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Dr James Jones, Royal Agricultural College

RICS Rural management and wayleaves conference 16th September 2005 ‘The new regime - where we are now’. Dr James Jones, Royal Agricultural College. Topics to be covered. Cross compliance Farmers’ assessment of the 2005 regulations Changes in 2006

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Dr James Jones, Royal Agricultural College

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  1. RICS Rural management and wayleaves conference 16th September 2005‘The new regime - where we are now’ Dr James Jones, Royal Agricultural College Dr James V. H. Jones Royal Agricultural College

  2. Topics to be covered • Cross compliance • Farmers’ assessment of the 2005 regulations • Changes in 2006 • Farm business strategies under the new regime • Thinking more widely about business structures and opportunities • Flexibility in cost structures and the difference it makes Dr James V. H. Jones Royal Agricultural College

  3. Cross compliance Dr James V. H. Jones Royal Agricultural College

  4. A recap of the SMRs and GAEC requirements Dr James V. H. Jones Royal Agricultural College

  5. Dr James V. H. Jones Royal Agricultural College

  6. The survey of farmers attitudes to cross compliance • Farmers took part in the Challenge Fund pilot project for farmer self-help groups • Briefing/demonstration/discussion sessions were based at agricultural colleges • Farmers surveyed took part were from Gloucestershire (RAC), Shropshire (HAC), Sussex (Plumpton), Suffolk (Otley) and Norfolk (Easton) Dr James V. H. Jones Royal Agricultural College

  7. The sample A bias towards larger farms compared with national statistics A bias towards dairy and mixed farms. Beef and sheep farms were under represented and none were in the LFA Dr James V. H. Jones Royal Agricultural College

  8. The assessment • Farmers were asked to rate the measures as either ‘not applicable’ or on a score of 1 to 4 for the impact on their business i.e. from ‘negligible to ‘major’. • The results showed that some measures although possibly quite important to a minority of farmers are of no concern to the majority. Dr James V. H. Jones Royal Agricultural College

  9. Applicability - conclusions • Measures that link up with special designations (SSSI, SCA, Sch. Monuments etc.) or specialist farming practices (grass burning, sewage sludge) have low applicability. • Measures which apply to all or most are general requirements e.g. soil management, hedgerow and water course protection, rights of way, ground water, wild birds, etc. Dr James V. H. Jones Royal Agricultural College

  10. The significance of measures (when applicable) - conclusions • Lowest scores where the measures are well established and/or uncontroversial • Highest scores where the measures are new (soil management requirements) or contain potential threats (sheep ID). • High scores where requirements are recently introduced, controversial or not always followed to the letter - pp rules, NVZs, rights of way, SSSIs Dr James V. H. Jones Royal Agricultural College

  11. Other conclusions • Systems of farming followed had an obvious influence on applicability and also the level of concerns • Participation in agri-environment schemes and organic farming did not seem to lessen levels of concern as I had expected (despite the overlap of requirements) • But in general the results were fairly predictable and logical Dr James V. H. Jones Royal Agricultural College

  12. Enforcement of cross compliance in 2005 • 1% of SP claimants will be inspected for cross compliance breaches. This is at random but targeted at high risk groups who have a higher chance of being selected. • Theoretically organisations responsible for enforcing current legal requirements should now inform RPA (DEFRA, EA, EN, EH, Local Authorities etc.) of breaches. • SP reduction is not as automatic as para 168 suggests. Dr James V. H. Jones Royal Agricultural College

  13. SMR changes in 2006 - new measures • 8 new and additional SMRs: • Plant protection products (Dir.91/414) • Hormones in animals (Dir.96/22) • Food safety (Reg.178/2002) • BSE prevention (Reg. 999/2001) • F&M prevention (Dir. 85/511) • SVD prevention (Dir. 92/119) • Blue tongue disease prevention (Dir. 2000/75) Dr James V. H. Jones Royal Agricultural College

  14. SMR changes in 2006 - existing measures • SMR8a Sheep and goat ID now has new requirements for animals born after 9th July 2005 • Must have an ear tag within 6 months of birth • Records of movement off the holding • Inventory at least annually • SMR3 Sewage Sludge to be amended spring 2006 • SMR 4 NVZs - adjustments Dr James V. H. Jones Royal Agricultural College

  15. GAEC changes in 2006 • No additional measures • GAEC 1 Soil Management Plans - draw up a ‘Soil Management Review’ by 1st September 2006 (to be imlemented from 2007) • Other changes are still at present confidential - but don’t expect major changes mostly just tightening of definitions and some rewording Dr James V. H. Jones Royal Agricultural College

  16. Farm business strategies under the new regime Dr James V. H. Jones Royal Agricultural College

  17. Effect of direct subsidy removal on average farm profitability Note: Figures are based on 2001 costings

  18. So what are farmers doing about the subsidy changes? • Not much - as yet • Most are still getting about as much subsidy as they did before. • However the subsidy will reduce due to modulation and financial discipline. • The historic element will be replaced by the regional average payment. • Signs that some are thinking ahead and making some changes Dr James V. H. Jones Royal Agricultural College

  19. Farming business options that will be favoured by decoupling • Diversification (but note effect of non-agricultural land use on the SP) • Agri-environment • Part-time farming • Co-operation and contracting arrangements • Crop and livestock enterprises that were previously unsubsidised (but note the need for the FVP sticker to get the SP) Dr James V. H. Jones Royal Agricultural College

  20. Influence on farm planning decision making of thin margins • Consideration of whether risks are matched by rewards (n.b. economies of scale can be offset by bigger risks). • Greater concern about price variability. • Closer examination of whether a positive net margin is being made - especially when labour and machinery costs are largely variable/avoidable. Dr James V. H. Jones Royal Agricultural College

  21. Fixed vs. flexible costs • Home farm is a 222ha (550 acre) family run cereal farm with its own grain storage. • Contract farm is run by contractors for an all in fee of £234/ha (£95/acre) plus off farm grain storage and handling charges. • Marginal cost savings by leaving land fallow: • Home farm = £127/ha (£51/acre) • Contract farm = £242/ha (£98/acre) + £7 to 8/t drying and storage charges Dr James V. H. Jones Royal Agricultural College

  22. Comparison based on average yields Dr James V. H. Jones Royal Agricultural College

  23. Marginal profit or loss in £/t

  24. Conclusions • Flexible costs = more likely to be attracted to fallowing land - especially if this means picking up an agri-environment payment. • The family farm with mainly fixed or notional costs will stick with production even with lower prices than at present on all but the poorest land. • But small farmers are opting to use contractors etc. to cut costs = flexibility. Dr James V. H. Jones Royal Agricultural College

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