CAP Reform – Affecting You Now?

3rd November 2011

The dust has started to settled a little on the proposed CAP reforms and farmers across the UK have probably asked two questions….how does it affect me?……..will they change it? The answer to both of these questions is yes. Yes it affects all farmers and yes the proposals will change between now and 2014.

What will affect farmers now is their 2011 claim. Anna Fell of George F White said “What’s really important and affects everybody is that in order to receive an allocation of entitlements in 2014 you need to have been a claimant in 2011. This will probably not be a problem for most Farmers, however Farmers should take advice before doing anything which may change their status – ie changing their business structure and inadvertently making the 2014 applicant different to the 2011 claimant”.

The proposal on Capping has caused concern for a number of claimants in East Yorkshire where a considerable amount of large businesses operate. Using current levels of modulation and next year’s anticipated flat rate entitlement value as an example, claimants would need to be occupying approximately 2,000 acres of non SDA land before they begin to be affected by capping.

It may be that steps can be taken to mitigate against this, for example offsetting labour cost, but this could depend on the business structure in place. Currently labour cost will include directors pay for Limited companies, but doesn’t include the often large quantity of unpaid labour in family partnerships. Any business structure changes to try and adapt to the proposals should be done cautiously and with advice for the reasons outlined earlier.

Another of the bigger changes will be the Greening element of the proposals. Anna Fell said that “What we do know is that Greening will exist in one shape or another. Greening is mandatory and attributable to 30% of the payment. The current proposals detail crop diversification, maintaining permanent pasture and an ecological focus area as the three elements”.

The proposals currently state that anyone with more than 3 ha of arable ground will be required to have crop diversity which is detailed as 3 different crops. It is not yet known whether spring wheat and winter wheat are the same crop. This proposal is going to affect a number of farmers big and small. It is hoped that the threshold of 3ha is lifted, as a small farmer with one, 10 acre field is now in theory going to have to grow 3 different crops….not an ideal prospect. Similarly larger enterprises who have adopted contract farming practises where for ease, cost and practical reason, block crop areas, will undoubtedly find that this proposal adds costs through time and fuel as well as headaches.

Another aspect of Greening is the 7% ecological focus area. Farmers will be unable to use the same buffer strips, field corners etc as they have put into their ELS. Some woodland is available as a focus area, however for a quantity of farmers coming up with 7% of their arable area, (which includes temporary grass) as a focus area over and above an existing ELS will be difficult. Anna continued that “we may see a rental market for ecological focus areas coming about, which increases rental returns on significantly poorer land, as it will be more cost effective to rent in poor land rather than not crop good land”.

Anna concluded that “the proposals are the start of a long and arduous process where it is very likely that the payment scheme we end up with is very different to what was proposed, however it is important to take advice before making significant changes”.

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