many other complications which may have the potential to cause problems.
The entitlements are important because in order to claim the area based support payments under the Single Payment Scheme and the new successor scheme, farmers need to match the number of entitlements they hold with an equivalent area of qualifying farmland. Therefore, as a result of the decision to roll over existing entitlements in to the new scheme, the value of entitlements has appreciated from around £200/entitlement to around £300/entitlement because there is now certainty that they will be around until 2020 which is when the CAP will next come under review.
Accordingly, those farmers with spare entitlements may consider selling them sooner rather than later because under the new scheme it is understood that any entitlements which are not claimed in 2015 will be confiscated without compensation. These entitlements will be put in to the National Reserve for distribution to other claimants, the rules for which are as yet unknown.
Further, any claimants with less than 5 hectares of land will no longer be allowed to claim in the new scheme which means they may wish to offload their entitlements now even though this would preclude them from making a claim in 2014.
So, it seems just as the RPA have got to grips with the existing Single Payment Scheme after 9 years of trying, there is a danger things could go awry as a new scheme is introduced in 2015. However, I hope the roll over of entitlements will make this process much more manageable than it was in 2005 although that does not mean to say the RPA or farmers should be complacent. The new scheme will present both opportunities for some and dangers for others and farmers will need to keep abreast of developments as the detail of the new scheme rules start to emerge over the coming months.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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