Quota scheme:Think hard
By Jonathan Long
TENDERING for the Sheep Quota Purchase Scheme (SQPS) will be a huge gamble and producers should read scheme literature carefully before applying.
John Thorley, National Sheep Association chief executive, advises thinking long and hard before committing to the scheme, taking into account the full effect on each individual business. "They will not be able to opt out once the quota is committed."
The scheme literature states that producers entering the scheme will give up quota permanently for a one-off lump sum payment. But tenders must only be based on subsidy payments due over the next five years, together with any loss of income over the same period, explains a DEFRA spokesperson. Stocking rates will be limited for those five years.
"Leaving it up to producers to bid for the scheme gives little idea of where to aim tenders or what the likely uptake will be," says Mr Thorley. "But current suggestions from flockmasters suggest that between £180 and £250 is likely to be the spectrum of bids. However with only £2m in the pot this year it will not significantly reduce the national flock."
Exmoor producer Peter Delbridge does not plan to apply for the scheme, but his rough calculations show that he would need £250/ewe if he did. A price of £250 will only remove 8000 ewes from the national flock.
The scheme, which aims to reduce stocking levels in historically overgrazed areas, will allow producers to offer up to 75% of their quota to the government, so long as they relinquish a minimum of 50 units of quota. Producers must reduce maximum stocking rates to levels proposed in their tender, including cattle, sheep and horses/ponies in calculations.
"Tenders will have to be submitted by Oct 31 this year and agreements lasting five years will commence on December 1. However, stocking levels agreed in December will only take effect from May 2003," adds the DEFRA spokesperson.
Producers with common grazing rights wishing to reduce stocking levels on commons will have to submit tenders in conjunction with their commoners association. The scheme rules state that tenders submitted by commoners groups must include quota from producers who hold at least 80% of the grazing rights for that common.
Although senior ADAS consultant David Morris believes the scheme has good intentions, he feels that falling returns from other enterprises, mean producers are unlikely to want to give up on a sector showing signs of recovery. "Sheep incomes have been good this year and with a fixed premium payment they are unlikely to sacrifice a guaranteed income.
"Early breeding sales are reporting strong prices and there is confidence returning to the industry," adds Mr Thorley.
Applications to the scheme will be judged on a number of criteria, says DEFRA with lower priced bids receiving higher priority. Preference will also be shown to bids offering larger reductions in sheep numbers and offering to reduce stocking rates on land under statutory environmental designations.
Mr Morris also foresees problems formulating bids as it is difficult to forecast incomes five years into the future. "Most producers budget 12 months in advance, with some forecasting three years ahead, to guess at incomes five years hence is impossible."
The NFU has also raised concerns that producers are being asked to commit to the scheme when the future of the SAP is uncertain. However, DEFRA says should there be significant changes to CAP livestock regimes requiring a review of SQPS within its five year lifetime, producers would not be penalised. *
* Five year commitment.
* Affect open market values.
* Continued until 2005/6.
• Five year commitment.
• Affect open market values.
• Continued until 2005/6.