18 January 2002

Why it pays to increase claims for forage area

MORE farmers should consider claiming IACS-eligible arable land as forage area to boost support payments this year.

Some could gain several thousands of £s, says Francis Mordaunt, partner at farm business consultant Andersons. He outlines several reasons why this is an especially attractive option for 2002 IACS claims.

"Stocking density tightens from 2 LUs/forage hectare to 1.9 LUs in 2002. In addition, there is no 90-head limit on beef special premium claims, and this year marks the final transition to higher beef subsidies in k terms. On the arable side, we will see the final transition to flat-rate area aid and there is no further chance of agrimonetary compensation."

The table (right) shows estimated comparative payments/ha for 2002, for all the possible competing subsidy claims.

Sheep are included because, although they do not require forage area themselves, if beef and sheep are both claimed the forage area for the sheep is always taken off the total forage area before possible beef claims.

"The figures show that payments can be substantially higher from area claimed as beef rather than arable – particularly BSP bulls," says Mr Mordaunt. "On the other hand, BSP steers more than two years old and sheep give a lower return/ha than cereal claims.

"The exception is English maize, which, because of its separate base area, is always worth dropping from an AAPS claim in favour of livestock.

"When considering whether it is worthwhile claiming eligible arable area as forage, do not forget that there is a bonus of no 10% set-aside requirement."

However, Mr Mordaunt warns producers to consider several points when considering their options (see Main Points box). "Farmers who are not fully familiar with all the details of these schemes should consult their professional advisors."

Nevertheless, the calculations are well worth doing as the difference in subsidy payments can soon mount up, he says. "The most likely beneficiaries are those operating dairy/arable/beef units, particularly if there is a bull-beef unit and forage maize is being claimed as an arable crop.

"And those finishing beef al-ongside an arable unit where there is a high throughput of short-keep steers claimed at first age BSP."

For example, a farmer may run 200ha (500 acres) and hold 650,000 litres of milk quota at Mar 31, 2002. He has quota and ewes to claim 500 SAPs in 2002, and plans to grow 90ha (225 acres) – 80ha (200 acres) of cereals and 10ha (25 acres) of maize – on eligible land with 10ha (25 acres) set-aside. The farm has a new bull-beef enterprise and intends to claim on 50 head for BSP as bulls in 2002. The grassland area is 100ha (250 acres).

The first calculation is to determine the forage acres required to make full claim (below left). This comes to 218.43 LU at a maximum of 1.9 LU/forage ha, which requires 114.96ha. That is 15ha more than the farms grassland area.

"To maximise subsidy take, without looking at renting in additional area, the best solution would be to claim 10ha of maize as forage rather than as arable area aid, and not to claim on 5ha-worth of sheep annual premium or 64 ewes," says Mr Mordaunt. "The gain would be approximately £4600, and would require 1ha less of set-aside which can now be cropped."

Alternatively, if the SAP claim has already been made, then 5ha (12.5 acres) of cereals can be claimed as forage rather than arable area aid along with the maize. The gain in this situation is about £4400 and releases 1.5ha (3.75 acres) of set-aside. &#42

&#8226 It is often possible to rent additional forage area as an alternative.

&#8226 If sheep claims are not made, quota can be leased-out (but only for a maximum of three years). Beware of usage rules (currently 70% of quota must be claimed/leased-out or quota is confiscated).

&#8226 If there is milk quota on the holding, the forage area available for beef will be reduced (5730 litres = 1 LU).

&#8226 Final subsidy payments will depend on £:k exchange rate and scale-backs.

&#8226 Cash-flow implications will result as arable payments will usually be made earlier than the full beef payments.

&#8226 Extensification is a completely different calculation and is not covered in this article.

Milk quota held 650,000 ÷ 5730 = 113.43

Sheep Annual Premium 500 x 0.15 = 75.00

Beef Special Premium 50 x 0.6 = 30.00

Total 218.43

LU/head Claims/ha Subsidy/head Subsidy/ha

Suckler Cow Premium 1.0 1.9 142 270

Beef Special Premium

Bulls 0.6 3.16 120 380

Steers under two years 0.6 3.16 85 271

Steers over two years 1.0 1.9 85 163

Sheep Annual Premium 0.15 12.66 12.63 160

Arable Area Aid (excl proteins)

England NA NA NA 218

England maize NA NA NA 67

Scotland non-LFA NA NA NA 206

Wales non-LFA NA NA NA 196

Assumptions: k1 = 62p, modulation at 3%, scale-back of 5% on BSP, and 2% and 4% for England and Scotland arable base areas respectively. England maize scale-back 70%. Ewe premium based on k21.

*Estimates for 2002 at 1.9 LU/forage ha.