Should the single farm payment on hitherto unsupported crops be passed straight down the supply chain?
Producers must say No, firmly and in unison. This is not new money – just the same pot distributed a different way; and reduced by modulation and financial discipline.
Take the case of a farmer growing peas or potatoes on 20% of his land and combinable crops on the other 80%. He will receive about the same total amount of money this year as he did last subject to deductions for modulation and national reserve. But his SFP will be spread across all his land, but his Arable Area Payment Scheme money was concentrated on his combinable crops.
Arable farmers providing land to specialist fruit, vegetable and potato (FVP) growers should also bear this in mind when discussing rents.
The only people receiving new money are those who had nothing but unsupported farming in the reference years. But the cost of set-aside and cross-compliance will more than offset the 20-22/ha (8.50/acre) regional payment.
The SFP is de-coupled from production. It will be paid irrespective of cropping provided the land is kept in good agricultural condition and that set-aside and cross compliance obligations are met.
Unlike AAPS money, it should not appear in the gross margin calculations for any particular enterprise – and certainly not in cost plus or open book arrangements with multinational retailers and processors.
During the long debate over CAP reform, the Processed Vegetable Growers Association argued for a single flat-rate area payment with everybody free to grow whatever they choose. Unfortunately we will have to wait for that.
Meanwhile, the complexities of the negative list and the special FVP authorisations, coupled with the lengthy transition period, cloud the issue. Farmers growing these crops without or with insufficient authorisations will lose SFP on the unauthorised area. So the de-coupling is less than perfect.
The reality is that this year SFP entitlement values will vary greatly. The reason is the extent of unsupported activities in the reference years and depending on whether the area farmed this year has increased, decreased or remained the same since the reference period.
Also growers will not know until perhaps the autumn of 2005 how many FVP authorisations they have been allocated so there is an understandable degree of nervousness pervading the industry.
Short-term lets for specialist potato and vegetable growers are causing most concern.
2005 is the crucial year for establishing the long-term right to the SFP entitlements, so most farmers want to keep all their land under their control this year. The question is whether or not the FVP authorisation will be in the right place.
Is it fair that existing FVP growers can claim SFP on their crops while new growers cannot? Categorically Yes. Existing growers will have a lower reference amount because of their historical cropping and therefore lower value entitlements.
New growers, whose reference period cropping was wholly AAPS crops, will have higher entitlement values so, after forgoing payment on his FVP area, his total SFP will be similar. Next year the picture will be clearer.
We expect to see a ready market for entitlements with FVP authorisations. Entitlements with the FVP authorisation are likely to have a lower value than those without because of the reference period cropping. So it will be a win-win situation for new or expanding FVP growers to trade entitlements with farmers in possession of FVP authorisations who no longer wish to grow those crops.
Uncertainty over CAP reform is likely to keep markets tight and prices firm for the next year at least. It is essential to remember payments are to pay for environmental improvements and to support farm infrastructure.
They should not be usedto drive down short-term land rentals for FVP crops. That will simply render the SFP a tool for boosting supermarket profits.