Yet more efficiency needed – but CAP reform may provide impetus
Faced by falling support payments farmers will, yet again, have to take a close look at efficiency changes.
That message was spelled out loud and clear to more than 40 farm professionals at a special seminar in Devon on the implications of Common Agricultural Policy reform, staged by the national consultancy Andersons.
"Many farm businesses could improve if they wished to make up the shortfall," said Richard King, an Andersons' partner. "This is not new – but CAP reform may give a new impetus to business improvement. The whole agricultural industry has a role to play in making the sector more profitable.
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"There are some businesses where there are obviously improvements to be made through the use of modern technology. The aim should be for targeted, good investments – rather than wasting money on schemes that come to nothing."
While there were still lots of proverbial "balls in the air" about the eventual details of CAP reform, since the end of June the main thrust of the new-look system had become apparent. A cut in support all round was inevitable – and how this would bite was best demonstrated by looking at models of different holdings.
The Basic Payment Scheme (BPS), that will replace the Single Payment Scheme across the board, will see a reduction in total funds. For example a 150-cow dairy farm of just over 100 hectares was estimated to be going to lose £6,000 a year in support, while a 154-hectare mixed lowland farm with beef, sheep and arable would lose a putative £9,150. The losses include the reduction of £30 per hectare in Entry Level Stewardship.
But, Mr King stressed, while the figures were substantial, efficiency savings were more than possible, which would offset them with plenty to spare.
So the dairy unit could gain an extra £14,400 from restructuring the business, while the mixed farm could gain £25,500.
"The restructuring examples are based on figures for realistic improvements that could be achieved by these businesses," he insisted.
There were a range of efficiency changes possible; better technical performance, cost control, continued investment in the business, utilising all the assets available, like renewable energy outlets . . . and producing what the market actually wanted, he said.
The BPS was going to be more complex than the SPS, but rather than being defeated by it, farmers would learn to cope, Mr King added. The CAP reform was a tinkering at the edges of the existing scheme, to make it more palatable to the EU taxpayer.
And that, first and foremost, meant "greening" – or "agricultural practices beneficial for the climate and the environment" – making up 30% of an individual payment.
There were complex regulations involved for this payment, for "farmers providing public goods' management", with the need to comply with rules on crop diversification, the protection of permanent pasture and special "ecological focus areas".
Other changes to CAP would involve capping of payments on large holdings, a simplified version of deciding on "active farmers", and different rates of modulation.
There will also be a transparency requirement, so everyone is going to be able to find out what a farmer is receiving, while the exchange rate for conversion will revert to being based on a monthly September average.
Mr King concluded that while the new CAP would only have a life of five years, the BPS, described by Defra as "a dog's breakfast", indicated the future direction of policy, with direct payments retained, and yet more greening measures.
"But shall we still be in the EU, or will there be a British Agricultural Policy by the end of this decade?" he asked.