Monthly farming update

John Sydney Nix

1927 - 2018

It is with great sadness that the Monthly Farming Update reports the death of John Nix, Emeritus Professor of Farm Business Management at Imperial College London.

It was in 1991 that John was approached to compile an update of farming news for a group of professionals who advised farming businesses on all matters associated with finance. It was immediately apparent that his update was too valuable to keep ‘in house’. It was therefore circulated to farming businesses, rural professionals, the Houses of Lords and Commons and to Brussels. The circulation covered all parts of the UK.

John continued to write the Monthly Farming Update until ill health in 2006 forced him to step down.

John will also be remembered for his unrivalled ‘Farm Management Pocketbook’.

Both publications continue to be highly valued by the rural community and the memory of John will live on through them, it is hoped, for many years to come.

I Policy issues

1 The Farm Animal Welfare Committee has published its report on how livestock sectors are responding to the need for a global increase in food production as well as protecting the environment and how this might impact on farm animal welfare.

2 The Forestry and Land Management (Scotland) Bill has been passed by the Scottish Parliament. The Bill’s advocates claim it “will enable the Scottish Government ... to create growth within the sector, to create growth within the rural economy, mitigate climate change and develop the role forestry plays in health, education and recreation.”

3 Defra has launched a consultation on implementation of the Agreement on International Humane Trapping standards in the UK.

II CAP/Brexit (etc.) support details/payments 

1 Defra is reported to be considering the transfer of the Countryside Stewardship scheme from Natural England to the Rural Payments Agency.

2 Defra has published guidance on the Countryside Stewardship Offers for Wildlife scheme with agreements due to commence next January. The 4 schemes cover Arable, Lowland Grazing, Mixed Farming and Upland.

3 United Utilities has joined forces with Reaseheath College to offer free advice on Countryside Stewardship schemes to improve farm infrastructure and protect groundwater.

4 Defra has published updated guidance on the Mid Tier and Higher Tier Countryside Stewardship schemes.

5 A revised application form has been published for capital grants for hedgerows and boundaries and woodland support.

6 Revised guidance on the woodland tree health grant has been published.

III Grants/regulations/legislation/environment

1 New rules come into force this month concerning the impact of farming practices on water quality. The rules include the application of organic manures and manufactured fertilizers to cultivated land must be planned in advance to meet soil and crop nutrient needs; organic manures must not be stored on land within 10 metres of inland freshwater; organic manures must not be applied within 10 metres of any inland freshwaters or coastal waters, or within 6 metres if precision equipment is used or within 50 metres of a spring, well or borehole; manufactured fertilizer must not be applied within 2 metres of inland freshwaters or coastal waters; precautions must be taken against soil erosion and run off from the application of organic manure and manufactured fertilizer, from land management and cultivation practices and from poaching by livestock; land within 5 metres of inland freshwaters and coastal waters must be protected from significant soil erosion by preventing poaching by livestock; and livestock feeders must not be positioned within 10 metres of any inland freshwaters or coastal waters, within 50 metres of a spring, well or borehole or where there is significant risk of pollution.

2 Penny Johnes, a professor of bio-geochemistry at the University of Bristol, has called for the whole of the UK to be designated a Nitrate Vulnerable Zone.

3 Projects in Inverness-shire, Perthshire, Monmouthshire, Cumbria, Northumberland, North Yorkshire and Lincolnshire have been awarded a share of a £25 millions funds to pilot 5G technology.

4 Defra has announced 25 new schemes which will benefit from a share of £36 millions to improve flood protection.

5 Defra, Natural England and the Enviornment Agency have launched a £27 millions scheme to improve the water environment in England. The Water Environment Grant scheme is available to applicants wishing to restore local ecosystems. Potential projects include river restoration activities, removal of obstacles to help fish move along rivers and streams and projects to improve water quality.

6 The Historic Buildings Restoration Grant is being piloted in Dartmoor, Lake District, Northumberland, Peak District and Yorkshire Dales National Parks with £2 millions of funding to help save iconic farm buildings from falling out of use. Up to 80 per cent of the cost of restoration is available by way of grant.

7 The Welsh Government has announced funding of £1.1 millions to support investment in small and medium-sized slaughterhouses in Wales.

IV Other matters of farm finance and tenure

1 Andersons has forecast that Total Income from Farming, which currently stands at about £5 billions, will fall to between £2 billions and £4 billions by 2027.

2 The Farm Business Survey has revealed that the average rent in 2016/17 for AHA tenancies was £73 per acre, up 1.1 per cent on 2015/16. The average rent for FBT tenancies was £89 per acre, up 4 per cent on 2015/16.

3 The US Department of Agriculture has forecast that net farm income in 2018 will fall by 50 per cent to £43 billions, a 12-year low.

4 Researchers at Wageningen University in the Netherlands have estimated that Dutch farmers will suffer a loss in value of £445 millions on exports to the UK following Brexit. It forecasts a reduction in exports of poultry, beef and dairy but an increase in exports of pork and tomatoes.

5 The Agricultural Price Index for all outputs in January fell by 0.5 per cent compared to December but was up 4.2 per cent compared to a year earlier. The index for all inputs was up 0.6 per cent on December and 2.9 per cent on a year earlier.

6 Scotland’s Rural College and Ringlink (Scotland) are to launch Scotland’s first shared agricultural apprentice scheme with places available for over 30 students on farms in Aberdeenshire.

V Product prices

 A Market background

1 Sterling, whilst still highly volatile against the Euro, switched mid-month to a more favourable trend and eventually closed stronger. From an opening position of 88.6p per € the rate weakened to a low-point of 89.6p but then changed tack to reach a high point of 87.0p before eventually closing the month at 87.9p per € (0.7p stronger). Against the US Dollar, Sterling faired better: from a starting point of 72.7p per $, Sterling spent most of the month improving, reaching 70.2p per $ near the end of the month but eventually succumbing to a late show of strength from the US and closing at 71.3p per $ (1.4p stronger). Crude oil prices remained volatile in March: Brent crude, after two ‘false dawns’ early on, gained almost 10 per cent on its opening position of $63.84 per barrel to peak just below $70 per barrel before dropping back to close the month at $67.69 per barrel.

B Crops

1 Wheat prices made some gains this month with feed wheat demonstrating steady improvement throughout the month on the back of local demand; however, the milling premium proceeded to weaken over the same period resulting in an almost static milling price. The previous concerns of frost damage and winter-kill in mainland Europe never came to fruition, whilst the US plains received some respite from dry weather as rain finally arrived. Oilseed prices took quite a hit as the stronger Sterling position combined with the improved expectations for the Argentine soya crop as rain arrived. LIFFE feed wheat futures were volatile this month, with swings of over £4 in the November 2018 and 2019 prices; the underlying trend was of early improvement followed by decline over most of the month with partial recovery as the end of the month approached. In late March, deliveries for November 2018 and 2019 stood at £144/tonne (-1) and £145/tonne (-1) respectively, whilst March 2020 futures opened at £147/tonne.

Average spot prices in late March (per tonne ex-farm): feed wheat £144 (+6); milling wheat £149 (+1); feed barley £138 (+7); oilseed rape £284(-11); feed peas £147 (+5); feed beans £156 (+5).

2 Potato prices continued the overall trend of improvement in line with the preceding months, albeit with small margins. The potato market remained flat, with over-supply the main factor in both bagging and processing sectors; storage is understood to be working effectively with only a small number of reports of rots, silver scurf, black dot and black leg. The average potato price gained £1 over its opening position of £155 per tonne to reach a late March close of £156 per tonne (£62 below the March 2017 closing average). The free-buy average, in this flat market, remained under pressure and subject to material volatility when that market moves. From an opening position of £99 the average dropped back to £92 but as the end of the month approached it jumped £13/t (14 per cent) to reach a late March close of £105 per tonne (£6 up in the month but £151 below March 2017).

2017 crop prices for grade 1 in late March (per tonne ex-farm): Maris Piper had improved marginally at the top end to between £220 and £255, whilst Desiree had weakened materially to between £70 and £90. King Edward remained unchanged at between £100 and £155, whilst Estima and other white varieties were steady at between £50 and £100.

C Livestock

1 Cattle prices held moderately steady this month. The average finished steer price made only fractional movements from its opening position of 196p/kg lw, resulting in a closing average of 196p/kg lw also (unchanged in the month and 11p/kg above the closing average a year earlier). The average finished heifer price did move more notably from its opening position of 205p/kg lw, with an short-lived increase to a peak of 209p only to return to 205p for most of the month, with a small dip at the end of the month resulting in a close 1p down at 204p/kg lw (6p above the price a year earlier). The average dairy cow price was volatile but largely weaker this month, dropping from its opening position of £1,231 per head to a low of £1,048 before recovering to close the month at £1,186 (£84 above the closing average a year earlier).

2 The lamb market, in the lead up to Easter, identified a large hole in the supply chain resulting in some material price movements. The average new season finished lamb price (SQQ live weight) opened at 209p/kg lw, gained 12p to sit in the 220s, then jumped by 20 per cent to peak at 264p/kg lw before dropping back to close at 234p/kg lw (up 25p in the month to sit 46p/kg above the average a year earlier).

3 The average UK all pig price (APP), continued to tail off in line with expectation, although again the margins were smaller; having opened at 149.0p/kg dw the average dropped to a closing position of 148.3p/kg dw (down 0.7p/kg, to sit 5.9p/kg below the closing average a year earlier).

4 The UK average ‘all milk’ price for January, published in late March, reported a loss of 1.02p to give an average of 30.60ppl (3.65ppl above the price a year earlier and 2.48ppl above the rolling 5 year average of 28.12ppl). The most recent update for the UK’s ranking against the ‘EU28’ farmgate milk price was for December when the UK ranked 16th against an EU28 weighted average of 34.07ppl (0.52ppl below the November 2017 average).

VI Other crop news

1 Results of the December Scottish agricultural survey reveal that the area of winter-sown crops was down 11 per cent on a year earlier at 174,000 hectares. The wheat area was down 11 per cent at 93,000 hectares while the barley area was the lowest for over 40 years at 42,000 hectares.

2 Rothamsted Research is seeking farms in Hereford, Worcester and the Welsh border, south eastern Scotland and northern Northumberland and Yorkshire to conduct trials research into boosting wheat yields.

3 The Agricultural Price Index for January for all crop products rose by 0.6 per cent compared to December but fell 0.4 per cent compared to a year earlier; the index for cereals was down 0.5 per cent compared to December but up 6.4 per cent compared to a year earlier; the index for potatoes was up 2.8 per cent compared to December but down 28 per cent compared to a year earlier; and the index for fresh fruit rose by 3.4 per cent and 17 per cent respectively.

4 A revised version of the AHDB wheat growth guide has been published.

5 The milling, starch and bioethanol industries used 1.701 million tonnes of wheat in the 3 months to December, down 9.5 per cent on a year earlier; of the total 1.48 million tonnes was home produced. Brewers, maltsters and distillers used 470,000 tonnes of barley and 211,000 tonnes of wheat, up 1.1 per cent and 5.3 per cent respectively.

6 In December, animal feed production rose by 10 per cent for sheep, 6.6 per cent for cattle and 3.7 per cent for pigs but fell by 0.2 per cent for poultry, all compared to a year earlier. The usage of wheat rose by 2.5 per cent and that of barley 17 per cent.

7 Research by Scotland’s Rural College has suggested that potatoes treated with Menathorin (fosthiazate) for potato cyst nematode control produced faster and more consistent canopy development with an average increase of 31 per cent 64 days after planting.

8 An AHDB survey has revealed that UK potato stocks stand at 2.4 million tonnes, the highest level since 2010 and nearly 500,000 tonnes more than this time last year.

9 Jersey Royal producers are forecasting the worst season for over 40 years with little if any crop harvested before Easter.

10 Defra has published guidance on plant passports which are required to move plants or plant products in the EU.

11 A research programme involving Northwest A&F University in China and NIAB EMR in Kent has discovered new strains of strawberry disease Verticillium wilt.

VII Other livestock news

1 Research undertaken by the National Farm Research unit commissioned by McDonald’s has found that 40 per cent of livestock farmers are planning increased investment in animal welfare. McDonald’s and Arla Foods are making a fund of £500,000 available with capital grants of up to £10,000.

2 Total numbers of cattle and calves in the UK fell by 2.2 per cent in December compared to June to 9.787 millions and by 0.2 per cent compared to a year earlier; the beef breeding herd fell by 3.1 per cent and 0.9 per cent respectively but the dairy breeding herd rose by 0.7 per cent and 0.3 per cent respectively. The total of sheep and lambs rose by 2.6 per cent compared to a year earlier to 34.832 millions while the breeding flock rose by 2.2 per cent. The total number of pigs fell by 5.1 per cent compared to June to 4.713 millions but rose by 3.9 per cent compared to a year earlier while the number of breeding pigs fell by 1.7 per cent and 0.4 per cent respectively. The poultry flock rose by 5.3 per cent compared to a year earlier to 181.818 millions.

3 The terms of reference of the bovine TB Strategy review have been published.

4 The number of new bovine TB incidents in the year to December in England rose by 2 per cent compared to the previous year with increases of 1 per cent in the High risk area, 11 per cent in the Edge area but a fall of 5 per cent in the Low risk area. There were rises of 11 per cent both in Scotland and Wales. The number of herds not officially TB free rose by 8 per cent in England with increases of 5 per cent in the High risk area, 43 per cent in the Edge area and 30 per cent in the Low risk area. There were increases of 8 per cent in Scotland and 17 per cent in Wales.

5 The December Scottish Agricultural survey has revealed that cattle numbers were down 1 per cent on a year earlier while sheep numbers fell by 3 per cent, pig numbers fell by 6 per cent and poultry numbers by 1 per cent.

6 Quality Meat Scotland has commissioned a feasibility study into the introduction of DNA traceability to protect the authenticity of Scotch Beef.

7 Avon, Berkshire, Derbyshire, Hampshire, Oxfordshire, Shropshire, Staffordshire, Warwickshire and Wiltshire have all applied for licences to cull badgers.

8 In February, UK prime cattle slaughterings rose by 1.3 per cent compared to a year earlier to 156,000; beef and veal production rose by 2.5 per cent to 73,000 tonnes; sheep slaughterings rose by 7.7 per cent to 952,000; mutton and lamb production rose by 4.2 per cent to 22,000 tonnes; pig slaughterings rose by 12 per cent to 886,000; and pigmeat production rose by 11 per cent to 77,000 tonnes.

9 In February average butterfat content rose by 0.3 per cent compared to January to 4.16 per cent and by 0.5 per cent compared to a year earlier. Average protein content rose by 1.1 per cent to 3.31 per cent and by 1.5 per cent compared to a year earlier.

10 AHDB is reported to be in ‘exclusive’ talks with HallMark Veterinary Services concerning the sale of Meat and Livestock Commercial Services.

11 The Agricultural Price Index for January for milk fell by 3.3 per cent compared to December but rose 14 per cent compared to a year earlier; the index for forage plants was up 0.8 per cent and 20 per cent respectively; and the index for animals and animal products fell by 1.2 per cent compared to December but rose by 7.2 per cent compared to a year earlier.

12 Muller has reduced its standard litre price by 0.5ppl to 26ppl.

13 In February dairies processed 1,062 million litres of milk, 8.6 per cent down on January but 0.1 per cent up on a year earlier. Production of liquid milk fell by 8 per cent to 509 million litres, cheese production fell by 10.3 per cent and butter production by 11.2 per cent while milk powder production rose by 163 per cent.

14 First Milk is to change its pool pricing structure and have just two payment schedules, First Milk Liquid and First Milk Manufacturing.

15 The Welsh Government has published a report into the relative performance of Welsh dairy farms.

16 Meadow Foods has reduced its standard litre price by 1.75ppl to 26ppl.

17 The welfare code for meat chickens has been updated.

18 In February commercial layer chick placings rose by 11 per cent compared to a year earlier to 3.1 million chicks; broiler chick placings rose by 5.1 per cent to 81.7 million chicks; turkey chick placings rose by 12 per cent to 900,000 chicks, turkey slaughterings rose by 20 per cent to 1.2 millions; broiler slaughterings rose by 8.5 per cent to 82 millions; and poultry meat production rose by 8 per cent to 143,200 tonnes.

19 Noble Foods, which owns Happy Eggs and Gu Puds and which supplies Tesco, Aldi and Morrisons, has vowed to scrap the use of cages by 2025.

VIII Inputs/Supply businesses

1 The UK Cereal Pathogen Virulence Survey has confirmed the Red 24 group of yellow rust isolates is now established in the UK.

2 The Health and Safety Executive’s Chemical Regulation Division has claimed that draft technical guidance issued by the EU for the determination of endocrine disrupter properties in pesticide active substances is ‘very complex’, ‘unworkable’ and likely to result in ‘many more substances being affected’ than predicted by a previous EC impact assessment.

3 A three-year survey undertaken by ADAS and Rothamsted Research has concluded that numbers of pollen beetles on oilseed rape crops did not exceed thresholds and did not justify insecticide treatment in field experiments.

4 The Agricultural Price Index for January for energy and lubricants rose by 2.6 per cent compared to December and by 7.5 per cent compared to a year earlier. The index for other goods and services rose by 0.2 per cent and 7.2 per cent respectively. 

IX Marketing

1 IGD has forecast that there will be real growth of 23.9 per cent in the European grocery market in the years to 2022 with high levels of growth forecast in Poland, Romania and Russia.

2 The Food Standards Agency has announced proposals which would require raw milk to be labelled with “The FSA strongly advises that raw milk should not be consumed by children, pregnant women, older people and those who are unwell or have chronic illness.”

3 The Co-op has committed to only stocking outdoor-bred pork from July.

4 Application has been made for protected name status for Scottish Wild Venison.

5 Poupart Produce Ltd has restructured its business. Orchard World, the top fruit entity, and Norton Folgate, the stonefruit entity, will be responsible to The Orchard Fruit Company.

Postscripts

One American’s view of the UK, recently posted on Facebook, following a visit.

• Almost everyone is very polite.

• There are no guns.

• There are too many narrow stairs.

• The pubs close too early.

• The reason they drive on the left is because all their cars are built backwards.

• Pubs are not bars, they are community living rooms.

• You’d better like peas, potatoes and sausage.

• Refrigerators and washing machines are very small.

• People don’t seem to be afraid of their neighbours or the government.

• The bathroom light is a string hanging from the ceiling.

• All the signs are well designed with beautiful typography and written in full sentences with proper grammar.

• They eat with their forks upside down.

• The English are as crazy about their gardens as Americans are about cars.

• They don’t seem to use facecloths or napkins or maybe they’re just neater than we are.

• There are hardly any cops or police cars.

• When you do see police they seem to be in male and female pairs and often smiling.

• Everything comes with chips, which are French fries. You put vinegar on them.

• After fish and chips, curry is the most popular food.

• It’s not unusual to see people dressed differently and speaking different languages.

• Nearly everyone is better educated than we are.

• It’s not that hard to eat with the fork in your left hand with a little practice. If you don’t, everyone knows you’re an American.

• Many of the roads are the size of our sidewalks.

• Instead of turning the heat up, you put on a jumper.

• Only 14% of Americans have a passport, everyone in the UK does.

• Walking is the national pastime.

• Their TV looks and sounds much better than ours.

• Dogs are very well behaved and welcome everywhere.

• Everyone knows more about our history than we do.

• Beer comes in large, completely filled, actual pint glasses and the closer the brewery the better the beer.

• Butter and eggs aren’t refrigerated.

• Excess cider consumption can be very painful.

• Their cash makes ours look like Monopoly money.

• Many doorknobs, buildings and tools are older than America.

• Cake is pudding, ice cream is pudding, anything served for dessert is pudding, even pudding.

• Everything closes by 18.00 (pm).

• You’re defined by your accent.

• Europeans dress better than the British, we dress worse.

• There are a lot of healthy old folks around participating in life instead of hiding at home watching TV.

• Their healthcare works, but they still bitch about it.

• Their coffee is mediocre but their tea is wonderful.

• They have towel warmers!

• There are still no guns. 

Making Tax Difficult!

Most readers will be aware of MTD – ‘Making Tax Digital’. Well that’s the theory. However, a recent survey has revealed that 25 per cent of accountants are not aware of the initiative so heaven help their clients.

MTD stands for the digitalisation of the UK tax compliance system. There will be no paper forms and no online form completion. The aim is for all business transactions to be recorded using accounting software which will then transfer totals direct to HM Revenue & Customs using an “application programming interface.” Reports will be submitted quarterly for VAT, Income Tax and Corporation Tax.

An individual who has more than one “business”, for example a farmer who also lets properties, will need to make separate reports for each, four times a year.

MTD will be introduced for VAT this time next year. MTD for Income Tax and Corporation Tax will not commence until the system for VAT has been shown to be working well. Pilot programmes will begin this month starting with the smallest businesses with more complex cases being invited later.

Manual adjustments to computer generated figures will be allowed for one year only. This begs the question of how the VAT partial exemption adjustment will be dealt with as most computer programs cannot cope with it.

The HMRC carrot, or stick as the case may be, is that penalty points will be awarded for the failure to submit a MTD report on time. Clock up enough penalty points and a financial penalty will be awarded.

Perish the thought if HMRC is using the same technology as the Rural Payments Agency. It would give a new meaning to the “chaos theory”!