CAP Reform update Impact on farming business 2013-2015 Simon Dixon Smith MRICS FAAV www.land-partners.co.uk Land Partners : CAP Reform update: December 2013 3 rd December 2013
Dec 04, 2014
CAP Reform update
Impact on farming business 2013-2015
Simon Dixon Smith MRICS FAAV
www.land-partners.co.ukLand Partners : CAP Reform update: December 2013
3rd December 2013
www.land-partners.co.uk
DEFRA statements of intent
• “We will seek to adopt the simplest approach which is most likely to
minimise the burden on you and the RPA…”
• “We will seek to implement a direct payment system which is simple
and accessible to you, by eliminating unnecessary complexities and
by avoiding gold plating”
• “Simplicity, affordability and effectiveness will underpin our approach
to implementing the new CAP in England and the policy choices we
take. I am resolutely determined to avoid the mistakes of 2005.”
Land Partners : CAP Reform update: December 2013
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Overall UK budget changes
2007 – 2013
• Pillar 1 £20.5bn
• Pillar 2 £3.7bn
£24.2bn
2015 – 2020
• Pillar 1 £17.8bn
• Pillar 2 £1.84bn
£19.64bn
•
Land Partners : CAP Reform update: December 2013
DEFRA consultation
Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
• Accelerated Period
• 31st October to 28th November
• Some decisions made
Who will be affected?
Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
• Largest farms
• Smallest farms
• Occupancy changes
• Young farmers
• Everyone else…
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If more than €150,000 after greening (c1750 acres cropped)
Preference – Degressivity
- 5% deductions
- Unlikely to be any allowance for salaries
Or – Re-distributive payments
- Up to the first 54ha
- Max 65% top-up
>30ha arable – 3 crops to be grown
Largest Farms
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Smallest Farms
• Less than 5ha – no claim allowed
• Less than 10ha of arable land – no crop diversification
• Less than 15ha arable land – no Ecological Focus Area
• Less than 30ha arable land- 2 crop to be grown unless
75% of holding grassland or
75% of arable area temporary grass
Consider letting out some land to bring the holding under the thresholds
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Occupancy Changes
Land Partners : CAP Reform update: December 2013
Entitlements will roll over
31st December 2014
2015 claim area
National Reserve
Crop diversification if you rent out more than 50% of your land
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Young Farmers
BPS top-up for 5 years
Minimum skills & training requirement?
Someone under 40 the „head of the holding‟
Defer appointments?
Each claim before 40th Birthday
Budget ceiling
Land Partners : CAP Reform update: December 2013
Everyone Else
Direct Payments (Pillar 1):
• Movement of area payments „uphill‟
• Loss of entitlements in excess of eligible area
• Block cropping
• Potential Alternative Certification Scheme
• Ecological Focus Areas
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2015, before
deductions
(per hectare)
Lowland SDA Moorland
Current €242 €195 €34
Proposed €236 (-2.5%) €236 (+20%) €62 (+82%)
Everyone Else
Direct Payments (Pillar 1):
• Contracting agreements
• Permanent grassland restrictions
• Potential for group EFA‟s
• More crop codes
• Designation of Permanent Grassland
• Tenancy agreement review
• Computer literacy
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Obligations to be reduced:
• 13 Statutory Management Requirements (SMRs) – from 18
• 7 Good Agricultural & Environmental Conditions (GAEC) – from
16
Everyone Else
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Ecological Focus Areas
Options include:
• Land lying fallow
• Landscape features (active management requirements?)
• Buffer strips
• Afforested areas (established under RDS)
• Short rotation coppice
• Areas with catch crops or green cover
• Areas with nitrogen-fixing crops
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Rural Development (Pillar 2)
“Our aim will be to implement regulations in a way that is as simple,
effective and affordable as possible, while seeking to achieve good
value for taxpayers and customers”
“I believe that transferring the maximum 15% from Pillar 1 to Pillar 2
would be the right thing to do….” Rt Hon Owen Paterson MP
Level of P1 to P2 transfer to be confirmed by 31 December 2013
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Rural Development (Pillar 2)
Max budget for England £3.874bn incl. 15% transfer P1 to P2
• CLA/NFU advocating 9% transfer P1 to P2
• Existing commitments carried forward c£2.1bn
• Headroom for NELMS - £600m to £1,500m
• No new ELS agreements until January 2016
• National co-funding c£558m over plan period
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Rural Development (Pillar 2)
New Environmental Land Management Schemes from 2015
(NELMS)
- Site specific agreements (c.f. HLS) „Upper Tier‟
- Area based agreements (targetted) „Mid Tier‟
- Small scale capital grant scheme „Lower Tier‟
Expecting area of land under agreements to fall from
70% to 35-40%
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Rural Development (Pillar 2)
In 2014 expiring „classic‟ agreements (other than ELS) will be
renewable as ELS or HLS
Risk of additional modulation? (10% + 9% in 2013)
ELS features & EFA interaction
Historically 83% of Pillar 2 has gone to agri-environment schemes
Dual Use to be scrapped?
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Budget Constraints
Re-allocation:
• Movement „uphill‟ 2.5%
• Young Farmers 2%
• National Reserve 3%
• Degressivity 0.08%
• Movement between regions ?
Possible cuts:
• EU Budget cuts 1.5%
• Financial discipline 2.45%
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Budget considerations
• 1,000 acre north Essex/south Suffolk cereal farm
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Current
ha Gross Margin Total
WW1 127 1024 130,048 (10T at £150/T DC £476/ha)
WW2 127 857 108,839 (8.5T at £165/T DC £546/ha)
OSR 126 695 87,570 (3.5T at £320/T DC £505/ha)
ELS 25 12,150
338,607
Cropping – Winter Wheat, 2ND Wheat, OSR
ELS – including 25ha of 6m Buffer strips
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Other Income
SPS 85,000
Overheads
Contracting 110,000 (£110/ac)
Others 54,000 (£54/ac)
Net Profit (before Prior charge and Divisible) 259,607 (£260/ac)
Case Study 1
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Other Income
BPS + Greening 80,000
Overheads
Contracting 110,000 (£110/ac)
Others 54,000 (£54/ac)
Net Profit (before Prior charge and Divisible) 252,607 (£253/ac)
ha Gross Margin Total
WW1 127 1024 130,048
WW2 127 857 108,839
OSR 101 695 70,195
Winter Beans 25 615 15,375 (3.75T at £220/T DC £210/ha)
ELS 25 12,150
336,607
Maintain ELS, Cropping WW1, WW2, OSR/25ha Winter Beans
(3rd crop and EFA met by beans)
Case Study 2
ha Gross Margin Total
WW1 127 1024 130,048
WW2 127 857 108,839
OSR 126 695 87,570
Buffer
Strips
25 0
326,457
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Other Income
BPS + Greening 80,000
Overheads
Contracting 110,000 (£110/ac)
Others 54,000 (£54/ac)
Net Profit (before Prior charge and Divisible) 242,457 (£242/ac)
Give up ELS, use buffer strips for EFA and 3rd Crop
(Could maintain ELS as well – make up points from other out of field options +
£12,150, funds permitting)
Case Study 3
ha Gross Margin Total
WW1 127 1024 130,048
WW2 127 857 108,839
OSR 101 695 70,195
Fallow 25
ELS 25 12,150
321,232
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Other Income
BPS + Greening 80,000
Overheads
Contracting 110,000 (£110/ac)
Others 54,000 (£54/ac)
Net Profit (before Prior charge and Divisible) 237,232 (£237/ac)
Maintain ELS, have 25ha fallow, use this for EFA and 3rd crop.
Rotate the fallow around the farm to control Blackgrass!!!! (fallow
might have to have a winter cover crop)
Conclusions
• Actions now may impact on 2015
• Definition of EFA features will be critical
• Bottom line may not be too bad
Nothing is decided until
everything is decided
Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
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