SFP DEDUCTIONS WARNING:By Andrew Shirley

 FARMERS ACROSS the UK could be hit by higher than expected deductions from their single farm payment cheques, industry consultants warn.

George Chichester, of Strutt & Parker, said money needed to fund the national reserve was likely to exceed the figure contained in the EU”s SFP regulations because of an underestimation of the number of farmers who will claim from it.

“The 3% cutback that has been proposed so far is unlikely to be sufficient to supply the entitlement rights for all eligible applicants,” said Mr Chichester, who is now assuming a deduction of 5-7% will be needed.

Andersons’ Richard King agreed. “It’s almost certainly not going to be 3%. If you’ve got a valid national reserve claim they (DEFRA) are duty bound to pay it.” He said the firm was using 5% in its calculations.

Those eligible to claim from the national reserve include new entrants to farming before Nov 2, 2004, dairy farmers who went out of milk production before May 15, 2004, and businesses that expanded in terms of acreage or, in certain cases, production capacity before the same date.

A DEFRA spokeswoman said the deduction required would not be known until all applications, which should be included on IACS forms due in by May 16, were analysed. But she added that in certain circumstances it would be possible to make later applications meaning deductions might have to increase in 2006.

SFP payments could also be hit by scalebacks to the regional ceiling, said Mr King. This was because the total pot of money available would be insufficient to cover land not previously supported, like equine grazing, that could now be claimed under the new scheme. This could add another 2% to deductions, he added.

EU modulation levels have already been fixed at 3% for 2005 with national modulation in England set at 2% (1.5% in Wales, an estimated 2% in Scotland and nothing in Northern Ireland), meaning most UK farmers are likely to see 12% cut from their SFP payments this year if 5% is taken for the national reserve.

For an English cereals farmer, this will total £30/ha leaving a net single farm payment of £221/ha (89.50/acre) if the average euro/pound exchange rate during December 2004 of £0.694 is used (for other regions see Markets, p21).

However, the EU has not yet determined which month will be used to calculate the exchange rate for converting the SFP from euros to pounds, so payments could still fluctuate widely, said Mr King. For example, if the pound strengthened by just 1p against the euro farmers would lose about £3/ha from their net payments.

andrew.shirley@rbi.co.uk