UK: Land And Farming Bulletin - Spring 2014

THE FUNDING FLOW - CAP 'PILLAR 2' POLICY REFORM

The Common Agricultural Policy is comprised of two pillars through which the funding passes. The vast majority flows through the first pillar, such as the direct aid, but an important minority flows through the second, the rural development fund. Defra has published more clarification on how policies in this pillar are going to change for the current 2014 to 2020 period.

Defra has decided that 12% of the first pillar funds will be transferred to the second pillar. It is Defra's intention to increase this to 15% in 2018, following a review of the demand for agri-environmental schemes. This will leave approximately £3.65bn for Rural Development for England for 2014 to 2019. Of this, 87% will be for agri-environmental schemes, 5% for a growth programme, 4% for competitiveness initiatives and the remaining 4% for the local LEADER programme.

New environmental land management scheme

The new scheme will aim to develop landscapes that are important for rural tourism, protect resources for farmland birds and pollinators, and tackle water pollution. It will encompass the upland and lowland, organic and conventional, as well as woodland and farmland alike, with a single multi-year agreement per holding.

With the new scheme, the environmental stewardship and English woodland grant scheme will be combined. Once the scheme has opened, the application can be made at any time of the year, although all start dates will be as of 1 January. However, the capital schemes like the farming and forestry improvement scheme and the rural economy grant might continue to be provided on an ongoing basis, although they will not have processing batch dates in favour of tight application deadlines.

There will be a tier of new environmental land management schemes (NELMS) focusing on 'priority' sites. This will look very much like the present higher-level stewardship (HLS) and would effectively be by invitation-only on the land with the most environmental potential. Most farmers with HLS schemes or the previous classic schemes will be invited to resubmit an application for the follow-on scheme, although success is not guaranteed.

There will also be a universal capital grant scheme paying up to £5,000 to fund activities such as hedgerow restoration and stone wall repairs. This would be open to all, even those not in a management agreement.

A 'mid-tier' was originally planned to focus on landscape-scale agreements. This was groups of land managers coming together to offer large areas of land into a scheme. This was thought to offer better environmental outcomes than isolated 'pockets' of land. However, this is now less of a priority over individual farms with high-quality environmental opportunities. Defra is still looking at ways to reward collaborative applications, but this is no longer the pre-requisite that once seemed likely. Instead, the industry is likely to be guided towards a more focused agri-environmental approach. This will be through only offering mid-tier agreements in certain priority areas with a limited choice of options.

The key point is that the concept of 'broad and shallow' environmental support for low levels of activity by anybody is no longer going to be available once the entry-level scheme (ELS) expires. This means there will be substantially more land in England that is not covered by environmental scheme income other than for the obligations of greening.

The last farming and forestry improvement grant scheme window has recently closed, with a £10m budget that many believed wouldn't be available at all. But Defra has recently pointed out that this is actually a successful scheme and will be incorporated into NELMS.

Energy crops scheme

The energy crops scheme that has subsidised the initial planting and set-up cost of biomass crops has been and will remain closed. The scheme supported less than a thousand hectares in 2012 and Defra considers that food production should remain the primary goal for farming, while biomass should not undermine British food security.

Competitiveness

About £150m of the Pillar 2 funds are being allocated to spend on raising competitiveness within the farm sector over the seven years from 2014 to 2020. It is too early to know how this will be spent, but the messages coming from Defra suggest there will be some capital funding, along the lines of the farming and forestry improvement scheme. It is likely not to have short application windows but be processed in batches instead. Applicants will probably have a more defined list of eligibility criteria on which to apply.

A skills framework is also being designed. This is not a continuing professional development scheme for farmers, but an opportunity to gather additional skills for the entrepreneur and farm staff. Focusing on the competitiveness of the industry, and with efficiency gains in mind as well, it is expected that this could link in with the two Government Strategies published last year on improving the agricultural industry. These are the 'Agri-Tech' and the 'Future of Farming Review'. The first considered the opportunity to improve UK farming through technology gains, and the other focussed more closely on the worker and the farmer.

Rural growth

Throughout the last Rural Development Programme, Defra has supported a series of enterprises with capital grant schemes, initially through the Development Agencies, and latterly from central Defra. Allocation of capital grants to 'pump prime' new schemes is going to be continued, following high demand for funds through the Rural Enterprise Grant. This time, however, they will be awarded according to the priorities of the 39 Local Enterprise Partnerships (LEPs). These are regional quangos, some rather small (such as Thames Valley Berkshire) and others large (North Eastern or New Anglia). They are a voluntary partnership between business and local authorities. With part of their remit to allocate these funds they will require some agricultural and rural expertise. It is possible that several will be urban-centric because this is where the majority of the regional enterprises occur. It might be worth getting to know your local LEP, to offer support as necessary (http://www.lepnetwork.org.uk/leps.html).

Opportunities in LEADER

While LEADER has not been a particularly important subsidy fund to farming in the past, it could become a more useful source of funding for the industry in the future.

LEADER pays for programmes run by local community partnerships. However, the new LEADER scheme has more funding, greater responsibilities and national coverage, and it may therefore be worthwhile for farmers to understand more about the programme. The new scheme will start on 1 January 2015 as part of the new Rural Development Programme for England. A total budget of £140m has been set aside for the programme. The Defra CAP implementation document provided guidance on the priority areas of the scheme as support for:

  • micro/small enterprises and farm diversification
  • increasing farm productivity
  • rural tourism
  • increasing forestry productivity.

Overall, around 70% of LEADER funds must directly support the rural economy. The remaining 30% must make a contribution to the local rural economy, for example, by attracting visitors who will then spend on local businesses and services.

THE UPWARD MARCH CONTINUES

RICS and the Royal Agricultural University's Rural Land Survey indicates that agricultural land prices have continued to rise.

Land values increased by 8% from June to December 2013 to £22,876 per hectare (£9,258 per acre), according to the transaction-based survey by the Royal Institution of Chartered Surveyors (RICS) and the Royal Agricultural University. The 'opinion based' measure, which is a hypothetical estimate by surveyors of the bare land value, rose by 4% to £19,160 per hectare (£7,754 per acre).

Commercial farmland prices have risen sharply over the past five years, but notably the demand for residential farmland (land which includes a residential component where its value is estimated to be more than 50%) has improved for the first time in three years. An upturn in demand has been seen in all regions, although at varying levels. Before the 'economic crisis', demand for residential farmland was the big driver of land prices.

Commercial farmland prices continue to be driven by farmers looking to expand their businesses - strong interest from neighbours and soil quality remain the key drivers. The lack of land coming on to the market is, for many surveyors, becoming a problem as demand outstrips supply, suggesting prices are likely to follow the upward trend.

The North West has the highest farmland price at £21,777 per hectare (£8,813 per acre), according to the opinion-based survey, and the North East has had the largest hike in land values.

Rent levels

Recent Defra figures on farm rents in England show the average rental value under the Agricultural Holdings Act 1986 (AHA) tenancies rose by 3% between 2011 and 2012 to £163 per hectare (£66 per acre). For Farm Business Tenancy (FBT) rents, the average figure actually decreased by 2% to £177 per hectare (£72 per acre). However FBT's on cereals farms saw rises of 10% to £211 per hectare (£85 per acre). Official data on rents is now collected via the Farm Business Survey, although it is rather dated by the time it is published. The figures are for roughly February 2012 to February 2013.

The average rent paid under seasonal agreements (likely to be largely grass lettings) in 2012 was £117 per hectare (£47 per acre) – an 8% drop. These rents show the amounts actually being paid by farm businesses in England. Other figures being quoted in the marketplace or by land agents' surveys tend to be the cost of the most recent rental agreement. These will inevitably be considerably higher.

AGRICULTURAL NEWS UPDATE

Organic market on the increase

Organic food sales rose by 2.8% in 2013 according to the organic market report published by the Soil Association, that's 0.7% above inflation. This reverses the trend seen since 2008 - sales declined by 1.5% in 2012; a 3.7% decline was seen in 2011; 5.7% in 2010 and nearly 13% in 2009.

Consumption of organic dairy products rose particularly strongly in 2013 increasing by 4.4% by value. There has also been significant growth in catering and restaurant sales; demand from high street chains such as McDonalds and Pret-a-Manger have seen sales increase in that sector by 10%.

The area of land registered and managed as organic in the UK continues to fall. In July 2013 the organic land area was down 7.6% from the previous year to 606,000 hectares – around 3.5% of the total agricultural land in the UK. The number of producers and processors fell by 6.3% to 6,487.

Conversion of farm buildings

New rules have made it easier to convert farm buildings for residential use. There is now greater flexibility in change of use under Permitted Development Rights (PDRs). The new Town and Country Planning (General Permitted Development) (England) Order 2014 states that:

  • change of use of existing agricultural buildings, and land within their 'curtilage', to up to three dwellings and associated buildings works can be permitted development
  • buildings up to 450m2 can be converted, but the footprint of the development must stay within that of the original building
  • permitted changes include the installation/replacement of windows, doors, roofs, external walls and services and 'partial demolition'
  • prior approval must be granted for location and siting, design and external appearance, transport and highways, noise, contaminated land and flood risk
  • the site must have been in use solely for agricultural use, as part of an established unit on 20 March 2013.

These new regulations do not apply to listed buildings, scheduled monuments, on Sites of Special Scientific Interest, in National Parks, World Heritage Sites or Areas of Outstanding Natural Beauty. Where the building is let under an Agricultural Holdings Act 1986 (AHA) tenancy, both the landlord and tenant must have consented in writing.

These new rights will sit alongside existing PDRs for agricultural buildings; this will result in the following restrictions.

  • If existing PDRs are used after 20 March 2013 to construct a new agricultural building, it will lose its right for change of use for ten years.
  • If the new rights to change the use of a farm building into a dwelling are used, the existing PDR to erect a new farm building will also be lost for ten years.

STEADY OUTLOOK - PROSPECTS FOR THE WHEAT MARKET

By Ben White-Hamilton, ODA UK

Old crop balances have been compiled and the focus is now shifting to the 2014/15 campaign.

The majority of UK wheat is grown for the feed industry, which means our wheat prices are correlated to international maize prices, as well as international wheat prices. Last year's record production for both maize and wheat pushed domestic prices below £150/t – a huge psychological barrier for many farmers.

Strong international demand from the EU and the US for crops, particularly quality wheat, is reducing carryover in these origins and providing some support to prices. The global outlook does not indicate any problems, however, with record production (713MT) balancing strong demand.

Forces of nature

Weather conditions will determine future production levels and therefore have a growing impact on prices. The 2014/15 balances seem stable for the time being, but supply is by no means guaranteed.

At this stage, new crop prices are heavily influenced by climate risk. It could be supported by, for example, maize sowing in the northern hemisphere from mid- April, followed by wheat and barley yield determination in May/June. Winter never really arrived in Europe and spring looks set to be early in the Black Sea and the US, with conditions in the US remaining dry in the Hard Red Winter wheat area.

Wheat production is expected to return to more 'normal' levels in the UK (similar to the 2011/12 production figure of around 15.2MT, compared to the 2013/14 figure of 11.9MT). This means that the UK will once again become a net exporter of wheat, which has led to it losing its premium over French wheat (it has already lost about -£8.40/t). This premium facilitated the necessary imports over the last two campaigns, when the UK was a net importer of wheat. The French market is of milling quality so, theoretically speaking, UK prices are normally trading at a discounted rate (-£12).

Looking ahead

Wheat prices have recovered slightly following January's lows, sparking optimism for further price rises – particularly given the ever-present weather risks. UK prices remain slightly depressed due to the strengthening currency and other complex market factors. Strong imports of milling wheat and maize are competing with domestic supplies, while the still heavily discounted feed barley prices are also keeping a check on wheat prices.

The political tension between Russia and Ukraine has increased volatility in the market, resulting in the recent support for prices.

Wheat consumption is expected to be higher than production over the coming year. In the absence of any climate-related incidents, prices are unlikely to change significantly. Factors to keep in mind, however, include the USDA's Crop Progress Reports published every Monday night; the northern hemisphere spring plantings; and the critical yield determining period (May/June) for northern hemisphere crops.

TAGGING A NOCTURNAL WOODCOCK

By Jerry Barnes

Jerry Barnes describes the satellite tagging of 'Smithy' – the latest bird to join the exciting Woodcock Watch project – at his shoot near Bristol.

At around 9pm on Monday 3 March, woodcock expert Dr Andrew Hoodless and my gamekeeper Andrew Waygood parked their car by the side of a small lane. It was a fairly moonless night, with a clear sky and hardly a breath of wind – less than ideal conditions for sneaking up on a wary bird such as the nocturnal woodcock.

A bird in the hand

A quick sweep over the hedge into the nearby field identified a pair of faint pink eyes. Dr Hoodless leapt into action with a lamp and a 15ft net. Within five minutes he was back with a shoe bag carefully grasped in his hand. In it was a mature, adult, male woodcock in excellent condition, which we affectionately named 'Smithy'.

Tagging 'Smithy'

Having found Smithy, now came the technical matter of fitting a customised satellite navigation tag. After much adjusting of the harness and possibly a little super glue, Smithy was fitted with a swish backpack, complete with a solar panel for power and a long aerial.

Dr Hoodless took him back into the darkness for a quiet few minutes before releasing him into the night. He later explained that we had been very lucky. Had it been a cold, wet and windy night, we would have had to endure many unsuccessful attempts before finding a suitable candidate for the tagging. Yet here we were, less than an hour into the night with the job done – and I hadn't even stepped into a field yet!

In search of more...

Filled with enthusiasm and optimism, Waygood and I demanded that we find some more birds. So off we all set to the other end of the moor, leaving Smithy to eat his breakfast in peace. Two hours later, after much yomping over very wet ground, mostly in the dark, we had found, ringed and released another three woodcock. It was a thrilling experience and a privilege to see these remarkable and beautiful birds in their natural environment.

Being a Cornishman, I have been aware of these birds all my life. Their story of migration all the way to Finland or Siberia and back is truly remarkable. On my own shoot, it was heartening to see as many as 25 or so woodcock before midnight. They were mostly mature birds that we hope will make it back to the breeding grounds and return again next winter – ideally, to my fields!

As for Smithy, he has recently relocated to Poland. For regular updates on his progress, visit our website: www.smith.williamson.co.uk/news/7122-the-capture-and-tagging-of-smithy

Visit us at the GWCT display area at the CLA Game Fair at Blenheim Palace on 18 July. We will be hosting an open drinks reception at 2pm, before joining the GWCT for a talk on the Woodcock Watch project at 3pm.

Jerry Barnes is chairman of the Bristol and North Somerset branch of the Game and Wildlife Conservation Trust (GWCT) and a partner in the Smith & Williamson landed estates team.

MAJOR GM CROP GIVEN THE GREEN LIGHT

The EU recently approved a major GM crop for cultivation for the first time in over a decade.

The maize variety 1507, produced by DuPont Pioneer and resistant to the European corn borer, will be the first new variety cultivated in over a decade. The variety joins a similar crop, Monsanto's MON810, as the only other GM 'event' authorised for growing in Europe. (Some GM potatoes for starch have been approved in recent years, but then subsequently withdrawn.)

The crucial vote was relatively close and was passed largely because the German coalition was divided on it and therefore had to abstain, creating a 'qualified majority'.

Legal intervention

The process only got this far after the seed company took the case to the European Court. The court ruled that the EU Commission had illegally delayed a vote on the product (the application was first tabled in 2001). As the crop had passed all the safety tests imposed by the European Food Standards Agency, the Commission was duty-bound to approve it unless there was a blocking majority of member states.

Continuing concerns

A number of people throughout Europe are still suspicious that GM technology is dangerous to human health. This is despite it having been legally cultivated in several countries since 1996 and consumed globally, including in the UK.

GM is a powerful technology and anything with such power can be used for positive or negative purposes, similar to nuclear power, fire, electricity and cars. Just as opposition to these forces has receded as the world has seen how they improve people's lives, so the same might happen with plant-breeding techniques – should they be given the same chance.

We are grateful to Andersons, the farm business consultants, for their contribution to this bulletin. We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014 code: 14/436 Expiry date: 31/07/2014

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