How and why farmers voted on Brexit

A view has developed that farmers voted overwhelmingly for Brexit. However, this view is largely based on a series of Farmers Weekly polls which were not based on a sample but on self-selected responses. Thus, if Brexiteers were stronger in their beliefs, they might be more likely to respond.

This does not mean that nothing can be learnt from these polls. The latest online poll shows that of 1,400 active farmer respondents, 54 per cent voted to leave and 44 per cent voted to remain. 28 per cent thought they would be better off as a result of Brexit and 41 per cent thought they would be worse off (21 per cent about the same). Even among those who voted to leave, there has been a decline in optimism.

Horticulture was the only sector in which more farmers voted to remain than leave. The sector is highly dependent on migrant labour from the EU.

Unsurprisingly, those sectors that have received little or no support from the CAP were most likely to vote leave (poultry, pigs, potatoes). The pigmeat sector incurs heavy transaction costs in meeting EU environmental regulations.

More than half of farmers in Scotland, Wales and Northern Ireland voted to leave, although they are particularly reliant on subsidies.

It is important to note that farmers often voted on the basis of the same concerns as the public in general, rather than agricultural policy. Those who wanted to leave were concerned about issues such as loss of sovereignty and migration. Those who voted to remain were more concerned about market access and loss of support.

During the referendum campaign I addressed a number of meetings of farmers on Brexit. Since then I have sought the views of well-connected farmers for their views on patterns of voting.

The general view was that livestock farmers were more likely to vote for Brexit as they felt constrained by what they saw as EU regulations. The FW poll shows that support for Brexit was particularly strong in the south-west, a livestock region.

However, there is anecdotal evidence that some arable farmers voted for Brexit because they felt constrained by the EU pesticides regime, e.g., restrictions on neonics and a possible ban on glyphosate, a popular weed killer. However, they now realise that if the UK wants to export grains to the EU, it would have to abide by EU regulations.

Special post-Brexit deal needed for Ireland

A special post-Brexit deal is needed for Ireland, according to an influential House of Lords committee: Brexit and Ireland

The report gives recognition to the importance of the agro-food sector in Ireland and Anglo-Irish trade in this area. Farmers will suffer if trade barriers are imposed between the two countries. The agro-food sector would probably be worst affected, given its reliance on cross-border trade.

Is Defra ready for Brexit?

It has been estimated that around a quarter of EU derived regulations fall within the ambit of Defra. Is Defra ready for Brexit? No, although the more important question is whether it will be ready by 2019.

The Institute for Government has undertaken a very interesting study of Whitehall's preparedness for Brexit which is quite positive about the Department for Exiting the European Union. Defra is one of five departmental case studies: Institute for Government

What is particularly worrying in Defra's case, given the range and complexity of the issues involved, are the cuts in staff and budget that have taken place. Defra's budget is 17 per cent smaller than it was in 2010 and will be about 35 per cent smaller by March 2019. Moreover, staff have already been cut by 35 per cent.

If all the depleted staff had to do was to deal with Brexit, it might be feasible. Decisions about which regulations to keep and which to change can be taken after Brexit. However, staff also have to do their 'business as usual' work and there is no shortage of challenges, e.g., bovine TB, not to mention the question of relations with the devolved administrations.

Seasonal worker shortage hits home

Even before Brexit, a shortage of seasonal workers is hitting fruit and vegetable growers. A survey by the NFU found that almost half the companies supplying agricultural labour were unable to meet the horticultural sector's demands between July and September. The supply pf pickers for late season crops was only able to meet 67 per cent of the industry's needs. This marked a sharp deterioration from the start of the year when none of the labour providers reported problems finding workers.

Leading provider HOPs Labour Solutions said that two years ago 40 per cent of seasonal workers planned to return to the UK. That number had fallen to 24 per cent.

There is a perception that Britain is a xenophobic place, while the devaluation of the pound has reduced net income by 15 to 20 per cent.

British horticulture relies on EU workers for more than 98 per cent of its seasonal workers. Defra secretary Andrea Leadsom has said that more British workers should be attracted into the sector, but they have proved unreliable in the past.

The possibilities of a bond scheme

If the basic payment is withdrawn overnight in 2020 after Brexit or becomes a limited payment confined to marginal upland farms, the effect on farming could be catastrophic. For many farms, probably the majority, it is the difference between running at a profit and making a loss.

Some sort of transitional arrangement is needed. It could be a phased reduction in payments, or it could be a government backed bond which could either be sold to invest in the farm business or would generate an income from interest for a period of time.

I have been sceptical about such schemes in earlier postings because of the current low interest rate environment and that does remain a challenge. However, writing in Agra Europe distinguished agricultural economist Stefan Tangermann has revived the idea with his usual eloquent advocacy.

A time limited annuity scheme would offer a soft landing, and would be far preferable to a phased removal of the existing system of support that is still linked to land and farmers. As Stefan says in his article, if these entitlements are 'in the form of a bond-type entitlement document that is saleable on the capital market' this would give farmers confidence that the 'future stream of payments is irrevocably determined'.

With the current state of financial markets, however, it is open to question whether there would be a robust market for this "bond". Most recipients would, I suspect, simply collect their annual compensation payments, rather than exchanging the entitlement for a cash sum for investment purposes.

What farmers really want

It is always good to talk to farmers about their post Brexit hopes and fears and I had another good discussion in Yorkshire last week.

In terms of their hopes, they thought that there was an opportunity to create a more bespoke domestic agricultural policy rather than the monolithic CAP. A smaller sum of money could be spent more efficiently and effectively to achieve better results. This required a reduction in transaction costs.

Overarching principles were needed and the objective should be to make good farming easier and to penalise poor practice. Policy should be simple to operate and transparent.

What had to be sought for farming to succeed in the future was increased and sustainable productivity. This would in turn depend on the making the best use of new technological innovations, some of which were highly complex. There was a skills gap, so investment needed to be made in human capital.

There was concern about the continuing effect of the retail sector's race to the bottom which led to delayed payments and cash flow problems.

Temperate agriculture

A blog report on a meeting on temperate agriculture which is interesting on a number of levels, but in particular arguing that we need to take a broader view of sustainability, thinking of it not just in environmental terms, but also giving appropriate weight to socioeconomic factors: Temperate agriculture

Brexit and food processing

By some measures food processing is the country's most important industry, but is rarely treated as such. Relatively few estimates are available of the impact that Brexit might have on it.

Boston Consulting Group, law firm Herbert Smith and advisory group Global Counsel have considered the impact on a chocolate manufacturer if the UK left the single market and the customs union without any trade arrangements in place.

It is assumed that the UK-based chocolate manufacturer imports most of its materials from around the globe, over half from the EU and a quarter from the rest of the world. It sells mostly in the UK, but exports a quarter of its chocolates to the EU.

Hard Brexit scenario 1 assumes that UK imports and exports are subject to WTO most-favoured nation tariffs. (This does not allow for non-tariff barriers which might arise, for example, over the definition of 'chocolate' which has been the source of tensions between the UK and the rest of the EU in the past). In Brexit scenario 2 imports are subject to zero tariffs.

Under the first scenario the company would be £4.2m worse off on revenues of £100m and under the second scenario it would be £8.2m better off.

A more fine grained analysis would take account of which were the key materials (e.g., cocoa, milk), where they were sourced from and how vulnerable they were to different scenarios.

In the quarter to the end of September British food exports to countries outside the EU grew at twice the rate of those to the bloc, 19.2 per cent against 9.6 per cent. However, the EU still accounted for 71.5 per cent of food exports, led by Ireland, France, Germany, the Netherlands and Spain. Exports to China rose by 62 per cent in the first nine months of the year, making the country the ninth largest destination for UK food (the US is sixth).

However, the trade deficit in food and non-alcoholic drinks increased by 6.7 per cent to £23.3bn.

Too cute to kill?

In the summer I was a keynote speaker at an interesting conference at the University of Surrey veterinary school which looked at the framing of policy on animal health and welfare and also the depiction of animals in children's literature. A report of the conference is now available here: Too Cute to Kill?

Views from Lincolnshire on Brexit

Yesterday I attend a Brexit seminar with large-scale farmers in Lincolnshire and there was a very interesting discussion.

Among their priorities for a post-Brexit domestic agricultural policy was research on what would reduce the cost of production. There could be more emphasis in policy on supporting success, on what was likely to succeed. There should be schemes to promote successful sectors and make them more efficient.The social, environmental and commercial aspects of agricultural policy could be more clearly separated.

Policy should be more evidence based and there should be less reliance on the precautionary principle. Among some of those present there was perhaps a little too much optimism about how it would be possible to roll back regulations. However, it was recognised that any attempt to use currently banned growth stimulants would be blocked by retailers.

It was accepted that intensive livestock systems would lose out under future subsidy policies because they could not demonstrate a public good. Even so, the beef and sheep sectors could be in trouble, especially if tariffs were imposed on exports of sheep meat.

I was struck by how much tension there was between different sectors and even within sectors.

Brexit impacts on trade

The AHDBB has produced a very useful report on the impact of Brexit on UK trade in agricultural products which includes detailed sector by sector analysis, focusing on threats and opportunities: AHDB report

What is the future for agri-environmental schemes?

What is the future for agri-environmental schemes post Brexit? This blog post considers some of the issues: The fate of agri-environmental schemes

The record of the schemes has been mixed and they are context dependent. The recent emphasis has tended to be on the reduction of species loss. Will there be a greater emphasis in future on agricultural landscapes?

As with other aspects of post-Brexit agricultural policy, there needs to be a debate about what the policy objectives should be and what priority should be attached to different objectives.

Brexit and the food and drink industry

Nick Clegg takes an in depth look at the implications of Brexit for the UK food and drink industry, including agriculture, and concludes that there will be a series of negative impacts. He sets out a number of questions to be answered: Food and drink paper

Goblygiadau Brexit i amaethyddiaeth Cymru

Yesterday I gave evidence to a Welsh Assembly committee on the implications of Brexit for Welsh agriculture. The paper I prepared for them is reproduced below. The standard of the questioning was high and a central theme was whether Wales would be able to develop a sufficiently differentiated agricultural policy that took account of its special needs and concerns.

Scenarios for the future relationship

Considerable uncertainty attaches to the nature of the relationship between the UK and the European Union after Brexit, and the form of that relationship will have considerable implications for agriculture. A worst case scenario would see tariffs imposed on exports of Welsh sheep meat to France, depressing the domestic price. It is quite possible that there will be a transitional period in which our relationship with the EU would be governed by WTO rules. However, the most likely outcome is a deal in which the UK has access to the single market but has make to concessions in terms of a contribution to the budget and relatively few limits on the access of EU labour, e.g., confining access to those with employment offers or providing for some kind of ‘emergency brake’.

Structural characteristics of Welsh agriculture

Clearly the sheep sector is of crucial importance to Wales which accounts for over a quarter of the total UK population. Cattle are also important with a greater share of the UK total than the share of the land mass. Milk is particularly important in Carmarthenshire. However, the horticulture sector is small so that migrant labour issues are of less significance in Wales.

It is important to bear in mind the importance of farming to the rural economy, particularly in the remoter parts of Wales where a traditional Welsh culture remains strong. The physical geography and climate in these areas is often challenging. Many people who are not farmers depend on the continued success of the farm sector for employment, e.g., agricultural contractors, tree surgeons, mechanics, veterinary practitioners etc.

Farm support

The Basic Payment in its present form and at its current level is to continue until 2020. For many far, businesses, this represents the difference between making a profit and running at a loss. What will happen after 2020 is uncertain, but there is a growing consensus among policy analysts that any future general support should be focused on marginal farms in upland areas where the need is greatest. Large-scale arable farms in East Anglia should be able to be competitive without the large subsidies that they receive at the present.

There is a case for some continuation of general support given that farmers remaining in the EU will continue to receive CAP payments and there will not be a competitive level playing field. Some attention also needs to paid to price volatility in terms of its impact on levels of production and hence on food security. Vulnerabilities to climate change could increase global price volatility.

Conservation and agri-environmental schemes will continue to be significant. There is a broader basis of political support for them. However, they are relatively short term, for example over periods of five years. All farms only have a limited area that can be taken out of production, or subject to special treatment; and still allow the farm to be a viable producer of food. Conservation and environmental protection will only be successful if the industry feels secure financially.

One sheep farmer I talked with noted, ‘if the family farms are not maintained then they will not be there in the future and then who is going to look after the environment?’ This farming family has been active in creating habitat areas with some grant help and noted ‘This was all possible because over the years we have had a fairly reliable income source which has allowed us to improve the farm.'

One issue with such schemes is that of ‘additionality’, whether payments lead farmers to behave differently from what they would have done in the absence of the scheme. Whether this is the case is very difficult to assess conclusively.

Mechanisms of support

Payments that are based on head of stock produce quantity rather than quality which is not the best outcome either for the industry or the environment and they may not be compatible with WTO rules. Whether it would be possible to devise a policy instrument that rewarded quality without placing too great an administrative burden on administrators and farmers is an interesting question.

Farmers in Wales have sought to move up market and add value by producing more speciality products that can command a higher return from the market. Anything that can be done to encourage and support these efforts would represent a good strategy. However, the buying power of the supermarket chains remains a challenge.

Regulations

The EU has devised a wide range of regulations that apply to agriculture. These are embodied in numerous EU directives such as the Nitrates Directive and the Water Framework Directive. These have been transposed into law by the introduction of primary legislation or by the introduction of statutory instruments under the European Communities Act 1972.

As well as environmental legislation, there are extensive measures relating to animal health and welfare reinforced by the recognition of animals as sentient beings in the Lisbon Treaty. There are 18 EU laws setting standards on the way farm animals are produced and reared, transported and slaughtered. There are 12 laws covering wildlife.

Existing regulations should remain in place after Brexit while they are reviewed in terms of their objectives and whether they are efficient means of achieving those objectives, in particular whether they place disproportionate compliance burdens on farmers.

Conclusions

How far Wales can pursue a differentiated policy after Brexit that is sensitive to Welsh needs and priorities depends in large part on funding arrangements. (The Barnett formula came up in discussion.

Four threats to global food security

This blog piece looks at four threats to global food security and what we can do about them: Food security

The four threats identified are drought, emerging diseases, salty soils and over dependence on fertilisers.

SAWS scheme to be revived?

Ministers are discussing with farming leaders the possibility of reviving a version of the SAWS scheme after Brexit to meet the need for migrant labour in the fruit and vegetable sector. Some producers have considered relocating abroad. A farmer in Suffolk recently placed on hold an order for £500,000 worth of cherry trees because of uncertainties about Brexit.

Planting and harvesting these crops is labour intensive and hard, monotonous work. About 75,000 workers a year are needed as British workers are reluctant to do the work. It's temporary and they would lose most of their benefits. Replacements such as robots are a long way off.

The seasonal agriculture workers (SAWS) scheme, which allowed people to come to Britain for six months to pick fruit and vegetables, operated for sixty years until 2013. It is felt that a larger and more flexible scheme is needed so that labour could be recruited from anywhere in the world. It is estimated that 90,000 workers will be needed by 2019.

Thinking about the consequences of Brexit

On a hot day a group of leading experts on the CAP and related issues gathered in a basement in London to discuss the challenges from Brexit on Chatham House terms.

Concern was expressed about the capacity of a hollowed out civil service to deal with the issues. How could we administer the more targeted policy that was likely to emerge after Brexit? Government departments were structuring and organising themselves with some staff transfers taking place, e.g., from Defra to the Brexit department.

It was somewhat ironic that the first trade pact being talked about was with Australia with which we had a small volume of trade. They would free access for agricultural products, not least for sugar. What would the EU think about that?

There was no idea how tariff related quotas or the amber box could be shared out.

After Brexit, should the focus be on labour saving technology development? But how near and how feasible/financially viable were some of the big developments like crops being picked by robots?

It was pointed out that existing domestic regulations were backed up in terms of compliance and enforcement by the possibility of reference to the ECJ.

The CAP was designed to slow down structural change, so we could expect more farm amalgamations after Brexit. Asset prices would fall. However, it was agreed that there were many variables that affected land prices, not least the availability of tax relief. There was no simple relationship between farm support and land prices.

The issue of price volatility was noted and it was pointed out that the 2010 food security study was very reliant on the fact that we were in the EU. Vulnerabilities to climate change could increase price volatility. A lot of things that were not really about price volatility were badged as such.

As far as food security was concerned, the biggest problem was the lack of storage in the food supply chain and the resilience of the system.

A farmer writes

A contribution from an upland sheep farmer, reflecting on prospects after the Brexit decision.

'At the moment we have a reliable source of revenue from our lamb sales but are concerned to what will happen when our exit from the EU takes place as it seems no negotiations with old or new partners can take place until that point. This could leave a gap of several years before anything is agreed. There have been discussions with the US taking place for a couple of years via the EU I believe for the sale of lamb to the States, these of course will come to a stop and we will have to start again. More than one country has indicated that we will be at the end of the queue.

The British government is being rather vague over the continuation of any support after 2020. Conservation support will not pay the bills commendable as it is. It is also very short term usually in 5 year blocks, you are then on your own and must come up with new areas of the farm to enter into a new scheme for another five years.

All farms only have a limited area that can be taken out of production and still allow the farm to be a viable producer of food. Conservation will only be successful if the industry feels secure financially. Some form of support is certainly needed to counteract the volatility in food production as we all need to eat.

Of the type of support even we are not sure. Any payments per head of stock only produces quantity not quality which is not good for the industry or the environment. Payments on the number of hectares held has caused some problems in Wales as to how you value different areas of land. Perhaps something more on the quality of stock produced and sold successfully, but I don't know how that would equate in the more arable areas.

One thing is for certain, if the family farms are not maintained they simply will not be there in a few years then who is going to look after the environment? Those making an income from the land see and understand the healthy balance of the land for all concerned, and that certainly includes the wild life in all forms.

Also the local communities who rely on agriculture, there are many people working self employed, be they fencing contractors, tree surgeons, agricultural mechanics, shearers- to name some who would find themselves having to move away for work. Our villages will become ghost areas or holiday parks. even those with holiday cottages I hear are sometimes finding it difficult to fill the vacancies as there seems to be so many of them.'

Pressure for green farm subsidies is mounting

Pressure for a greening of domestic farm subsidies after Brexit is mounting. Indeed, one might say that it is becoming the new conventional wisdom.

Such pillars of the agricultural establishment as former Defra ministers Caroline Spellman and Richard Benyon, along with agriculture select committee chair and former MEP Neil Parish, are among 36 MPs who have written to Theresa May urging her to shift farm subsidies towards protecting the environment. It may be that they think that this is the best way of maximising continuing payments for farmers.

The influential RSPB is expected to launch its 2016 State of Nature report this week, claiming that intensive farming methods are putting more than 120 species of wildlife at risk.

The NFU is seeking to put food security, which it sees as its strongest subsidy card, back at the heart of the debate. They claim that the food and farming industry is worth £108bn a year, but that includes second stage food processing which is not reliant on domestic ingredients and necessarily has to import ones like cocoa.

Tim Lang from City University admits that farmers are being squeezed by a vicious cycle of increasing costs and lower returns. He says that what we need is less farming and more horticulture.

However, the sector is being hit by a double whammy of the National Living Wage and difficulties in recruiting labour after Brexit. Wages are a particular problem in Scotland where the National Living Wage is not age banded so that you cannot pay less to under 25s. Foreign workers are concerned about Brexit and a large UK supplier of foreign workers to UK agriculture has seen applicants to its Bulgarian office drop by 70 per cent compared with a usual 25 per cent at this time of year.

Concentration in seeds supply causes concern

Concern is growing about the extent to which the global seeds market is dominated by a smaller and smaller number of agribusinesses. The bid by Bayer for Monsanto has caused particular concern.

Twenty years ago there were 600 independent seed companies. Most of them have now been bought out by the six big players that control 63 per cent of the global seed market: Monsanto, Syngenta, Bayer, DuPont, Dow Chemical and BASF.

That could soon be just four companies. Dow and DuPont announced a $130bn merger last year, while ChemChina is pursuing a $44bn takeover of Switzerland's Syngenta. A takeover of Syngenta would be China's biggest overseas transaction.

The European Commission has launched an in depth probe into the effect of Dow-DuPont tie up on competition. However, Dow and DuPont do not think this will affect the deal going through. They propose to split the combined company into three parts after the merger.

A Bayer takeover of Monsanto would combine the two largest cotton seed sellers in the US into a single company, responsible for almost 70 per cent of crop acreage, according to Verdant Partners, a consultancy.

Campaigners are worried about the possible impact of these mergers on biodiversity. They are concerned that the diversity of plant varieties available to farmers would shrink even further.

Supply, demand and the dairy industry

Supply and demand are key forces in economics and the dairy industry is beset by excessive supply and flagging demand, leading to a situation in which prices for many farmers have fallen below the cost of production, although there are signs of a revival in prices.

The supply crisis was started by the end of milk quotas in 2015 and the Russian embargo on European dairy products. However, there has been a seven per cent fall in UK milk production and both global prices and those paid by milk processors are edging upwards.

On the demand side, the EU has brought in a milk reduction scheme which pays 12p for every litre not produced compared with output in the same period the year before, up to a maximum of 50 per cent.

The problem with schemes of this sort is 'additionality': do they change behaviour, or are they simply taken up by farmers who intended to reduce output anyaway? For example, it may be attractive if bTB has taken cows or calving has slipped. In any event, the effect on the total volume of production will be marginal and short-term.

On the demand side, younger people are drinking less milk. Celebrities advocating a vegan diet and concerns about the contribution of cattle to climate change are helping to persuade teenagers to switch to soya milk and other plant-based alternatives, according to Dairy UK. There is also concern about the fat content of milk, although it has other nutritional benefits.

According to research by Kantar Worldpanel, those over 65 consume milk 875 times a year compared with only 275 times for 5 to 24 year olds. Other research shows that 19 per cent of 16 to 34 year olds do not consume milk at all.

A critical look at the CAP and its possible replacements

A number of papers have been produced on the consequences of CAP and the policies that may replace it, but this is one of the better ones. It takes a critical look both at the pathologies of the CAP and the cases that have been put forward for continuing forms of subsidy: Dieter Helm

The paper points out that no other economic sector outside defence has received so much government money. It points out the CAP was the result of a very political deal, reflecting a very particular historical context. The reforms that have taken place addressed some of its deficiencies, but remain sub-optimal.

The paper subjects the three main arguments for subsidy to critical scrutiny: food security; a shift towards environmental subsidies; and public money for public goods. It points out that food security arguments still embody production maximisation. The paper then goes on to consider the key issue of a workable transition.

This is very much an economist's perspective and as a political economist I tend to take a somewhat different perspective. For example, I sometimes think it is necessary to accept a 'satisficing' (in Herbert Simon's terms) rather than an 'optimal' solution. However, I will certainly take its arguments seriously as I prepare my paper for a Welsh Assembly committee public seminar next month.

It looks like a no brainer, but is it?

The latest phase in the debate about the future of agricultural policy in England is the call for a diversion of subsidies from large estates to smaller firms. It is easy to make both an intellectual and a populist case, but one also needs to consider countervailing arguments.

The Campaign to Protect Rural England (CPRE) argues that it is wrong to pay people more subsidy simply because they own more land: CPRE report It proposes that all farmers should receive a higher amount per hectare for the first 50 hectares they own but payments should reduce for the next 100 hectares and then continue to taper.

The CPRE argues, 'Good, resilient farming means cleaner water, less flooding and more carbon storage. It means abundant wildlife and rich soils that underpin beautiful countryside and assist efforts to tackle climate change. And it means a mix of farms more strongly connected to the local community.'

The countryside is, of course, more than an aesthetic asset to be enjoyed by urban populations, it is also a means of food production, although that food production needs to take into account environmental impacts. Particularly valued areas of countryside are designated as national parks, although even here farming contributes to their appearance.

The CPRE says that it is not engaging in 'big farm bashing', but size of farm is not necessarily related to how well farming is undertaken, although there is some evidence that larger farms tend to have higher animal welfare standards. Big estates can be well integrated into their local communities, not least as a significant source of employment.

Some of the payouts to big farms can be substantial, Last year, Farmcare Trading, the former Co-op farms bought by Wellcome Trust in 2014, received £1.7m. Beeswax Farming, owned by Sir James Dyson of bagless vacuum cleaner fame, received £1.4m. Blankney Estates in Lincolnshire got £1.1m. Lilburn Estates in Northumberland, owned by Duncan Davidson, founder of the house builder Persimmon, received £915,000. The Elveden Farms in Suffolk, owned the Earl of Iveagh and the Guinness family, received £915,000.

A recent report from Exeter University, commissioned by the Prince's Countryside Trust, argues that small family farms employ more people per acre (i.e., are less capital intensive), help sustain rural services and provide a wider variety of locally produced food. The number of such farms has fallen from 84,000 in 2000 to fewer than 67,000 in 2013.

What does one consider is how far competitiveness objectives should form part of any future policy. Large farms in countries such as France and Germany will continue to receive CAP subsidies, leaving English farms at a competitive disadvantage. The result could be more food requirements being met by imports and hence a decline in domestic food security.

What is clear is that the present level of subsidy to larger farms will not be affordable. However, a debate is needed about the priority given to different policy objectives, something that never really occurred with the CAP.

Farm subsidies to run until 2020

Philip Hammond as Chancellor has undertaken to maintain current farm subsidies until 2020 when the current EU multi-year programme ends. According to some reports, that may not be that long after Brexit takes place.

Not only does enable farmers to make business plans for the next four years, it allows full time for a debate about the future support regime for farming.

When Brexit does take place it will be necessary to fix farm subsidies with a sterling value.

There is still some uncertainty about exactly what is on offer. Chief secretary to the Treasury David Gaulke has stated that 'the agricultural sector will receive the same level of funding it would have received under Pillar 1 of CAP until the Multiannual Financial Framework in 2020.' Will this be inflation adjusted? Inflation looks likely to rise to a higher level over the next year or two.

Farm business consultants Andersons have pointed out that the final year of the MFF actually pays the 2019 Basic Payment. It is thus possible that the guarantee lasts only until 2019.

It is clear that agri-environmental agreements already under way will be honoured, but there are questions over Countryside Stewardship agreements due to start this autumn. Applications to other rural development projects, including Leader projects that help rural businesses to grow, are guaranteed only if they are agreed before this year's Autumn Statement.

The Government statement says, 'The Chief Secretary to the Treasury, David Gauke, has also written to each devolved administration to confirm the same level of assurances offered to UK government departments in relation to programmes they administer but for which they are expected to rely on EU funding. The Treasury will work closely with the devolved administrations on subsequent funding arrangements to allow them to prioritise projects within their devolved responsibilities.'

This was well received in Northern Ireland where it was seen as removing uncertainty, but declared to be not good enough by the Scottish Government finance minister.

National Trust pitches into farm subsidies

Britain's largest membership organisation, the National Trust, has demanded a complete reform of farm subsidies after Brexit. The idea is that the basic payment would be scrapped and farmers would just be paid for ecosystem services or public goods: Reform call

I heard Dame Helen Ghosh, the director of the National Trust and one time permanent secretary at Defra, interviewed on Radio 5 this morning and she did say that subsidies would have to be phased out over a five or six year period. I would favour seven years and the use of a bond scheme I outlined in an earlier post.

She argued that farmers deserved a better return from the market. No doubt they do, but would the market respond, given retailer power and the limitations of the supermarket ombudsman? Governments in practice welcome oligopolistic price competition between retailers because it holds down food prices for families who are already struggling with tight budgets.

Her views are certainly not without merit and will receive wide support from those who want to see an agricultural policy that places greater emphasis on sustainability. Farmers who voted for Brexit may now start to realise what they have unleashed.

The NFU has responded saying that farmers take their role as custodians of the countryside seriously, but we need to recognise how vital food production is: NFU response

Brexit and agriculture - what now?

My latest reflections for the Landbridge blog: Brexit and agriculture

How universities link with agriculture

One of the components of a post-Brexit agriculture policy needs to be greater 'near farm' applied research that can be delivered to farmers. We are working on that in the Farmer-Scientist Network of the Yorkshire Agricultural Society. Learn more about its work here: Farmer Scientist Network

This blog post takes a look at how many universities have farms: Farming boffins

Unfortunately, our own Warwick Crop Centre (the former Warwick HRI) does not get a mention: Crop Centre

How coupled payments make a difference

The last CAP reform allowed the devolved administrations to make 'coupled' payments in addition to the basic payment for particular schemes. A case in point is the Scottish Upland Sheep Support Scheme where payments to farmers have just started. It was originally envisaged that they would receive €100 per hog ewe, but demand for the scheme has reduced the payment to €78.12, still a significant amount, particularly given the falling value of the pound.

I have just returned from a visit to Orkney which is traditionally a beef area, although there are dairy herds which, among other things, supply the Orkney cheddar cheese factory which is a protected 'geographical indication'. I was surprised by the growth in sheep numbers, but the coupled payment could help to explain it.

The scheme is devised for rough grazing areas and is intended to protect the social and environmental benefits that sheep bring to those areas. There is also a Scottish Suckler Beef Support Scheme. Beef accounts for 22 per cent of Scottish agricultural output over the last ten years.

The farming community in Orkney seems to be in good heart, with their own specialist and informative magazine, The Orkney Farmer.

Some land in Orkney, notably on the island of Hoy, is not even suitable for rough grazing.

TFA produce plan for post-Brexit farm support

The Tenant Farmers Association is the first farm organisation to come up with a plan for a post-Brexit domestic agricultural policy. It should be noted that basic payments often go to landlords rather than tenants so their advocacy of the abolition of general support payments is not surprising,

What they propose is a three pillar scheme. There would be a new agri-environmental scheme that would set out a menu of costed options that farmers can choose from to deliver on their farms and would be judged on the basis of outcomes. It would include options for hill and upland farmers focusing on livestock production. Of course, they form a significant portion of the TFA membership, but many analysts think that support payments should move 'up the hill'.

Second there would be a farm business development scheme to provide annual grants of up to £25,000 a farm a year to assist with the implementation of five year plans for farm development. This would take into account economic, social and environmental resilience. It strikes me that the administrative costs of this would be quite high in relation to the amount available, both for government and for farmers.

Third, there would be a package of near-market research and development, technology transfer, promotion, market development, brand development and other supply chain initiatives focused on supporting British-produced food. Our capability to provide scientifically based advice to farmers has been severely diminished and they have become increasingly reliant on private providers such as agronomists.

Public procurement of British food would be part of this effort, something also supported by the NFU. That sounds fine, but if you are a prison governor with a restricted budget but more autonomy to spend it, are you going to want to buy food that is more expensive?

There is talk of a coalition being formed between the NFU, the CLA and the TFA to provide a united front to government. Other groups might become involved such as the Food and Drink Federation and selected environmental organisations, although the NFU do not seem keen on working with them.

UK farmers are less productive than their counterparts in the Netherlands, France and the US. The CLA rightly argues that there must be an attempt to improve the productivity of the worst performers. The top ten per cent of British farmers are twice as productive as the bottom ten per cent.

Concerns for horticulture

After being hit hard by the living wage which has eroded already thin profit margins, the horticulture industry is now coping with the consequences of Brexit.

Someone familiar with the sector said that growers were 'concerned that Brexit would mean another layer of bureaucracy being placed on top of existing compliance with EU regulations covering plant protection, and that companies would be less likely to get plant protection products authorized in the UK.'

'I can’t see the UK pulling out of [Regulation] 1107 or the Sustainable Use Directive. We would have to comply because of UK exports of cereals and seed potatoes, the press would have a field day (“British farmers to start using bee killing pesticides” etc.) and the retailers would probably insist that their growers comply with EU standards.'

For horticulture, there is already a concern that larger growers will shift their production to EU if they can’t get access to the eastern European labour force. Anything harvested by hand could switch to Poland and other eastern European countries and be sold back to the UK.

Too cute to kill?

The conference postcard reflects one of the themes discussed: anthromorphism

Yesterday I attended the first day of an international workshop on this theme at the University of Surrey's new veterinary school. I talked once more about that mythical construct, the old rogue badger. There was one other paper on bovine TB by Jess Phoenix.

A lot of the papers were about perceptions of animals in children's literature. Samples of the literature were scattered around the conference space.

I think there is some interesting interdisciplinary work to be done in this area. The challenge is to link framings in literature with what is rather a fragmented and volatile public opinion on issues related to the well-being of animals, and then how this feeds into public policy.

Details of the workshop keep disappearing from the web, but you may find something here: Too cute to kill

The challenges facing Andrea Leadsom

An interesting survey, with many useful links, from Emily Lydgate of Sussex University at the challenges facing Andrea Leadsom as Defra secretary: Angry farmers and environmentalists

Farm minister stays in post

George Eustice stays in post at Defra as farm minister, news that will probably reassure the NFU. He was a very active 'leave' campaigner, making some extravagant promises to farmers which will be difficult to deliver on. He may reap what he has sowed.

Lord Gardiner also stays in post. He is a Lord in Waiting and responsible for all Defra ministerial business in the Lords.

Therese Coffey replaces Rory Stewart as the 'Pussy'. Stewart has been promoted to the role of Minister of State at Overseas Development where he will work with Priti Patel.

Coffey is MP for Suffolk Coastal, part of the 2010 intake. She was formerly Deputy Leader of the House of Commons. As well as representing a rural East Anglian constituency, the traditional source of farm ministers, she did work at one time in the food and drink industry for Mars Drinks. She has a PhD in Chemistry.

For junior ministerial changes in general, go here: Salvete, Valete

Lack of trade negotiators hits home

During the referendum campaign I made the point a number of times that the UK had no experienced trade negotiators which we would need after a Brexit to negotiate with the EU and with third countries. As Ken Clarke noted in a Sky interview when he was up against Nadine Dorries, trade negotiations are not a doddle. They are complex and demanding and require a special skill set. The legal context is baffling and I am pleased that we have two trade law experts on our Yorkshire Agricultural Society working party.

At one point I even thought that I had got The Times 'Red Box' interested, but it all came to nothing.

The only trade negotiators we have at the moment are working for the EU and they may be able to line up other, more lucrative jobs in Brussels where they are probably settled with their families with children attending an international school. The civil services does claim there are 10 or 12 officials 'with direct knowledge on trade negotiations', but that could mean attending as observers or summarising the outcome. Canada, which recently negotiated an as yet unratified agreement with the EU, has 830.

The head of the civil service, Sir Jeremy Heywood, has already spoken to professional services firms (among them Linklaters and McKinsey) but they and law firms are likely to charge an arm and a leg. Nevertheless, the aim is to have 300 experts by the end of the year when Article 50 is likely to be triggered.

Nigel Farage has come up with a unique solution: 'Let's get them from Singapore or South Korea or Chile or Switzerland or any of these countries who've managed to achieve far more in terms of global trade deals than we have', departing from his usual line on immigration.

Poor old Ken, by the way, not only did he have to try and have a serious debate with Nadine Dorries, at a meeting in Skipton where I was the warm up act, an elderly gentleman stormed out shouting 'Traitor' when Ken started to speak. He didn't bat an eyelid and gave his usual polished performance.

Andrea Leadsom is new Defra secretary

Andrea Leadsom, formerly a junior minister at the Department of Energy and Climate Change, is the new Defra secretary of state. A Warwick University politics graduate, she stood down from the leadership race against Theresa May after her performance in the referendum debates had raised her profile.

She faces a challenging task. Brexit has important implications for the agriculture and food sector. Food processing is one of the country's most important industries and is particularly significant in the North of England. (The writer should declare that he is a substantial shareholder in Cranswick plc, the Hull-based food processor which is a FTSE 250 company).

One of the challenges is that Defra has been hollowed out as a department. Does it have the capacity and the resources to ensure that agriculture and food is taken sufficiently seriously by the new 'Brexit' department (we await its official title) headed by another Warwick graduate, David Davis?

What NFU chief is thinking

It was interesting to hear Meurig Raymond talking at the Great Yorkshire Show. The NFU is, of course, going through a big consultation exercise with its members, but it was possible to see some of his thinking.

The balance of payments argument was used extensively in the 1960s as a justification for subsidies to farmers and with the trade deficit at not far off 7 per cent of GDP, it seems that this is to be used again. Of course, much of the deterioration is due to falls in repatriated investment income. The balance of trade in goods, although in deficit, is broadly stable.

It was interesting that he said it was not necessary to match the current sum paid by the CAP to the UK, but this may just be an acceptance of reality.

He was clearly aware of how relatively well Pillar 2 type payments are viewed, but said these should be more oriented to promoting competitiveness on the farm.

He noted that farmers found it difficult to influence the UK Government, noting the recent decision to turn down a revised and reduced application for the use of neonics. Denmark had permitted 100 per cent use.

In reply to a question, he made it clear that the scope for coalition building with NGOs was limited. The focus would be on the NFU's own members.

Farwell, then, Liz Truss

Liz Truss has been appointed as Justice Secretary to replace Michael Gove, effectively a promotion. It shows how far Defra has fallen down the departmental rankings. Liz was at the Great Yorkshire Show yesterday and met with NFU president Meurig Raymond. NFU types were hoping that the existing team would stay in place.

Who now for the poisoned chalice?

What I told farmers at the GYS

With Meurig Raymond at the Great Yorkshire Show

Here is the text of my address at the NFU breakfast meeting.

Harold Wilson used to say a week in politics was a long time. We have recently learnt than an hour in politics is a long time. Fortunately, we are now entering a period of greater stability as far as the Government is concerned. We have to wait to see who will be Defra secretary. I would expect Theresa May to approach the start of the Article 50 negotiations with some caution. Little preparatory work was undertaken by government, or at least little that was committed to paper. I think that our YAS report is actually quite helpful in terms of highlighting the issues that need to be considered.

Brussels is on holiday in August. Of course, too long a delay could lead to Article 7 being triggered. This invokes sanctions against an EU member for ‘failing to uphold the values on which the Union is based.’ However, I do not think that would be a very likely scenario.

How long the negotiations will take is a matter for speculation. They have to be completed in two years, but could be completed in less. France has a presidential election in April and May 2017, where the outcome is uncertain, and Germany has a federal election in September 2017. France is trying to carve out a leading role for itself in the negotiations and has set up its own task force led by their secretary-general for European affairs.

A few words about the negotiation process. The role of the European Council in the negotiations is to set the guidelines and key conditions while Commission staff will make concrete recommendations. The Council task force on the UK is headed by Belgian diplomat Didier Seeuws. There was some feeling in the Commission that he had been appointed too early. President Juncker’s chief of staff Martin Selymar is expected to be the Commission’s lead, at least unofficially.

The European Parliament won’t be directly involved in the negotiations, but will try to make itself felt before it carries out its official role, ratifying the final agreement. The Commission is likely to issue progress reports on the talks and the Parliament will vote on non-binding resolutions on them. One of our objectives with our report was to try and get greater attention given to agriculture and the food chain in the referendum debate. We were not very successful and I am concerned that this will happen again in the Article 50 negotiations.

The work of the YAS working party will continue and will have two main tasks:

• 1. Monitoring the negotiations in terms of their impact on agriculture
• 2. Contributing to the debate on a new domestic agricultural policy. That will be a policy for England as agriculture is a devolved matter. Up to now the constraints of the CAP have limited the scope for policy divergence. In future I would expect Scotland and Northern Ireland to spend more on agriculture and the rural economy, although budget constraints limit the scope of such divergence. I am less certain about Wales.

I have been asked to be positive today and I will try to be so, but it has to be recognised that farmers face political challenges and no longer have the support of farmers elsewhere in Europe. ‘Time to cut our greedy farmers down to size’ says this article in last Saturday’s Times. It is a very ill informed article and I have criticised it in my blog. The only good point in it is when it says that the NFU is a well organised lobby. But we can expect more of this sort of thing.

Before looking at various areas of policy, I want to say something about sterling. A falling rate against the dollar and the euro brings many advantages to farmers, but also some downsides. Exports become more competitive and the value of EU subsidies rises, but the cost of inputs such as fertilisers and soya increases. Fuel prices also increase, which is why the future of red diesel is something that needs to be watched.

The future of subsidies is clearly a matter for concern as for many enterprises they make the difference between running at a profit and a loss. Pillar 2 subsidies are in many cases protected by contracts that run beyond 2020, but we were also confident in our report that there was a strong domestic coalition of support for the continuation of agri-environmental subsidies, but hopefully putting right some of the failings in the existing scheme. There needs to be some discussion about whether subsidies should move up the hill to livestock farms.

We were much less confident about Pillar 1 or basic payment subsidies. We didn’t think they would be abolished, but we did think they would be a target for the Treasury. It has to be recognised that falls in tax revenue, some of which may be longer term, will put public expenditure under greater pressure, even though the budget surplus target has been rightly abandoned.

Inertia would suggest that a modified form of the basic payment would be used, hopefully with fewer form filling complexities and payments being made to farmers on time. I am clear that there will be no return to the deficiency payments that were used in the past because it is difficult to forecast how much they will cost in any one year.

The justification for general subsidies (or support payements) needs to be articulated. In my view the strongest argument is the need to maintain a level playing field with farmers elsewhere in Europe that will continue to receive CAP subsidies. There are also food security arguments given that our ability to grow temperate foodstuffs has declined over time. One also needs to consider environmental protection and the maintenance of the appearance of the countryside.

As far as regulation is concerned, hopefully we will see the back of the monoculture regulations that interfered in farm decision-making without making any contribution to environmental objectives. I think that it should be possible to eventually get rid of the Nitrates Directive in its present form and some aspects of the Water Framework Directive.

It does need to be recognised, however, that there is a strong coalition of domestic lobbies - environmental, conservation, animal welfare, consumer, public health – that often do not have a good understanding of the challenges that face farmers.

Take the case of badgers and bovine TB which I have written about a lot, indeed I am giving a presentation at the vet school at Surrey University next week. In forty years of working on agricultural policy, I have never encountered such an intractable policy problem in which emotion often trumps the evidence.

Plant protection legislation has not worked well in the EU. The internal market is not complete. Many of the national agencies suffer from very serious problems. There is too great a willingness to accept hypotheses about risk which are not evidence based. However, the UK Government is not necessarily sympathetic, as has been shown by the recent decision to reject a revised application to use neonics this autumn. It won’t be too easy to operate a pesticides regime in the UK that is at odds with that in the EU.

Trade agreements between the EU third countries or groups of countries, of which there are over fifty, provide one of the greatest challenges, although my guess would be that probably only fifteen of these are really important for agriculture. Trade negotiations are very complex and we lack enough experienced trade diplomats, although I believe that the Government is thinking of hiring them in from private firms, which will not be cheap.

There is a major issue about migrant labour which is particularly important in terms of planting and harvesting field vegetables and fruit. I don’t have time to go into this in detail, but in my view the way forward is through a revised version of the SAWS scheme that extends to specific countries beyond the EU. As far as the border with Ireland is concerned, I think that the most likely solution is to move it back to England.

The NFU is undertaking a major consultation with its members, probably one of the biggest it has ever undertaken. I await the results of that with interest, but in the meantime the work of our working party will continue.

Sources close to the NFU suggested to me later in the day that the biggest challenge would be managing the expectations of farmers.

'Time to cut our greedy farmers down to size?'

I am required to be positive when I address the Future Farmers of Yorkshire on Wednesday at the Great Yorkshire Show and I will do my best. When I was going round talking to farmers before the referendum, many of them were confident that there would be plenty of money to carry on paying subsidies at much the same level, presumably from the alleged £350m a week that was going to the EU, and was in any case spent many times over.

The smarter farmers realised that there were a lot of political forces ranged against them and they would no longer have political back up from farmers elsewhere in the EU.

An opening shot was fired in The Times yesterday with an article by Emma Duncan, who is apparently the editor of 1843 magazine. She starts with a good joke about the recent headline on the NFU website, 'Brexit may not be beneficial to UK farmers' which reminded her of Emperor Hirohito's surrender statement in 1945, 'The war has not necessarily developed to Japan's advantage.'

She starts with a critique of the amount spent on the CAP as a proportion of EU spending and levels of tariff protection. Both in my view are higher than can be readily justified.

So far, so good. But then she apparently wants to remove all of this and 'let our farmers compete in world markets just like our manufacturers'. The problem is that most other countries subsidise and/or protect their farmers. The clear exception is New Zealand which has a very favourable climate for farming. Australia is not as clear a case as it appears as drought payments (no doubt justified) have been used as a less transparent form of payment to farmers.

If we cut subsidies, she says that food prices will fall (not necessarily if there is a sharp fall in domestic production). Land prices will fall and more will be released for housing (do we want the better quality land to be used in this way?) Some land will return to wilderness which will be a good thing (scrub and bracken is not good to look at and not good for biodiversity). The only losers will be the farmers, although she thinks that one problem is the strength of the NFU as a lobby.

Farmers do need to develop an evidence based case for support, and also about whether subsidies should be redeployed. Remember that we will now have an English agricultural policy as farming is a devolved matter which has hitherto constrained by CAP. I would expect the devolved administrations in Scotland and Northern Ireland to be willing to pay more to support agriculture and rural areas (the Welsh case is less clear).

What we do need is a debate that is based on policy objectives and identifying the best means of pursuing them.

Is there a migrant labour crisis?

I had to do a pre-record for ITV Yorkshire about the potential migrant labour crisis in agriculture, more specifically in field vegetables and horticulture (there are also many Fillipinos working in the dairy industry).

I think there is a potential crisis, indeed some signs of strain are already emerging, but there is also a potential partial solution.

The pound is 13 per cent weaker against the Polish zloty since January and salaries are rising there. Polish shipping agents are reporting increased business.

The solution would be to restore a version of the Seasonal Agricultural Workers Scheme (SAWS), but to extend it outside the EU. As far as I am aware, this could be limited to specific countries.

A SAWS type scheme does impose additional administrative costs compared with the free movement of labour. There is also some risk of those on temporary work permits disappearing into the illegal labour market.

However, the alternative scenario is a reduction in the quantity of fruit and field vegetables grown in the UK, reducing even further the percentage of temperate foodstuffs we can supply ourselves. Prices would be pushed up, as imported fruit and vegetables are generally moe expensive, especially if sterling is weak.

Looking to a positive future

The emphasis will be on the positive aspects of Brexit when I join Meurig Raymond, president of the National Farmers Union for a breakfast presentation at the Great Yorkshire Show next Wednesday: Looking to the future

As I have said before, we need to have a debate about the objectives and mechanisms of what will be an Englsh agricultural policy given that agriculture is a devolved matter hitherto constrained by the CAP.

Brexit and food security

Tim Lang from City University raises food security concerns in an article on Brexit: Feeding ourselves

Lang argues: 'If the UK really does want “independence” and to “take back control”, we might like to think about how our current food system, according to an Aberdeen University study this year, has 70% of its cropland located abroad, with 64% of its climate change impacts there too. Others feed us here and pollute there on our behalf.'

'UK self-sufficiency has been inexorably dropping from the high point that EU membership took it to in the early 1980s. Then it was more than 80%. Now it is down to 61% according to Defra’s statistics.'

'The UK imports 30% of what we eat from the EU. A huge amount of that is the good stuff for health: fruit and veg. We export whisky, biscuits, fat and meat. History suggests that a country which only just feeds itself is in a potentially fragile state. Just-in-time logistics means supermarkets operate on about three to five days’ stocks.'

NFU looks to the future

The National Farmers Union has sought assurances that existing EU schemes for British farmers can remain open until 2020: Reassurance sought

However, they also think there will be an opportunity to build a new domestic agricultural policy that is more adapted to national needs. Plant protection regulations are clearly one area of concern.

Along with NFU president Meurig Raymond, I will be addressing a breakfast meeting on the consequences of Brexit organised by the Future Farmers of Yorkshire at the Great Yorkshire Show on 13 July.

Where do we go from here?

Britain, or more specifically England and the devolved administrations, now need to think about what sort of domestic agricultural policy they want to have outside the European Union. I do not think that the decision to leave will be good for agriculture and the food industry more generally, but we now need to move on. Talk of a second referendum is in my view a distraction.

Of course, at this stage, we do not know what shape Britain's future relationship with the European Union will be. However, as a working hypothesis, I am assuming that we will have a domestic agricultural policy and that, hopefully, there will be no tariff barriers against British agricultural exports such as sheepmeat.

It is an opportunity to re-think what the objectives of a domestic agricultural policy should be, and which policy instruments could best achieve those objectives. However, there are many other items on the Government's agenda and agriculture is not likely to be their top priority, just as it was very much a secondary issue in the campaign outside farming areas.

Path dependency theory would suggest that the most likely outcome in terms of subsidies is a scaled down version of the single farm payment. I say scaled down because there are already considerable pressures on public expenditure and the economy is likely to grow more slowly than it would otherwise have done in the short to medium term following Brexit.

In an ideal world, farming as an economic activity would not be subsidised. However, we are faced with volatile prices and for many farms the subsidy payments make the difference between running at a profit and a loss. There are food security and environmental arguments for not reducing the total area farmed.

One could return to deficiency payments which made up the difference between the market price and a target or guaranteed price. However, the expenditure involved is unpredictable which means that they do not find favour with the Treasury as a policy instrument.

There are a series of difficult questions to be faced. For example, do we want to concentrate subsidies more on marginal upland farms which make an important contribution to landscape? The counter argument is that efficient arable farms would be disadvantaged in terms of competitors elsewhere in Europe if they did not receive similar subsidies.

There are also difficult questions about how the horticultural sector is to secure the unskilled or semi-skilled labour it needs for planting and harvesting? Could we and should we revive a version of the Seasonal Agricultural Workers Scheme (SAWS)?

What we certainly need is a debate about what sort of domestic agricultural policy we could and should have in terms of both objectives and policy instruments.

What would Brexit mean for British farms?

My last contribution to the referendum debate: Brexit and British farms

It has already been condemned by one commentator as a piece of agit prop, but we think that our report represented an honest appraisal of the evidence and that it is difficult to see clear gains for British agriculture from Brexit.

If there is a Brexit decision, hopefully we will have a thorough debate about the objectives of a domestic agricultural policy and the policy instruments that can best achieve them, but the pressure of events will probably dictate otherwise.

Consequences of Brexit for UK agriculture

This article summarises a contribution I made to a recent edition of EuroChoices on the consequences of Brexit for UK agriculture, along with summaries of contributions by Alan Matthews and Alan Swinbank: Brexit uncertainties

The need for a Common Sustainable Food Policy

An authoritative and informative survey of the CAP by Alison Bailey, Tim Lang and Victoria Shoen concludes with a call for change and the formulation of a Common Sustainable Food Policy: Common Food Policy

Whatever else the referendum debate has done, it has stimulated some excellent work on the future direction of policy.

Deficiency payments unlikely to return

Writing in The Spectator Matthew Parris cites as one of his six arguments for Remain that 'The EU good has been good for farmers and good for the countryside.' It's quite unusual to see agriculture mentioned in the general debate.

He then goes on to say 'Leaving the EU, the UK would probably have to revert to pre-membership system of "deficiency payments" to support farming. It was a costly, ill-controlled nightmare which the Treasury hated.' That's one good reason why it won't come back.

Deficiency payments do at least take some account of market prices. The problem is that the guaranteed price, with farmers paid the gap between that and the market price, was often set too high as a result of lobbying.

Path dependency theory suggests that what we are most likely to get is a scaled down version of the basic payment (formerly single farm payment). In the event of a Brexit, what we really need is a debate about what the objectives of a domestic agricultural policy should be and which policy instruments could best achieve them. However, we are unlikely to get it. Expediency and rushed decision-making is likely to prevail.

Is CAP beneficial for UK?

Alan Greer of the University of the West of England has written a particularly good contribution to the referendum debate in relation to agriculture for the Royal Society of Edinburgh: Agriculture, Food and Rural Policy. He covers a lot of ground in a relatively short space.

He notes that there is at least consensus about what the key issues are. Much of the debate reflects disagreement about whether or not the CAP is beneficial to the UK.

Looking at the views of the farmers, he says that the evidence is contradictory. However, the Farmers Weekly poll he refers to was based on self-selection rather than a sample. Supporters of Brexit are more likely to respond. I would place more reliance on the NFU poll.

Single market is key for agriculture

The importance of the single market to agriculture was emphasised by Martin Haworth, deputy director-general of the NFU, in a presentation earlier today at a conference in London organised by the UK in a Changing Europe programme. Subsidies to farmers were not the most important issue. 65 to 70 per cent of agricultural exports from the UK went to Europe and there was no other alternative. He also noted that the EU had over fifty trade agreements with third countries.

The uncertainty inherent in the Article 50 process was of itself damaging and the CBI had estimated that it could lead to a fall in GDP of 0.75 per cent to 1.5 per cent.

UK agriculture required 20,000 - 25,000 seasonal workers and there were another 35,000 full-time EU workers in agriculture. Analysis by Oxford University of the effects of a point system showed that 96 per cent of the workers would not get through.

Governments of other EU member states showed more sympathy with agriculture. Britain was a more urban society than most of the rest of Europe. He noted, 'I get much more access, interest and sympathy in Brussels.'

Farming formed part of a food chain and virtually the whole chain was in favour of staying in the EU. Food manufacturers would have to consider relocating in the event of Brexit. The catering industry was highly dependent on migrant labour.

He had not heard a credible argument on agriculture that suggested we would be better off leaving.

Responding to questions he said that the Ciolos reform had not offered a strategic vision of agriculture, but was a tactical attempt to green the CAP to attract more support. The division between Pillar 1 and Pillar 2 had been blurred.

Britain in the EU had been sullen and budget obsessed and had never punched with the weight we should have done.

Natalie Bennett, leader of the Green Party, said that going around the country food issues had been raised relatively rarely. However, she occasionally heard the demand 'We must take control of our fish' which created the vision of a fish swimming round with a passport tucked under its fin. We now had a reasonably sustainable fisheries policy that took account of the biological capacity of the ocean. The fact that we had been able to reform the CFP raised hopes for the reform of the CAP.

What is very clear is that fishers want to get out of the EU, in contrast to the more divided views of farmers: Fishermen and the EU

As for the referendum debate, it had degenerated into a Tory leadership contest masquerading as a EU referendum debate.

Big data could be the next big thing

'Big data' could foster the next wave of agricultural innovation, but there are some impediments that arise from the nature of the industry. Developing low cost measurement capabilities is key: Innovation

What is the Common Agricultural Policy?

CAP expert Robert Ackrill (there aren't many of us) explains in a very useful review: What is the CAP?

No bonfire of controls

Here are some extracts from a presentation I made at a conference at the British Academy on 'The EU and the UK: the Wrong Kind of Regulation?

Farmers find the most negative aspect of the European Union to be what they perceive as the excessive burden of regulation. There is particular complaint about the ‘gold plating’ of EU regulations in the UK, adding to what is required by the EU, although when farmers and their representatives are asked to come up with examples they can usually produce very few and some of those are trivial.

There is no doubt that regulations impose transaction costs on farmers, taking them away from the activity of farming. My brother-in-law is a sheep farmer and I have seen the paperwork associated with the movement of his animals. However, regulations are there for a reason and those farmers who anticipate a bonfire of controls if there was a Brexit would probably be disappointed. There are four main drivers of the regulation of agriculture and food:

• The protection of human health
• The protection of animal health and welfare
• The protection of the environment
• The protection of the consumer

It is worth noting that the UK has been in the forefront of pushing the EU’s smart regulation agenda which emphasises:

The need to take impact assessments for significant proposals

The desirability of seeking alternatives to legislation

The need to evaluate current legislation, so-called fitness checks

The importance of consulting on proposed regulations

Another defining characteristic of UK policy has been that risk management should be based on robust science and evidence. This has led it at times to question risk management decision as being unduly risk averse leading to disproportionate legislation, for example in relation to plant protection about which I will say more later.

Farmers receive substantial subsidies from the EU. The payment of these subsidies by the Rural Payments Agency is often badly delayed with consequences for farmers’ cash flow. This is partly the responsibility of the agency, but it also reflects the complexity of the regulations and the difficulty of applying them. Simplification of CAP rules has been objective of the EU for some time, but progress has been slow. In part, this reflects the fact that the regulations are the result of an often messy compromise between different interests.

The EU has effectively prevented the commercial use of genetically modified crops. However, whether this represents the right or wrong kind of regulation depends on where you stand on this controversial issue. Regulatory issues are not just questions of burden reduction but also of political judgment.

As far as food regulation is concerned, the emphasis has been on free movement and food safety. It has been argued that the regulations are safe and comfortable and not that useful. In particular, there has been a relative neglect of nutritional issues which are important in relation to obesity. However, that in turn reflects defects in the scope of the Common Agricultural Policy. Good policy instruments in the form of regulations rely on well thought out and comprehensive policy objectives.

David Baldock of the IEEP, also on the panel, and I agreed that the main areas in which regulations might be relaxed after Brexit were GM crops, the Nitrates Directive and some aspects of the Water Framework Directive.

Food culture and Brexit

The March meeting of the Food Ethics Council Business Forum considered the consequences of Britain remaining in or leaving the EU for food and agriculture and have now produced a concise report on the meeting: Business Forum

An interesting point is how the UK's food culture has strengthened since the country joined the EU. How much this is to do with the EU and how much due to other factors such as more sophisticated and informed consumers is a moot point, although the report argues that European food culture has had a beneficial effect which might be lost after Brexit.

In addition, Dan Crossley gives his reflections on various events on the subject (one of which I participated in) organized by the Food Ethics Council: Enough time to decide?

More on Brexit and agriculture

My latest contribution to the Brexit and agriculture debate, this time for the Global Plant Council: Global Plant Council

We need to stay in the CAP but we must continue to work for reform

I was one of the speakers at an event on the impact of Brexit on food at the House of Commons last night. It was organized by the Food Foundation, Food Research Collaboration and the Food Ethics Council. The other speakers were Tim Lang of City University and Fiona Smith from Warwick who covered the complex international trade dimension which she described as a 'quagmire'.

Tim Lang claimed that the issue of how food and drink would be affected has been 'largely ignored' in the debate so far. His report suggests there will be 'volatility, disruption and uncertainty' in a post-Brexit trade world. 'The UK should wake up to the significance of our and the EU’s food role in this changed world,” said Lang. 'The public isn’t yet interested, seeing it as a matter of farming. This is dangerously wrong.'

I argued that Pillar 1 subsidies would be vulnerable after Brexit, Pillar 2 subsidies less so. Kerry McCarthy, the shadow cabinet member for Defra, asked why this was the case. I responded that Pillar 2 subsidies would be defended by a coalition of environmental and conservationist lobbies along with farmers, whilst Pillar 1 subsidies would be defended by farmers alone. Pillar 2 subsidies would also receive more support from academics as they were seen as providing public goods.

There was agreement among the panel that the emphasis needed to be on sustainability and that the CAP needed to address public health issues. There was increased public concern about these issues, but it would take at least ten years to make progress. If the UK remained in the EU, the Government needed to take a more systematic and engaged approach to CAP reform.

Kerry McCarthy made a good point when she referred to the Janus-faced nature of the CAP, on the one hand encouraging niche, high valued added, quality production and on the other hand intensive forms of commodity farming.

As President Obama pointed out, we live in an interconnected world and that is why we need a policy like the CAP, for all its imperfections.

Brexit and agriculture

My latest contribution to the debate can be found here: Brexit

Brexit fears hit farmland prices

English farms have seen the steepest fall in their value since the financial crisis, as investors worry about what might happen to farm subsidies after Brexit. Values fell 3 per cent in the quarter to March according to an index constructed by estate agent Frank Knight. This is the largest quarterly fall since the end of 2008. Average values have risen nearly 180 per cent in the last decade.

Knight Frank think that farmland values will fall 8 per cent this year on the assumption that commodity prices remain low and there is not a collapse of sterling.

Farmers Weekly has noticed a 24 per cent drop in the acreage of land advertised in its pages in the three months since January compared with the same period last year. The average price of an acre of English farmland has dropped below £8,000.

NFU release Brexit report

The National Farmers Union have released the report they commissioned from Wageningen University on the possible implications of Brexit for EU agriculture: The report explores three alternative scenarios of what might happen after Brexit.

The NFU Council will decide in mid-April whether to take a position on the referendum. Most farmers probably favour remaining in membership, but a sizeable minority want to leave.

Feedback meetings on the report being held by the NFU around the country are attracting big audiences. This is in line with my experience of addressing meetings in Yorkshire on our Yorkshire Agricultural Society report on Brexit. These attracted audiences of 200 and 160. I will be addressing a meeting in Cumbria on May 5th.

The results of each scenario show that the biggest driver of UK farm income change is the level of public support payments available. The positive price impacts on farm incomes seen through both the FTA and WTO default scenarios would be offset by reductions in direct support. A reduction of direct support, or a complete elimination of it, would exacerbate the negative impact effects seen under the UK Trade Liberalisation scenario.

The cattle and sheep sectors are particularly dependent on direct support payments, but so too are mixed farms and field crops. Consequently, the combination of a more liberal trade policy and a reduction or elimination of direct support would make many British farms less viable.

The report can be linked to from here: Report

Is the CAP fit for purpose?

50 NGOs have urged the European Commission to carry out a fitness check of the CAP: Fit for purpose?

They say that it needs to be assessed in terms of its effectiveness, efficiency, coherence with other EU policies and the advantages of an EU wide policy compared with national policies.

The EU referendum and the CAP

My latest contribution in terms of a briefing paper for the Birmingham Food Council: Referendum

An imperfect storm

A new book edited by Johann Swinnen entitled The Political Economy of the 2014-20 Common Agricultural Policy judges it to be an 'imperfect storm' compared with the 'perfect storm' of the Fischler reforms dealt with in an earlier book. The book has chapters written by leading experts on the CAP such as Alan Matthews, Tim Josling and Alan Swinbank.

The authors generally found the outcome of the 2013 decision to be disappointing. The policy changes were relatively minor and not always coherent. The term 'reform' is probably inappropriate.

In terms of explanation, the reform proposals presented by Commissioner Ciolos were not very ambitious to begin with, reflecting his inexperience and that of his cabinet. Another factor was the role of the European Parliament with COMAGRI able to control much of the decision-making with farm interests having more influence than environmental organisations. A final element was that the increase in global food prices pushed food security up the agenda.

The new CAP provides an unprecedented amount of flexibility for member states. However, flexibility may have been a rational choice by decision-makers to reach an agreement. It may become a permanent part of the CAP, reflecting the need to come to political decisions in an increasingly heterogeneous EU.

Alan Matthews suggests in his chapter that the reformist camp, always a minority among member states, seems to have lost much of its momentum and cohesion during the 2013 negotiations. The UK in particular was preoccupied with other issues.

Brexit a diversion from sustainability

The referendum on the UK’s European Union membership will have “momentous significance” for the country’s food system, according to a new briefing paper published by the Food Research Collaboration (FRC). The report – called Food, the UK and the EU: Brexit or Bremain? – argues the country must “wake up to the enormity of unravelling 43 years of co-negotiated food legislation”.

According to the authors – Professor Tim Lang, of City University London, and Dr Victoria Schoen, of the FRC – both consumers and businesses will be affected by a vote to leave the EU. This is a deviation from what the authors describe as the real task of getting the UK food system, from production to consumption, to be more sustainable. If the country decided to leave, food imports are predicted to become more expensive, prices would increase and there could be major disruptions to the finely tuned just-in-time supply chains on which the UK food system now depends.

With such prices increases for imported goods, it is suggested there could be consequences for the consumption of foods that the UK relies on EU nations to produce. For example, nearly 40 per cent of the UK’s total food supply of fruit and vegetables comes from the EU, and nearly 55 per cent of its supply of pigmeat.

The authors express concern about the health implications of Brexit, as diet now accounts for 10.8 per cent of the nation’s total disease burden (compared with 10.7 per cent for tobacco). According to the report, the UK is about 60 per cent food self-sufficient so should be wary of instant independence from the EU.

The authors also warn of a potential “food service and food factory crisis” if EU labour currently working in those industries lost their freedom of movement to be in the UK – figures show EU employees make up more than a quarter of the food manufacturing workforce (26.9%) and a tenth of workers in food and beverage services (11.3%). This compares with 6.1 per cent across the UK economy as a whole.

The paper can be accessed here: Brexit or Bremain

Farmer debt pile grows

Farmers are building up record debts as they struggle to cope with a sharp drop in the price of wheat, milk and other commodities. Farmers borrowed £17.8bn in 2015, driven by cash flow problems, the NFU revealed at its annual conference in Birmingham.

NFU economist Anand Dosa said that agricultural borrowings had doubled in less than a decade. There had been a double digit rise in borrowings since 2012.

However, Allan Wilkinson, head of food and agriculture at HSBC, said that indebtedness remained 'very small' compared with the value of assets. Land values had remained relatively resilient.

Is the CAP less green?

Environmental NGOs argue that the increased flexibility given to member states by the last round of CAP reform has led many of them to reduce environmental spending, making the CAP less 'green' than it was: Greenwash?

New Brexit report

The latest report on Brexit has been prepared by Professor Allan Buckwell for the Worshipful Company of Farmers: Brexit report

Presenting the report, he highlighted the deep uncertainties that exit from the EU would be likely to create, especially for agriculture which currently relies so heavily on EU support and regulation. He pointed out that the only certainty at present is that a referendum will occur, we can’t even be sure when. And, whilst the outcome of this referendum is currently impossible to predict, the possibility of a vote to leave has now to be given serious consideration.

He also made it clear that even if the earliest possible date for a referendum (sometime in June 2016) were to be adopted, a vote to leave would, in all probability, mean exit would not occur for at least another four years, making exit the end of 2020. Creating an extended period of enormous, and potentially highly damaging, uncertainty for our industry.

The interim period would involve a whole raft of intensely complex, international negotiations, not just between Britain and the EU but with all our trading partners globally, as the UK Government tries to secure trade deals to replace those negotiated within the EU. At the same time there would need to be a national debate to establish the basis for agricultural policies to replace EU regulations and the CAP.

Whilst it is clear that even if the British people were for BREXIT, payments due to UK farmers under the CAP will continue right up to the actual exit date, the nightmare scenario for farmers following exit would be a combination of the rapid removal of CAP direct payments, with much, if not all existing regulation remaining, and with continuing free access to our market for the still-supported EU farmers. At the same time, outside of the EU, UK farming would also be exposed to increased competition from the world’s lowest cost exporters. This outcome is likely to be regarded as equally undesirable by environmental interests.

Once the immediate effects of a vote to leave have worked through the system, the future of the industry would depend critically on the intelligence and constructiveness of the agricultural policy debate that follows. Some might argue that in the long run it could result in British agriculture being in a stronger position with a more resilient industry developing, but this would depend very much on the legislative and policy environment that replaced the CAP and the competitiveness of the industry it encouraged to develop.

Brexit report out

The report from a working party set up by the Farmer-Scientist Network of the Yorkshire Agriculture Society on Brexit and agriculture is now out: Brexit

The working party was made up of academic specialists from the fields of law, agricultural economics and political science, as well as farmer members.

The report highlights the complexities and uncertainties associated with Brexit, particularly given the absence of any Plan B for agriculture produced by the UK Government.

Among the topics covered are the future of farm subsidies, international trade, the devolved administrations, plant protection, animal health and welfare, GM crops, geographical indications and migrant labour.

CAP reform fatigue

EU agriculture commissioner Phil Hogan is open to a mid-term review of CAP reforms next year, but says that there is 'reform fatigue' among decision-makers and stakeholders: Mid-term review

Farmland prices fall

The cost of prime arable land fell last year for the first time in 13 years, according to estate agents Savills. It is estimated that prices fell 1.7 per cent last year, after rising 12 per cent in 2014.

The main reasons for the fall are thought to be falling commodity prices and uncertainty about what would happen to farm subsidies if the UK left the EU. Farm subsidies have tended to push up prices.

The 25 per cent fall in wheat prices last year had a particular impact on demand, especially from farmers looking to expand. Farmers with high debts or no successors may have cashed in last year while prices remained high. Farmers accounted for 50 per cent of farmland sales last year, the highest proportion for seven years.

Arable land values in the eastern counties of England, where prices have been the highest, fell most compared to other types of land. They remained stable in Scotland and the north of England.

Savills said that the fundamental factors driving UK farmland value growth remained: 'Supply is historically low, the product is finite, competing land uses and ownership motives will all support farmland values growth in the long run.'

High land prices remain a significant barrier for new entrants to farming who do not inherit a farm.

Brexit could hit farmland prices

It is unlikely that the current level of €3bn a year direct support would be maintained after Brexit. The Treasury would see it as an opportunity to reduce subsidies to farmers.

The value of prime agricultural land would be unlikely to be affected. High quality land has been selling at £1,000 per acre with investors looking to diversify assets and preserve capital values. The price of the best land in East Anglia and the south east has risen fourfold over the last decade.

However, the value of land used for dairy farming, lowland beef and sheep farms could be hit much harder. Ian Ashridge, a partner specialising in agriculture at Bidwells, told the Financial Times, 'You would seem some sectors affected severely. Those investors who have acquired land that supports more than one enterprise are likely to be affected much more seriously by any reduction in support.'