Twelve months ago, whoever thought that we would be starting 2017 with the inauguration of Trump, Andy Murray ranked number one in the world, and of course the triggering of Article 50? The world is a very different place to what it was in January 2016. What does all this mean for British farming and what can be expected for the year ahead? Uncertainty is a given, but for those of us who are optimistic, we have a huge opportunity in our hands.
The short term Brexit boost through the sterling devaluation has been welcomed by most farmers, particularly those who are selling their goods abroad. The longer term implications will be more important, and there is no doubt that as we go forward, currency will remain highly sensitive to political announcements, decisions and even resignations. It was only this week that we heard the news of the UK Ambassador to the EU resigning over differences.
During 2016, the UK bank base rate was reduced from an historic low to an even lower level. Coupled with a significant quantitative easing programme it is clear that Mark Carney is trying to steady the ship for what is expected to be an unsettled ride ahead. UK stocks and other assets have risen also on the back of the Brexit currency effect. Recent price rises will be seen as the first signs of rising inflation, but this is not expected to be significant by any means.
It will be important for farm businesses to focus on risk management for the year ahead and to get the right business structure in place to help best cope with the uncertainly we are likely to experience during the policy vacuum that will persist during Brexit negotiations. Big projects planned for the year ahead? Money has never been so cheap to borrow with low rates offered to fix in for the medium and longer term, so shop around. But a word of caution, it will be wise to proof test and critic such plans against uncertainty and ensure that any investment has costed benefits.
But what do we know for the short term going forward? We are guaranteed to receive Basic Payment Scheme monies for the next couple of years, with the likelihood of these continuing until 2020. The Treasury has also created more certainty about Pillar 2 funding, confirming last Autumn that all grant fund projects, including agri-environmental schemes signed before the UK leaves the EU will be honoured. Both of which unfortunately rely on the RPA processing such payments, which of course adds a greater deal of unpredictability of when payments will be received!
Speculation remains as to whether it will be a hard or soft Brexit, but the following key points will need to be addressed over the coming months. Access to European markets after 2019; subsides; availability of European farm labour, and perhaps more importantly the formation of a good solid vision for British agriculture in a post Brexit world.
It was comforting to see this week that the CBI believes that the finance and the farming sectors should be equally prioritised when it comes to the Brexit negotiations, despite the financial services adding £120bn to the UK economy verses an agricultural contribution of £8.5bn. Let’s hope that Mrs May doesn’t treat UK agricultural market access as a soft concession when she gets around to trade negotiations with the EU.
For something to take all of this off your mind, we can always look forward to watching Trump take tea with the Queen or Wimbledon, with Sir Andy Murray taking to the court. An interesting year lies ahead.
For more information or to discuss further email Robert Moore or telephone 07590 230510
Energy is such a fundamental part of our day to day life both at work and at home, yet the generation of power is often controversial and emotive in our desire to have electric on demand and at an affordable price. You only have to look at the recent debates over nuclear at Hinkley Point and the recent fracking approval in North Yorkshire to understand the level of emotion and debate surrounding energy. Government policy and incentives to produce renewable energy had a desired outcome but it’s a shame that this sector has now died a death (particularly solar on small scale for onsite demand). The direction now seems to be moving towards generation of electric from gas with analysts suggesting around 60% of our electric being produced from gas in the near future and I don’t see this changing unless the consumers want to pay more for electric.
Fracking is likely to become more headline news over the next 5 years as the Government issue licences to operators and planning consents granted. From a land owner/occupiers or householders perspective, the questions arises as to what can you do? Theresa May as recently announced that up to 10% of the tax from fracking will be re-directed to the communities affected by the wells and rather than being lost within local councils (spent on administration now doubt), there is suggestions that it will be paid directly to the householders in the parish. From personal experience living in a community where there is a renewable energy pot of money, the issue we always face is distributing this amongst the parish and this statement from central government I think perhaps is a much more equitable way of ensuring fairness within the area and distributing equally.
But what happens if you own the land? Under the Petroleum Act 1988, shale gas belongs to the Crown, not the Landowner, however exploration can only happen once the Secretary of State has issued a Licence to an operator following a competitive but stringent bidding process. Such licenses will grant exclusivity to operators in defined licence areas and, as we know parts of the north are already subject to certain agreements. An operator is also able to obtain certain ancillary rights under legislation which include an ability to occupy land, to erect buildings and lay pipes, amongst others, in order to carry out extraction of the gas if deemed feasible, with such rights able to be enforced under statutory powers if terms cannot be agreed between the Landowner and operator. The operators’ access requirements should be carefully scrutinised as these may need to be separately negotiated as part of any terms of entry. Compensation will of course be payable to a landowner for any of these rights being enforced upon their property, however if pursued down a statutory route rather than by agreement, compensation has been established as what the landowner is losing rather than what the operator is gaining, so it is important to understand the whole picture.
For more information or to discuss further contact Robert Moore on 07590 230510 or you can email on email@example.com.
Unbelievable diversity, vast opportunities and incredible people are what make global agriculture so interesting, but everywhere faces challenges. Travelling with 8 other international Nuffield Scholars from Australia, New Zealand, Ireland and the Netherlands, I have over the past 3 months been spanning the globe on a Nuffield Farming Scholarship agri-focus programme visiting the US, Mexico, Brazil, New Zealand and the UK.
As a group we looked at everything from cereals, beef, lamb and dairy through to coffee, tomato and citrus production, and debated the growing opportunities for global agriculture and explored how farmers, industry and government are all gearing up to tackle key challenges such as sustainability, succession and food security. Providing a brief flavour of my travels, I summarise a few key themes which were discussed with farming hosts along the way.
Scale and diversity in California is incredible. The state alone accounts for 65% of the total US non-citrus fruit and nut production, and 73% of the total US national value. With a Mediterranean climate and rich soil, California is the most productive almond, walnut and pistachio growing region in the world. Non planted bare land, with irrigation is actively being sought by large agri-investment companies paying up to US$30,000/acre (£21,300/acre) with an agenda to plant, grow and harvest nuts. Once planted and a third nut crop has been produced, land with walnut trees could be achieving anything in the region of US$45,000/acre (£32,000/acre).
The dairy and beef sectors are also huge. We visited a dairy farm managing over 11,000 head of Holsteins. The milking facility consisted of four 13 unit double-up herring bone parlours milking 3,500 head within seven hours. The whole dairy operation employed 65 employees.
On another visit, we went to a beef feedlot measuring one square mile with cattle held in outdoor pens with shade from the intense sun. On the day we visited, there were 85,000 head of cattle, with an expectation that as summer comes along and spring grass disappears, the unit will fill up to their full capacity of 125,000 head.
Water, or the lack of it, and labour are two key challenges that California faces going forward. The state relies heavily on snowpack each winter to resupply surface water stocks, and with this being at an all-time low, supplies from aquifers are pumped to make up the shortfall. Aquifers are rapidly depleting and without real investment in more efficient water technologies and infrastructure, California’s water uncertainty remains a huge problem. The agri-sector has a strong reliance on a manual workforce, predominately Mexicans. Legislation has recently been passed raising the minimum wage from $10 to $15 an hour by 2020, after just increasing from $7. The implementation of more mechanised processes in order to keep overheads down was a key challenge that many farmers discussed with us.
Visiting Brazil, you cannot help but be amazed by the sheer speed on which the agri sector has developed. In 1993, Brazil’s share in world exports by volume was just 15% for soyabeans, 8% for sugar and 13% for poultry. Today these figures are 41%, 47% and 34% respectively. There is no doubt Brazil is well on her way to becoming an agricultural superpower, but there are big ticket items that need to be addressed, such as political stability, investment in road and rail infrastructure, and education, especially within the rural areas.
A highlight was visiting a 7,000 hectare arable farm in south Brazil growing soya and maize, with three crop rotations achieved per year. Working on a no-till system that had been in place for the last 15 years, our host prided himself on the organic matter content of his soils. One host commented that “Brazil is the land of the future, but always will be”. With ample rainfall, warm climate, good soils, innovative technologies and novel cropping rotations, Brazil has undoubted opportunities, but her challenge lies in tackling the big ticket items so that her agricultural potential can be truly realised.
Since the removal of subsidies in the mid-1980s New Zealand’s agricultural industry has had to adapt to market needs, which led to a difficult period during the nineties, before sheep and beef rose as the dominant sector. Numbers have been in decline over the last 12 years as dairy farming has boomed predominantly driven by Asian demand. The dairy industry now has a debt level reaching NZ$38 billion, we learned from Federated Farmers; the farmers national union, that almost 1 in 10 dairy holdings are under pressure from banks over their mortgages.
Attending discussion groups, I asked farmers what they believe the biggest challenge facing th industry is going forward. Succession topped the list, closely followed by getting new entrants into farming.
Share farming is a well-known model in the New Zealand dairy sector, but there are other structures emerging. On our travels we visited mixed units and arable holdings incorporating innovative equity based partnerships, all with a remit to encourage, motivate and embrace young talent, and not necessary family siblings. Farms are run like companies, with regular board meetings among shareholders. It was refreshing to see young farmers getting a chance to move up the ladder to farm ownership.
Throughout my travels, I asked several businesses, ‘what is the most important question a business should ask it’s self? No matter where you are in the world, the most successful and forward thinking organisations answered “happiness, when people in your business are happy, profit will follow”. The best quote which I picked up on my travels was “Culture will eat strategy for breakfast any day” and when you really think about it, it is so true. Incredible people are what really turn the wheels of global agriculture and what makes this industry so fascinating to be involved within.
As I continue my Nuffield farming scholarship over the next year, I will be specifically exploring the issues surrounding short-term land occupation and will be questioning whether our most valuable asset, the soils in which we rely upon to supply food is progressively coming under strain as businesses look for short-term gain in an era of increasing price volatility and uncertainty within the market.
If you would like to find out more about the Nuffield Farming Scholarship Trust, please visit www.nuffieldscholar.org