Agriculture: Five Great Challenges

Jeremy Moody, Secretary and National Adviser to the Central Association of Agricultural Valuers, spoke at Harper Adams University on Thursday 15th October on ‘Agriculture: Five Great Challenges’.

Opening with the observation that necessity is the mother of invention Jeremy commented that farming only adapts when it has to do so.

Jeremy identified his five great challenges as:

  1. Volatility.  Farming’s response so far has been to spread unit costs by taking on more land.  Attempts have been made to spread risks as well, but farming risks are increasingly connected.  Cost leadership is the answer, but ‘costs are like daisies’ – you cut them down and they grow up again.  Some farmers have responded effectively by moving further down the supply chain, for example the potato grower who now supplies chips to take aways.
  2. Output/acre ~ value/acre: We are generally growing low value commodity crops and with this we are seeing an inexorable shift to domination by combinable crops, wheat in particular.  The number of potato growers is predicted to drop from 2,000 to 1,000 over 10 years.  On the other hand, high value output enterprises are starting to appear.  For example vineyards in the south of England, and orchards.
  3. Resources: capital has been readily available at very modest cost, but the rising challenge will be the repayment of the capital itself rather than the servicing charges.  There are 60,000 farms which keep only one person in work.  Employed labour is concentrated in the pig, poultry, horticulture and dairy sectors and many of these employees come from abroad.  There are gaps in the age structure of farmers and it will be a continuing challenge to recruit and retain skilled labour.  Foreign workers are no longer confined to handwork in the fields but are steadily moving up the value chain – without its input we would not be able to sustain much of the higher value cropping leaving farmers with little choice but to revert to monocultural wheat.  Soil health and the resilience of natural capital is also a key part of the resource challenge.  We need to be able to put the right values on the health of soil.  This also draws in the value of water, and abstraction rights for irrigation in particular.
  4. Science and productivity: There has not been much growth in productivity since the 1980’s yet we know that precision farming can increase yields.  There needs to be spare capacity in management in order to make time to consider the possibilities and implement new approaches.  Our increasing reliance on data raises questions about its ownership, for example at the end of tenancies, from one farmer to another, from contractor to farmer.  Actually making effective use of all the data and technology now at the farmer’s disposal is also a large part of this challenge.  Modern machines have enormous technical capacity, but in practice little of what is available might actually be used.
  5. Progression: Flexibility must be the watchword in considering progression.  New entrants need not be young.  Sideways entrants from other sectors can bring just as much and more.  The wonderful smallholding opportunity for the 25 year old can be prison for the same 40 year old.  The industry is dominated by family businesses, 90% of farm employers and 30% can trace their farming origins to before 1900.  Increasingly we may see 90 year olds leaving farms to 70 year olds.

We cannot be the world’s cheapest producers, it is therefore essential that we focus on high input and high output farming with a long term view to ensuring the health of the basic resources on which farming and much else depends.

What do you think of Jeremy’s Five Challenges for Farming?  Here’s the video if you would like to see more:

Source: Agriculture: Five Great Challenges by Jeremy Moody

This video was filmed at Harper Adams University on 15 October 2015 in front of a live audience of students and staff in the Weston Lecture Theatre

The Privatisation of Biodiversity

Professor Colin Reid and Dr Walters Nsoh presented the conclusions of their research programme at the University of Dundee on 20 February 2014. Their research has focussed on the legal implications of the development of new ‘markets’ in natural capital. The emphasis tended to focus on biodiversity offsetting and payments for ecosystem services. Law Commissioner Prof Elizabeth Cooke provided an extremely helpful update on progress with the introduction of conservation covenants in England and Wales. The Parliamentary Draftsman is working on draft legislation following the Law Commission’s review last year so we are likely to see a new type of land covenant in the next two years or so. These covenants will be distinct because Continue reading “The Privatisation of Biodiversity”

CAP: Agric Fundamentalists v Enviro Fundamentalists – some inconvenient points

Decision week for Defra Secretary Owen Paterson.  He is due to announce the ‘modulation’ rate for England by the end of the week.  Will it be 9% as the NFU wants, or 15% as the RSPB demands?  Modulation is EU-speak for the amount of farming support that is diverted (modulated) into more general rural development and environmental schemes.  So the more money that is modulated, the less the direct farm payments through the Basic Farm Payment which will soon replace the Single Farm Payment.  The BBC provides some of the background here.

Last weekend saw a crescendo of lobbying on the issue, with the RSPB taking out full page national newspaper advertisements and the NFU writing to all MPs.  Some of the mood of the debate is caught in Mark Avery’s Sunday blog: all households will have to pay £400 to support farmers; this is nothing more than a payment for owning land and farming it (whither tenant farmers?).  On the other hand the NFU whinges that German farmers are only subject to modulation rates of 4.5%, French farmers 3% and the proposed Scottish rate is 9.5%.  This will hurt competitiveness, says the NFU, and disadvantage English farmers.

The environment lobby makes much of the ‘value’ that we get for CAP payments.  The more money that goes to Pillar II (EU-speak for the budget that pays for environmental and social goodies), the better. But farmers prefer Pillar I (EU-speak for the budget that pays for direct farm support payments) because that relates directly to the land they farm and how they farm it – and this can be defended strongly on grounds of food security (will you starve or me?).

But of course we are dealing with public policy here, and the reality is more complex that the advocates of Pillar I and II would like us to accept.  The new direct farm payments come with more environmental strings attached – crop diversification and ecological focus areas for example.  And more of the money is moved uphill – where it is desperately needed because much of upland farming is economically marginal at best – at the (moderate) expense of lowland areas.  Whatever Pillar II funding we are left with, will be far more focussed than previously – a better deal on the 35% of rural land which will benefit compared with the previous 70%?  Perhaps so if you are in the lucky areas; perhaps not otherwise – although tougher conditions on the Pillar I funding may make up the difference in some lowland areas.

The RSPB and others have set out their case for the ‘value’ we receive in return for our £400 per household.  This is a compelling and attractive case, immediately attractive to anybody who pays tax.  Given the propensity of Avery and others to dismiss the CAP payments as a mere subsidy on land ownership and farming, I have been pondering what we do get for the money we spend on farm support.

This is an incredibly complex question once you factor in food security and social justice.  To take some dairy figures, our consumption of milk products works out as follows:

Taking our daily consumption of fresh milk, butter, yogurt, cream, dairy desserts we on average consume about 4 litres of raw milk a week.  That’s a little over 200 litres a year.  With an average dairy cow now producing 7,327 litres a year, that means each cow is supporting 36 people.  This typical cow requires 0.5 ha  of land a year, and lives in an average herd of 125 cows.  So the average herd is providing dairy produce for 4,500 people.  At a direct CAP Single Farm payment cost of just over £200/ha, this equates to a cost per consumer supported with dairy products of just under £3.00/year (1).  Doesn’t seem much, but let’s cut the CAP farming support payments altogether.   What happens next?

There is little doubt that the main buyers of milk from farmers have an excellent idea of the costs of production – including the effects of farming subsidies – and set their prices accordingly.   Ergo – exit CAP, enter higher payments from the main buyers.  Despite the hyperbole to the contrary, the main farm produce buyers have no interest in the financial failure of their principal suppliers.  So prices are adjusted accordingly to make it worthwhile – but only just so for better than average producers – to continue to supply milk.  In compensation retail prices increase – for everybody.

So if you are hard up, milk has just gone up and you won’t save much tax if you weren’t paying any or much tax anyway.  But if you are better off milk, yogurt, cheese etc has also gone up, but the CAP isn’t costing you so much through your tax bill.  That’s to say that another element of redistribute taxation has been lost.

Meanwhile at lower rates of modulation fewer farmers are encouraged (forced?) to look at the financial effiency of their operation.  At the recent LEAF conference, Martin Wilksinson (HSBC Head of Agriculture) made the point that many farmers could more than make up their CAP losses with improved technical and financial effiency.  This is one of the real challenges to the farming industry: to move more farmers to the standards of the best.  England was the first region in the UK to move to Single Farm Payments based on the same average payment, away from a payment based on historic payments.  Wales and Scotland have been slower to move in this direction, and there seems a compelling case for England being better prepared for this round of CAP reform as a result.  One fear for the environmental lobby might be the real danger that some of the best lowland farmers may move away from CAP support altogether, joining those sections of the farming industry which have never had it anyway (eg pigs and poultry).

Meanwhile farmers need to promote the value we get from Pillar I payments by stressing any benefits they provide to the rest of the country as consumers and taxpayers.  For example, how many people is your farm feeding?  And at what cost in public support?  Will Santa be coming early for the farming lobby or the environment lobby?

-oOo-

Footnote 1: These calculations were surprisingly hard to source.  The DairyCo website provides daily consumption figures, and the average herd size and milk yield are available from Defra statistics.  DairyCo also provides a diagram showing how the UK’s milk supply is utilised.  My approach was to take the daily consumption of the dairy products listed (a list which is not complete) and work out how much raw milk is needed for each product, eg about 20 litres for 1 kg of butter; 10 litres for 1 kg of cheese.  This ignores some of the complexities of dairy processing, for example milk from which cream has been separated may reappear as another milk product and so on.  Some arithmetic followed based around stocking rates (0.5 ha/cow), total production/consumption figures and lowland Single Farm Payment Rates per hectare in the last year or two.  In short, lots of assumptions; lots of scope for error – but if anybody can highlight any errors or better still existing sources of information like this I would be delighted to know.

 

Sustainable Agriculture: show me the money #LPE13

The annual LEAF (Linking Environment and Farming) President’s Event takes place today, 5 November, at the headquarters of HSBC in Canary Wharf, East London. The theme of the event is Sustainable Agriculture: Show me the money, and I am speaking on the Valuation of Ecosystem Services. Here are my slides:

The key message is summed up on Slides 10, 11 and 12. We have the potential to embark upon a new paradigm in rural land management but will we step up to the task of the ecosystem entrepreneur?

PEATLAND RESTORATION AND INVESTMENT IN THE SOUTH WEST

The Natural Environment Research Council has funded practical research work in the South West to develop a scheme for the practical restoration of peatland for water management, the reduction of atmospheric carbon and biodiversity habitat management.  This work has been led from Leeds and Birmingham City Universities, and supported with additional funding from South West Water (SWW).  A prospectus is planned to be one of the major outputs from the project, providing advice to landowners, farmers and land managers as to how a scheme could work, what factors need to be considered in deciding on site suitability, and how land managers can decide if participation is right for them.  The prospectus should also be helpful to potential investors in deciding if they wish to invest in the carbon and biodiversity aspects of the scheme.

The prospectus is now being prepared and the purpose of this synopsis is to invite feedback and comments on its overall structure, and the matters which it is proposed it will cover.  All comments are welcome.  Please send them to Charles Cowap, Project Team, at cdcowap@gmail.com.  Charles Cowap and Dr David Smith (SWW) are happy to discuss any questions arising from this work: Charles Cowap 07947 706505; Dr David Smith: 07824 460274 (dmsmith@southwestwater.co.uk).  There will be further opportunities to comment on the full prospectus in due course.

Introduction

  • What this document is about
  • How it is structured
  • How it aims to help you to consider if PES (Payments for Ecosystem Services) is for you including some important factors to consider in deciding to sign up for PES
  • Status of document in contractual terms
  • Desirability of seeking independent advice

The proposed PES scheme

  • What we are offering for SWW (South West Water) and other investors to ‘buy’: peatland management for water supply and quality, with an option to bundle carbon and biodiversity management/development for corporate CSR (Corporate Social Responsibility) purposes
  • Potential interest for other investors in carbon and biodiversity benefits
  • Background to ESS (Ecosystem Services) and PES more generally, including links to the development of a UK Peatland Carbon Code
  • The relationship of this prospectus to the important and growing role of ESS and PES thinking in government policy and land management more generally

Basis (es) of offer

  •  The ‘offer’ to landowners and managers interested in selling their ESS
  •  The offer to companies and other potential investors in biodiversity and carbon in the south-west

Factors and issues for sellers and buyers to consider in deciding whether to join PES programme

  • Contractual aspects: length of agreement, review terms, break clauses, succession, other key terms and what they mean
  • Land tenure arrangements
  • Effects on other interested parties, eg tenants, landlords, graziers, commoners, rights of turbary, manorial rights, owners of sporting and mineral rights, implications for succession and inheritance,
  • Practical farming considerations
    • Series of sub-headings
    • Animal welfare and health considerations
    • Relationship with statutory schemes and designations (ESA, HLS, ELS, GAEC obligations etc)
    • Public liability and insurance questions/CROW Access Land
    • Other business considerations, eg relationship to diversification opportunities
    • Maintenance obligations and concerns
    • Taxation: VAT, Income Tax, Inheritance and Capital Gains Tax, Stamp Duty Land Tax [Corporation Tax]
    • Ongoing obligations [may be covered by contractual aspects or cross-linked]
    • Impact on capital values
    • Security/risk judgements

Decision Tree

Two decisions trees, one for site selection; the other to help land managers to work through the options.

Site suitability, eg

  • Peatland – known mapped damage – further investigation by survey team – detailed mapping – determine if damage restorable – evaluate impact on farming activity – evaluate drainage/wetness implications for surrounding farmland

 

  •  Identify all interests in site: tenure, other rights, designations, schemes
  • Liaise with other interests and stakeholders
  • Identify new management requirements
  • Consider compatibility with existing management and schemes, and potential to gain funding from conservation related initiatives through providing more sustainable habitat
  • Identify any needs for adapted management or farming policy
  • Consider scope to release other resources for alternate uses
  • For non-compatibility, evaluate ‘better’ option: in or out of PES and review for alternatives
  • Assess financial benefits and costs

A suggested approach to financial aspects

Costs saved

  •   Eg some livestock purchases
Extra costs, eg

  •   Time for access to more difficult ground
  •   Vet and med bills
  •   Insurance
  •   Feed
  •   Machinery costs if contracting to be offered

 

Extra Revenue, eg

  •   PES Income
  •   Contracting opportunities for SWW
Lost Revenue

  •   Eg some livestock LWG or sales
Balance positive: financially worthwhile

– Consider capital and tax implications

Balance positive: not financially worthwhile

Conclusion: pulling it all together

Next steps and who to contact for further information

Please forward comments on this draft to:

Charles Cowap, MRICS FAAV

NERC Project Team

cdcowap@gmail.com

For further information or to discuss any points on this synopsis, please contact either Charles Cowap as above (or phone 07947 706505), or Dr David Smith, SWW, 07824 460274 (dmsmith@southwestwater.co.uk)

[Reproduced in full from a document circulated on 5 March 2013 to stakeholder representatives]

Development of a Peatland Ecosystem Services Scheme on the South West Mires and Moors

Slides presented by Dr David Smith and Charles Cowap at an evening meeting of the Agricultural Law Association, kindly hosted by Michelmores LLP at their Exeter Office on 26 February 2013.

Dr David Smith first reviewed work in recent years on the benefits of peatland restoration work in the south west, for water management, carbon capture and habitat and biodiversity management.

David then went on to explain why South West Water is interested in securing clean supplies of water from upland areas

Finally Charles Cowap presented the work he has been doing with South West Water in a project funded by the Natural Environment Research Council with Leeds and Birmingham City Universities.

Questions and discussions continued in a lively fashion for some time after the presentations, both formally and informally over refreshments kindly provided by Michelmores.
 

Farmers and Town and Country Planning

The interests of farmers and planners in each other were brought together on Friday 9 November 2012 at Harper Adams University College in Shropshire.  The conference was hosted by the National Farmers’ Union and the Royal Town Planning Institute with the aim of enhanced mutual understanding.

This ‘storify’ posting summarises the conference.

‘Planning for Farming’s Future, 9 November 2012’

I hope this brief summary will be helpful to farmers, their advisers and planners trying to understand each other’s perspective.