Contact our offices
5 & 6 BAILEY COURT
COLBURN BUSINESS PARK
Estate Agency Offices are located in
BARNARD CASTLE, BOROUGHBRIDGE & RICHMOND
Residential Management Team
There is only one certainty in agriculture and that is that there are never two days, weeks or years the same. 2015 has been no different and has proved to be a turbulent time for British landowners, producers and growers alike, but it’s not all bad news.
After a hectic and slightly delayed harvest, now would seem an opportune moment to take stock of where the industry stands and some of the headlines that have hit the farming press to date.
Basic Payment Scheme & Countryside Stewardship
Quick to hit the headlines at the start of the year was undoubtedly how the roll out of the Basic Payment Scheme was handled. With delay upon delay it was inevitable that the RPA would have to postpone its implementation of a paperless system for future years. The eagerly awaited new online system which has cost over £150m to implement so far, never materialised and eventually the RPA confirmed in March that the system was to be side-lined for 2015. What followed was a dash to submit printed paper BP5 forms in order to meet the extended June deadline. We wait in anticipation for the launch of the online system for 2016 applications, although the RPA have confirmed that paper forms will be made available for 2016 claims.
Since June, the RPA have quietly been working away at processing BP5 forms in addition to carrying out on farm inspections in line with their pledge to inspect 5% of all claimants. Some claimants may begin to hear from the RPA in connection with queries surrounding their application. This is routine and should not cause alarm.
Meanwhile Natural England have been busy implementing a rather fragmented introduction to the new Countryside Stewardship Schemes (CSS) which is the new face of agri-environment schemes aimed at providing £900m to the rural economy. As of 1st October 2015, Natural England had received over 2,200 Mid-tier applications and over 1,000 Higher tier applications – a substantially lower uptake than had been envisaged although there are no plans to amend the application process. Natural England should start contacting those who have made a successful application from the end of October onwards.
Harvest 2015 has been challenging for many but has produced some promising yields, proving what some land is capable of yielding given the right conditions. Recent data published by ADAS shows cereal yields are up 14% above average and testament to this is the recent world record claim for the highest wheat yield, tipping the scales at 16.52t/ha achieved on a farm in Northumberland.
Without a sustained period of fine dry weather, harvest has been somewhat intermittent with some holdings still combining well into mid-October although most are now well on with autumn cultivations and potato harvesting. Albeit heavy rain in late September has made some farmers think twice about their winter cropping.
Pulse crops remain a popular choice for 2015/16 cropping, no doubt driven in part by the BPS Greening rules and strong demand both in the domestic and export markets. Prices are nudging towards £120/t which is where they were back in 2009/10. The global market for cereals would appear to be saturated with good quality grains owing to successful growing and harvesting seasons reported by all major producers.
The livestock sector never fails to be a challenging market in which to operate, price fluctuations and generally low values continue to squeeze profit margins. Although commodity prices have dropped over the past few months, feed and electricity costs remain high. Low commodity prices do however beg the question whether it is cost effective to continue buying in feed, or look at becoming self-sufficient, if farming operations allow.
Pig producers are another example of a struggling industry. Pig prices for the week ending 3rd October hit a seven year low of just 129.22p/kg for an EU-spec standard pig, there are a number of seasonal factors being blamed for this which include an oversupply and a weak EU market.
The dairy industry took centre stage over summer as farmers responded in a variety of ways to a drop in farm gate prices for their milk. This followed action taken by our European neighbours in France and Brussels who responded to what was described as an attack on milk prices.
In response, the EU launched a dairy aid package to help support dairy farmers by providing them with a one off grant. This averaged £1,820 per holding and was designed to help those struggling to pay bills and aid cash flow. For some this was seen as too little too late as the payments are not due until December 2015.
Keen to shy away from the negative publicity in the media, several supermarkets were keen to use this to their advantage by coming to the rescue of UK dairy farmers. Aldi, Asda and Lidl have all promised a minimum price of 28p/litre however a question over how long they will sustain this remains. On 12th October 2015 Morrison’s launched a new milk and cheese brand dubbed “Milk for Farmers” the idea being that 10p/litre will be passed back directly to the farmer for every bottle sold and 34p for every pack of cheddar cheese. Some farmers see this as a step in the right direction whilst others have condemned it as a public relations stunt.
It is quite shocking to think that a bottle of milk is now cheaper than a bottle of water and perhaps a sign of the times. What is clear is that our livestock industry needs the support and backing of ministers and Government departments who are committed to the success of British agriculture. In September alone 21 dairy farms in the UK closed and we have seen a loss of almost 4% on the number of producer’s year on year.
The badger cull has been another controversial area that has attracted coverage in the national press due to strong opposition from a range of high profile objectors including Brian May and Café Nero. Badgers have been linked to the spread of Bovine TB in certain hot spot areas and figures suggest that they are responsible for transmitting the disease in 50% of cases. Initially a badger cull area was approved in Somerset and Gloucestershire however this was then later extended to include Dorset. The argument continues to rage as to whether vaccination is better than a cull.
For this year at least, the cull in Dorset and Somerset has now come to an end and the industry awaits the results. Clearly this is an emotive subject with many discussions yet to take place but the cost of TB to the economy is significant, whether you look at it from the point of view of the number of cattle slaughtered, or the cost of vaccination and monitoring.
Fuel & Timber
Oil prices have dropped significantly over the past few months to their lowest September value since 2011. Historically fuel prices shadow that of wheat, which is promising news for hauliers and households as road fuel prices and heating oil have dropped to levels which make solid fuels look comparatively expensive. Red diesel averaged 44.81p/l whilst white diesel averaged 110.40p/l during September 2015.
Although log prices are down by approximately £10 per tonne, year on year there remains strong demand for small round wood used for biomass. Our reliance on imported timber is high as the UK is only 20% self-sufficient. The volume of UK harvested timber this is predicted to flat line for the next ten years before dipping to reflect the lack of woodland planted in the late 1970s and 80’s.
We are already at a point where many of the existing commercial woodlands of the northern England and southern Scotland are close to exhaustion but the barriers to afforestation such as planning issues mean that many of these will not be re-stocked. Despite this, the local authorities still have aspirations of planting 21,000ha of forestry over the next 10 years in order to increase forest cover in the north of England up to 15% and 25% in Scotland.
In order to meet this target we need to plant around 2,000ha of forestry every year however those in the logging industry believe that we are a long way behind this target and place the blame partly on the Forestry Commission for being unambitious. The hurdles to overcome in terms of planning and environmental protection naturally present a barrier for which the financial return is simply not enough.
The amalgamation of the English Woodland Grant Scheme with the new Countryside Stewardship Scheme is undoubtedly complicated for those not involved with it on a regular basis, but there are substantial funds available to assist with the cost of installing infrastructure for forestry and creating management plans and addressing tree health.
Finance & Tax
Fresh from the final budget statement before the May election was an announcement by George Osborne to an extension to farmers’ tax averaging. From April 2016, a five year period will now be allowed which is designed to help farmers cope with market volatility and focus more on investment, this will undoubtedly be welcomed by many farmers, not least the dairy sector.
It is worth noting that changes to the Annual Investment Allowance will come into force from 1st January 2016, the current limit will reduce from £500,000 per annum to £200,000 which means that for businesses with accounting periods which straddle this date it may be prudent to take tax advice in respect of maximising reliefs and capital expenses.
Other points worthy of mention are changes to the taxation of dividends and the introduction of the national living wage from April 2016. This is by no means an exhaustive list of changes and if you are in any doubt about how any of these changes may affect you or your business you should seek professional advice.
The start of the Grouse shooting season is a firm favourite on the country sports calendar but the atmosphere on the 12th August was slightly deflated this year owing to poor rearing conditions which has meant that bird numbers are down significantly in some areas. Because of this, many estates have had to cancel let days this year which has also lead to knock on effects within the rural economy as the normal high demand for local accommodation and hospitality services during this season has dropped as a result. Our £2bn shooting industry however continues to prosper with more people entering the sport.
As the nights draw in and the countdown to Christmas begins there are still busy times ahead and changes on the horizon that will affect the industry going into 2016. The maize harvest is well underway in the south but operators in the north wait eagerly to start cutting and filling the clamps before the winter frosts begin to take hold. The next few months for livestock and poultry farmers will no doubt be busy in preparation for the pre-Christmas boom and sales at the local auction marts are attracting strong numbers, representing a strong appetite for trade.
We wait with baited breath as to how the RPA will roll out the new online system for BPS applications in 2016 and how this system will integrate with applications for Countryside Stewardship.
One item which raises concern and that will need monitoring over the coming months relates to DEFRA who have been asked to draw up savings plans of up to 40% in the face of further austerity measures made by the government. We often forget the vital role that DEFRA plays in supporting our industry and promoting rural England but it is difficult to see how the vital services that they provide can continue when faced with such significant savings.
Alexander Morrison, Assistant Land Agent, Richmond Office.
GSC Grays offer a range of professional services to rural land and property owners. For further information please contact the Land and Rural Business team for further advice.
[team-member name=”Lucinda Riddell”]
[team-member name=”Phil Scott-Priestley”]
[team-member name=”Will Parker”]
[team-member name=”John Wallis”]
[team-member name=”Alexander Morrison”]