28 May 1999

AGENDA 2000:BE REALISTIC

MISCONCEPTIONS over the true implications for the arable sector of Agenda 2000 Common Agricultural Policy reforms are rife. They need correcting now to prevent profits suffering more than necessary, say ADAS arable experts who have been analysing the likely results of the Agenda 2000 changes.

Their main findings centre around the true impact of the aid cuts announced earlier this year. Those changes apply to the crops which will be sown this autumn. When all factors are taken into account they do not justify a big swing into more cereals, ADAS insists.

Equally importantly the hope that currency movements will reverse the expected slide in profits is a false hope, they add.

"The Agenda 2000 reforms will hit farm profits, growers should be in no doubt about that," says senior economist Bill Hall. "The only thing that would prevent that is a noticeable revaluation of the £, which really is not very likely."

To offset the Agenda 2000 support cuts the £ would have to slip back from the 66p/k seen in early May to 73-74p/k. "If that happens growers will end up slightly better off than last year."

But Mr Hall does not believe that benefit can be relied upon. "If we get to 70p we will be doing very well. Relying on that for farm profitability and using it as an excuse not to tackle the key issues of farm restructuring would not be sensible business."

The reality is that currency movements may not materialise. "The market indications are that 68p/k is optimistic for the year end."

Add to that the adoption of 10% set-aside, in place of the original 0% proposal, and the Agenda 2000 package should be seen as a further severe blow to profits, he says.

"That extra set-aside has costs attached and is going to have a very debilitating effect on balancing out the implications of the reforms," agrees head of arable consulting Julian Hayes.

"It is bound to hit profits and it makes it more important than ever to treat Agenda 2000 as a very real threat that needs a response. But it must be an appropriate response."

Wall to wall wheat is not the answer. Using farm survey data ADAS has analysed the relative merits of the four most popular UK rotations. Heading the list is continuous wheat followed by osr plus wheat/barley; winter beans, wheat, barley; and osr, wheat, pulse, barley.

Even if a 35% oilseeds aid cut for excess plantings is built into rotation 2 it still outperforms continuous wheat, according to the ADAS figures (see chart).

"The gross margin rankings remain surprisingly similar. They are all down, but their relative positions are largely unchanged," says Mr Hall.

Continuous wheat gains a little, but is still behind the cereals/osr rotation. Rotation 3 with its single pulse break slips most, but not as disastrously as some suggest, he says.

Admittedly, rankings could differ for any producer who is significantly better than average at growing one crop than another. That could be particularly important for pulses, where light land growers in particular can find a ready home for spring peas, says Mr Hayes. But for most growers the rankings hold.

Key to the ADAS figures is the allowance for factors beyond the simple individual crop performances. Wheat may show the best margin in any one year, but the knock-on effect of dropping breaks is considerable at both variable cost and overhead levels.

The main reason continuous cereals fail to advance more than they do is the knock-on implications of extra weeds and disease, plus the impact on yield of less timely sowing, input use and harvesting.

Difficult to cope

If a cropping system is well geared up now, it will find it difficult to cope with a shift to more cereals, Mr Hall suggests. "Our figures show peak workloads could increase by up to 30%."

That either means less timely operations, as sowing, spraying and harvesting periods get stretched, or higher overhead costs as extra equipment and labour are bought in to keep operations on schedule.

"And that is at a time when growers should be looking to expand their farmed area to spread overheads, not the reverse," Mr Hall says.

"Continuous cereals can appear attractive at first, but if you are losing timeliness because you cant regularly and consistently optimise sowing and other activities, then yields are going to fall.

"It isnt just a case of growing wheat at least cost. The interaction with labour and machinery costs must be considered too. They cant be divorced.

"You also have to get the full benefits of early drilling first wheats and technical advances in agronomy to deliver the crops full potential. It is no good shifting to continuous cereals if all those benefits are lost because peak workloads have increased so dramatically."

That helps explain why good theoretical yield responses after break crops in trials often fail to materialise on farm. "It is the sheer practicality of getting the crop in on time to exploit the rotational benefits fully."

Timeliness is critical for mixed rotations, but it is even more critical for continuous cropping runs, he stresses.

Continuous cereals also increase risks. "With all their eggs in one basket businesses are at more risk from crop failures and poor market prices," Mr Hayes adds.

Take-all seed treatments may be expected to reduce the yield loss from continuous wheats. But the concertina effect of trying to harvest all the crop by late August and then prepare seed-beds and sow the next one by late September is likely to be greater.

"Take-all treatments may reduce yield losses, but will that effect be greater than the losses from late drilling?" asks Mr Hayes. "I can see the proportion of second wheats rising, but not continuous wheats. Growers should hold their rotations relatively unchanged."