cla cap talk nov 13 - land partners

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


Overall UK budget changes

2007 – 2013

• Pillar 1 £20.5bn


£24.2bn

2015 – 2020



£19.64bn

•


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?


• 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



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



Occupancy Changes


Entitlements will roll over

31st December 2014

2015 claim area

National Reserve

Crop diversification if you rent out more than 50% of your land


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


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


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


Obligations to be reduced:

• 13 Statutory Management Requirements (SMRs) – from 18

• 7 Good Agricultural & Environmental Conditions (GAEC) – from

16

Everyone Else

Land Partners : CAP Reform update: December 2013www.land-partners.co.uk

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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


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



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



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%



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?


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%


Budget considerations

• 1,000 acre north Essex/south Suffolk cereal farm


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


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


Other Income

BPS + Greening 80,000

Overheads


Others 54,000 (£54/ac)



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


WW1 127 1024 130,048

WW2 127 857 108,839

OSR 126 695 87,570

Buffer

Strips

25 0

326,457


Other Income


Overheads


Others 54,000 (£54/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


WW1 127 1024 130,048

WW2 127 857 108,839

OSR 101 695 70,195

Fallow 25

ELS 25 12,150

321,232


Other Income


Overheads


Others 54,000 (£54/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 LLPThe Old Stables, Lyons Hall Business Park, Lyons Hall

Road, Braintree, Essex, CM7 9SH

[email protected]

01376 328297

mailto:[email protected]

