Sunday, May 31, 2009

EU could do better on environmental farming

Millions of pounds of txapayers' money intended for environmental projects is instead being used to prop up damaging farmning practices across Europe, according to a report Could Do Better compiled for the Royal Society for the Protection of Birds by Birdlife International.

The report highlights some of the positive work being done in EU member states with CAP funding which is helping farmers create and protect habitants for wildlife. 'In principle this European funding is great news for wildlife because it supports agri-environment schemes which protect biodiversity - but the truth is that implementation of the policy by many member states is weak,' warned RSPB's head of agriculture policy Gareth Morgan.

'In compiling this report we found examples of agricultural schemes receiving large amounts of public subsidy from the EU which had no environmental benefit at all, in fact some were causing the degradation of the environment.'

Farmland bird species are in decline across Europe and this is often linked to changes in agricultual activities. Many of these threatened species are extremely senistive to changes in their habitat caused by intensification of farming. For example, the Spanish imperial eagle requires large areas of sparse wood picture rich in rabbit and the eastern European red-footed falcon requires traditional farmland with ponds rich in dragonflies.

'The findings of this report make it clear that the CAP is still not functioning properly and requires radical reform,' Gareth added. 'Agri-environmental schemes can and do deliver great results for farming and wildlife, but only if member states commit to them properly - otherwise it is simply an exercise in handing out money for nothing.'

'Some EU governments are clearly unprepared to stand up to the vigorous lobbying of their agricultural sector. If they continue to put forward dodgy agri-environmental schemes which have no positive impact on biodiversity then Brussels should have the backbone to kick them out.'

Examples of money down the drain included €790m in Portugal that has been invested in irrigation projects which will destroy wildlife habitats and increase water over-abstraction. In Cyprus conservation money is being spent on opening forestry roads and creating forest firebreaks which fragment bird habitats and disturb populations. Italy, France and Ireland also get the thumbs down for spending money on agri-environmental schemes that have no impact on normal farming practice and no benefit for the environment.

However, in England agri-environment schemes are judged to have been well designed and to be delivering benefits for biodiversity.

The full report can be downloaded here: Birdlife

Saturday, May 09, 2009

Sterling fall gives farmers subsidy cash windfall

British farmers are set for a cash windfall worth hundreds of millions of pounds because of the fall of the pound against the eurp. Within the next fortnight farmers must tell Defra whether they want to receive their subsidies in pounds or euros ahead of the figure being fixed in September.

The last single farm payment was worth about £3bn to UK farmers when it was paid out at the end of last year based on an exchange rate of 79p to the euro. Since then, the euro has appreciated to about 90p.

Peter Kendall, chairman of the National Farmers' Union said that if the exchange rate stayed the same payments would be about 13 per cent higher than last year. This would add up to an extra payout of more than £300m to farmers.

Many farmers have used hedging strategies to fix their payments in advance at 92p per euro or higher. However, that is an option that is only really available to larger farmers. Less prosperous farmers with smaller farms have not been able to do so and are still exposed to market fluctuations.

Perhaps they should set some of the extra money aside to pay their tax bills. Tax liabilities will be higher after increased profits during the last two harvest. Accountants Grant Thornton warned that many farmers faced substantial tax bills next January and July.

Monday, May 04, 2009

Grain supply deficit by 2009-10

Grain stocks are projected to rise by 39 per cent this year to 160m tonnes after Russian and the Ukraine planted large crops in response to rising global prices. But, according to Societé Generale, the global wheat crop could shrink to around 642 million tonnes in 2009-10.

This still a bumper harvest by historical standards but significantly lower than last year. With consumption expected to increase to 657m tonnes, the market could see a supply deficit by the end of 2009-10. This could contribute to what is expected to be an era of volatile prices.

An important factor in the situation is the disapperarance of Argentina as a reliable exporter. Farmers there are due to start planting the 2009-10 crop in less than a month and there could be a fall of some 30 per cent on the 2008-9 season and the lowest since 1902-03 when Argentina was starting to earn a reputation as the bread basket of the world.

The decline stems from three years of misguided government intervention in wheat trading in which farmers are periodically banned from selling overseas; a 23 per cent tariff on exports; and a serious drought that has slashed exports. A long-running conflict between the government and soyabean farmers will slash export income this year. Lower wheat planting levels will lead to a bigger shift to soya, though, which is Argentina's biggest cash crop.

El Tejar, one of Argentina's leading agricultural groups, has frozen investments at home and is looking elsewhere in the region, such as neighbouring Uruguay and Brazil, where the regulatory hurdles that plague Argentina are absent.

The whole history of Argentina over the last hundred years is an object lesson in how political meddling can undermine a country's propserity. As far as farm trade is concerned, export taxes are just as much a distorting mechanism as import barriers.