October 2010 Archives

DairyCo has this week published further evidence of how the supermarkets are battling to tempt cash-strapped consumers into their stores…by cutting the price of milk.

According to those busy market researchers at Kantar Worldpanel, the average price for a litre of milk in the four main retailers was 58p/litre in the four week period ending 3 October - some 8p down on the July average of 66p/litre.

Overall volumes sold have increased where prices were cut, but total revenue from milk sales has still fallen - suggesting that consumers have just changed where they buy their milk, rather than buying more of it.

After the retailers came under fire earlier this month for increasing their margins from dairy products, farmers and processors will hope that supermarkets are funding the latest price wars out of their own pockets and not putting more pressure on suppliers’ margins.

Arla is to increase production of its Cravendale milk brand at the Stourton dairy near Leeds.

The company said sales of the brand were growing by 16% year-on-year and £6.7m was being invested in a joint venture with blowmoulding specialist Logoplaste. That will boost Cravendale production at the plant by 50m litres once the new equipment is operational next March.

“Since its launch 12 years ago we have recently topped the 200m litre milestone and expect value sales to exceed £166m by the end of the year,” Cravendale brand manager Sam Dolan said.

The company hopes the brand will become a top 10 grocery brand by 2020.

49m litres of milk (17m of it organic)..192,000t of potatoes…5.2m heads of lettuce…91m free range eggs a year…these are just a few examples of the annual volumes of British and Irish produce being used by McDonalds. Given the company’s commitment to the London Olympic Games, these numbers can only grow.

The chain is also spreading the word about how food is produced by holding open days for the public at some of its supplier farms, with the farming businesses involved sometimes devoting several days to this role. Top honours must go to a Derbyshire milk producer who reluctantly rescheduled his syndicate’s first day’s shooting to host an open day this week.

Agriculture is often regarded as being relatively recession-proof and figures just published have added further weight to the argument.

For the first time, the organisation behind Bacs direct debit and direct credit payments has produced a breakdown of its payments over the past three years.

The figures show the volume of payments within the agricultural sector increased by 2% between August 2007 and August 2010, whereas many other sectors saw sharp falls.

The construction sector was hardest hit by the economic downturn, with the volume of Bacs payments down by a quarter over the same period. The transport, storage and communications sector saw a 19% fall and manufacturing a 15% decline.

The only other sectors to show an upturn in payment volumes were mining and quarrying (up 8%), health and social work (7%) and education (3%).

Bacs is a not-for-profit, membership based, industry body, which processed more than 5.6bn UK payments last year, worth £3.83 trillion. It is estimated that over 90% of the UK workforce is paid via Bacs direct credit. The data includes monthly salaries and weekly wages.

Defra will have its budget cut by almost one-third, after chancellor George Osborne unveiled his spending review at lunchtime today.

The department faces cuts of about £240m a year over the next four years, reducing its overall budget by 29% to almost £1bn.

It’s still unclear how this will actually affect farmers and as with all these things, the devil will be in the detail that emerges over the next few days.

What we do know is that environmental schemes (namely ELS and HLS) and ‘green’ energy should escape relatively unscathed...

Farm assurance provider NSF-CMi is to buy Genesis Quality Assurance from the Leavesley Group.

The deal, which includes the Genesis subsidiary Integra Food Secure, will strengthen NSF-CMi’s position as the main provider of farm assurance in the UK, but reduces the choice of provider for farmers.

The company already manages a number of crop and livestock inspection and certification schemes in collaboration with various organisations, including:
• Red Tractor Farm Assurance - combinable crops & sugar beet
• Assured Dairy Farm Scheme
• Freedom Food Schemes
• LEAF Marque
• Tesco NURTURE
• Organic Certification
• ISO 22000

Since it was set up in 1999 Genesis QA had grown to provide farm assurance to over 4000 arable, beef & sheep, dairy and pig producers. It prided itself on providing “straightforward, commonsense but effective and credible” assurance for farmers.

“We are proud to have established these businesses, but we believe that for them to optimise their potential, they will be better served by a specialist company operating throughout the world,” James Leavesley said.

“NSF-CMi has an impressive track record and is well placed to develop the businesses over the next few years.”

Will the acquisition be good news for existing Genesis QA members? Tell us what you think in the FWi forums.

Ambitious plans to improve the environmental performance of the Welsh dairy industry over the next decade have been published.

The Dairy Roadmap for Wales has been created by a range of stakeholders including producers, milk processors and supermarkets, and sets out a number of environmental targets across the supply chain.

For producers, it aims to reduce greenhouse gas emissions from dairy farming by 20-30% by 2020, use 40% of energy from renewable sources and recycle 70% of non-natural on-farm waste.

The Roadmap identifies a number of practical areas where environmental performance can be improved, “without threatening the economic viability of the industry”.

PepsiCo UK has announced bold plans to cut the carbon emissions and water usage across its farmer suppliers by 50% over the next five years.

The parent company of Walkers, Quaker, Tropicana and Copella is one of the largest buyers of British potatoes, oats and apples, working with 350 British farmers.

Its Sustainable Farming Report details how the company will work with suppliers to reach its “50 in five” aim.

Measures include: The use of a computerised carbon calculator that allows farmers to analyse carbon use during farming practices and make effective changes; a trial of a novel low-carbon fertiliser; a new web-based crop management system that allows growers to maximise yield and quality; and a series of workshops where growers can learn how technology can reduce their carbon footprint.

Specialist crop firm Premium Crops is trying to attract more linseed growers for 2011 to supply rising demand for the oilseed.

The company is offering farmers a forward contract price of £350/t and/ or a 20% premium over the oilseed rape price.

It has also overturned many other normal linseed trading practices. For example, it will buy produce from a set area rather than a fixed tonnage; it will accept up to 10.5% moisture and 5% admixture without claims or rejection; and it is guaranteeing no capped load charges.

The firms says most growers are so far opting for a 50:50 split, with half of their crop fixed at £350/t and the other half at 20% over osr.

Anyone completing their 2009/10 Self-Assessment tax return on paper has been reminded to return their completed form to HM Revenue & Customs by midnight on 31 October.

Missing this deadline could result in an automatic £100 penalty.

An alternative to paper filing is to file your tax return online - as three-quarters of Self Assessment filers already do. Those submitting tax returns online also get an extra three months, as the online submission deadline is not until 31 January 2011.

Find more information and register for online filing at the HMRC website or call 0845 9000 444.

The rise in grain prices this year has been good news for Syngenta. The company says total third-quarter sales across its global business were 10% higher than Q3 last year at $2.2bn (about £1.4bn). Year-to-date sales now stand at $8.9bn (£5.6bn), up slightly (1%) on last year.

Crop protection sales were 10% up last quarter at $1.8bn, while its seeds section saw similar growth.

All regions recorded sales growth, although the greatest was in Latin America and Asia Pacific, at 15% and 13% respectively.

“The third quarter performance confirms our expectation of continuing positive volume momentum in the second half of 2010,” chief executive Mike Mack said.

“As we look ahead to 2011, we are in a strong position to capture value from improving conditions in the crop protection market and from the significant advances in our seeds technology.”

H&H Group of Cumbria has reported a record £1.37m trading profit for the year to June 2010, up 40% on the previous year. Overall turnover was more than 5% higher at £9.5m.

Growth in all six operating companies contributed to the group's performance, with the livestock business, Harrison & Hetherington, trading over £100m-worth of livestock, up 3%.

"After very strong trading in the first half of the year supported by currency which helped facilitate exports and restrict imports, the remainder witnessed some trend reversal with weaker prices against an on-going background of declining livestock numbers nationally," a statement said.

The largest distillery to be built in Scotland for more than 30 years has been opened by drinks giant Diageo.

The £40m Roseisle malt whisky distillery in Speyside features 14 large copper stills and can produce up to 10m litres of spirits a year, going into brands such as Johnnie Walker, J&B and Bells.

Roseisle is part of a £100m investment in Scotch whisky by the company and its opening was welcomed by NFU Scotland vice-president Allan Bowie. "Diageo has been at pains to make known its commitment to Scottish farmers and to the quality Scottish grain those farmers produce. The investment in the future of Speyside at Roseisle is a clear sign that this commitment is there and set to continue."

Commissioning of the Vivergo Fuels biofuel plant at Saltend near Hull, originally scheduled to begin late this year, will now start in January to March next year with plans to be fully operational by the end of June 2011.

The plant will take in more than a million tonnes of feed wheat each year to produce bioethanol and animal feed. It will employ about 70 full-time employees once fully operational.

“Given the scale of the project it is a complex process to take it from the drawing board to full operation, and therefore initial timescales have moved,” said a spokesperson for the company, which is owned by BP, British Sugar and DuPont.

So the exchange rate that will be used to convert this year’s single payment from euros to sterling has been set.

The rate of €1 = £0.85995 wasn’t quite as good for UK farmers as last year’s bumper €1 = £0.91 and SFP cheques will be worth around 5% less as a result. But, timely weakening of the pound just before the rate was set means this year’s rate is still more favourable than those used in 2005 to 2008.

Indeed, the timing of sterling’s weakening was uncanny. After firming for much of the summer, the pound fell throughout last month on the back of dodgy economic forecasts, reaching its recent low-point almost exactly as the crucial 30 September deadline arrived.

It’s small consolation to farmers facing hefty increases in costs this winter, but every little helps. Now it’s just question of when the money arrives.

The European Commission has already said the UK won’t be one of the 10 member states that will get early delivery of single payments to help alleviate income pressures - ironically, partly due to the better income conditions afforded by the relative weakness of sterling.

Click here to read more blog postings

OK, we can’t do much about the weather, but a rainy day well spent might pay off [writes Suzie Horne].

For example, just one day after the single payment exchange rate was fixed, a further fall in the pound meant that claimants who choose to take their payment in euros could already secure next year’s cheque at a slightly better exchange rate than this year.

It’s interesting that in Scotland around 20% of claimants elect to be paid in euros, compared with just 2% in England. Any theories on why that might be? Almost all of those who take a euro payment in turn protect the value of that payment by fixing the rate at which it will be converted to sterling before the 30 September deadline.

Protecting margins elsewhere is becoming a higher priority. After another week of see-sawing wheat futures and the weather holding up drilling, many will have been watching prices and wondering if the dip we saw at the end of last week was the start of something bigger.

With a recovery of more than £5/t on Tuesday (5 October), it seems not. It will be interesting to see what happens to the £30/t-plus gap between new crop futures and prices for the final few months of the 2010 crop. Both November 2011 and 2012 London feed wheat futures were at more than £130/t delivered midweek, while May 2011 was £161/t.

It’s all change for Phil Clarke’s Business Blog. Having flown the business nest to Poultry World magazine, you’ll now find the whole business team contributing to the Business Blog - keeping you up to date with the latest news, views and musings from the world of agribusiness.

It falls to me (Paul Spackman) to open the proceedings, and what better subject than one that seems to have jammed by inbox over the past few weeks - solar power. The flood of press releases and article ideas about solar PV shows it really is flavour of the month.

Whether you’re putting a few PV panels on a barn roof, or thinking about renting out several acres for a ‘solar farm’, it all looks financially attractive and relatively low-risk. I can see why so many companies and landowners are keen to join the bandwagon.

But, let’s not forget the main factor behind this solar revolution - namely the government’s Feed-in Tariff. Where would this fledgling sector be without those attractive incentives? I suspect it would still be struggling to get off the ground.

So it’s no surprise a recent article in the Financial Times that suggested FiTs could be slashed as part of the autumn spending review prompted a number of worried PV investors to contact the REA - the ‘voice of renewables’ in the UK.

The REA reacted by urging government to confirm the tariff rates published at the scheme’s launch would not be reduced in advance of the scheduled review due in 2013 - let’s hope those in power take notice.

If government does go ahead with cuts ahead of this date - and it’s a big if - then it’s likely to put a severe dent in confidence in the sector and I can easily see investors looking for another flavour to try next month…

See our Farm Energy special in this week's Farmers Weekly for more.

For earlier blog postings, please click here.