Tuesday, December 26, 2017

How do farmers feel now about Brexit?

Perhaps the question I am asked most often is, 'Why did farmers vote for Brexit?' Well, the short answer is that they didn't. Or, at least, we don't have any reliable data. Opinions have been based on self-selected polls by Farmers Weekly and my hunch is that they tend to over represent supporters of Brexit.

However, they are the only data we have. The latest poll suggests that, just like the population as a whole, most farmers have not changed their mind about the way in which they voted, despite being more pessimistic about the outlook for their businesses. The Remain camp gained just one percentage point.

The latest poll of more than 1,400 respondents (two-thirds of them farmers) shows that 53 per cent of them voted to leave the EU and 45 voted to remain with two per cent not voting. This would imply a 98 per cent turnout among farmers and reinforces my view that the more committed are over represented in the poll which would tend to be Brexiteers, given that many Remain voters were not enthusiastic about the EU but thought that on balance the UK was better staying in.

The non-farmers taking part, mostly those in ancillary occupations and the wider food industry, voted 57 per cent to remain and 36 per cent to leave, 7 per cent not voting.

It is no surprise that support for leaving was highest in those sectors that have not received much in the way of subsidies: 67 per cent in sugar beet; 66 per cent in; and 57 per cent in horticulture. Dairy and sheep farmers would be more inclined to stay in the EU.

It would seem that for many leave farmers concerns about sovereignty and immigration trumped purely agricultural issues. One farmer commented, 'My biggest hope is that we will get away from the strangehold Brussels has on this country. The EU has got too Big Brother and dictatorial.'

12 months ago 45 per cent of farmers were confident that Britain would get a good trade deal after Brexit, but that figure has now slumped to 35 per cent. Among non-farmers 67 per cent have little faith in a good trade outcome.

Just 28 per cent of farmers now think they will be better off after Brexit with 46 per cent expecting to see an income decline. Before the referendum 37 per cent thought they would be better off and 43 per cent thought they would be worse off. Just 22 per cent of those in the non-farming group see a benefit to their businesses from Brexit compared with 54 per cent who they will be worse off.

Friday, December 22, 2017

Farmers' confidence hits an all time low

Medium-term confidence among farmers has hit an all time low according to the latest NFU survey: Business confidence goes into the red

One in five plans to cut investment and there is concern about rising input prices, regulation and Brexit. NFU president Meurig Raymond commented, 'everyone is concerned about the trade deal that we'll have with the EU, the domestic policy that will replace the Common Agricultural Policy and labour shortages.'

The survey showed that arable and sheep and beef producers were most pessimistic about the medium-term outlook.

The weak pound led to higher subsidy payments and helped exporters, but the devaluation has recently fed through to higher import costs including feed, fertilisers, energy and machinery.

Policy instruments for domestic agricultural policy

Following the recent workshop of the Brexit working party of the Yorkshire Agricultural Society we have produced an interim report on policy instruments in a domestic agricultural policy after Brexit: Interim Report

A more detailed report is in preparation.

Thursday, December 21, 2017

Subsidies to continue for hill farmers

Defra secretary Michael Gove has told the House of Commons Defra committee that subsidies for hill farmers will continue beyond 2022. He said, 'Farmers in less favoured areas, and upland hill farmers who are producing sheep meat as well as wool ... will need support for several years to come.'

Whether payments would still be made on an area basis is unclear.

Mr Gove was not sympathetic to the NFU argument that subsidies were needed to prevent the UK becoming more reliant on imports. I have always been sceptical about the idea of self-sufficiency targets.

Wednesday, December 20, 2017

Confusion over CAP exit

Theresa May has said that Britain will leave the Common Agricultural Policy at the same time as it leaves the EU in March 2019. She said, 'The relationship we have on [the CAP] continuing through the implementation period with the European Union will be part of the negotiation of that period, which will start very soon.'

She added: 'Leaving the CFP and leaving the CAP gives us the opportunity to actually introduce arrangements that work for the United Kingdom.' What these arrangements might be remains unclear, as is the issue of whether the basic payment would cease in 2019.

Michael Barnier has said that Britain would remain in the CAP in the transition period. In practice the political priority, certainly for Michael Gove, might be getting out of the Common Fisheries Policy. In any event there is now more uncertainty about the future of British farming.

Thursday, December 14, 2017

Conservationists estimate cost of new agri-envirionmental policy

A new report Assessing the costs of environmental land management in the UK commissioned by The Wildlife Trusts, RSPB and the National Trust, shows how much Government might need to pay farmers and land managers for their role in looking after our natural heritage.

The report estimates that meeting existing government commitments to improving natural assets such as water quality, soil health and biodiversity will cost £2.3 billion per year. But meeting existing commitments will not be sufficient to halt the decline of the UK’s wildlife and reverse this trend.

£2.3 billion is five times more than is currently spent through agri-environment schemes – the source of most current environmental land management funding. This figure does not include wider financing required in the farming sector, for example for research and development or providing advice to farmers.

The total includes £876m for protecting and improving priority habitats, which include woodlands, marshes, bogs and fens; £402m for hedges and stone walls; and £78m for flood plains.

Ellie Brodie, Senior Policy Manager, of The Wildlife Trusts said: 'Farmers can sell the food they grow through the market. But they can’t sell a whole range of services that society needs them to provide, whether it’s reducing the risk of floods downstream, creating habitat for bees or improving the health of our soils. The Wildlife Trusts believe that farmers should be paid for this as it benefits us all. A healthy, wildlife-rich natural world is valuable in its own right and is also at the core of people’s well-being and prosperity. We must be prepared to pay for these benefits.'

Christopher Price, head of policy at the Country Land and Business Association said that government agri-environmental schemes were over bureaucratic and fragmented and drew attention to the CLBA's vision of a land management contract.

The associated policy briefing can be found here: Policy briefing

Friday, December 01, 2017

Hard Irish border would be difficult for food trade

A hard border between Northern Ireland and the Irish Republic would create particular problems for the agriculture and food sectors.

Food and live animals account for the largest share of trade with Ireland. Northern Ireland is reliant on the republic for more than 60 per cent of its food and live animal exports. Agri-foods are particularly important to Northern Ireland and the sector is 'one of the few economic bright spots' according to the CBI.

Aiden Gough of InterTradeIsland told the Financial Times that 'The food industry is absolutely predominant in the cross-border trade in the island. The vast majority of trade is supply chain and goods cross the border multiple times before coming final products.'

A quarter of Northern Ireland milk and more than one-third of its lamb are processed at plants across the border. Baileys liqueur is produced in Ireland and sent north for bottling before returning to the republic for export.

Shaun Murphy at KPMG says that agriculture is 'the sector that is most at risk' because 'integrated cross-border supply chains are complex and costly to unravel'.

Given that the UK Government is not prepared to countenance Northern Ireland staying in the customs union or internal market, it is apparently prepared to consider continued regulatory convergence between the north and south of Ireland to prevent border problems.

However, that solution is unacceptable to the DUP whom the Government depends on for its majority. It would in effect create a border in the Irish Sea. It might also attract objections from other member states who could portray it as giving an unfair advantage to Northern Ireland.

Tuesday, November 28, 2017

Glyphosate gets a reprieve

The controversial herbicide glyphosate which is used by Monsanto in its Roundup products has been given a reprieve. It has been the subject of a battle between agrochemical and farming interests and environmentalists. However, the EU has given it a five year licence after Germany changed its position.

German environment minister the SDP's Barbara Hendricks has been against renewal of the licence while Christian Schmidt, the conservative agriculture minister has been in favour. Schmidt decided to change the vote from abstain to in favour, Hendricks accusing him of acting behind her back.

Up to now the Christian Democrats have been constrained by their 'Jamaica' coalition negotiations with the Greens, who are against the herbicide, but these have now broken down.

After Germany changed its vote, and following some tweaking to the wording of the licence, Bulgaria, Romania and Poland followed suit and switched their vote from abstain, allowing the EU committee for plants, animals, feed and food to give its approval for another five years by qualified majority vote.

Despite their apparent victory, farming organisations are concerned that renewal was only for five years rather than the 15 years they think was justified.

Thursday, November 23, 2017

NFU 'disappointed' with Budget

The NFU is 'disappointed' with the Budget which it saw as offering little to help farmers to prepare for life outside the EU or to help rural communities more generally: Budget response

The NFU should not be that surprised at the urban focus of the budget. The more general question that arises is whether tax reliefs are a better policy instrument than direct support payments.

If we gave farmers more tax allowances, it would not alter their behaviour in any way in accordance with policy objectives, but it would give them an additional financial cushion against the effects of Brexit.

Monday, November 20, 2017

Big Blue goes for green farm policy

Liberal Conservative think tank Big Blue has produced the latest analysis of the future of agricultural support in Britain, A Greener, More Pleasant Land. It's certainly in tune with the emerging conventional wisdom. Read the full report here: Green and pleasant

It sets out a vision for a new market-based commissioning scheme for rural payments after Brexit, which would replace the EU’s Common Agriculture Policy (CAP) and fund ecosystem services, such as woodland creation, restoration of peatlands and removing invasive plant species. Under the scheme, ‘suppliers’ would bid to supply ecosystem services to paying ‘beneficiaries’ in specific catchments via online market-places. Suppliers would include farmers, landowners, and land managers.

Beneficiaries would include the general public (represented by central, devolved, and local government), private interests (such as water companies, other land managers, and insurers), and other groups (such as conservation NGOs, civil society groups, land trusts, philanthropists, local communities via town and village halls, or crowd funders). Contracts for supplying ecosystem services would pay quarterly based on results, potentially with incentives to encourage performance.

It calls for ensuring that as current CAP subsidies are phased out, public funding for market-based commissioning scheme and means tested livelihood support is phased in pound for pound.  It advocates the creation of a single rural payments budget from central government that identifies exactly and merges existing government budgets for production and land management support (under CAP), natural flood management, and payments for ecosystem services. Merging these current expenditures into a single rural payments budget would result in at least £3.1 billion being made available per year. It appears that prices for ecosystem services would be derived through an online market place designed by users for users. Striking a price may not be as straightforward as the paper assumes.

Three forms of income for farmers

The elimination of all production subsidies in agriculture would ensure instead that farmers have three forms of income available to them. The first from the new market-based commissioning scheme for rural payments, the second from a form of means-tested livelihood support, and the third from agricultural produce or other monetisable services sold at market prices without production subsidies. These sources of income are not mutually exclusive.

In my view means-tested livelihood support is a matter for the benefits system and not for specific policies directed at farmers. It seems that these are meant for small farmers, but there is a case for keeping area based payments in some form in marginal upland areas.

 

All things bright and beautiful

It is claimed that market-based commissioning of rural payments combined with a properly enforced system of environmental regulations, targeted livelihood support (particularly for smaller farmers), and consumer demand for high-quality UK produce will together drive higher environmental standards across the UK.

Senior Associate Fellow Ben Caldecott, who co-wrote the report, says: 'Commissioning ecosystem services efficiently and effectively using the dynamism of market-based approaches will bring significant public benefits, including a more sustainable farming industry, enhanced natural beauty and landscapes, greater biodiversity, increased carbon sequestration, improved natural flood defences, better water quality, better mental and physical health, and better air quality.'

Commenting, Zac Goldsmith MP, member of the Environment Audit Committee, said: 'The biggest opportunity by far [on leaving the EU] is the ability we now have to redesign the way we subsidise rural activity via whatever regime replaces the Common Agriculture Policy, something environmentalists have long dreamed of being able to do. Instead of simply paying people for owning land, no matter what they do to it, we can finally tailor that support to reward good stewardship of the land to boost biodiversity, minimise floods, improve water quality and access, and deliver food security.' Of course, it could be argued that one of the things that the current system does is support food security.

The usual targets

Press commentary on the report has inevitably brought up the £1.6m in subsidies going to Sir James Dyson. In a sense he is fair game, but he has been investing money in his farms and losing money on them.

No one wants to retain blanket area based subsidies in their present form, but we have little practical experience of pricing ecosystem services (there is one public-private scheme covering forests and peat bogs). As it is, area based subsidies represent the difference between profit and loss for most farms, so one has to be careful how one replaces them if one doesn't want to see a forced restructuring of the industry which might hit food production and would certainly disadvantage smaller farmers.

Thursday, November 09, 2017

The pros and cons of land management contracts

Talking to farmers recently, it is clear that quite a few of them see merit in the idea of land management contracts put forward by the CLA. This 'would be a legal agreement between the farmer and the government for provision of goods and services that the market doesn't pay for but provide valuable benefits to society.' Examples include safeguarding and increasing carbon storage; mitigating or reducing flood risk; creating better connectivity of habitats and species; maintaining the distinctiveness of historic landscapes and heritage; managing soil structures to maintain productive capacity of land for future generations.'

The motivations of the CLA are clear. President Ross Murray states, 'The best retort to accusations that the acreage payment merely rewards the wealthy is to promote a compelling and revolutionary new system based on contract where the farmer or manager is rewarded for public service'.

Policy instruments that are envisaged are:

  • Multi-channel advice to increase adoption of new technology and practices
  • Business skills development and encouraging collaboration
  • Capital grants, loans and tax incentives for investment in infrastructure, equipment and buildings, farmer led research and collaboration
  • Support for new entrants and succession and retirement planning support [this is an under developed area of policy]
  • Promoting UK food in domestic and international markets
  • Resilience funds and compensation for unforeseen events [some might think that was the role of insurance]

There would not be a standard contract. 'Farmers will choose what sort of land management activities are right for them and their rural business ... The importance of specific outcomes will vary across the country ... The land management contract will be locally adaptive'.

This is reasonable enough, but it does raise the question of the transaction costs of negotiating contracts with individual farm businesses with variable payments reflecting the public benefits delivered. The CLA calls for 'simplicity of administration' and 'keeping bureaucracy to a minimum'.

However, public money is involved and accountability is necessary. It is admitted that 'new and existing evidence from mapping' is involved which invariably involves a checking process. Proposed outcomes need to be realistic and there needs to be some means of checking that they have been achieved.

This is an ingenious idea and a good one in principle, but how would it work out in practice?

Friday, November 03, 2017

Post Brexit model could mean major disruption for farmers

Chatham House (the Royal Institute of International Affairs) has produced a new paper on the implications of Brexit for UK, EU and global agricultural reform: Chatham House

The briefing paper looks at four broad agricultural policy options for the UK after leaving the EU. It considers how these four models might perform in the context of future EU agricultural policy decisions and wider global trends and challenges.

The paper argues that for the UK, only a market-oriented model – aligned and integrated with a more effective commitment to the environment and climate change mitigation – would enable the country to benefit from free trade while keeping the government’s promise to improve the environment for the next generation. Applying such a model in the UK could lower prices for consumers, lift the economy’s productivity and allow for substantial budget savings to support the environment and public finances.

It would mean significant disruption for agricultural producers, and the political challenge of market reform should not be underestimated, but, the paper concludes, implementing a sustainable, market-oriented agricultural policy is a genuine opportunity for UK global leadership outside the EU in the next decade.

It is admitted that, 'A move to a genuinely market-oriented model would result in imports displacing UK products, and the removal of all forms of subsidies would cause some farming operations to fold. While the resulting lower prices would benefit consumers, importing businesses and the economy overall, it would also mean unviable agricultural businesses closing, being taken over or having to reinvent themselves. The livestock sector in particular is vulnerable in this regard, with rural communities, especially upland areas, likely to suffer the most commercially.'

Friday, October 27, 2017

Does Gove speaked with forked tongue?

Defra secretary Michael Gove has become something of an unlikely hero with green activists. Some of this reputation has been achieved by grabbing low hanging fruit such as stopping the sale of ivory antiques or banning the use of plastic microbeads in personal care products.

However, this week he delighted greens by condemning farmers who 'drench' their fields with chemicals and damage soil fertility. In my experience most farmers don't over apply chemicals as it would be a waste of money. Never mind, the Soil Association said they had been 'bowled over' by his comments.

So are farmers unhappy with him? No, because he has giving them assurances behind the scenes. Moreover, he has matched his words with actions. He ensured that the UK voted in favour of retaining glyphosate in the EU and has ordered the biggest cull of badgers ever.

Mr Gove is an ambitious man and he is trying to win support in as many areas of political life as he can.

Thursday, October 26, 2017

Future of key pesticide in doubt

The future of glyphosate, a key ingredient in pesticides, is in doubt in the EU. Arable farmers say they cannot do without it if they are to farm successfully, but environmental lobbies such as Pestcides Action Network Europe (PAN) have been working hard on the issue: Weedkiller decision

A standard ten year renewal no longer seems achievable, but it may be possible to get agreement on a three year phasing out period. However, Angela Merkel's need to involve the Greens in a German coalition government is a complicating factor. In any event, its future seems in doubt and the search for alternatives will need to begin. The scientific evidence is contested, but the politics are leading the way with President Macron favouring its withdrawal.

PAN's statement can be found here: Policy recommendations

The perspective of the National Farmers Union can be found here: Questions and answers

Tuesday, October 17, 2017

New SAWS scheme not ruled out

The Government has now responded to the House of Commons Defra committee report on the agricultural labour market: Response

It argues that the sector faces a 'challenging situation' rather than a crisis. However, it does not rule out a new version of the SAWS scheme and says that such a scheme could be introduced within months of it being needed.

Thursday, October 12, 2017

Farmers incomes could halve after Brexit

The AHDB has produced a report looking at alternative scenarios for Brexit and the impact on farmers: Brexit Scenarios

Agricultural incomes could halve after Brexit unless the UK strikes a free-trade agreement with the EU, according to a new report that urges farmers to prepare for Britain’s departure from the bloc by boosting their productivity.The average UK farm is predicted to have its income fall from a current level of £38,000 per year to £15,000 should the UK unilaterally open its borders to low-cost food producers.

The AHDB also found that in a second scenario of the UK erecting protectionist trade barriers, farm incomes would fall to £20,000. However, if the UK succeeded in its objective of securing a free-trade deal with the EU, the AHDB said the average farm income could rise slightly to £41,000, because an increase in trading expenses would push up costs of imports and therefore the prices that farmers can charge for their products.

Which scenario is most likely remains to be seen, although the odds of a hard Brexit appear to have increased. However, judging from an interview in the latest Farmers Weekly with a farmer who voted 'Leave', many remain optimistic. His 'Remain' colleague, a tenant farmer, feared he may have to leave farming and was already taking a Law degree.

Wednesday, October 11, 2017

Thinking about domestic farm policy after Brexit

Brexit is going to occur, but we do not know what form it will take or when it will be completed. The chances of a very hard Brexit seem to be increasing which would not be good news for farming in particular and the economy more generally.

Last week I gave a presentation in the Entente Cordiale room at the Foreign and Commonwealth Office on options for a domestic agricultural policy after Brexit. Staff from a number of government departments were there including Brussels and UKRep Brussels. There were some very good questions, as one would expect.

Policy objectives

I suggested that what we needed to learn from the CAP was the need to have a clear and hierarchically ordered set of objectives. We should avoid poorly designed and overly complex policy instruments that imposed high transaction costs on both government and farm businesses.

Policy should seek to support an economically, socially and environmentally sustainable agriculture:

  • Economic: profitable, productive and internationally competitive
  • Social: the need to support marginal farmers in upland areas and to avoid depopulation in remote rural areas, especially island communities. Often the biggest boost that could be given to these communities was in the form of infrastructure, especially fast broadband. I gave the example of how the Isles of Scilly had benefited from this: Take up of fast broadband. A theme that emerged in discussion was that a sustainable rural life depended on many things apart from farming. Discussion centred on what role local authorities might take. The Orkney Islands have been successful at attracting returning graduates: Going back home. This is not just a question of the renewables industry: I know from reading The Orkney Farmer that it is happened in agriculture and food processing.
  • Environmental: minimise environmental damage from farming activity and promote beneficial effects.

What will go and what the emphasis will be

Area payments would disappear, except possibly in upland areas. There has been resentment at large sums paid to big scale farmers, often investors from outside the industry who may have tax planning motivations. However, it should be remembered that big farms are generally the most competitive, and they will be competing against, for example, North European grain farmers who will still be receiving EU subsidies.

The emphasis in the future will be on public goods, as is evident from remarks made by the Secretary of State (Michael Gove) at the Conservative Party conference and elsewhere. These would include the maintenance of valued landscapes and resilience in relation to climate change. There is a lot of interest in ecosystem services. Payment for them would mainly benefit upland farmers, but how does one price them?

Technological revolution

Farming is on the verge of a digital technological revolution which is likely to be as important as earlier revolutions which saw the introduction of crop rotation and agronomy; mechanisation; and artificial fertilisers/agrochemicals. Data from near earth satellites has been used for some time, but drones offer more precise information to guide decisions in relation to crops. There will be an ability to monitor the condition of cattle ín the fields. Advances are being made in robotic ploughing, planting and cropping.

Accelerating this trend may be an area where the Treasury would be willing to provide some support. Knowledge transfer and training is key with an important role for the existing four Centres for Agricultural Innovation.

There might be a case for supporting investment in buildings and equipment, particularly for sectors that did not receive much CAP funding, e.g., pig farming. This could run up against the additionality problem of paying farmers to do things they would have done anyway, but it would be a mechanism for helping farms to remain internationally competitive.

I noted that migrant labour was one one of the biggest concerns raised with me by farmers as its availability was already declining. This was a particular issue for the horticulture and field vegetable sectors. However, dairying had become increasingly reliant on EU and Fillipino labour. In a time of full employment, recruitment from the local unemployed pool was not possible, even if it ever was. Further mechanisation was some way off. What was needed was a new version of the SAWS scheme, but the difficult political question would be which countries to include.

Elephants in the room

The devolved administrations feared that Westminster was using Brexit as an opportunity to repatriate functions that were rightly theirs. However, we did need a UK policy framework to maintain a level playing field. The whole question of the trade settlement, largely dealt with by fellow presenter Carmen Hubbard, was clearly crucial. One issue that arose in discussion was whether the shelf life of fresh products could be extended to offset delays at the ports.

Succession planning

One issue that was raised in discussion was the advanced average age of farmers (which has been high for some time). I pointed out the statistics may not reflect the reality of a farm business. For example, my brother-in-law is 75, but my nephew has just turned thirty and is driving the farm business forward. Succession planning is nevertheless perhaps an issue under researched by academics, notwithstanding all the advice available from consultants and the farming press. I suggested that The Archers had offered some good fictional treatments of the inter generational tensions that can arise in a farm business.

Thanks

Palmerston and Larry discuss their differences over policy

Thanks to the FCO for offering me a tour of the building, but above all the chance to meet Palmerston the Foreign Office cat who was basking in the sunshine surrounded by a semi-circle of admirers. We peeped into Downing Street, but could not see his adversary Larry.

Tuesday, October 10, 2017

TRQ deal knocked on head

Hopes that the UK and the EU had reached an agreement in principle on the tricky topic of tariff rate quotas (TRQs) have been knocked on the head by an intervention by the United States. The Trump administration is leading a group of countries challenging British plans to retain EU import restrictions on agricultural goods after Brexit. The other six countries who sent a letter to the UK's WTO representative and his EU counterpart were leading agricultural exporters: Argentina, Brazil, Canada, New Zealand, Thailand and Uruguay.

New Zealand's former high commissioner in London has given it large on the issue saying that the row would make Brexit look 'like a kids' Christmas party' if access was scaled back.

The risk for the UK is that part of the post-Brexit transition in the WTO it may have to accept opening up access to agricultural goods from third countries far more than it wants, even before it agrees the much vaunted new trade deals with such countries.

The UK has tried to smooth ruffled feathers by saying that the plans would be discussed extensively with partners in the WTO before proceeding. This is the opening stage of a process in which countries have staked out their starting position in what is likely to be a long negotiation.

Sunday, October 08, 2017

Farmers don't drive land prices

It is often claimed that Brexit will bring down the price of farmland and make life easier for new entrants. However, according to Strutt & Parker, lifestyle buyers and tax-savvy investors are about to overtake farmers as the primary buyers of agricultural land. This conclusion is based on an analysis of every public sale of over 100 acres since 1996.

Farmers bought 68 per cent of the holdings for sale in 1998 but they bought over 51 per cent of those sold in the first six months of this year. Private investors have increased from 4 per cent of buyers in 1998 to 20 per cent this year. Lifestyle buyers have stayed largely constant at 25 per cent of sales [most of these sales in England are within reasonable travelling distance of London]. Overseas and institutional investors fluctuated around 4 per cent combined.

Stamp duty is capped at 5 per cent when a country house comes with land, otherwise a mansion is liable for up to 12 per cent. Agricultural land is also exempt from inheritance tax.

Sir James Dyson, who bought 33,000 acres (of admittedly good quality land) in Lincolnshire, Oxfordshire and Gloucestershire, is believed to have paid £15,000 an acre in 2013. Average prices peaked at £10,100 in acre in 2015 and, because of many years of poor prices and Brexit uncertainties, have dropped to around £9,600 an acre.

James Beedell, head of research at Strutt & Parker, said that investors have turned to farmland after the 2008 financial crisis because they wanted something safe. 'Lifestyle buyers and investors set prices because what they are prepared to pay for land isn't necessarily related to the profit it can produce.'

If there is a fall in land prices in Brexit, it could lead to greater consolidation as those with capital or access to it buy up smaller farms. Some think that would lead to productivity gains, others that it would have an adverse effect on rural communities and landscapes.

Wednesday, October 04, 2017

TRQ deal agreed

Tariff rate quotas have always been one of the more difficult aspects of the negotiations between the UK and the EU over agricultural issues arising from Brexit. However, it looks as if an understanding about a deal has been reached. It may, however, not please third countries which could cause trouble down the line. The proposed deal would not expand overall quotas, and hence market access.

TRQs set the amount of goods that can be exported at low or zero tariffs, and are hence valued by agricultural exporters. The UK and the EU need to share out the quotas by the time Brexit takes place in 2019. Countries such as Australia and New Zealand have been pushing for an increase in combined UK-EU quotas after Brexit.

The deal would divide up quotas according to where goods were previously consumed. For example, the UK would take a larger quota for products such as New Zealand lamb. Consumption patterns would be measured over a three year period. This outcome would reduce additional competitive pressure on sheep farmers in particular.

Australia and New Zealand will challenge any outcome they think reduces their current levels of market access. Other major agricultural exporters such as Brazil and the US want more market access. However, if they decide they want to take matters to the dispute settlement mechanism of the WTO, they may be in for a disappointment. The US has been blocking the appointment of new judges and the quasi-judicial tribunal may soon have insufficient judges to function.

Tuesday, October 03, 2017

Limits to Kiwi lesson learning

Attention is often drawn to how New Zealand benefited from the withdrawal of agricultural support, but this helpful briefing note from the AHDB points out that there are many differences between the situation in New Zealand in 1984 and that in Britain today: What can we learn from New Zealand?

In particular we should never forget that New Zealand has a particularly favourable climate for livestock with year round grazing.

There are some lessons that can be drawn:

  • Should the structure of farm support change there is likely to be a challenging transition period
  • In order for the UK agriculture industry to be successful post-Brexit there will need to be a focus on efficiency and streamlining
  • There may be opportunities for the UK to carve out niches and for agriculture to thrive through increased vertical integration
  • Agriculture operates most efficiently when decisions are based on actual market returns

Monday, October 02, 2017

Not so sweet?

This article examines the implications of the end of EU sugar quotas: Sugar deluge?

European refiners are seeking to increase production and secure more exports. However, the EU price is likely to fall in line with the lower global price, so it may not be good news for those who grow sugar beet. Less sugar may also be imported from least developed countries in Africa and the Caribbean.

Wednesday, September 27, 2017

Import threat to sheepmeat sector

Australia and New Zealand are pushing the UK to open its food market after Brexit and allow the same quota of low-tariff imports as they send to the whole of the EU. The UK would mirror the tariff rate quota of the whole EU bloc which would mean that larger imports of sheepmeat would be admitted tariff free. It is also likely that Australia would be interested in increasing their exports of cheese to the UK.

This could be devastating for the sheepmeat sector which has always been the most vulnerable to Brexit through a combination of increased imports and tariffs on exports to the EU. Upland farming is highly reliant on sheep.

The Government has produced some warm words, but Defra secretary Michael Gove has talked about 'an outcome that is net positive for UK agriculture.' In other words, some vulnerable sectors could take a hit.

Applying the whole EU TRQ to the UK would avoid the tricky problem of dividing it up while the EU would want to avoid a situation where its trading partners demanded compensation because the UK's departure would make their access quotas less valuable than before. This would particularly apply where an exported product is popular in the UK which is true of sheepmeat. It would also offer lower prices for consumers. Sheep farmers may have a tough fight on their hands.

Monday, September 18, 2017

Can new technology solve labour shortages in farming?

There is considerable interest in the potential of new technology for making farming more productive and less reliant on difficult to obtain labour. I think that the development and application of these technologies should form a key part of a domestic agricultural policy post Brexit, but no one should pretend that they offer a quick, readily available and affordable fix.

Big farms already use semi-autonomous satellite-guided tractors and combines, which can drive in straight lines without overlapping. However, these big machines also tend to compact the soil, affecting its long-term viability and plant growth.

Harper Adams University, using government funding from Innovate UK, have adopted machinery to drill, spray and harvest crops autonomously using open source software, cameras, lasers and sensors. They used drones and scout vehicles to monitor the field and collect data by bringing back soils and crop samples.

The first crop is slightly wobbly where the tractor failed to keep to its line. The first hands free crop is expected to yield only 4.5 tonnes per hectare, compared with 6.8 tonnes using conventional methods.

In the horticulture sector, where labour problems are particularly acute, machines to pick strawberries and apples are being deployed, but they pick at only one third of the rate of a human and miss 15 per cent of the crop. Moreover, the machines can cost something approaching £200,000. Most farmers reckon that their large scale deployment is at least a decade off.

However, it is clear that one narrative that is being put forward (see Matt Ridley in The Times today is that access to cheap labour has held back the introduction of new technology in British farming.

The deputy president of the NFU has told a meeting at the Liberal Democrat conference that future growth in agriculture will be driven by overseas labour. There was no sign of government action on labour and trade issues: Lack of action

Thursday, September 14, 2017

Worker shortages draw media attention

The problems that Brexit has caused for labour intensive sections of agriculture have received considerable treatment in the media. The latest analysis in the Financial Times looks at Barfoots of Botley whose biggest crop is sweetcorn: Worker shortage

Barfoots operate along a strip of the south coast in West Sussex where there are many big horticultural firms. I have visited a number in the Littlehampton area. The area has a particularly favourable climate due to the shelter provided by the Isle of Wight.

Picking sweetcorn is a hard grind. It is repetitive and physical and must be done quickly if the product is to be on the shelf in optimum condition. Workers do 12-hour shifts on a range of tasks from picking to processing.

This year's headcount at Barfoots has been running about 15 per cent short, representing 50 to 60 workers. I would think that the biggest factor is the post-referendum fall in the value of sterling, combined with better opportunities in countries such as Poland. Seasonal workers also say they no longer feel welcome in the UK.

Another Brexit-related concern is, that like many horticultural concerns, Barfoots only produce in the UK from May to September. Production then shifts briefly to Germany, then to Spain and onwards to Morocco and Senegal. Post-Brexit import duties could play havoc with this arrangement.

What are the answers? Some would say pay more, but most workers earn between £8 to £10 an hour and there have been improvements in accommodation. Some growers offer English language lessons.

In the short run Barfoots are going to cut out labour intensive crops such as broad beans which offer small profit margins (although they are a useful part of a rotation).

Many see the answer in new technology, and I will consider this further in a later post, although it is not easily applicable to many labour intensive crops.

Seasonal workers will still be needed for many years to come and post Brexit there needs to be an arrangement for temporary work permits on the lines of the old SAWS scheme. Opinion poll data suggests that nearly two-thirds of voters would be prepared to support such a scheme.

Sunday, September 10, 2017

Post-Brexit fruit picking apprenticeships

This is a dated satirical piece, but it makes some telling points in an amusing way given the Government's reluctance to accept arguments about the need for seasonal farm labour: Newsthump

Friday, September 08, 2017

Geographical indications become a Brexit issue

The basic idea behind geographical indications (GIs) is to prevent a domestic producer giving a name to their own product that gives the impression to consumers that it comes from the protected region covered by the GI, e.g., Parma ham. It is seen as a means of preventing the public from being misled by producers jumping on the bandwagon of a successful GI and also to prevent unfair competition.

The EU has been favourably disposed to GIs because it sees them as a means of encouraging high quality, value added food production in the EU which will increase returns to farmers. This has led to some conflicts with producers elsewhere in the world, e.g., with the United States over Parmesan cheese.

The EU has over 3,300 protected food and drink products which have a specific geographic origin. Sales of protected labels account for some six per cent of the EU's food and drink sector. The products are sold on average at a price more than two times higher than similar non GI products.

In the Brexit report from the Yorkshire Agricultural Society we did consider GIs, but in terms of continuing protection for British products such as Orkney cheddar cheese and Cornish pasties.

However, in one of its latest position papers the EU is demanding that Britain should legislate to recognise products such as Champagne, Parmesan and Beaufort cheese after Brexit. Such protection should be comparable with that provided by Union law: Position paper

Thursday, September 07, 2017

Migration plans would hit farming hard

The plans for migration control after Brexit set out in the draft government paper leaked yesterday would hit farming hard, particularly the field vegetable and horticulture sectors which are labour intensive and rely on seasonal labour from elsewhere in the EU.

Under the Government's plans low-skilled workers wanting to stay more than three months would have to register with the Home Office. The National Farmers Union claimed that the plans would cause 'massive disruption to the entire food chain'.

The Government seems to have disregarded the arguments put forward by farmers, claiming that the shortage of labour can be dealt with by recruiting from the local labour pool and new technology. In practical terms we are near full employment, particularly in areas where fruit and vegetables are grown, and those workers that are available often lack the aptitude to tackle the work on offer. As for a shortage of labour becoming a spur for new technology, there are limitations here, particularly in terms of easily damaged fruit. I will look at this issue in more detail in a subsequent post.

There is some evidence that even Brexit voters are relatively relaxed about seasonal workers coming in for a time limited period. If voters found that fruit and vegetables were more limited in supply and more expensive to buy, they might start to question the wisdom of the Government's approach. The issue could readily easily by dealt with by a new version of the Seasonal Agricultural Workers Scheme, although the fall in the value of sterling continues to make the UK a less attractive destination for seasonal workers.

Tuesday, September 05, 2017

New aide has remain background

Former deputy chief whip and remain supporter Sir John Randall has been appointed as special adviser on the environment to Theresa May. Sir John was formerly the MP for Uxbridge and South Ruislip. In 2015 he stood down in favour of Boris Johnson.

It is expected that he will play a key role in shaping future government policy for agriculture. He is seen as an antidote to the pro-Brexit instincts of Defra secretary of state Michael Gove.

Farmers have been complaining that Gove's energetic interventions are just intended to raise his political profile, but if farming does better as a result, everyone is a winner. However, some farmers consider that he is paying too much attention to conservation and wildlife interests.

Monday, September 04, 2017

Hard Brexit threat to farm exports

Campaigning organisation Open Britain claims that agriculture could suffer if existing trade agreements with the US are lost as the result of a hard Brexit: How trade could be derailed

19 trade agreements could be lost. Exports including beef, lamb and oilseeds could face new trade barriers. It is argued that these agreements will be lost once Britain leaves the EU unless the UK can negotiate new deals with the US, or negotiate to remain within the EU-US agreements, which in my view is not very likely. As far as a trade agreement with the US, the Americans are likely to want concessions on agriculture.

The agreements include food safety and animal welfare standards covering beef and pork as well as concessions on cereals and oilseeds.

Thursday, August 17, 2017

Ireland position paper raises more questions than answers

That is a general view of the Government's position paper on Ireland, but it applies particularly to agriculture. It is suggested that one option to avoid disrupting the substantial trade in food and agricultural products between Northern Ireland and the Irish Republic could be 'regulatory equivalence.' The UK would agree to achieve 'the same outcome and high standards, with scope for flexibility.' Is the latter phrase some kind of get out clause?

It is difficult to see how one could negotiate trade deals with countries like the US which would want entry to the UK market for its hormone reared beef and chlorinated chicken. Such deals are supposedly one of the benefits of Brexit.

If one had a customs agreement with the EU similar to that with Turkey, it should be noted that this excludes agricultural goods. Agricultural products would then need to be checked to ensure tariffs had been paid and that there was compliance with phytosanitary standards.

I am sceptical about claims that there is a technological fix to these issues, particularly given the current clunky state of HMRC's IT systems. The logical solution would be to have a border in the Irish Sea, but that is politically unacceptable, particularly with the DUP breathing down the Government's neck.

Wednesday, August 16, 2017

The New Zealand question

When Britain was originally negotiating and then confirming by referendum its membership of what was then the European Community, one of the issues was New Zealand agricultural products. I need to go back and read the contemporary literature, but essentially the point was that Kiwi exports of butter and lamb were important to its economy and the UK wanted to continue to have access to them tariff free, so it was agreed that quantities of these products could enter the common market free of tariffs.

New Zealand subsequently adopted a 'scorched earth' farm policy which caused more pain than many of its admirers admit and was also accompanied by a devaluation of the NZ dollar (as well as freeing up the country's ports from various restrictions). New Zealand has thus opened up new markets for its dairy products in East Asia and the Gulf states.

Nevertheless, that does not mean that the European market does not matter. New Zealand has formally objected to a plan that would limit the amount of its lamb sold in Britain. The UK Government wants to share the tariff rate quotas with the EU after Brexit. The hope is that replicating the EU's tariffs and quotas would make matters easier in the World Trade Organisation.

It is somewhat ironic given that it was hoped that one of the first post-Brexit free trade pacts would be with New Zealand. You might wonder what the UK could export all the way to New Zealand, but apparently it is about financial services.

Wednesday, August 09, 2017

The case for small farms

The CPRE are the latest contributors to the debate on farm policy post Brexit and they make the case for the benefits of small farms: Uncertain harvest

The report highlights the declining number of smaller farms. It argues that farm size diversity is a crucial consideration as we move towards Brexit. 'It could help deliver the many public benefits that we need farming to provide and that public funding – and the market where possible – should foster and reward.'

There is a case to be considered here. Big farms generally get a poor press, although many of them make substantial efforts on environmental protection. Moreover, they are potentially more internationally competitive, not that that has ever been a big concern for the CAP.

Monday, August 07, 2017

Migrant labour supply problem worsens

Growers of fruit and vegetables are reconsidering their investment plans as it becomes more difficult to recruit migrant labour from elsewhere in the EU. Some may relocate to eastern or central Europe: Pickers shortfall

According to a report in The Guardian: '“The perception from overseas is we are xenophobic, we’re racist, and the pound has plummeted too. We’ve gone with Brexit and that makes us look unfriendly.” Those are the words of John Hardman, director of Hops Labour Solutions, which supplies about 12,000 workers a year to food-growers. He reckons that when it comes to “food-picking jobs in agriculture – which means everything from strawberries to brussels sprouts”, there is currently a Brexit-related shortfall of about 20%, which chimes with recent surveys by the National Farmers Union.'

Tuesday, August 01, 2017

Farming tomorrow

It's difficult to keep up with the flood of reports on the future of agricultural policy after Brexit. Many of them say rather similar things, which I suppose reflects an emerging consensus focusing spending on 'public goods', although there is still a lack of clarity on the policy instruments that would deliver these objectives. The latest report comes from the Policy Exchange: Farming Tomorrow

It argues that subsidies on food production should be phased out and in the words of Policy Exchange's director, Warwick Lightfoot, be directed 'towards more sustainable goals - the landscape and its appearance.' Tariffs should be lowered unilaterally, so farmers would face a double whammy.

It is argued that the UK should replace the CAP with a new British Agricultural Policy which focuses on payments for ecosystem services (or natural capital) and phases out production subsidies and income support by 2025. Any remaining subsidies should be redirected towards protection for natural and public goods, and increasing R&D to boost innovation and the sector’s long-term productivity. The difficulty is that no one has yet come up with a feasible scheme for pricing ecosystem services.

Professor Tim Lang has described the report on Twitter as a 'clear neoliberal farm Brexit call' while another tweeter commented 'Bye-bye, quality British food.

Monday, July 31, 2017

A new and lasting food governance

Tim Lang, Erik Millstone and Terry Marsden call for a new and lasting food governance in a paper on 'Food Brexit: a time to get real': Food Brexit report

They argue, 'Brexit could, all too easily, diminish food security in the UK, where parts of our food system are already far too insecure; this rich country is pocketed with real food poverty, for example, and diet-related disease is part crippling the NHS. We understand food security to be the achievement of a system that provides food that is sufficient, sustainable, safe and equitable.

Brexit could, however, undermine all four of those aspects, in what is an already insufficiently secure food system. Moreover, the UK food system should not only aim for domestic security, it should also not undermine food security in any of the countries from which we buy, or to which we sell, foodstuffs.

This briefing suggests changes that the UK food system should be undertaking if its long-term structural needs are to be addressed. Our case is that the UK food system is highly vulnerable to the rising costs of diet-related ill-health, ecosystems damage, economic dependency, and social reliance on migrant and relatively low-waged labour.'

As far as the CAP is concerned, they state, 'So far, the national UK discussions about the various options for, and effects of, Brexit on food and agriculture policy have been discussed as if they were separate and independent variables, rather than interconnected.'

They note, 'The Brexit process is happening at a particularly vulnerable time for the UK food system - a time when it has become excessively dependent upon imports, while some of its population face worrying levels of ‘food poverty’, i.e. poverty which affects food consumption, 119 and while its productive base is declining, in terms of the number of farms and of small independent businesses, upon which it has historically relied.'

Benefits of high animal welfare standards

The House of Lords European Union committee has produced a report on Brexit and farm animal welfare, emphasising the many benefits brought by the high standards adhered to in the UK: Animal welfare

The report states that 'the UK has some of the highest farm animal welfare standards in the world. UK producers are rightly proud of these standards, and there is cross-sector support for maintaining high levels of farm animal welfare after Brexit.

In order to deliver on its commitment to preserving these standards, the Government must transpose existing EU law on farm animal welfare into domestic law so as to be effective on day one after Brexit. Thereafter, the Government, in consultation with the industry, consumers and other relevant stakeholders, will be able to consider whether to improve these standards.

Scientific evidence and advice should be at the heart of any farm animal welfare policy decisions, and the Government must ensure that withdrawal from the EU does not lead to a shortfall in funding for farm animal welfare research.

The Government must also bear in mind that while high farm animal welfare standards can be a selling point for UK producers, they also increase the cost of production. In the event that post-Brexit trading relations with the wider world, and if standards diverge over time with the EU, lead to increased imports from countries operating lower farm animal welfare standards, UK producers could become uncompetitive. This could undermine the sustainability of the industry or incentivise a race to the bottom for welfare standards—contrary to the wishes of the UK industry.

The Government must negotiate to include provisions regarding farm animal welfare in future free trade agreements. There is some doubt, however, over whether animal welfare can be used as a rationale to restrict imports from other countries under WTO rules. The Government must therefore explore the extent to which developments in World Trade Organization (WTO) case law allow the use of farm animal welfare as grounds for restricting imports under WTO rules.

The demand for high-welfare products is ultimately driven by whether consumers prioritise purchasing those products, at added cost, rather than buying cheaper, lower-welfare products. Labelling systems should be simplified, thereby helping consumers to make informed decisions about supporting farm animal welfare. Farm assurance schemes also help build consumer confidence through their high standards, inspections and associated labels. The Government should encourage the uptake of voluntary farm assurance schemes in the UK.

High farm animal welfare can be seen as a public good. We invite the Government to consider whether the delivery of this public good should be supported through agricultural funding after Brexit, bearing in mind that any such funding must respect World Trade Organization rules.'

The suggestion that funding for animal welfare could be part of a future domestic agricultural policy is an interesting one, although it is not easy to envisage the policy instruments that might be used. I also doubt whether it is technically a 'public good', more of a 'merit good'.

Saturday, July 29, 2017

Thinking out of the box

Somehow I missed this comprehensive report by three leading agricultural economists and an environmental specialist when it first came out. It considers the issue of further modernisation of the CAP: RISE Report

The analysis laid out in this RISE Foundation report shows how the current CAP does not make best use of the considerable resources deployed to support land managers through the necessary transition.  The largest instruments of the CAP, the pillar 1 direct payments, which account for over 70% of CAP funds are ineffective, inefficient and inequitable.  It is suggested that these direct payments should be systematically reduced and resources switched to provide targeted assistance, including transitional adjustment assistance to help farmers adapt and rise to the specific challenges of improving productivity, resource efficiency and risk management and to pay farmers to provide specific environmental and other public goods.

The report argues that the two principal aspects of the CAP requiring the most attention are land management and risk management. Where land management is concerned, the greatest worry is that the current environmental standards are not being met. The report therefore proposes a redesigned, more integrated tiered structure of supports with clearer targets on the environmental outcomes sought.

The core issue concerning risk management is that the present approach in the CAP towards market orientation has not gone far enough. Indeed the sheer scale of direct payment inhibits farmers from better mitigating the risks they face.  The report outlines the full range of instruments that are most appropriate for managing risk at the farm level, market level and nationally at times of catastrophic risk.

Finally, following the lessons that have been learnt from previous successful reforms, the report suggests some procedural changes to kick-start a more effective reform process which brings together more constructively the conflicting interests in agricultural policy. This is particularly important given the difficulty of securing effective reform in the past.

It is suggested that the Commissioners (and their Directorates General) for Agriculture and Rural Development, for Climate and for Environment15, should be tasked to work jointly to produce the next reform proposals for adoption by the College of Commissioners. Following this, the co-decision process should be correspondingly adapted. This might involve the proposals being considered by an appropriate configuration of the Council Ministers who normally serve on the Agriculture, Environment or perhaps Energy Councils.

Friday, July 21, 2017

Gove to outline farm subsidy plans

Michael Gove will outline his plans for the future of farm subsidies today: Green Brexit

Farmers will have to earn support in the future by providing environmental benefits, although it looks as if there will be some scope for assistance with investment and food promotion. Upland farmers will also continue to receive support.

Monday, July 17, 2017

What can the UK learn from New Zealand?

It is often suggested that the UK could learn from New Zealand's experience of abolishing agricultural subsidies, although such comparisons often overlook the way in which the climate there favours pastoral agriculture and the extent to which devaluation assisted the transition (a devaluation of 55 per cent over ten years).

The AHDB has taken a systematic look at what might be learnt from New Zealand, emphasising the differences between the state of the New Zealand agriculture and economy in 1984 and that of Britain today: Kiwi subsidy reforms

Ten per cent of farmers were in serious financial trouble by 1986 and land prices fell by over half.

The principal conclusions are:

  • Should the structure of farm support change there is likely to be a challenging transition period (my view is that phasing and managing this transition is crucially important.)
  • In order for the UK agriculture industry to be successful post-Brexit there will need to be a focus on efficiency and streamlining.
  • There may be opportunities for the UK to carve out niches and for agriculture to thrive through increased vertical integration.
  • Agriculture operates most efficiently when decisions are based on actual market returns.

NFU suggests solutions to seasonal worker crisis

The NFU has warned that the supply of agricultural workers on UK farms is now 'in jeopardy' for the next two growing seasons. They have produced a report on the subject: Access to a Competent and Flexible Workforce

The options they suggest are:

  • Reintroduction of a seasonal agricultural workers scheme
  • An Australian style points based immigration scheme
  • A UK points system to attract non-UK nationals
  • Retaining an element of free movement

I would prefer a new SAWS scheme as there is already experience in operating such a scheme which has worked smoothly in the past.

Wednesday, July 12, 2017

Match fit for Brexit

Wyn Grant with Professor Rob Edwards (left), chair of the Farmer-Scientist Network at the Great Yorkshire Show.

'Match fit for Brexit' was the theme of a seminar sponsored by the Farmer-Scientist Network of the Yorkshire Agricultural Society at the Great Yorkshire Show, chaired by the writer and led by James Severn and Richard King of farm business consultants Andersons. They are offering a 'Match fit for Brexit' business review to farmers for £650 plus VAT.

Andersons realistically see area payments ending and they see the following possible forms of support in the future with a budget half of the current one:

  • A wildlife and landscape scheme, agri-environmental, building on the platform of current schemes such as environmental stewardship
  • Support for hill farmers which could be in the form of an area payment
  • Productivity (research and development, knowledge exchange, training, capital investment
  • Food promotion at home and abroad (my question here would be, is this cost effective?)
  • Revenue insurance to guard against price volatility (I remain sceptical about whether this is the solution)
  • Natural resources, focused on water and soil in catchment areas (more than one farmer I spoke to at the show highlighted the problem of soil exhaustion)

One point made in discussion was that the payments available in agri-environmental schemes might not be sufficient to motivate farmers to participate.

Andersons used their three 'model' farms to predict the impact of Brexit. (Note that their profit figures are after making allowance for 'drawings', i.e, a wage for the farming family). The arable 'Loam' farm makes a healthy £248 per hectare a year at the moment. This would go down to £108 in 2025 with good access to the EU and still over £60 with poor access. (My view is that cereal farms with no stream of income from non-farm businesses, which is the case for many of them in East Anglia, would be particularly exposed to price volatility).

The Freisian dairy farm makes a modest £4.4 per hectare at present, this would go down to £3.4 under good access and a bare margin of £0.6 per hectare under poor access.

The 'Meadow' mixed farm, which it was admitted in discussion, is not a well-run business, makes £35 a hectare at present. This would be a loss of £72 per hectare under good access and a big £233 under poor access.

The core message was that farmers should not worry about the figures they can't control like the Brexit negotiations and focus on how well prepared their own business is prepared to respond to the impact of change (albeit that the form of that change is very uncertain). There was a time window for adjustment, given a relative status quo over the next few years and a boost to prices from devaluation. Farmers need to step back from their businesses and review them. For example, farms need to look at their debt structure. Could machinery and labour be pooled with neighbouring farms?

There was some discussion about whether Brexit could lead to land abandonment, but it was felt that most available land would be farmed by someone who could do a better job with it. There was scepticism about whether there will be a big fall in land prices or rents given all the factors that are in play apart from CAP support.

Drones and precision farming

The following session dealt with this topic with speakers from Newcastle University. Precision farming was defined in terms of more correct decisions per area of land or unit of time.

Drones can provide very high resolution images across a wide spectrum, more so than near earth satellites, and they can fly under clouds. However, they cannot be used in anything more than light rain or winds above 23 mph (and winds are often higher above the ground).

The sophisticated cameras cost more than the drones, the cost of which is falling. A question that arose was whether the information gathered for an average sized farm for about £100 would bring a sufficient return in terms of lower inputs and higher outputs.

Monday, July 10, 2017

The biggest receipients of direct payments

Three conservation organisations are among the biggest recipients in the UK of area based payments. The National Trust receives £1.64m, although the bulk of that is for agri-environmental schemes. RSPB receives just under £1m and Natural England just over £850,000.

The biggest private recipient is Beeswax Farming owned by Sir James Dyson who has two big estates in Lincolnshire. He received £1.60m. He is listed 14th on the Sunday Times rich list with an estimated fortune of £7.8bn.

Scottish farmer Frank A Smart receives £1.45m. Farmcare Trading got £1.16m. It is owned by the Wellcome Trust and was formerly Co-op Farms.

These figures will increase the pressure for an end to area-based payments, reinforced by a likely reduction in CAP subsidies in the 27 member states which will undermine the argument that UK farmers need subsidies to create a 'level playing field'.

Thursday, July 06, 2017

Trade deal with Japan offers boost to farmers

A trade deal between the EU and Japan, which has required four years of negotiations, will provide duty free access for almost all agri-food exports, although there will be a transitional period. For example, transition periods for phasing out all tariffs on hard cheese will last 15 years. It does cover pasta, confectionery and chocolate.

Current duties on food are high, ranging from 15 per cent on wine to 30 to 40 per cent on cheese.

A major stumbling block in the talks was Japan's reluctance to open up its dairy sector to European imports. There will be full tariff elimination for some cheeses and other dairy products, while in other cases a quota system would apply under which duty free access would be granted up a threshold. Soft cheeses will be covered by a duty free quota larger than the current volume of exports.

Wednesday, July 05, 2017

Agri-environmental policy after Brexit

A group of academics funded by the ESRC has produced an authoritative briefing paper on agri-environmental policy post Brexit: New Dawn?

The report states,'By recognising the wider role of farming in the landscape, agricultural policy can become part of a wider sustainable Land Use Strategy, which seeks to end the decline in environmental quality and to enhance that quality through restoration.'

The policy brief concludes, 'There is a risk that future policy will be constrained by the legacy of past policies and practices. Whilst a transition arrangement between current and future policies is both sensible and inevitable, it is important to grasp this opportunity to remake our rural development and agricultural policies and avoid “lock-in” to unsustainable practices.'

Environmentally sustainable agriculture

The Parliamentary Office for Science and Technology has produced a short but informative briefing note on environmentally sustainable agriculture: Research Briefing

The note places particular emphasis on the notion of 'natural capital'. As part of a new domestic agricultural policy, measures could be taken to achieve natural capital targets referring to the elements of nature that directly or indirectly produce value to people.

It also notes that the Conservative Party manifesto contained a proposal for a 25-year environment plan, but this was not included in the Queen's Speech. If it was proceeded with, it would have implications for a number of aspects of agricultural practice. Among them would be water pollution; greenhouse gas emissions (GHG) from crops and livestock; soil compaction from machinery and livestock; the effects of pesticide use on pollinators; and, the degradation and fragmentation of natural and semi-natural habitats.

Thursday, June 29, 2017

The CAP after Brexit

The EU will lose about eight per cent of its current income after Brexit and is thinking about how to adjust to this loss. Given that the CAP accounts for 39 per cent of EU expenditure, it is at the forefront of concerns.

The European Commission has published a 'reflections' document on possible ways forward: EU finances

In terms of what it has to say about agriculture, it is an interesting mix of sticking to old orthodoxies and some signs of new thinking.

On the negative side, it sticks to the discredited argument that direct payments offer a form of 'income support that partially fills the gap between agricultural income and comparable income for other economic sectors.' It is a highly inefficient and poorly targeted means of delivering income support. Later down the same page, we are told that 80 per cent of support goes to 20 per cent of farms. (Actually, this is a stylised fact based on the Pareto rule: the actual figure is lower than 80 per cent).

We are also told that 'thanks to the CAP, European citizens have access to safe, affordable and high quality food.' One could argue that this is the result of technological advances and the innovations made by many farmers in response to changing patterns of consumer demand. Do the citizens of New Zealand lack access to food with these qualities despite the absence of subsidies?

The paper does admit that 'There is no consensus on the level of income support necessary when taking into account competitiveness within the sector.' This is because the policy does not have a competitiveness objective and is not designed to promote competitiveness.

Indeed, high tariff barriers allow uncompetitive practices to continue). A graph makes the claim that 'Agricultural trade balance shows a competitive sector', but makes no reference to the way in which tariffs keep out price competitive imports. Indeed, it is admitted that 'In some cases, these [CAP] payments do not contribute to the structural development of the sector but tend to increase land prices that may hinder the entry of young farmers into the market.'

There is a greater recognition of the need to deliver 'climate public goods and services', a serious omission in the current policy. There is also a recognition of the need to encourage farmers to invest in new technologies which is forming part of the UK debate on a new domestic agricultural policy.

The document envisages 'the introduction of a degree of national co-financing for direct payments in order to sustain the overall levels of current support.' This will not go down well in countries such as France which benefit from the current distribution of CAP funds.

There is also reference to reducing direct payments for large farms. It is suggested that there should be a new 'focus on farmers under special constraints, e.g., small farms, mountainous areas and sparsely populated regions.' Again, care will be needed to ensure that the chosen policy instruments do really tackle problems such as rural depopulation. For example, improving rural broadband might be a more effective way of stimulating new economic activity rather than propping up farms that lack viability.

Friday, June 23, 2017

Challenges for grains post-Brexit

The AHFB has produced a comprehensive report on the challenges facing the grain sector post-Brexit: Grain challenges

The report emphasises that the global grain trade is driven by competitiveness. It is a high volume, low margin business, dominated by relatively few multinationals. The UK is a small player in a big market. In the past four seasons the UK exported 11 per cent of its wheat and 17 per cent of its barley crop. Competition for barley export business is likely to get tougher in future. There is no doubt that the UK faces tough competition from lower cost producers with higher outputs.

Any change in trade and support arrangements is likely to lead to structural changes on farm. Further farm consolidation could follow to achieve economies of scale.

The loss of preferential treatment in relation to the EU market is likely to mean loss of access agreements with non-EU countries such as Morocco and Algeria in the absence of new access arrangements and probably tariffs.

Strawberry prices could soar

Growers have warned that strawberry prices could soar if they no longer have access to seasonal EU workers after Brexit. Already this year the number of seasonal workers has fallen by 17 per cent because of the fall in the value of sterling and uncertainties about the future: EU workers

Former Defra secretary Andrea Leadsom suggested that farmers should invest in machinery as an alternative, but this is not an option for some crops. Machinery would damage soft fruit.

Sunday, June 11, 2017

No need for experts at Defra

There will be no need for experts at Defra after Michael Gove was appointed Secretary of State at the department in the reshuffle of the Cabinet.

It had been widely anticipated that Andrea Leadsom would be replaced and she becomes Leader of the House of Commons.

Monday, June 05, 2017

Confidence levels among farmers falling

Confidence levels among farmers are falling, despite a good short-term outlook, according to this report from The Guardian.

However, it repeats the myth that farmers were among the 'staunchest supporters' of Brexit. Where is the evidence for this statement? To generalise from rural voting to that of farmers is to commit an ecological fallacy, a basic methodological error.

Read the report here: Gloomy farmers

Tuesday, May 23, 2017

More time for farmers before subsidy phase out

The Conservative manifesto promises to keep farm support at current levels for the lifetime of the next Parliament. This means that farmers will have until 2022 to adjust to a reduction in subsidies, although the downside risk is that the longer time span may lead them to postpone necessary changes, especially when future policy remains uncertain.

According to farm manager George Eustice the intention is to focus on supporting small enterprises and those new to the industry. The introduction of government backed loans could see a revival of a version of the Agricultural Mortgage Corporation set up by Stanley Baldwin's government (it was sold to Lloyds in 1993).

The Government is also considering schemes to help older farmers retire and changes to tenancy legislation to create slightly longer tenancies.

Wednesday, May 10, 2017

A farmer writes

In an interesting article a Northamptonshire farmer who has a mixed farm writes about how Brexit will affect him and other farmers: The impact of Brexit

Friday, May 05, 2017

Labour crisis in agriculture

The House of Commons Environment, Food and Rural Affairs Committee was not able to complete its inquiry into labour constraints in agriculture because of the dissolution of Parliament, but has produced a report that highlights some of the key issues: Feeding the nation

The committee does not share the Government's view that the sector does not have a supply problem. It took the view that government statistics are inadequate for measuring agriculture's labour needs, particularly where migrant labour is concerned.

The report says there about 75,000 temporary migrant workers employed in UK agriculture. The NFU says that the sector will need 95,000 seasonal workers by 2021.

Improved living standards in Eastern Europe, the fall of the pound and uncertainty following Brexit have contributed to a labour shortfall in the sector.

Wednesday, May 03, 2017

Government giving mixed messages to agriculture

With Parliament now dissolved, the House of Lords Energy and Environment Sub-Committee has produced its report on Brexit and agriculture: Brexit report

The report implies that Government has not sorted out its priorities in relation to the sector: 'The Government is currently giving mixed messages to the agricultural sector. Its vision for the UK as a leading free-trade nation with low tariff barriers to the outside world does not sit easily with its declared commitment to high quality and welfare standards in the UK farming sector. Combining and delivering these two objectives will be a considerable challenge.'

The report notes the reliance of the UK agri-food sector on both permanent and seasonal labour from other EU countries. 'This is an immediate challenge which the Government must address urgently.'

The report warns, 'Farmers risk high tariffs and non-tariff barriers on exports, which could render their business uncompetitive, while simultaneously having to adjust to a new UK policy for funding.'

Tuesday, May 02, 2017

Growing soya becomes more popular

Soya is a subtropical crop largely grown in Brazil, Argentina and the US. The UK imports £1bn worth of soya each year, 95 per cent of which goes to animal feed for chickens, sheep, pigs, cattle and farmed fish. It's also an essential ingredient in a wide range of things from bread to ice cream.

New varieties of soya can cope with the cooler, less sunny climate in England. In the past year there has been a fivefold increase in the area planted in the southern half of England, with about 4,500 acres this year.

The world price for soya has soared as growing demand for meat in China has pushed up the cost of livestock feed. Soya now sells for about £400 a tonne, compared with about £140 for wheat and £330 for oil seed rape.

It also cheaper to grow than traditional crops because it does not suffer much from pests and diseases, a key consideration when plant protection products are becoming less readily available. It fixes nitrogen from the atmosphere in its roots and can help to break up blackgrass, a growing weed problem in cereal fields. This makes soya a valuable break crop in spring rotations to help to kill off diseases, pests and weeds in the ground.

Friday, April 28, 2017

How farmer attitudes affect farm profitability

A fascinating study explores the association between farmers' attributes and profitability.

PhD candidate Niall O'Leary at the University of Reading has found that a large proportion of the variation in farm profitability can be predicted by the attributes of a farm's manager. Two studies of dairy farmers in Great Britain were carried out and almost 40% of the variation in farm profitability could be explained by five variables in one study and by three variables in the other.

The major predictors of farm profitability identified fall under the following five categories.

  • Detail Conscious behaviour - farmers are generally not Detail Conscious but high scorers are much more profitable. A high scorer 'focuses on detail, likes being methodical, organised and systematic'. A low scorer is 'unlikely to become preoccupied with detail, less organised and systematic, dislikes tasks involving detail'.
  • Leadership behaviour described as 'Inspiring and guiding individuals and group. Leading by example and arousing enthusiasm for a shared vision' is strongly associated with profitability.
  • Those who 'lose their cool' when things go wrong and also those who are generally relaxed or laid back are less profitable. A motivated and proactive person who can handle problems is likely to be much more profitable than either a laid back, relaxed person or an overly anxious person prone to frustration.
  • Attitudes and beliefs, in particular how entrepreneurial / profit orientated farmers view themselves are associated positively with profitability.
  • 'Growth Mindset', those who have a fixed view of their own and staffs abilities are much less profitable. Education and training provision are tangible indicators of a Growth Mindset.

The effect of Detail Conscious is significant with 24% of variation in profitability covarying with it. A high scorer 'focuses on detail, likes being methodical, organised and systematic'. A low scorer is 'unlikely to become preoccupied with detail, less organised and systematic, dislikes tasks involving detail'. A one point difference in Detail Conscious on the 1 - 10 scale is associated with 1p per litre or £72 per cow greater profit per year.

Leadership is described as 'Inspiring and guiding individuals and group. Leading by example and arousing enthusiasm for a shared vision.'Relaxed is negatively associated with profitability. A high scorer on the Relaxed measures 'finds it easy to relax, rarely feels tense, generally calm and untroubled' and a low scorer 'tends to feel tense, finds it difficult to relax, can find it hard to unwind after work'.

Thursday, April 27, 2017

The need for resilience

Participants in the panel on Brexit and agriculture

The Agricultural Economics Society conference in Dublin in the earlier part of this week attracted a number of interesting presentations and a speech by EU agriculture commissioner Phil Hogan.

One point that he made was that any free trade agreement with the UK would have to cover food standards, food quality, food safety, animal welfare and environmental issue. The aquis wold have to be imported into a FTA. The UK could not be used as a backdoor mechanism for inferior goods.

One theme that emerged from the conference was the need for farmers to show 'resilience' in the face of changing conditions and uncertain circumstances. However, that may not be a quality they all have.

One poster presentation by Niall O'Leary investigated the personality traits of farmers. It showed that 'independence' was the most common trait, in the sense of 'I'll do it my way.'

Agricultural economist Alan Swinbank said that high tariffs were a relic of a 1980s CAP when there was a fear that imports would undermine the intervention price. If one lowered tariffs to ten per cent that would still give more protection than enjoyed by other sectors.

There was considerable discussion of ecosystem services, although I was still left uncertain about how this concept could be operationalised. In policy terms it was seen as a means of challenging the 'agriculture first' element in policy. The objective would be to promote the total social value of rural land resources.

It was uncertain whether we had identified all ecosystem services. How could a balance be achieved between marketed and non-marketed services? There was the question of trade offs between different ecosystem services. Local environmental governance organisations (LEGOs) could be a mechanism for coordination at a local level.

How will Brexit affect British farming?

Share Radio talks to myself and NFU Vice-President Guy Smith: Brexit and farming

Friday, April 14, 2017

From crop protection to crop health

As a member of the Farmer-Scientist Network at the Yorkshire Agricultural Society, I was involved in getting this project off the ground which is using field trials to see if we can make more use of biologicals in plant protection. View the introductory video here: From crop protection to crop health

Roma Gwynn and other experts look at the future for pesticide regulations here: Horticulture Week

Friday, April 07, 2017

The benefits of stability

The round of talks on Brexit and agriculture, at which one often meets the usual suspects, continues. Next stop Dublin, yesterday it was the Public Interest and Environmental Law (PIEL) conference at Cass Business School, ably organised by students.

My central focus was on the need for well-designed policy instruments in a domestic agricultural policy that would meet their objectives without imposing undue transaction costs.

Our chairman from the RSPB made an interesting observation. He said that the CAP was slow to reform, but the other side of the coin was that it offered stability through the legislative framework. Moreover, it offered a multi-year budget but in future we would be facing an annual budget with competing demands on resources.

Incidentally, I never knew that red diesel was used at Heathrow and for the refrigeration compartments of food lorries.

Thursday, March 16, 2017

New agri-business Brexit coalition formed

Eight trade associations or organisations concerned with agri-business have formed a new coalition to advise the Government on the implications of Brexit for farming: Voice of agribusiness

It will be interesting to see how this new grouping relates to the NFU.

Successful diversification

Farmers have diversified in all sorts of ways to provide new streams of income for their farms. For dairy farmers, one option has been to process their milk on the farm to provide high value added products such as yoghurt, speciality cheeses or ice cream.

Troy Town Farm on St. Agnes in the Isles of Scilly is the most westerly farm in Britain. I think they have just nine cows, but they produce high quality ice cream. I can vouch for that as I have walked across St. Agnes to taste it.

This short video gives a brief account of their story: Troy Town Farm

Monday, March 13, 2017

Four new papers on Brexit and agriculture

The Brexit working party of the Farmer-Scientist Network of the Yorkshire Agriculture Society, which I chair, has produced four new papers on Brexit and agriculture. They can be found here: Brexit papers

I have written papers on the future of Pillar 1 subsidies and migrant labour; Michael Cardwell and Fiona Smith have written on agri-food trade; and Alan Greer has covered devolution aspects.

Friday, March 10, 2017

More threats than opportunities

The agricultural trade dimension of Brexit posed more threats than opportunities according to NFU Director of Strategy Martin Haworth. He was speaking at a EurActiv seminar on 'After the CAP: what future for British agri-trade?' in London yesterday.

He thought that there was a lot of optimism about how easy it would be to negotiate a free trade area with the EU. How far could one replace EU markets with third country markets? With no frictionless access to the single market, we were looking at second best outcomes, the question was how second best?

Even with tariff free trade, there would be barriers with customs procedures. There was a great potential for disruption with perishable goods. He had a number of campaign medals from the past, but none of these problems had arisen since we had been part of the single market.

He noted that the horticulture sector was very integrated through importing and exporting. (Later, this led to discussion of how it was not in Spain's interests to have salad exports to the UK disrupted).

Our food exports to Belgium were three times those of China, India, Russia and Brazil combined.

Peter Hardwick of the ADHB noted that the advantages of proximity and speed of delivery in EU markets. Logistical issues around rules of origin were far more difficult than tariffs.

Molly Scott Cato MEP noted that it was difficult to justify paying people for owning land. There needed to be a discussion in government about what the future farming model should look like. A Defra staff member confirmed that no green paper was in prospect.

Phil Stocker, chief executive of the National Sheep Association, said we were not having a discussion about how we wanted agriculture to look like in the future. Upland farmers could respond by intensifying.

Lord Teverson said that the future relationship with the CAP was critical. The sequencing of agri-trade deals was important. Supply chains were now important even for SMEs.

Martin Haworth emphasised that a defined transition period was needed for everything.

Monday, February 27, 2017

Fall in farm land prices

After many years of above inflation increases, the price of agricultural land fell by 7 per cent last year with the average price per acre dropping to £10,223. The Royal Institute of Chartered Surveyors blamed a sense of uncertainty linked to the prospective loss of EU subsidies.

A survey by Knight Frank found that farmland prices had fallen last year at the fastest rate since 1999. Its survey of bare agricultural land (not including homes or farm buildings) found that prices fell by 9 per cent to £7,470 an acre. Nevertheless, a pound invested in agricultural land in 2009 would still be worth twice as much as a pound invested in a house or the FTSE 100 share index.

It is thought that the price of farmland could continue to fall this year because of higher input prices resulting from the fall in the value of the pound. Prices are, however, being propped up by lifestyle farmers who are estimated to account for a quarter of purchases.

A fall in land prices might be seen as a benefit of Brexit, making it easier for new entrants to come into the industry, reducing the average age of farmers and boosting innovation. However, the real consideration here is whether rents for tenants fall significantly as this is the usual entry route other than in cases of succession.

Even then, new entrants face the cost of machinery and, other than or arable farms, livestock. What may be needed is new means of building up a herd such as share farming which is being experimented with, following the Nee Zealand example.

Friday, February 24, 2017

NFU goes for three pronged approach

The National Farmers Union has gone for a 'three pronged' approach to British agricultural policy after Brexit. If it seems a little short on detail, this is no surprise as different sectors of the industry want different things and even farmers within the same sector.

The first area would be designed to enhance productivity and competitiveness. This could include capital grants to farmers, knowledge transfer, training and advice an tax breaks to encourage investment.

The second area would be directed at environmental measures. As well as traditional agri-environmental schemes this could encompass payments for ecosystem services such as water companies paying farmers to look after watercourses.

The third area would be concerned with volatility. This would be the top priority if the settlement was an unfavourable one for the sector, e.g., on trade. This could include crop insurance (I remain to be convinced), future contracts (surely only for bigger farmers), and income guarantees, as well as direct payments to farmers. Income guarantees might look like deficiency payments as happened pre-1973, but they may not be WTO compatible.

Tuesday, February 21, 2017

Migrant labour and agriculture

The UK in a Changing Europe programme has published a blog post from me on migrant labour and agriculture in which I call for a new version of the SAWS programme after Brexit: Migrant labour

Friday, February 10, 2017

No priority at all?

According to a leaked report in The Times today, the Government has divided sectors of the economy into high, medium and low priority for the Brexit negotiations.

As one might expect, pharmaceuticals, motor vehicles, aerospace and air transport get high priority, along with (rather more surprising) textiles and clothing. Fisheries gets into the medium priority list. But in this leaked list, agriculture and food processing don't get mentioned at all.

That is a concern when agriculture could be the sector economically damaged by Brexit through a combination of the loss of subsidies and the removal of tariff protection.

Tuesday, February 07, 2017

What form of pesticide regulation after Brexit?

This is one of the many complexities to be faced after Brexit and fortunately the ADHB has produced an excellent guide to the subject authored by Sarah Barker and John Knight: Horizon study

After the referendum, I heard that some arable farmers had voted for Brexít because of restrictive pesticide regulations. However, this study concludes: 'The regulatory burden might not be reduced as much as farmers hope and in any event would probably take a number of years to achieve. It is also likely that environmental, consumer and public health lobbies will continue to be influential and to exert pressure for more stringent regulation'.

The report sets out four options. Aligning with the EU would be relatively straightforward, provided it was accepted by the EU. The precautionary principle would continue, but the UK would have no influence over the approval process which might become more restrictive with the remaining EU members.

Aligning with the US has found favour in some quarters because of the use of a risk-based approach there. More actives and products would become available to the UK industry and more biologicals would be available [the US has been particularly innovative in this area]. However, there might be a pressure group reaction to a more permissive regime and climatic differences may mean that US actives are less suitable for use in the UK, particularly for niche crops.

Adopting OECD standards, which use a risk-based approach, might work in the future but there are major challenges in obtaining efficient collaboration between multiple governments.

The UK could have its own policy which would give it full control of the approvals process. It could adopt a low-risk approach and it might be possible to speed up the approval of biopesticides. However, the registration and use of pesticides would have to be acceptable to trading partners. The UK may be seen as too small a market for companies to go to the expense of registering products for approval, leading to fewer actives being available.

In other words, there is no ideal solution, although a UK policy might be seen as politically compatible with hard Brexit.