17 January 1996

Area aid capping would be bad news all round

By Philip Clarke

CAPPING area aid payments will wipe out farm profits, undermine rural employment and cause environmental degradation on many farms in the eastern counties.

That is the claim of a report prepared by the recently-formed Arable 2000 Working Group, a collection of interested parties, including Bidwells consultant Simon Ward, Brussels adviser Robert Gooch and Suffolk farmer John Kerr.

The report, obtained by FW this week, is due to be presented to EU farm commissioner, Franz Fischler, imminently, and demonstrates the damaging effect capping, or "modulation", would have on the UKs larger arable units.

The analysis shows that, for the current season, a "typical" farm in East Anglia should be making a gross margin of £723/ha (£293/acre) from a combination of cereals, pulses, oilseeds and set-aside.

While Brussels has yet to come out with any firm proposals for modulation, restricting area aid to the first 50ha (124 acres) has been suggested as a working figure.

On this basis, and assuming constant yields, prices and variable costs, the model shows the impact of modulation for various farm sizes (see graph).

For example, a 150ha (370-acre) unit could expect to see gross margin fall to £554/ha (£224/acre), while a 440ha (1090-acre) farm would return just £519/ha (£210/acre). "This allows for some change in cropping pattern," explains Mr Ward. "High aid crops, such as oilseeds and pulses, would be claimed on up to the 50ha limit. Thereafter, cereals would dominate."

Despite this change, at these gross margin levels many farms would fail to make a profit once fixed costs have been deducted.

Mr Ward suggests that a 1% fall in gross margin would lead to a 0.6% fall in the permanent and part-time workforce. This amounts to a 10% drop in the overall workforce of 121,600 on mainly cereal farms in East Anglia.

The report suggests the commissions original proposal, to cut cereal area aid by 7% across the board, would be a better way to save money.n

Simon Ward of Bidwells believes modulation will lead to 10% job losses on East Anglian farms.