Panel to look at farm funding across UK after Brexit

The question of how farm funding should be divided up across the UK after Brexit has been a thorny political issue, not least because the Scottish Government in particular has been concerned about a loss of powers. It also has an ambition to continue some form of basic payment after Brexit, although that would depend on funding being available (the Welsh Government does not intend to maintain a form of basic payment).

The Government has appointed an independent panel chaired by Lord Bew to review the issue: Fair funding for farmers. Each of the devolved administrations will be represented on the panel.

It is also stated that the intention is not to maintain the Barnett formula in relation to agricultural spending after the end of the lifetime of the current Parliament.

Under the present distribution of funding, Northern Ireland does best on both a per capita and a per hectare basis: Funding for farming across the home nations

Agriculture Bill lacks clarity

The House of Commons Environment, Food and Rural Affairs Committee’s Scrutiny of the Agriculture Bill report is calling on the Government to ensure imported food products are held to current British standards as part of any future trade deal. The inquiry was launched alongside the Agriculture Bill, which was introduced in the House of Commons in September 2018 and examines the provisions that will be needed in the agricultural industry following the United Kingdom’s exit from the European Union.

Due to the inquiry running parallel to the Bill, the Committee focused on three key areas of the Bill, including future trade deals. The Committee is calling on the Government to ‘put its money where its mouth is’ and accept its amendment to the Agriculture Bill regarding trade. The amendment stipulates that food products imported as part of any future trade deal should meet or exceed British standards relating to production, animal welfare and the environment.

The other two key areas prioritised by this Report are the transition from the EU Common Agricultural Policy (CAP) to a new system based on public money for public goods and fairness in the supply chain The Committee recommended that there should be a multi-annual financial framework to provide a long-term commitment to agriculture. The Committee also concluded that the Groceries Code Adjudicator should oversee the proposed fair dealing obligations for first purchasers of agricultural products, rather than the Rural Payments Agency.

Given the importance of this Bill in shaping UK agriculture in the future, the Committee expressed disappointment that it was not given the chance to scrutinise the Bill pre-legislatively. This unsatisfactory precedent has been swiftly followed by the publication of the Fisheries Bill.

Neil Parish MP, the Chair of the Environment, Food and Rural Affairs Committee, said: 'The United Kingdom currently has exceptionally high environmental and food standards and an internationally recognised approach to animal welfare. This legacy cannot be ripped apart by the introduction of cheap, low-quality goods following our exit from the European Union. Imports produced to lower standards than ours pose a very real threat to UK agriculture. Without sufficient safeguards we could see British farmers significantly undermined while turning a blind eye to environmental degradation and poor animal welfare standards abroad.

This Bill lacks clarity and gives any future Secretary of State the opportunity to avoid scrutiny and make crucial decisions while going somewhat unchallenged. We would like to see sufficient opportunities for parliamentary scrutiny before any new systems or policies are rolled out.

The report can be found here: Defra committee report

The scale of Italian food fraud

The very complexity of the Common Agricultural Policy provides opportunities for fraudsters. One recalls that a British farmer claimed for fields which turned out to be in mid-Atlantic. A herd of cows was supposedly living on the upper floors of an office block in Rome. Italy has been particularly prone to systemic fraud involving organised criminals.

According to the Rome-based think tank, the Observatory of Crime in Agriculture and the Food Chain, the Mafia have infiltrated the entire food chain. The value of the so-called agromafia business has almost doubled from €12.5bn in 2011 to more than €22bn in 2018 (growing at an average of 10 per cent a year) according to the Observatory. It now accounts for 15 per cent of total estimated Mafia turnover.

According to a recent article in the FT Weekend Magazine 'the cartels have developed white collar expertise in infiltrating the local councils and committees that award tenders and subsidies.' A Mafia family could claim about €1m a year in EU subsidies on 1,000 hectares, while leasing it for as little as €37,000.

In part the Mafia's interest in land deals stemmed from lower earnings from its drugs business and a drop in public money for public works contracts. With margins as high as 700 per cent, profits from olive oil can be higher than those from cocaine and with less risk. According to police, about 50 per cent of all extra-virgin olive oil sold in Italy is adulterated with cheap, poor quality olive oil.

Counterfeited organic food also offers the opportunity for big profits. Italian gangs were discovered importing wheat from Romania and labelling it as organic, which commands a price three to four times higher.

Apart from the opportunities to make money, the move into food also reflected the organisations's growing propensity to enter legitimate businesses. Of course, laundering profits in this way is not a new tactic.

However, there has been a crackdown. Even the smallest leaseholders have to pass police checks, enforced retrospectively, and there have been numerous confiscations of land. Specialist police tasters work to uncover adulterated foods, especially in olive oil.

CAP reform plans fall short

This is not the first time the Court of Auditors has criticised the CAP and it probably won't be the last, given that its findings are generally politely brushed aside: Plans fall short

It is argued that 'The proposed reform of the Common Agricultural Policy after 2020 falls short of the EU’s ambitions for a greener and more robust performance-based approach. The auditors identify a number of other issues with the proposal, notably in terms of accountability.'

The auditors note that many of the proposed policy options are very similar to the current CAP. In particular, the largest part of the budget would continue to be direct payments to farmers, based on a given amount of hectares of land owned or used. However, this instrument is not appropriate for addressing many environmental concerns, nor is it the most efficient way of supporting viable income.

Why operating under WTO rules is not simple

The nature of WTO negotiations is changing, argued Professor Fiona Smith in her inaugural lecture at Leeds Law School last night. The agricultural trade specialist said that diplomatic negotiations were replacing regulation, although it was a messy process, but one that would mean a less central role for lawyers and technocrats. Diplomacy and regulation were in tension in some ways. That tension could be creative, but it could also be destructive.

Without regulation, the strongest and richest could get the best deal. The WTO had been far from ideal for least developed and developing countries, but what had gone before had been worse. For agriculture trade would effectively cease under a hard 'no deal' Brexit.

Professor Smith reminded us of the complexity of WTO rules, 30,000 pages of them and a 500 page handbook. Brexit was not something that WTO rules had been designed for, a country leaving a regional trade arrangement. There was more to trade than goods and services. The trade regime covered subsidies, quality agreements and the environment.

The question of whether the UK was a WTO member had in a sense been resolved, but its schedule of commitments had been absorbed in those of the European Community in 1973. The UK did not have the benefit of an accession treaty, She noted that the UK did now have its own representative in Geneva who was actively attending meetings, although what the UK's stance would be on various issues was unclear.

It was evident from her remarks that following WTO rules was not the simple matter that it was claimed to be. One might add that this is why countries around the world enhance them with regional trade agreements, not least the super regionals like the EU. WTO rules do not accommodate someone leaving a regional trade agreement.

Brexit could push up fruit and vegetable prices

Some of the claims made in relation to Brexit do seem to be exaggerated, particularly when one considers that we do not know what the final settlement will be (my best guess is that the EU and the UK will reach a deal and it will get through the House of Commons with the support of Labour dissidents).

However, this article suggests that higher fruit and vegetable prices could lead to a large number of early deaths: 5,600 deaths a year

Indeed, the article admits: 'Analysing the potential implications of Brexit is a tricky business. The concrete details of Brexit remain unclear. Proposals range from various forms of “soft Brexit” that include a new trade agreement with the EU, to a “hard Brexit” in which the UK falls back on the (higher) tariffs set out by the World Trade Organization.'

What is needed is for domestic policy to have a greater focus on growing fruit and vegetables, both for health reasons and to respond to the greater number of consumers who are vegetarians and vegans. That is lacking in current proposals.

RSA report on food, farming and the countryside

Reports on food and farming keep appearing. The latest is from the Royal Society of Arts and this is just a halfway stage report: Our Common Ground

The basic message is that 'We cannot carry on treating our food, farming and countryside as we do currently. We are failing our citizens, our communities and our environment.'

We are almost at a point where analysis of the problems is far outpacing necessary action, but it was ever thus.

Brexit could compromise biosecurity

The House of Lords European Union Committee has produced a report on plant and animal biosecurity after Brexit: Publication

The report notes, 'The UK currently follows EU legislation on biosecurity, with decisions on implementing biosecurity measures made predominantly at an EU level. The UK also benefits from EU-wide intelligence gathering and disease notification systems, systems for tracing plant and animal movements, and coordinated research efforts. When the UK leaves the EU, it will no longer automatically be part of this framework.'

It states, 'We urge the UK Government to negotiate continued participation in as many of the EU’s notification and intelligence sharing networks as possible. We note also the significant work that remains to be done to ensure the UK has a replacement legislative framework in place, along with the monitoring, inspection and enforcement mechanisms, staff and IT systems to support it, by the time the UK leaves the EU. It seems doubtful this could all be achieved by March 2019, when it would be needed in the case of a "no deal" Brexit, potentially leaving the UK’s biosecurity compromised.'

Brexit and agriculture in Northern Ireland

A House of Commons Select Committee report has just been published on this topic: Northern Ireland

The report states, 'We are concerned that Defra’s consultation on Post-Brexit agriculture policy does not look in detail at the sector in Northern Ireland. We have also heard that there has been little direct engagement with farmers in Northern Ireland on this consultation, and consequently there has been insufficient recognition of key differences between Northern Ireland’s agriculture sector and that of other parts of the United Kingdom.'

'This is a particular concern given the absence of a Northern Ireland Executive, which means that an agricultural policy for Northern Ireland cannot be developed independently at this time.'

The report notes, 'Direct Payments are essential to the viability of much of the agriculture sector in Northern Ireland, and the level of support available to Northern Ireland farms must not be reduced following Brexit. Northern Ireland’s agricultural funding should be maintained until at least 2022.'

The report also notes, 'EU farming regulations have been frustrating for farmers, and at times counterproductive. Brexit is an opportunity to redesign farming regulation and inspection to simplify compliance and to reflect the circumstances in which Northern Ireland’s farmers operate. The Government’s ambition is to introduce smarter regulation and enforcement, but we heard that this may be easier said than done. There is also a tension between reducing regulatory burdens and maintaining the high environmental and animal welfare standards that the public expects.'

Is the UK ready for new challenges in food production?

The Financial Times yesterday had a 'Big Read' article about the transformation of food production by new technology. Like all FT articles on new technology, it's a bit 'gung ho'. It doesn't consider that many farmers may be resistant to new technology or may not have the resources to acquire it. Nevertheless, it makes some good points.

The central thrust of the article is to be found in a sentence some way down: 'Once an unfashionable backwater, agricultural technology has started to capture the imagination of investors.' It reckons that 'annual global investment in food tech, from farm management systems to robotics and mechanisation, more than tripled to $10bn' in the five years to 2017. The main areas of innovation are identified as gene editing, artificial intelligence and digital technology.

Consumer demand is, as always, of key importance. As the populations of developing companies become wealthier, they demand protein products, especially meat. The total amount of meat consumed globally is forecast to rise by 76 per cent by 2050. But, as we know, meat production is not good news for climate change (fossil fuels, methane), nor is increased red meat consumption good for health.

Coincidentally, The Economist has a big feature on the vegan trend. Veganism as such, it concluded, is a niche market, but large numbers of people who are not vegans or vegetarians are interested in healthier eating which has led to an increased demand for plant based products.

One of my concerns about Brexit was the impact of the loss of migrant labour on fruit and vegetable production in the UK. Food miles issues can be exaggerated: it makes more sense to produce tomatoes in Spain in the winter than to heat glasshouses around Littlehampton.

I am somewhat sceptical of claims made about automated picking. The FT notes, 'Given that fruits and vegetables are not of uniform shape and ripeness, the technological challenges are extensive. On top of the mechanical dexterity and spatial cognition that the machines need to demonstrate, researchers hope that AI can help them to learn to pick only the ripe fruit and vegetables.'

The FT rightly praises what is going on in the Netherlands in this area, particularly in 'Food Valley' near Wageningen University (it is, of course, as flat as a pancake). When I was doing research on biological alternatives to chemical pesticides, I was impressed by the way in which the Netherlands was ahead of the curve. As the FT notes, 'The country has made food science one of its strategic priorities and hosts one of the world's most efficient agricultural systems.'

Among the advantages that the Netherlands has is Rabobank, one of the biggest lenders to the food industry and a central location in Europe with an excellent port in Rotterdam.

The FT notes, 'Some investors believe that the food business is about to face the sort of disruption that technology has based on hosts of other industries.' Is the UK ready? Is domestic policy prepared? I doubt it.

Boost for dairy futures

Now that we no longer have devices like milk marketing boards and large scale intervention buying to manage dairy markets (both of which had big problems), there has been an interest in the deployment of novel financial instruments to help farmers cope with market fluctuations. However, you have to be quite a financially sophisticated farmer to be able to use them and they potentially working best in cooperative arrangements.

Indeed, the traditionally conservative cooperatives are now becoming more active as they look for ways to hedge against fluctuating prices. Big processors are using futures to fix their prices and the big retailers are also involved.

A total of about 20,000 tonnes of skimmed milk powder, butter and whey were traded on the EEX dairy futures market in September, the highest monthly volume on record. Skimmed milk futures were launched in 2010, but there has been a lack of liquidity.

The market is still illiquid, but analysts believe that we are at a tipping point.

Record summer temperatures across Europe affected supply. Brexit is also driving volatility in Britain and Ireland.

John Lancaster, a senior analyst at a commodity broker, told the Financial Times:'It's become more obvious to people that high volatility is not going away.'

Stakeholders prioritise outcomes over process

The Government has issued a response to the EFRA Committee report on its consultation document on domestic agricultural policy after Brexit: Response

The Government praises itself for the extent of its engagement with stakeholders on the trajectory of policy and certainly there is a lot of interest and concern from many different quarters on its future direction and content. Stakeholders are interested in outcomes not process and what those will be remains to be seen.

Defra states that, 'It is incorrect to say that there have been minimal discussions between Defra and the Treasury over the future funding of the new agricultural policy. We have been in regular contact with HMT at both ministerial and official level.'

Again it is not the regularity and level of contacts that matters, but the content of those contacts. We are now in a period where the end of austerity has been proclaimed alongside continued fiscal responsibility. The reality is that it is politically difficult for the Government to increases taxes, but it has pledged substantial new funding to the NHS before one even starts to think about, for example, the needs of the police and the prison service.

Spending on agriculture is likely to be squeezed over the coming years. Normally reliable sources suggest that the Treasury is happy with the direction of travel of policy towards payments justified by public goods arguments. However, they are not impressed by food security arguments, although they are interested in the possibilities of a new technological revolution.

What is still largely missing is any link between agricultural policy and health policy in relation to issues such as obesity. Healthy eating is an interest of large sections of the population, not least younger voters.

The Government's view is that 'eating healthily is ultimately a consumer choice'. This is true, but that choice can be guided and that is what Public Health England is trying to do, possibly sometimes in too hectoring a tone.

The Government argues, 'We take the view that the market remains the best way to reward the production of good-quality food. Paying farmers to produce healthy food would not necessarily result in the desired outcome of a wider contribution to public health. Farmers may be the wrong target to incentivise consumers to eat healthy food, especially where primary produce travels through the supply chain via food processors and manufacturers before it is turned into the final product that consumers purchase.'

Whilst there is something in these arguments, policy needs to go beyond a reliance on the market mechanism. For example, there is a climate change argument for eating less meat. We need to ensure that there is a good fruit and vegetable supply at an affordable price. Of course, that raises much wider questions about the roles of the state and the market.

End of basic payment challenges National Park farmer

It was a pleasure to open my Financial Times on Monday and see a photo of a fellow member of the Farmer-Scientist Network of the Yorkshire Agricultural Society, Richard Findlay. I had just finished the draft of our submission to the EFRA inquiry into the Agriculture Bill which received its second reading this week (attracting attention because the Democratic Unionists abstained).

Drawing on the expertise of our academic and farming members we have made a detailed response which hopefully will appear on our website before long. You can read our earlier reports and documents here: Brexit

Richard has 700 sheep on 1,250 acres of the North York Moors national park. In a good year he makes a profit of about £12,000, but he receives £44,009 in subsidies under the CAP.

As he points out, the moorland is a managed landscape which would revert to trees and bushes if he was not farming it. Hopefully, he will be able to demonstrate that he is providing a 'public good' under the new arrangements, although the income stream is likely to be more uncertain and involve form filling.

GM bonanza after Brexit?

Producers of GM crops have called on ministers to abandon European environmental rules after Brexit. The Agricultural Biotechnology Council repesents BASF, Bayer, Dow AgroSciences, Monsanto, Pioneer (DuPont) and Syngenta.

Top biotech companies have long been frustrated by rules that have prevented the sale and development of new GM products in Europe. They have the support of the American administration which is likely to make access for GM seeds one of the conditions of a US-UK trade deal.

Mark Buckingham, chairman of the council, said that under the existing system 'a generation of British farmers have operated without technology that is taken for granted around the world while the EU is known for its political regulatory decisions.'

Any move to allow the commercial cultivation of GM crops in the UK would be strongly opposed by environmental groups. The Government might wonder whether it would be worth spending political capital on the issue when they are under pressure on many other fronts, but the US would push on the issue. This is a more serious concern than chlorinated chicken, although I am not taking a position one way or the other on GM crops.

It should also be noted that the EU would be unlikely to accept exports of GM grains from the UK, just as they would not accept crops grown with pesticides they have banned. It is not realistic to think that UK agriculture can become a regulation free zone after Brexit, although some farmers may have been swayed by that hope when they voted in the referendum.

The limits of new technology

The new conventional wisdom is that agriculture is on the verge of a fourth revolution and that once the UK has Brexited this digital revolution can get under way in earnest, supported by domestic policy and unshackled from the CAP.

I am no fan of the CAP, but I think that some caution is necessary. One farmer commented to ‘Yes, however, there are challenges with farmers getting to grips with the very many and varied types of tech, as my latest tractor testifies, I am generally mystified by the number of possibilities and so find myself being overwhelmed. Tech needs to be simple and intuitive. It’s also expensive.’

Appropriate policy could, of course, help with the question of expense. But much of the AI and digital tech is still at a relatively experimental stage and not ready for on farm use.

Of course, farmers have been using data from near earth satellites for some time and that is now being supplemented by more fine grained information from drones. That enables decisions to be made, for example, about what quantities of fertiliser or agrochemicals are to be applied where with both business savings and environmental benefits.

It is also claimed that machinery using AI can spot when strawberries are ripe and ready to be picked. A downward facing camera is used. However, the berries still have to be picked by hand.

We do face the challenge of producing more food from a given area of land and in an environmentally friendly way. Technology is the key to sustainable intensification. But we also need to think more broadly. Should we try and move away from meat heavy diets which require large quantities of animal feed and livestock that produce methane, a particularly damaging climate change related emission?

US faces challenge in shifting food mountain

We all know that government policies often have unintended consequences. So it has proved in the United States with President Trump's trade war leading to a mountain of food that hunger charities are finding it hard to cope with.

The US administration intends to buy up $1.2bn of foodstuffs over the next year to help out farmers suffering from new tariffs on their produce in China and elsewhere. Sales of US soyabeans to China have been badly hit while pork, a staple product in many mid-western states, faces a 60 per cent tariff in China and 20 per cent in Mexico. Indeed, nearly half the purchases to be made will be of pork.

The purchases will increase by more than 50 per cent the amount that USDA purchases for donation. It is estimated that 40 million households in one of the richest countries in the world are 'food insecure'. However, the challenge is to find enough trucks and drivers to mood the before it spoils. Milk may be the biggest difficulty because of its short shelf life and one is often talking about distances between the producing and recipient areas.

With the average farm business earning 20 per cent less this year, if nothing else it shows the continuing political clout of farmers. There are mid-term elections coming up and although farmers are not numerous, the votes of them and their families can be crucial in tight Senate races, of which there are a number this year. Moreover, many farmers are bedrock Trump supporters.

Brexiteer Dyson sees his farm business make a profit

The farm subsidies given to vacuum cleaner entrepreneur Sir James Dyson's extensive estate have attracted a lot of criticism. In 2017 he received CAP subsidies of £2.8m, up from £2.4m the previous year because of land purchases.

It is thought to be unfair that one of Britain's richest men should be given such amounts, although in fact they go to his farm business (Beeswax Dyson Farming) rather than to him personally. The estate is made up of 35,000 acres of land in Lincolnshire, Gloucestershire and Oxfordshire. No doubt his example has given some impetus to the reduction of subsidies for larger farms after Brexit.

Now the Financial Times has revealed that the business generated a pre-tax profit of £747,000 last year, compared with a loss of £1.53m the year before. Turnover went up 11 per cent to £15.7m. This represents a return of just under 5 per cent. The cost of sales fell by 12 per cent.

He was one of the few prominent Brexiteers from the world of business in the referendum campaign. He has said that he needs EU subsidies to compete against continental competitors. Over the five years he has put £92m into improving the farms, including renewable energy projects. Investment has been directed at such areas as soil health, technology and infrastructure.

Plan A+ and agriculture

No longer responsible for traffic jams, Boris Johnson turns his attention to agriculture.

The Institute of Economic Affairs was founded by one of the first battery farmers and has always take an interest in the way in which agricultural policies perversely disrupt (in its view) the operation of the market mechanism. It is therefore no surprise that its PLan A+ for Brexit, endorsed by leading Brexiteers such as David Davis and Boris Johnson, has a lot to say about agriculture, some of it on very technical matters: Plan A

It is certainly no 'Plan A' from outer space in the sense that it based on a good if particular understanding of how the CAP and international trade rules in agriculture operate.

The report calls for Britain to eliminate tariffs on all agricultural products it does not produce such as avocados, oranges and rice [rice is a significant crop in Italy]. It does allow for the continuation of direct grants to farmers who it admits may face competition from new foreign imports. Tariffs on food should be reduced.

Cargill's central role in food supply

Earlier this week I went to see the brilliant play at the National Theatre about Lehman Brothers. Essentially this was a story about an admittedly always rapacious family company which lost its connection with the family and became even more resolute in the pursuit of money for its own sake, eventually leading to its own demise and its central role in the financial crash of 2008.

Everyone interested in food and agriculture knows about Cargill and what it does, but no one knows too much about it. It has remained a private family company controlled by 100-odd members. About 90 per cent of its common stock is owned by members of the Cargill and MacMillan families, descendants of the man who founded it in 1863.

It is the largest private US company by revenues and plays a central role in global food supply, moving millions of tonnes of agricultural commodities around the world. However, the sector in which it operates has provided its challenges in recent years because of glutted grain markets and an increase in farmers' power in negotiating crop deals.

Chief executive since 2012, David MacLennan. has sought to improve its returns and profitability. He has focused on food and agriculture businesses where it is most competitive. Dividend payments have historically been modest, but it paid $551m to shareholders in the fiscal year to 31 May, up 29 per cent from the year before.

Getting your head round the Agriculture Bill

I was out shopping early this morning and was stopped by an agricultural lawyer. Naturally conversation turned to the Agriculture Bill and she pointed me to a useful essay on Sustain. It answers ten questions and, of course, there are more, but it is a start as I try to get my head round the framework for future English agricultural policy: 10 questions