2014: A year of CAP reform preparations and volatile prices

Andrew Jamieson
Andrew Jamieson

2014 has been a year of learning and preparation for farmers ahead of the introduction of the new Common Agricultural Policy (CAP), which is now almost upon us.

The Farm Business team at the Carlisle and Durham offices of H&H Land and Property have been disseminating information about the new Basic Payment Scheme (BPS) and how it will work in practice, and advising clients on any changes they need to make to prepare for the new regime.

H&H Land and Property organised seminars to keep farmers up to date as new information emerged from Defra on how the rules will be implemented. Currently it handling farmers’ queries and helping farm businesses prepare themselves for the impact of the new BPS.

Farm Business Advisor, Andrew Jamieson, said that farmers have contacted the Farm Business team, principally with two main areas of concern about CAP implementation in the year ahead.

“The first issue relates to how the new online system will work and how they will manage to ensure that everything is up and running online by May,” he said

“The other major concern is related to ecological focus areas and how they will be inspected. Defra has issued guidance as and when it has become available and we have digested and shared that information as widely as possible; however, the final information farmers need to know about the ‘greening’ aspect of the CAP did not become available until November, so it’s quite understandable that people have been concerned.”

The controversial ‘greening’ part of the policy will make up 30% of the new Basic Payment Scheme (BPS) which comes into effect from 1st January 2015, with a further 2% allocated for the young farmer incentive. The new BPS is also aiming to prevent payments to ‘slipper’ farmers and has drawn up new guidance on who is and is not now classed as an active farmer.

The transition from the Single Farm Payment Scheme (SPS) to BPS is itself a huge challenge for the industry. From 15th May 2015, all applications from English farmers must be made online, and a different, but equally complex changeover is happening in Scotland.

Mr Jamieson said: “These are huge changes, especially for the arable sector. All English farmers must re-register to claim BPS and the Rural Payments Agency (RPA) is already falling behind with the new online system.

“On the Scottish side, where all land is being re-classified into three regions to ensure an area-based payments system by 2019, processing has fallen behind too.

“It’s understandable that farmers on both sides of the Border are concerned about how this will be managed. It’s an extra worry in addition to the day-to-day concerns about running their businesses.”

The major shake-up of the CAP has been accompanied by volatile prices during the year for all agricultural sectors.

Arable farmers have contended with lower prices than in 2013, thanks to the huge world harvest of 2014. The best returns have been earned from milling wheat and prices have been picking up towards the end of the year due to the poor quality harvest in France and ongoing concerns about the international situation in Ukraine and Russia.

In the livestock sector, there has also been a mixed picture. Sheep farmers have benefitted from strong breeding stock prices which remained at similar levels to 2013. Lamb prices also had a good start to the year and remained high for a longer than usual period. But when the annual drop came, it was larger than normal. Prices have now started to recover and the store lamb trade has remained good.

The beef sector has contended with a year of poorer, depressed prices for finished cattle, as a huge number of imports from Ireland diluted the domestic market. However, store, suckler and calf prices remained strong thanks to good demand. In addition, H&H Land and Property’s sister company, Harrison and Hetherington, auctioned a Limousin heifer for a world record 125,000gns at Borderway mart in Carlisle.

Dairy benefitted from strong spring prices, but high yields in the earlier period of the year led to concerns the industry would exceed its quota ahead of the quota being abolished next spring. Although these worries have receded, the industry has had to contend with crashing prices since August/September, with Arla suppliers now facing an 8ppl fall over the course of 2014.

Mr Jamieson said: “The only area where we’ve seen a steady picture this year is in land prices, which have remained strong and on a par with 2013. The rental market remains good and there are huge numbers of applicants tendering for Farm Business Tenancies.

“Indeed, the importance of new entrants to the industry and the next generation of farmers coming through is set to be a key feature for 2015. The BPS Young Farmers incentive could be attractive to many, but many younger generation farmers are already beginning to prove efficient well-managed businesses can still turn a good profit even in poorer years.

“I would also forecast that anything new or innovative, such as data tools to help with flock management when EID tagging in sheep becomes compulsory in 2015, will be growth areas for agriculture in the year ahead.”