Tuesday, 3 August 2010

Nick Read's monthly briefing on agricultural matters

Structural reform Plan
Defra has published a plan for the department which sets out its priorities and a series of actions to create a strong, green, economy. The first priority was to “support and develop British farming and encourage sustainable food production.” Government departments would be encouraged to source food meeting British production standards and promote domestic food production. The plan replaces Public Service Agreements (PSAs) which were more focused on environmental issues.

Organics increase
Figures from the European Commission suggest that organic farming has increased by more than 7% across Europe in the past decade. Between 2000 and 2008 the total amount of land farmed organically increased from 4.3m ha to 7.6m ha, so that organic production accounts for 4.3% of agricultural land use across the 27 member states. Spain has the largest area, with 1.13m ha and the UK is fourth with 0.72m ha, though Austria has the highest proportion of its land under organic production with 15.5%.

Bovine TB update
The Court of Appeal has ruled against the Welsh Assembly Government concerning its plans to embark on a limited cull of badgers (see previous briefings). The appeal was brought by the Badger Trust and the legal challenge succeeded on three technical grounds: that the TB Eradication Order incorrectly referred to the whole of Wales rather than the pilot area in north Pembrokeshire; that a 9% reduction in TB predicted as a result of the cull constituted a “substantial cut” in disease levels, a legal requirement for the Order; and that there was insufficient evidence submitted to conclude that the benefits of a cull outweighed the harm it would do to badgers. The Welsh Rural Affair’s Minster, Elin Jones, has indicated that a new TB Eradication Order will be submitted.     A computer study produced by the Farmers Union of Wales (FUW) predicts that a badger cull would cut TB in cattle by 30% for a five-year cull and by 32% for up to three and a half years after culling had ceased.

Defra fined by EC
Defra has been fined more than £160m by the European omission, as Europe’s worst offender for breaking rules over the administration of farm subsidies. The Rural Payments Agency (RPA) was also criticised by an independent review published on 20th July. A new director will be appointed together with an “oversight board” to monitor the agency’s progress.

Defra is changing the way it administers agri-environment payments in a bid to escape further fines from Brussels for non-compliance with EU rules. The changes are likely to mean that farmers will receive environmental payments annually, rather than twice a year, and all applications and renewals will have a single annual deadline of 15th May, the same as the Single Farm Payment. Whilst this will not affect the amount of money that farmers receive, it may have a dramatic impact on cashflow.

Economic data
November wheat futures rose to £120/t in mid July as markets reacted to fears of yield reductions across the EU and world grain producing areas, together with US Department of Agriculture figures showing a slight reduction in both production and stocks of grain. Combining was delayed by heavy rain in Eastern Europe and heat-waves elsewhere have affected yields.

Standing wheat crops were making more than £350/acre, driven by demand from livestock farmers seeking extra forage and straw. Many of the standing crops sold recently have been bought by livestock producers for wholecrop silage making, helping to fill the gap in fodder left by the recent dry weather. Met Office figures show that from January to June the UK had average rainfall of 356.8mm compared to a long-term average of 511.7mm. Significant forage shortages have been reported as a result, with silage yields reduced by up to 40% compared to last year and hay crops down by as much as 50%.

Cattle and sheep sales for the first six months of 2010 were down by 7% and 12% respectively compared to the same period last year. Whilst sheep prices remained relatively buoyant the average cattle price between January and June was 10p/kg lower than for the same period last year.

There has been a significant slump in the wholesale egg market. The price of medium eggs on the open market fell from about £1/dozen in the Spring to as low as 40p by mid July. There is a surplus of eggs and no mechanism for relieving the downward pressure on prices.

posted August 3rd 2010
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