Recent years have seen increasing volatility in commodity markets, prompted by natural and political events such as US droughts and Russian sanctions.
Farmers are grappling with the latest rules for Common Agricultural Policy (CAP) payments schemes and assessing the impact of the loss of EU milk quotas (March 2015), whilst also trying to negotiate competitive contracts in a complex food supply chain, headed by the supermarkets.
However, the overall, long-term economic outlook for UK farming is positive.
In the 2015 Parliament, the new Government will immediately have to continue to implement the complex CAP reforms, develop its priorities for the next round of reforms, and consider a range of other farming challenges on the horizon.
CAP reforms 2014-20
The UK was allocated €25.1bn (£18.5bn) under the CAP for the period 2014-20 agreed in 2013. Member States and their devolved administrations have been allowed far more flexibility than ever before to tailor the measures according to their priorities. As a result, CAP implementation varies widely across the UK.
These latest reforms include a new Basic Payment Scheme (direct subsidies). Wales and Northern Ireland kept the original 15 May 2015 farmers' application deadline whilst England and Scotland opted for an EU-approved extension (15 June 2015).
In England, glitches in the Rural Payments Agency’s new IT system caused it to switch from online applications to paper forms, whilst the Welsh Assembly Government had to revise its payment regions after judicial review.
Imperfect application of CAP rules brings EU disallowance fines, something the new Government will be keen to avoid.
CAP funding also supports Rural Development Programmes (RDPs) for 2014-20 across the UK. These offer further payments to farmers in return for additional environmental protection and enhancement, as well as funds to support the wider rural economy (e.g. through broadband schemes, renewable energy and tourism development).
The previous Government planned to review the agreed level of CAP funding (12.5%) that can be moved (‘modulated’) from direct subsidies to the English RDP in 2016, with a view to increasing it to the maximum 15% allowed. Labour has pledged to move to 15%, without a review, to boost funding for environmental protection.
Further CAP reforms
The latest EU Agriculture Commissioner, Phil Hogan, has made CAP simplification an immediate priority. The previous Government flagged concerns with the unpopular “three crop rule” - one of the “greening” requirements farmers must meet to receive their direct payments in full.
The rule seeks to promote diversification by specifying how many crops have to be grown per hectare of area farmed.
However, farming and environmental stakeholders agree that these complicated requirements offer limited environmental benefit.
The new Government will immediately have to look ahead to CAP 2021-2027 as negotiations will start 3-4 years ahead.
The previous Government wanted further value for money for the taxpayer with more emphasis on improving productivity and competitiveness and protecting and enhancing the environment.
CAP reform and implementation are not the only farming policy challenges which lie ahead.
Dairy farming. The previous Government committed to a range of measures to help the dairy industry, which has been facing volatile milk prices. These included new tax rules and support for EU country of origin labelling to help customers buy British.
The new Government may want to continue to look at how best to help dairy farmers, and the industry generally, to better absorb market shocks and manage uncertainty.
Select Committees, all-party groups and stakeholders have called for the Groceries Code Adjudicator’s (GCA) role to be strengthened so that the Adjudicator can actively seek and deal with breaches of the Groceries Code (which promotes fair conduct between direct suppliers and supermarkets).
They have also called for the GCA’s remit to incorporate indirect suppliers like farmers.
Productivity and food security
In the last Parliament, the Commons Environment, Food and Rural Affairs Committee called for the “sustainable intensification” of farming, including better use of technology, to improve productivity and food security.
However, new precision farming techniques, including GPS and mapping, are still not seen by many farmers as cost-effective.
In the UK, 68% of food consumed is produced domestically but the National Farmers Union has warned that this proportion could drop to 53% in the next 25 years without strategic action.
There is no agreed optimum level of self-sufficiency but the UK has to be resilient to potential changes in climate and global markets.
Currently no GM crops are grown commercially in the UK and new EU rules allow Member States more discretion to restrict the use of EU-authorised GM crops.
However, if a wider range of such crops (more suitable to the UK) become available there may be more pressure to use them to boost productivity.
The new Government will have to decide the next steps on Bovine TB. All parties have different views on badger culling but all agree that the disease must be eradicated. The previous Government set out a strategy to do this by 2038.
The EU Commission will be reviewing its (UK-opposed) ban during 2015 on certain neonicotinoid pesticides thought to harm bees. Meanwhile, Labour has supported calls by the Sheep Dip Survivors Group for an inquiry into the health impacts of organophosphate sheep dip on those who were historically required to use it.
Plenty of food for thought for a new Parliament.
The previous Government’s strategy for food and farming
The previous Government launched an economic plan for food and farming (February 2015), prioritising new markets and simpler regulation, along with a £160m UK Strategy for Agricultural Technologies (July 2013) co-funded with industry. It also planned 17 Food Enterprise Zones, allowing businesses to access streamlined planning procedures.
- Conservatives: will set out a long-term vision of British farming working with industry to develop a 25 year plan to grow more and push for reform of CAP
- Greens: support reform of the CAP
- Labour: support reform of the CAP
- Liberal Democrats: implement programmes to help farmers and push for reform of the CAP
- UKIP: Introduce a modified UK Single Farm Payment (SFP) scheme