EFRA report shows farmers risk livelihood if RPA does not fix IT systems

A report published by a cross-party group of MPs acknowledges the threats facing the farming industry but positive, visible and tangible action must now be taken, the NFU said today.

The EFRA report warns that farmers in the UK are at risk of suffering further cash flow problems if the Rural Payment Agency (RPA) does not commit to fixing ongoing issues with its IT systems.

Neil Parish MP, Environment, Food and Rural Affairs Committee Chair said: “Many producers rely on CAP payments to turn a profit so it is unacceptable that our farmers are still facing lengthy delays to financial support. The RPA introduced an IT system that wasn’t fit for purpose and subsequent errors made in the attempt to fix the problem only caused further delays and confusion for applicants.

“We welcome the efforts being made to solve this problem and reduce delays but it is crucial that the RPA works to at least match the target achieved by the previous scheme of 90% of payments made by the end of December each year.”

The NFU says it welcomes the EFRA committee’s recommendation to the RPA which states it ‘must return to paying at least 90 per cent of BPS monies by the end of December each year.’

Commenting on this recommendation, NFU President Meurig Raymond says: “This will alleviate the financial turmoil that thousands of farmers have been and still are feeling. And we will be pushing this recommendation in our own discussions with the RPA.”

Commenting on the wider report, Mr Raymond continues: “The fall in prices and associated cash-flow problems are the biggest challenges currently facing our farmer members. And we’re not expecting the market situation to get better anytime soon.

“We are pleased that the EFRA committee has listened to our evidence and to others from across the supply chain and produced this wide-ranging report.

“There is no quick-fix. However the report identifies a range of recommendations that can help in the short-term and not leave the industry so exposed in the future. Our members now expect to see this swiftly followed up with positive, visible and tangible actions.

“It is vital that the industry comes together to deliver these recommendations to support farmers through these difficult times. We want to see genuine improvements, transparency and commitment to give farmers more confidence.

“Pricing models, long term relationships, contracts, producer organisations and a greater emphasis on export opportunities for British agriculture are all tools which can be used by government and the supply chain. Using these tools will help the agri-food sector through this period of uncertainty and the whole supply chain better combat volatility.

Dr Judith Bryans, Chief Executive of Dairy UK, said the entire dairy industry is taking positive steps forward but still needs government support to achieve long-lasting success.

Dr Bryans said: “The report makes a number of recommendations on exports, adding value and promotion that are very much aligned with Dairy UK’s key priorities in these challenging times for the dairy industry. From farm to fridge, the industry is affected by harsh market conditions and we must continue to work with Government and its agencies to facilitate and stimulate demand at home as well as in key export markets.

“We welcome the Committee’s recommendation to promote exports with the help of Defra and AHDB. Just last month, Dairy UK published a new export strategy to drive demand for our quality British products abroad and promote UK dairy globally. This strategy can help steer industry efforts in the right direction in collaboration with Defra, AHDB and other supply chain stakeholders. In order to develop these new export markets, we will need to showcase and promote the quality, the value and the integrity of UK dairy products.

“We fully agree with the Committee on the need for innovation and new product development to meet changing demands. We must focus on value to make sure we deliver innovative, appealing and nutritious dairy products to consumers across the world.”

The EFRA Select Committee report into farmgate prices comes after a three month enquiry to which the NFU provided evidence.

Phil Stocker, NSA Chief Executive, says: “The enquiry clearly shows that the structure of the farming and food sector does not generally support adequate farmgate prices, despite the fundamental role agriculture plays in the UK economy.

“The report outlines some valuable recommendations that could work to address this, including several based on evidence NSA gave during the enquiry. These include further development of export opportunities, as well as displacing imports through greater domestic trade, setting up producer organisations and establishing futures markets for red meat as well dairy produce. NSA is also pleased that improved identification and labelling of British products has been listed as a key recommendation.

“While it sets out some valuable actions that the industry should take heed of, we must also recognise the rationale of direct payments under the Common Agricultural Policy (CAP) to support farming and rural incomes, and to ensure an effective supply of food. The CAP should be recognised as highly beneficial to the country as a whole and this should be remembered, irrespective of the outcome of the forthcoming EU referendum.”

Expressing concern over the uncertainty that would surround an exit from the EU, Mr Stocker adds: “In the event of a Brexit, this financial support may be at risk and I am concerned it could be phased out. Producers rely on CAP payments to hedge income and, as the report has shown, farmgate prices often aren’t high enough to support a sustainable business. Whether we opt in or out of Europe, any attempt to change the support system should be avoided.”

A year of particularly low farmgate prices, coupled with delivery challenges with the new Basic Payment Scheme in all parts of the UK, has left many farmers in severe financial difficulty, highlighting just how important this support is.

Mr Stocker adds: “With farmgate prices being so low, the importance of getting payments out to farmers on time is essential to aid cash flow. Some farmers still haven’t received payment and this year’s fiasco must not be allowed to happen again.”

NSA now urges the industry to act upon these recommendations, in order to make the sheep sector more resilient and sustainable in an ever changing global market, while reminding the government that financial support is still very much needed.

Critical points in the report:

• The Committee questions assurance from the retail sector that there is no link between the price at which supermarkets sell to their customers and the price supermarkets pay to farmers. While farmers engaged in contractual arrangements with supermarkets, directly or otherwise, are guaranteed a price for their milk for specific periods, the chronic low price of milk sold through supermarkets inevitably disadvantages farmers in the longer term. Supermarkets may choose to sell milk cheaply as a loss leader, but farmers must not be the victims of the supermarket wars currently taking place in the UK. Progress is uneven amongst supermarkets and assurances must be met with action

• More effective co-ordination between Defra and the devolved administrations is necessary to prevent unsustainable price inequalities emerging at a national level

• Farmers must recognise the strength they can achieve through being part of a Producer Organisation

• The Committee encourages the industry to work with Defra to take forward work on futures markets

• Defra should encourage farmers, processors and retailers to agree more long-term contracts that provide predicable income levels to encourage secure financial planning and investment decisions

• British farmers and producers must seize opportunities for domestic and global market growth. To be able to trade in a global economy, the agricultural industry needs to look at developing global products or adapting traditional products to meet changing demands

• The Committee is concerned that the majority of the 25-year strategy for food and farming will be about developing a plan for England, while also including an export strategy for the UK as a whole. For the sake of clarity, MPs recommend that the Government publish its export strategy separately

• The Department for Business, Innovation and Skills should consider urgently how to extend the Groceries Code Adjudicator's remit to incorporate, and thereby protect, both direct and indirect suppliers to the major UK retailers. The Committee asks Defra to include this in their recommendations to the review of the role of the Groceries Code Adjudicator later this year