Livestock farmers rely on subsidies

With crop prices rising worldwide, arable farmers should be in for a good spell, although individual returns will depend on how they have sold their crops forward. However, many medium-sized livestock businesses still rely on subsidy payments to make a profit according to farm busienss consultant Andersons.

Latest results from its notional Meadow Farm model, which is typical of many mixed farming businesses, suggest that while better market returns are expected to lead to an improvement in margins in 2010/11, the farm will only achieve a surplus once single payment and agri-environment receipts are included. The farm, like many others, has been hit by higher feed, straw and forage costs, which havepushed this season's variable costs up by almost 14 per cent on 2009/10.

Profitability of Andersons' hypothetical dairy farm - Fresian Farm - was also tight, although the situation had improved following recent milk price increases. The 150-cow unit was predicted to make a small 0.7p/litre margin from production in 2010/11, despite cost of production increasing by 0.6p/litre. With the single payment and ELS money added in, that surplus was boosted to more than 3p/litre.

Dairy processors Robert Wiseman have issued a warning that their profits could fall by about a third. They are major suppliers of milk to supermarkets. Tesco have increased the price they pay to farmers by a little over 1p a litre.

Cur farm aid to one third of budget

The CAP should be cut to about a third of the EU budget rather than well over 40 per cent as at present, according to budget commissioner Janusz Lewandowski: Budget . This would then give more headway for spending on research and innovation.

The target is a realistic one, but Lewandowski admitted that the CAP was defended by a strong lobby. The budget negotiations would probablly be the toughest ever.

France will be a stalwart defender of CAP funding and it has many allies but it is interesting to speculate how much French political capital will be depleted by the row over the expulsion of Roma.

France gets biggest share of CAP budget

No great surprise but France got the largest share of CAP spending among member states in the 2009 financial year. France received €9.87bn, 17 per cent of the total budget of €56.781bn. Spain took second place with €7.26bn, followed by Germany on €6.9bn, Italy on €6.08bn and the UK on €4.04bn.

Poland headed the accession states on €3.72bn, followed by Greece on €3.05bn and Romania in €2.1bn (70 per cent from Pillar 2). Malta was bottom of the pile with €14.88m, most of it from Pillar 2 funds. The combined payments to the Baltic states of Estonia, Latvia and Lithuania amounted to €324m. The importance of the CAP to Ireland was illustrated by its receipts of €1,655.55m.