25 July 1997

Aid to account for lions share of OSR income

By Philip Clarke

OILSEED rape growers will be getting a bigger slice of their income from area aid than from the crop this season, as prices continue to slide.

The full rate of aid is put at £455/ ha (£184/acre) in England and £509/ha (£206/acre) in the Scottish non-LFA. Using official EU yield figures, this is equivalent to £148/t from the aid cheque alone, well above the £130/t the crop is worth ex-farm from fields being cut this week.

Whether this is the final level of subsidy remains to be seen. Two things are likely to change it:

lPenalties due to the EU and UK exceeding the so-called "maximum guaranteed area".

lCompensation as a result of EU prices falling more than 8% below the "world reference price".

The first of these is almost certain to be triggered. Official estimates put the EU as a whole 6% over the 4.93m hectare MGA. The method of calculating the consequent aid cuts is unclear, but basically the worst offenders get the biggest penalties. On this basis, UK growers could expect to have 4% knocked off their area aid, says the Home Grown Cereals Authority.

But traders are wary of making predictions. Final areas will not be known until IACS forms are processed later in the year and Germany in particular is believed to have overstated its crop. "Aid will go down, but for now we cant tell by how much," says United Oilseeds boss, Martin Farrow. As for price adjustments, these, too, are uncertain. The reference rate is about £158/t. After deducting the 8% threshold, that suggests that anything below £145/t should trigger a top-up of area aids.

The problem is that the calculation is done on EU average prices, which are significantly better than UK values. Furthermore, Brussels monitors prices over a six-month period and this only started three weeks ago. Market movements will be crucial in the next few months in determining whether area aid will benefit.

Prospects for prices are not good, says Anne Guttridge, based in Cargills Paris office. She cites three reasons:

lCrops across Europe have yielded better than expected.

lLatest USDA figures point to even bigger soya plantings.

lCurrency factors have put pressure on all grains, and oilseeds have been dragged down with them.

"We are now looking at an EU crop of 8.1m tonnes compared with 7.25m tonnes last season," says Ms Guttridge. The next few weeks will also be crucial in setting yields for US soya and Canadian canola, but both have the potential for much higher output.

On the demand side, oil is trading strongly with the Chinese in the market since April. But meal is more of a problem, not least because of the loss of demand from the disease-affected Dutch pig industry.

But that is of little consequence for UK growers, whose only real hope is a collapse in sterling. &#42

Apex oilseed rape comes off 16ha (40 acres) for Dennis Eagle at Manor Farm, Hockering, Norfolk, yielding a "satisfactory" 4.3t/ha (1.75t/acre).