Wales must develop a 'farming plus' policy post Brexit to ensure a sustainable agriculture argues Professor Terry Marsden: Post Brexit Farming Model
He concludes, 'Developing a reinvigorated and branded quality agri-food strategy, based on a more diverse set of farming practices, thus becomes a critical element of the post-Brexit approach in Wales.'
The British Retail Consortium has warned that there will be food supply issues in the event of a 'cliff edge' Brexit: Food supply issues
The retail organisation warns: '[The] supply chain is fragile. Failure to reach a Brexit deal – the cliff edge scenario – will mean new border controls and multiple "non-tariff barriers" through regulatory checks, creating delays, waste and failed deliveries.'
'This could lead to dramatic consequences, with food rotting at ports, reducing choice and quality for UK consumers. It could also lead to higher prices as the cost of importing goods from the EU increases.'
Defra has moved away from capping Basic Payments to farmers as they are phased out. However, in its consultation paper on post Brexit policy, the Scottish Government suggests capping payments at £25,000 a farm. This would affect 5,000 farm businesses and raise £140m. An alternative option would see payments capped at £200,000, affecting just 50 farm businesses and raising only £4m.
Money raised would be used to support new entrants to farming and smaller businesses, although there is scant detail on how this would be achieved.
The Trump administration is looking into ways of offsetting the financial losses American farmers have suffered from its trade battle with China. Beijing is set to raise duties by 25 percentage points on Friday on $34bn of US goods in retaliation for new American tariffs. Among the biggest targets are soyabeans, the largest agricultural export to China.
The threat has pushed the US soyabean price below $9 a bushel, an unprofitable price for many farms. Last week, futures slid a further 4 per cent.
Consideration is being given to using the Commodity Credit Corporation set up in 1935 by President Roosevelt. It has $30bn in borrowing authority from the Treasury and latitude in how its funds are spent. Congress in March broadened its authority by lifting curbs on its authority to support crop prices and remove commodity surpluses.
Farm groups have set to head off President Trump's aggressive trade tactics against China, Mexico, Canada and the EU without success. There is concern that in the lomg run tariffs could lead to more land being converted to soyabeans in Brazil.
The US has amassed the large stockpile of cheese since records began 100 years ago. If gathered together. the different varieties of cheese would weigh 630 million kilograms and occupy roughly the same amount of space as the Capitol building in Washington DC.
Stocks have increased because processors have more milk than they can cope with, and it is easily stored as cheese. Milk production has reached record levels thanks to selective breeding and consolidation in the agriculture industry, but consumption has fallen as consumers have embraced non-dairy alternatives such as almond milk. The average American now drinks 18 gallons of milk a year, barely half of what they drunk in the 1970s.
In 2016 the US agriculture department bought more than 40 million kg of cheese to reduce a surplus that was 16 per cent smaller than the current one.
When the EU had extensive intervention buying, cheese was not included with one or two minor exceptions.
Animal welfare standards are at risk after Brexit according to a report from the Food Research Collaboration at City University: Low standard imports
Just as England's NFU has a woman leader for the first time, so does France's leading farm lobby, the FNSEA. Christiane Lambert, a 56-year old pig farmer, does not hold back in giving it large to President Macron. She says that his image is as a president of the cities who had no idea how farmers lived and worked.
She thinks that French farmers stand to lose €5bn over the next budgetary period if cuts in the CAP budget are confirmed. She thinks that Macron is dithering over the issue. Last year the number of farm bankruptcies in France rose by seven per cent.
More competitive countries such as Germany and the Netherlands have pushed down the prices of beef. dairy and pork products and gained market share abroad. Ms Lambert thinks that labour intensive farming activities have suffered from distorted competition from German producers who employ cheap labour from Bulgaria and Romania.
French farmers are resorting to their usual direct action tactics, planning to block 13 oil refineries tomorrow. The farmers are protesting against imports of palm oil to make biofuels.
The House of Commons Defra Committee has produced a report in response to the Government's consultation on the future of agriculture: Report
It states, 'The evidence from a range of agricultural businesses indicates that their sectors will face significant impacts from the proposed withdrawal of Direct Payments. The level of impact will vary by sector as the economics of each are so different. There are likely to be particularly damaging effects on grazing livestock, cereal and mixed farms and the withdrawal of support and any subsequent closures of businesses could have wide reaching impacts on the rural economy and its communities. As in our Brexit: Trade in Food report, we were disappointed that these impacts have not been thoroughly assessed by Defra on a sector-by-sector basis, to then inform future agricultural policy.'
The report notes, 'The consultation paper lacks discussion of wider food policy and has failed to link agricultural policy to wider public health goals and reducing diet-related diseases. Healthy food makes a wider contribution to public health, which is in the public good and we recommend it should be supported as such under the new model of awarding payments to farmers.'
The Defra consultation on a future domestic agricultural policy received 44,000 responses, among them that from the Farmer-Scientist Network of the Yorkshire Agricultural Society which you can read here: Consultation response
I think that we submitted particularly strong sections on public goods, international trade and animal welfare.
The House of Lords European Committee has published a report on Brexit: Food Prices and Availability: Food Prices
The report finds: 'If an agreement [with the EU] cannot be negotiated, Brexit is likely to result in an average tariff on food imports of 22%. While this would not equate to a 22% increase in food prices for consumers, there can be no doubt that prices paid at the checkout would rise. To counteract this the Government could cut tariffs on all food imports, EU and non-EU, but this would pose a serious risk of undermining UK food producers who could not compete on price.'
'At least as significant as tariffs are the non-tariff barriers that may result from Brexit. The Government remains confident that it can secure an agreement that would allow ‘frictionless’ imports of food from the EU to continue, but it is unclear how that would be possible outside of the customs union. Any such agreement would be likely to require the UK to mirror all EU standards and regulations; a condition the UK Government may find politically difficult to accept.'
'If no agreement is reached, and food imports from the EU are subject to the same customs and border checks as non-EU imports, the UK does not have the staff, IT systems or physical infrastructure to meet that increased demand. Any resulting delays could choke the UK’s ports and threaten the availability of some food products for UK consumers. The Government’s proposed alternative is to allow EU imports through with no, or very few, checks: this raises safety concerns as well as questions over how customs charges would be processed.'
'As well as securing a deal with the EU that will allow continued tariff-free, frictionless imports of food, the Government must also secure agreements with the non-EU countries from which the UK currently imports food as part of EU trade agreements. 40 such agreements are currently in place, covering 56 countries and accounting for more than 11% of UK food imports. The Government’s belief that most can be simply and easily ‘rolled over’ is not shared by those who have given evidence to previous EU Committee inquiries.'
The report concludes, 'The Government should develop a comprehensive food security policy for the UK. A long-term view is needed on whether to prioritise food standards or food prices, whether to reverse the UK’s declining self-sufficiency or increase imports. Other factors should include workforce shortages, priorities for investment, and bigger, global issues such as the impact of climate change on food production worldwide.'
The European Commission's proposals for the 2021-27 EU budget suggest a 5 per cent cut in CAP funding. (Some analysts think that the cut is actually bigger). Direct payments would be reduced by four per cent and Pillar 2 payments would take a fifteen per cent hit: Budget cut
Payments to farmers would be capped at €60,000. This is at the lower end of the €60,000-€100,000 spectrum suggested in the original communication on the CAP last autumn. The relatively low capping figure favoured by the Commission will reassure UK farmers concerned about being put at a competitive disadvantage by the reduction of direct payments after Brexit.
The Basic Payment Scheme will be renamed the 'Basic Income Support Scheme'. This is the first time the EU has explicitly identified area payments as being for the purpose of income support. It is an inefficient means of supporting income as the relationship between farm size and household income is far from straightforward.
A report from a House of Commons Select Committee on Business, Energy and Industrial Strategy highlights some of the risks that the processed food and drink sector faces after Brexit.
'The processed food and drink sector is the largest manufacturing sector in the UK and contributes £28.8 billion to the economy. Exports were worth £22 billion in 2017 and they continue to grow. The sector directly employs 400,000 people throughout the country, a third of whom are EU nationals. It is characterised by just-in-time delivery of products with short shelf lives and is heavily integrated with supply chains spread across the UK and the EU for sourcing raw materials, processing goods and selling them. Many manufacturers have factories in both the UK and the rest of the EU.
The success of the UK processed food and drink sector has been so far highly dependent on participation in the Single Market and Customs Union: free movement of goods and people have tipped the UK export balance towards an over reliance on the EU as a trading partner with 60 per cent of UK exports going to EU markets. 50 per cent of total UK food and drink exports go to five countries, four of which are EU member states.
It is crucial that the sector is able to remain competitive when we leave the European Union as failure to do so would not only impact businesses and workers but also consumers at the till point and the choice available to them in shopping aisles all year round.
The sector would undeniably suffer from reverting to WTO tariffs in the event of a ‘no deal’ scenario. The EU’s Most Favoured Nation tariffs under WTO rules would be disastrous for UK exports and must be avoided at all cost. It is unrealistic to expect that the sector will stop relying on the EU as its main export destination at least in the short term. Consequently, the negotiation of a free trade agreement with the EU should be the number one priority for the Government. Should the UK lower or remove its tariffs on imports in the future, the consequences for British farming could be extremely damaging and the positive impact on prices for goods to households is likely to be very limited.
UK competitiveness would also be adversely affected by any additional delays and bureaucracy encountered at the UK-EU border, given the prevalence of cross-border just-in-time supply chains in the sector. The Government should seek to secure as few additional impediments to trade between the UK and the EU as can be negotiated. Frictions at the border between Ireland and the UK are of particular concern as the sector is highly integrated across the two countries. A credible solution to avoiding a hard border must be found as soon as possible.
The EU regulatory regime in food and drink is also highly integrated, and the UK is a full member of the European Food Safety Authority (EFSA). EU food regulation is associated with high safety and quality standards and already allows divergence. The majority of the evidence was in favour of remaining aligned with EU regulation as it is favourable to exports amongst other things but some opportunities from divergence were identified in a few sectors. Nevertheless, all were unanimous in rejecting any ‘race to the bottom’ as UK consumers would not tolerate any lowering of standards. Most stakeholders also supported the UK continuing its membership of EFSA after Brexit.'
The full report can be found here: Report
At last week's Agricultural Economics Society meeting, Jonathan Brooks of the OECD convened a panel on the links between agricultural market prospects and policy challenges at the global, European and UK levels.
At the global level, food prices increased sharply in 2007-8, sparking fears about food security as well as about the earth's capacity to produce enough food for a growing and increasingly wealthy population.
World population growth is slowing. The growth in consumption has halved over the last ten years and is not coming from per capita income growth with the exception of Africa. This pattern is different for dairy, sugar and vegetable oils. India is driving dairy demand. Cereal demand is driven by animal feed.
Since 2007-8, world agricultural markets have stabilised, with prices of most commodities well below the peaks of a decade ago. The return to lower prices has led to resurgent demands for agricultural protection, with several large emerging economies now adopting policies previously pursued by high income countries. PSE levels have increased in those countries.
Markets also remain vulnerable to periodic shocks, and many countries have sought to find ways of managing the risks such shocks pose to both producers and consumers, often via policies that may have a significant impact on world markets (such as public stockholding).
Over the next ten years, the demand for most agricultural commodities is projected to slow. This will provide relief to the supply side challenge of feeding a rising world population and provide greater room for policy makers to focus on the parallel requirements of using the world's resources sustainably and making an effective contribution to climate change mitigation.
One interesting point was that a small number of countries dominate the production of particular commodities which does lend some reinforcement to food security arguments. Russia and Ukraine are increasingly important in world grain trade, but could withdraw exports to protect domestic markets in conditions of tight supply.
One of the most interesting panels I attended at the Society of Agricultural Economists conference at the University of Warwick was on what, if anything, we could learn from the reforms in New Zealand, often held up as an example of the benefits to be obtained from a radical eradication of subsidies. Interestingly, the position first taken in the discussion was that the experiences were so different in terms of geography, the prevalence of cooperatives, the timing and form of subsidies etc. that little could be learnt. However, as the discussion progressed, some lessons were extracted.
It is important to understand the context in which reforms took place. New Zealand was suffering from fixed exchange rates, the Think Big energy projects and high inflation, leading to a fiscal crisis. The subsidies were in place for a relatively short time and were also offered to manufacturing to offset the effects of a high exchange rate. Capitalisation into asset prices did not have the same impact as elsewhere.
For a long time New Zealand agriculture enjoyed preferential access to UK markets at guaranteed prices, but in the 1960s commodity prices fell. There were some really sad cases among farmers, but not that many went bankrupt. Because most farms were family farms, some use was made of unpaid labour.
New Zealand had first mover advantage with exports to China, but failed to follow through on that and let others capture market share. Hence, the first mover advantage was squandered.
New Zealand had 67.8m sheep in 1985 and 29.1m in 2015. The dairy herd has expanded, particularly on the Canterbury Plains, but this has led to concern about environmental impacts in terms of climate change and water pollution.
It was pointed out that the structure of cooperatives allowed the rapid transmission of intelligence from external markets to producers.
Some specific mitigation measures were provided. For example, although subsidies on interest payments were withdrawn, the actual payments were kept at the same level. There was also help with farm business plans.
The UK should aim for value added growth, but what sorts of policies did this imply? One approach might be to enhance the knowledge base.
Tim Lang and his colleagues have produced an important briefing paper on the issues that arise from Brexit for food in Northern Ireland: The critical issues
They argue, 'Food is central to the economy of Northern Ireland, and the continuing supply of safe, high quality, healthy food is currently dependent on the absence of border controls between Northern Ireland, the Republic of Ireland, Great Britain and the rest of the European Union. Hundreds of thousands of tonnes of food criss-cross these borders every year. They are currently free from inspection because of shared, underpinning EU Single Market regulation. An unplanned or mishandled food border imposition is likely to have powerful, destabilising consequences for the integrated nature of food supply, trade and access within Northern Ireland for many years to come. It would raise important challenges for food safety, put jobs at risk, potentially constrain Northern Ireland’s access to health-supporting foods such as fruit and vegetables, and create opportunities for food fraud and crime.'
They rightly rule out technological fixes for which specific details have never been provided.
The Institute for Government has issued a report on relations with the devolved administrations after Brexit which focuses on agriculture as one of the areas in which key decisions will need to be made. Some of the main points are reproduced below. The report as a whole can be accessed at: Devolution after Brexit
In particular, how can funding be distributed? Option one would be to use the Barnett formula, which would give greater flexibility to the devolved administrations, but leave devolved budgets more vulnerable to UK government cuts.
Distributing this funding through the Barnett formula would mean that the future level of agricultural funding available for the devolved administrations would be tied to policy decisions made by the UK government. While the devolved administrations would gain greater day-to-day control over how their budget is spent, they would run the risk of their budgets being squeezed in the event the UK government chose to cut the English agriculture budget.
Option two: The UK could decide to create a ring-fenced agricultural support budget, which would be the least change to the current arrangement An alternative approach would be for the UK to establish a new agricultural support budget, protected and separated from the wider devolution budget settlement and ‘block grant’.
The initial distribution would likely reflect the current split through CAP and these levels would be maintained until 2022; reflecting Michael Gove’s commitment to match-fund agricultural support payments. After that, there would need to be an agreement on how the budget was agreed for future years.
The Barnett formula would be one option, but the creation of a new, separate budget is an opportunity to take a different approach. A new budget could allow the governments to create a new funding mechanism, taking into account some of the criticisms of Barnett. The budget could be negotiated periodically, formally and at a four-nation level, as part of the UK government’s spending review.
A ring-fenced agricultural budget for each nation would offer a greater guarantee to farmers in the devolved nations, with funding levels set for a specific period of time. It would protect them against money being reallocated to other policy priorities. A ring fenced budget would also make the UK rather than the devolved governments responsible for resolving the difficult trade-offs between agriculture and other policy areas. Ultimately, from the devolved administrations’ perspective, agreeing to this type of budget could be a missed opportunity for greater autonomy in spending decisions, preventing them from making their own decisions around policy priorities and funding.
An important first step will be reaching consensus on what the UK ‘internal market’ is, and where divergence becomes market distortion. Just as the EU’s single market contains provisions to ensure a ‘level playing field’, the UK Government and the devolved administrations will need to consider what a UK level playing field should look like.
Today I attended a Defra consultation meeting on the agriculture and food green paper in Harrogate. There was a good attendance of over eighty people,including a large contingent of farmers.
Defra personnel insisted that 'nothing was set in stone', but they also said that the secretary of state had set a very clear direction of travel.
The clear view of farmers in the direct payments breakout session was that they wanted an across the board reduction in support, i.e., no capping.
There did seem to be a hankering for the world of the 1947 Agriculture Act. In particular, deficiency payments were mentioned. However, the Treasury would never endorse them as the spend is so variable.
I am not convinced that all the money saved by capping will be transferred to new farm schemes. Many of these schemes may not be accessible to all farmers, so the idea that any money lost in direct payments will be compensated elsewhere is optimistic.
It was argued that the figures that showed a high level of dependency in support payments were too optimistic, i.e., the level of reliance was even greater.
It was evident in a discussion on knowledge transfer that many farmers were benefiting from small self-help groups where they could see new methods tried out in practice. However, it was probably the more efficient farmers that were making use of these arrangements.
Above all, a great deal of uncertainty prevailed given that we do not know the shape of any trade deal with the EU and third countries.
The Landworkers' Alliance has issued a report arguing that fruit and vegetable production should be boosted after Brexit: New deal for horticulture
It argues that directing more of the budget towards fruit and vegetables will deliver much of what Mr Gove wants in terms of health and sustainability.
However, it is already difficult to secure labour to pick such crops. Google searches by Romanian, Bulgarian and Polish citizens looking for agricultural jobs in the UK dropped by 34 per cent in the past year, according to a study by GK Strategy and OneFourZero.
The fall in interest from overseas has not been matched by an increase in searches from UK workers for UK farm jobs. Bulgaria saw the largest drop, with 2,000 fewer searches for UK jobs in January 2017 compared with the same time the year before.
The two companies said Google search data was a good early indicator of changing behaviour patterns because people increasingly looked online for job vacancies.
The UK agricultural sector already has a 29 per cent shortfall in seasonal workers. The Government has so far failed to introduce any kind of special scheme.
The RSPCA has published a report Into the Fold discussing how animal welfare could be supported as a public good justifying taxpayer support. It suggests a two tier system that limits support to those who go 'above and beyond' the minimum in animal welfare: RSPCA proposals
The RSPCA argues that producers should not be rewarded for 'business as usual' or for being legally compliant. Tier one would be a transitional payment awarded to producers for things such as improving buildings, better stocksmanship or to compensate for higher running costs.
Tier two payments would be awarded to members of a higher welfare assurance scheme, such as RSPCA Assured, covering the whole life of the animal.
The report gives some examples of payments that could be made to farmers and how much they would cost. For example, allowing all pigs access to straw might cost £70 a weaner and would amount to £20m if 25 per cent of the national herd not currently weaned on straw were to take up the support.
Implementing a veterinary plan to cut lameness in sheep might cost £10 a ewe, giving a total bill of £89m annually based on a 25 per cent uptake of flocks not currently covered by RSPCA standards.
These are quite substantial sums given the amount that would be released by 'capping' payments to larger farms and the fact that there will be other claims on that money.
Defra gets the second largest additional sum of any department (after the Home Office) to prepare for Brexit, an additional £310m. About 80 per cent of its work is affected by Brexit, given that its main task in the past was to seek to influence EU policy and implement directives It needs to develop new systems for agricultural policy, fisheries management and environmental protection. In particular it needs to develop the Government's rather vague green paper on food and farming into a set of viable policy instruments.
Staff will be boosted by 65 per cent. Of course, in the interim, many experienced staff have been lost. Under New Labour I had a period of secondment with the animal welfare team, and I was impressed by the way they integrated veterinary expertise with more generalist skills. But, like the rest of Defra, they were subsequently hollowed out.
Stakeholders such as the NFU will be giving evidence to the House of Commons Defra committee about the department this morning. It will be interesting to hear what they have to say. The initial discussion seems to be about farm policy rather than Defra's capabilities, but I will watch some more later.
As Brexiteers point to the sunlit uplands, they draw attention to the way in which New Zealand agriculture has flourished since the withdrawal of subsidies. A number of caveats are necessary. The original measures were accompanied by a devaluation of the New Zealand dollar and an end to restrictive practices in ports. Even so, some farmers did take a big hit and went out of business.
What strikes me today about the New Zealand economy today is how dependant it is on exports of dairy products and in turn how important the Chinese market is. Admittedly, the share of dairy products in exports peaked a couple of years ago at 35 per cent and has dropped to just under 30 per cent, but that is still a heavy reliance on one set of products. New Zealand does, of course, have an ideal climate for dairying, although there are environmental concerns about levels of water abstraction for irrigation and the pollution resulting from intensive dairy farming: Green image threatened .
The co-operative Fonterra is New Zealand's largest company and the world's biggest dairy exporter. It supplies almost a quarter of New Zealand's exports. China is its biggest customer, consuming a quarter of the milk produced by Fonterra farms.
It will be recalled that in 2008 Sanlu, in which Fonterra held a 45 per cent stake, was involved in a scandal involving infant feeding power which led to the deaths of six babies and left tens of thousands and others in hospital. The Chinese authorities did not hold back and executed two of those involved and jailed others. The scandal helped overseas companies dominate China's powdered milk market. Foreign brands account for about three quarters of powdered milk sales in China - worth $19.7bn a year.
Now Fonterra has lost out in a different way through its minority stake in Chinese infant formula manufacturer Beingmate. It has lost 70 per cent of its market value in three years and has made losses in the last two years, $152.5m in the year ending December 2017. There have been problems with pricing after a clamp down on price fixing, the distribution network and the discovery of counterfeit powder by the Shanghai police which hit revenues.
Farmer members of Fonterra are getting increasingly concerned and urging the co-operative to drop the investment.
The Sunday Express once named me as one of the five hundred most influential people in Britain because I was the only person who understood the Common Agricultural Policy. This was wrong on two counts. First, I have never fully understood the CAP: I am always making new discoveries about its complexities.
Second, there are a dozen or so academics in Britain who understand the CAP better than I do from the disciplines of economics (Alan Swinbank, Alan Matthews), law (Michael Cardwell) and political science (Alan Greer). Conspiracy theorists may wish to note that three of them are called Alan: is this a derivation of 'alien'?
Sometimes the media contact me on the assumption that as I know something about the CAP, I must understand the Common Fisheries Policy as well. It is a mystery to me. I know that we have had enough of experts, but the one academic expert on the CFP that I knew has long since retired. I am aware that there are some conflicts about fishing stocks between marine biologists and fisher folk. The best short account I can find of the CFP is here: Senior European Exp**ts
What is clear is that fishermen (they are mostly male) do follow a very dangerous and demanding occupation and live in tight knit communities. They have been vociferous in their criticisms of the CFP and bringing it to an end is one of the core demands of Brexiteers who see it as an affront to British sovereignty and an area where we need to take back control.
The fact that the EU now appears to be using the CFP as a bargaining chip in the negotiation is potentially politically explosive. Continued access for EU fishing vessels to UK territorial waters in accordance with existing fishing rights is being advanced as a trade off against tariffs on agricultural products and, more importantly processed food and drink products to the EU.
But we should remember that this is a negotiation. Each side is going to push its own interests and perspectives, but ultimately there is a mutual interest in finding common ground. Hopefully.
In the latest Farmers Weekly a 'Cotswold farmer' argues that the vegan movement can be defeated by a lack of publicity. 'I would suggest that we as farmers stop trying to justify our industry and ignore the vegan militia. The press will become disinterested with no televised arguments or public squabbles, and the issue will fade from the public eye.'
I think that the issue is more fundamental as it involves moral or lifestyle choices, changing conceptions of personal identity and what constitutes a well lived life. That moral choice is in my view undermined if people are pressured to eat only particular types of food, rather than making a choice based on an assessment of the issues.
The number of vegans (people who consume no animal products, including dairy or eggs, has trebled in the last decade according to the Vegan Society but still only make up about one per cent of the population). About five per cent of people are vegetarian, but 55 per cent of meal alternatives are eaten by non-vegetarians. I prepare vegetarian food for vegetarian friends or a vegan picnic for a vegan friend.
The AHDB states that 'flexitarianism' is a bigger issue than vegans or vegetarians. 'There are more people looking to limit the amount of meat they eat.' They are concerned about health issues and the contribution of livestock farming to climate change. There is an effort to go without meat on at least one day a week (which, of course, used to be Catholic practice). Concern about animal welfare is also on the rise, particularly among younger people.
The decline in per capita meat consumption has been masked by population growth. But there should be more marketing opportunities for fruit, vegetables and pulses - if farmers can get the staff to harvest them.
Please note that the following is a press release from Pesticides Action Network Europe:
'The European Food Safety Authority (EFSA) published today [28 February] 3 reports on the new scientific findings on the toxicity of imidacloprid, thiamethoxam and clothianidin (neonicotinoids) to bees. The Authority highlights that most studies show that neonicotinoids have a negative impact on bees’ health, from damaging their orientation capacity to impairing their reproductive ability. On 24 March, the European Member States will have the possibility to vote for a ban on neonicotinoids; hopefully these reports will contribute to a total ban.In the frame of the restrictions on the use of neonicotinoids in 2013, the European Commission committed to initiate a review of the ban within 2 years. The EFSA was given a mandate to collect all available scientific evidence on the toxicity of neonicotinoids on bees. The data were then analyzed by the Authority and today, it has published an opinion on imidacloprid, thiamethoxam and clothianidin.
The Authority concludes that the majority of the studies show a negative impact to honey bees, bumble bees or wild bees. Furthermore, the Authority points at the high level of contamination of the environment as the majority of the studies could not be included in the opinions as their controls were contaminated with neonics.
Based on a November 2016 report from the EFSA, the European Commission has made a proposal to Member States to ban neonicotinoids except for glasshouses. The report at the time indicated that, based on new industry data, there was no safe use of the 3 substances. The proposal was nevertheless not put to a vote in the Standing Committee on phytopharmaceuticals as several Member States asked to wait for the publication of today’s report.
Martin Dermine, PAN Europe’s pollinators expert said: "In 2013, there was enough evidence to totally ban neonicotinoids. In the meantime, an impressive amount of additional evidence has been piling up over the last years and the EFSA reports are a small glimpse of such evidence as the EFSA limited its study to bees and to the evidence available until June 2016. EU pollinators are facing a dramatic decline and neonics have now clearly been shown to be one of the major causes. Member States have no choice but to ban neonicotinoids".
As a member of the Save The Bees Coalition, PAN Europe will be advocating, together with nearly 100 NGOs across Europe, to finally obtain a full ban on neonicotinoids.'
I do not have any reaction from farm organisations at present.
The briefing surrounding today's consultation paper on domestic agricultural policy has made it clear that direct payments will be reduced to bigger farms to free up money for other purposes. The paper sets out various ways in which this might be done which then form the basis of consultation questions. At this stage I don't want to get bogged down in the detail, but instead consider the principle.
There is no doubt this will be politically popular. Why should wealthy individuals be subsidised to farm? My sense is that most of the public have rather a sentimental view of agriculture made up of small farms. Another issue here is the vegan campaign run on social media in January. I think this was rather effective and has rattled livestock farmers who often failed to respond very effectively. But that is another story.
I also think that one of the issues here is that tax breaks encourage individuals to buy farms and farmland for tax avoidance reasons. This is a complex subject, as one does not want a tax structure that inhibits succession.
What is interesting is that the issue of competitiveness has dropped off the agenda to some extent. It appears in a form in debates over poor productivity, but they are not a central focus in the way that public goods are. Competitiveness is mentioned nine times in the document, for example in relation to the opportunities offered by new technology, and productivity forty times.
Large scale grain farmers in Northern France and Northern Germany will continue to receive CAP subsidies, albeit somewhat reduced because of the loss of the UK contribution. To over simplify, the international grain market is driven by supply and demand considerations, but price is clearly a factor. The UK needs to be very careful not to use pesticides prohibited in the EU or they may find their exports of grain blocked.
I think there is a better clarity/hierarchy of objectives in the Government's thinking that one found in the CAP. I am not against caps on subsidies. But I do think we need to be aware of the consequences.
The Government consultation document is now available with replies required by May 8th. I have not had time to analyse it yet, but hope to do so before long: Consultation
This is clearly an important stage in the evolution of a domestic agricultural policy after Brexit, although I have some scepticism about how much government is influenced by the responses submitted.
No one should underestimate President Macron's determination to modernise France, but farmers are one of the most difficult groups to deal with. They may be only three per cent of the population, but they have considerable public sympathy. British farmers have resorted to direct action from time to time, but if they blockaded roads as often as the French do, public opinion would soon turn against them.
I am no expert on France, but it does seem to me that food is absolutely integral to the national culture. Apart from perhaps Italy, there is no country where I can eat so well so consistently at reasonable prices.
I also happened to be up in the mountains the year before last when transhumance was taking place and this gave me some idea of how important farming is culturally in France. Britain is a much more urbanised nation in outlook.
Emmanuel Macron endured jeers and whistles on his first visit as president to France’s largest agricultural fair amid growing tension between his government and the country’s farmers, although earlier in the week 700 farmers have been invited to the Elysée Palace in a charm offensive. Mr Macron was confronted by hostile crowds on Saturday as he toured the showground in southern Paris, underlining the difficulties he faces in winning over France’s powerful agricultural lobby, which has been angered by EU trade talks and Chinese land purchases. Last year the acquisition of 900 hectares of farmland in Allier and 1,700 hectares in Indre by Chinese investors caused alarm.
In a tense exchange with a farmer over a weed-killer which the government has said it will ban, a visibly angry Mr Macron said he would find solutions for farmers who were unable to replace glyphosate, which is claimed to be carcinogenic. The Salon de l’Agriculture traditionally brings France’s political class into close, and often confrontational, contact with the country’s farmers. Last year, Mr Macron was hit by an egg when he visited as presidential candidate.
Macron wants farmers to move away from an over reliance on EU subsidies and to move towards less intensive production methods.
He has said that he will curb the forces of globalisation represented by Chinese land purchases. But he recognises that the EU will not have as much money for farm subsidies when Britain leaves, reducing net income by about eight per cent or some €15bn. (Sometimes I wonder if it might have been in the EU's interest to offer Dave Cameron a little more).
CAP is being eyed by Mr Macron as a French 'taboo' that needs to be revamped. 'We have come to this paradoxical situation in which the CAP has become a French taboo while our farmers continue to criticise the way it works', Mr Macron said in a speech at the Sorbonne last September.
Macron is prepared to pump in €5bn to help farmers to switch to environmentally friendly methods, find successors for their land and bring on a new generation of agricultural entrepreneurs. He wants 22 per cent of farmland to be managed organically by 2022, compared with 6.5 per cent today (ambitious in my view). He is also going to fund much needed early retirements. What he didn't seem to have much to say about were the efficient, competitive grain farmers in the Paris Basin.
As someone who has been wary of France and the French, my attitude is I admit paradoxical. I don't like their arrogance and elitism, but I would also admit their étatisme has brought some remarkable achievements. In a way I think they are most effective when they are assertive, which is why I like Macron and wish him well. But he has a tough task with the farmers.
It is generally accepted that farmers are going to face a more competitive environment after Brexit. Support payments will be lower; there may be more competition from cheap imports; exports could be disrupted.
At the very least, farmers might expect a level playing field domestically. But that has not been the case for some time. Power has moved down the food chain to retailers. They are engaged in intense competition, not least against the interlopers Aldi and Lidl. The most important element in that competition is price. So they ask farmers to produce high quality goods at the lowest possible prices.
I have been told some stories of retailer sharp practice over the years by reliable individuals that give me cause for concern. I cannot repeat them because I do not have an evidence base. Evidence is difficult to obtain because producers fear retailer reprisals.
The Groceries Code Adjudicator (GCA), sometimes referred to as the 'supermarkets ombudsman', was designed to tackle these problems. With modest resources, some progress has been made. However, in an announcement slipped out this week when other agricultural and food stories were dominant, the Government has said that it will not extend the remit of the GCA.
It suits the government to have intense competition between supermarkets which keeps down food prices. But farmers are left as price takers.
The letter from the minister to the chair of the Defra committee can be found here: Adjudicator
The House of Commons Defra Committee has issued a critical report on this topic: Brexit and food
It states, 'The Government has offered no clarity to the agricultural industry on its post-Brexit policy. The Government must offer this clarity and stability so that the industry has the confidence to invest and take advantage of the opportunities offered to the sector post-Brexit. We would like to see the Government offer policies that would stimulate home grown food production.'
'The UK has an international reputation for high animal welfare, environmental and food standards. These must not be sacrificed on the altar of cheap imports. Doing so could undermine the premium British brand and might affect our ability to negotiate trade deals with other countries. We will hold the Secretary of State to his assurances that there will be no compromise on animal welfare, environmental and food standards.'
'The Government must make it clear to industry how it intends to deal with potential regulatory divergence with the EU, and the mechanisms it will put in place to track divergence in the future.'
As a divided Government has difficulty in deciding what its policy should be on Brexit generally, I am doubtful that clarification will be forthcoming.
Sir James Dyson has written to the Spectator in response to an article that said that subsidies 'absurdly' favour bigger farms.
He writes: 'My family's farming business, Beeswax Dyson Farming, farms 33,000 acres directly and has invested £75m in technology, training, soil improvement and environmental stewardship over the past five years. Subsidies we receive go directly into the activities they are designed to support but are dwarfed by our own investments.'
'If Britain wants an internationally competitive agricultural sector, rather than a domestic theme park, we must encourage investment in innovation and stewardship. Removing subsidies from efficient farms simply because they are large would remove their incentive to invest at scale. This will hurt the farming economy as we become increasingly uncompetitive against our EU counterparts.'
The 'big farms bad, small farm good' orthodoxy does need to be challenged. It is also important to raise the issue of international competitiveness which is rarely mentioned in discussion of the future of UK farm policy. Post-Brexit, UK farmers will be competing against farmers on the near continent still receiving CAP subsidies.
However, when one pays out blanket subsidies, there is no means of tracking or ensuring that they are used for investment rather than consumption. Sir James evidently does use them for investment, but this cannot be guaranteed.
The NFU's director of strategy Martin Haworth told a Euractiv seminar in London: 'We need to explore the markets in China and the United Arab Emirates, but the chance of these replacing the EU market is remote. Without regulatory alignment, the costs (of accessing the EU market) could be really high.'
Tom Hind, director of strategy at the AHDB emphasised the importance of investing in the agricultural sector, noting that 'Brexit or no Brexit, productivity will have to be addressed as the imperative facing our industry.' The sector is currently ineffective in 'translating innovation into practice. The sector needs to seize the current opportunity presented [by Gove] to enable us to be more competitive and maintain market share.'
The views put forward by a range of industry leaders at the seminar can be found here: Invest to competeIn this short video speakers emphasise their key points, Martin Haworth noting that Michael Gove speaks only about public goods and environmental payments and nothing else: Video highlights
Farmers need financial guarantees from government post Brexit if a decimated industry is to be avoided, argues former Labour agriculture minister Lord Rooker: Need to avoid Brexit cliff edge
He said that there was no sign of the promised agriculture bill and no indication of what might be in it. [It looks as if the first step will be a white paper and a period of consultation].
My latest reflections after Michael Gove's Oxford speech: The future of farm policy after Brexit
The AHDB has produced a Horizon report on the productivity challenge facing UK farming: Driving Productivity
British farmers are falling behind their competitors in terms of productivity. For example, the USA and the Netherlands have raised their annual agricultural productivity by 3.2 per cent and 3.5 per cent respectively in recent years, while the UK has been limping along at 0.9 per cent.
The report argues that spending on research and development is heavily skewed towards 'blue sky' rather than 'near market' research and is heavily fragmented. There is also a lack of training with British farmers under investing in their skill base.
It's an argument we've made before, but this is a good blog article by Richard Byrne at Harper Adams pointing out that the migrant labour crisis is already here and cannot be solved in the short term by agri tech: Migrant labour shortage
Irish beef producers have not been reassured by Theresa May's pledge that cross-border trade would continue uninterrupted after Brexit. The promise of regulatory alignment was essentially a fudge that got round an awkward issue and allowed talks to proceed to the next stage. It was kept vague for political reasons.
Ireland's beef exports to the UK are worth €4.4bn a year. The largest groups have operations in the Irish Republic, Northern Ireland and mainland Britain.
Beef exporters remain concerned that the UK might yet seek to enforce different food safety and animal health rules to the EU. They fear delays when exporting to the UK; disruption to meat shipments to continental Europe via Britain; and the prospect of having to compete with cheaper imports from the likes of Brazil.
There is a concern that without full regulatory alignment, the UK could take imports from the US, Brazil and Australia - countries with different food safety and animal welfare standards to the UK.
Farm subsidies will stay at their current levels (presumably without an inflation adjustment) for five years after Brexit, Michael Gove will announce today: Farm subsidies
After 2024 they will be replaced by a new system designed to secure environmental outcomes and support rural infrastructure. There is also reference to giving greater access to the countryside which may worry livestock farmers who already have problems with out of control dogs.
The extension of subsidies represents a considerable victory for the NFU and gives farmers more time to plan for the future. The downside is that it may lead them to delaying necessary adjustments to their businesses to prepare for a life without existing blanket support payments. It will create something of a 'cliff edge' in 2024. I have always been an advocate of tapering payments to facilitate adjustment.
The largest landowners may have their payments capped before 2024. The government has yet to make a decision on the cap, but it could be implemented using a sliding scale with the 3,500 farmers who receive more than £100,000 each annually getting a lower amount per hectare above a certain number of hectares.
Mr Gove is expected to tell the Oxford Farming Conference today: 'Paying landowners for the amount of agricultural land they have is unjust, unfair and drives perverse outcomes. It gives the most from the public purse to those who have the most private wealth.'
Mr Gove hopes that the UK will leave the CAP when Brexit happens in March 2019. Whether the UK remains a member of the CAP during the transition period is still a matter for negotiation. but most officials in London and Brussels believe that Britain will still be a member for a period of time after Brexit.
There have been a considerable number of reports on Brexit and the agri-food sector and Birmingham Food Council has compiled a list of them with links: Brexit reports
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
I return to this issue in a contribution to the LSE Brexit blog: The migrant labour dilemma
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:
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?
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.'
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.
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
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.
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.
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:
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 Ãn 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.
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.
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.
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.
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:
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.
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.
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
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.
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
