CAP three-crop rule set to have heavy costs for growers

Thousands of arable farmers will have to significantly change their farming practices to meet the controversial three-crop rule being implemented under the latest round of CAP reform, experts agree.

DEFRA has announced it will follow the European Commission’s greening proposals closely, says Guy Gagen, chief arable adviser at the NFU. “They will be implemented pretty much as written.”

The NFU believes about 15% of growers will be affected by the three-crop rule, with many facing significant and costly changes to their operations to meet its requirements.

DEFRA estimates 7% of farms will find the cost of complying exceeds the 30% of the SFP that is dependent on greening, a figure Mr Gagen believes could be conservative.

Contract farmers who block-crop land belonging to several different claimants to drive efficiencies will be badly affected, as will continuous wheat or spring barley growers and smaller farmers co-operating with neighbours who also block crop, he says.

The three-crop rule will introduce added complexity and confusion, he believes. “Rather than trying to make farmers more market-orientated as per previous CAP reforms, this is doing the opposite. It will lead to logistical problems when planning and carrying out field operations, as well as storage and transport problems.

“This will discourage farmers from achieving efficiencies and will curb competitiveness. It might fit the practice in other parts of Europe, but it doesn’t fit forward-looking, progressive farming.”

On the plus side, some of the 15% affected will already be growing two crops, reducing the scale of change needed, says Mr Gagen.

“Also, it is not clear how Environmental Focus Areas fit in. If DEFRA decides protein crops can be grown on these and count towards the third crop, that will help. There is a suggestion that crop area might be discounted by two-thirds for EFA purposes, meaning they would have to be grown on 15% of the farm to qualify. We need information from DEFRA by this spring so growers can plan.”

Stephen Craggs grows 750ha of continuous milling wheat at East Close Farm, Sedgefield, Co Durham. He believes the three-crop rule will cost him thousands of pounds in lost income.

The farm has grown only milling wheat, with the exception of the odd pocket of oilseed rape “as needed”, for 30 years.

“Milling wheat generates the highest gross margins here because 90% plus regularly meets the requirements of 76kg/hl specific weight, 250 hagberg and 13% protein,” says Mr Craggs, the 2013 winner of the Nabim/HGCA Milling Wheat Challenge.

“Milling wheat is less of a commodity crop in our area, so when there is a shortfall I am in a position to sell well above market price. I would struggle to do that with other crops.”

It also makes for a simple system. Weather windows in the North East during autumn can be quite short, so minimising downtime is vital.

He believes the three-crop rule makes little economic or environmental sense. “Farmers grow crops that suit their climate, soil type and market. A good example is Scotland’s distilleries. A 75% cap on spring barley will mean crops are grown where there is no established demand, creating longer truck journeys and less margin for the farmer.”

More fuel will also be used on farm to manage smaller areas of additional crops. All this runs counter to the Renewable Energy Directive, which will require growers to undergo an individual assessment in 2016, he adds.

Continuing with winter wheat on 75% of the farm and splitting the rest between OSR and spring wheat would be the best option for East Close Farm, says Mr Craggs.

“OSR allows me to use propyzamide to control grassweeds and spring wheat harvest would follow on from the winter crop without interruptions. Beans could be possible, but a late entry for wheat could prove challenging.”

Profits would suffer, he says. “Growing spring wheat on 12.5% of the area would, assuming a price of £185/t and a 2.25t/ha reduction in yield, cost the business £39,000.”

Lower growing costs might offset a fraction of that, but the figure takes no account of inefficiencies in cultivations, other field operations and harvest, or any change in overall margins from growing OSR, says Mr Craggs.

Robert Nightingale, farm manager for Sentry’s Sussex operations, says only small areas of the 600ha of land under his immediate charge are likely to be affected.

“However, as a company Sentry will have quite a few areas under one holding that are being block cropped in rotation with other separate farms. So there will be areas where small areas of a third crop will need to be introduced, challenging the economics of crop production.”

Careful thought will be needed to split blocks into the most efficient sizes possible, says Mr Nightingale. For example, a 200ha block could be divided into two 80ha areas, which remain economic for most field operations. That leaves a less attractive 40ha block but, provided a similar approach could be taken on other land within reasonable travelling time, the penalties should not be too great, he explains.

Smaller areas will cause inefficiencies, he adds. “An offlying 20ha planted with one crop may not get the attention it needs to maximise yield. For example, it may be more economically efficient to spray it slightly earlier or later than ideal because the timings fit in with a larger block nearby.”

Given that crops are rotated each year under the current block-cropping system, albeit between holdings rather than within them, the environmental benefits of the three-crop rule seem tenuous, especially as most farms are in ELS schemes and some in HLS too, says Mr Nightingale.

“Although we don’t think greening will be as big a problem as initially thought, it will create some diseconomies of scale and additional management. It will also be a consideration when taking on more land, especially when well away from existing farms.”

Farmers could abandon greening  

Some farmers may opt out of greening measures altogether if they become too onerous, says Phil Edenborough, business leader of Agrogate, Agrovista’s farm business consultancy arm.

“It appears they may be able to do this, at least for the first two years under the reformed CAP. However, it will mean foregoing 30% of the area-based payment. Careful calculations will be needed to see if the perceived savings outweigh the cost.”

Environmental Focus Area (EFA) requirements will have a big influence on that decision, he adds. “EFAs remain the most uncertain element of greening. We know DEFRA and the Scottish government are considering a range of options, but there is no clear guidance as to which will be included and how much they will contribute.”

A leaked document suggests DEFRA plans to give field margins and buffer strips relatively generous values, with each sq m worth 9sq m of fallow. Hedges and ditches would score 4.5 and 3, respectively.

“Some of the options may overlap with existing environmental schemes or cross-compliance demands. The downside is that funds will not apply to both schemes where such overlap occurs, apart perhaps from hedges. These look as if they might be particularly blessed, because existing environmental schemes pay for their management whereas their existence appears to be the key factor for EFAs.”

Permitting protein crops on EFAs would makes things easier, though some growers might still be better off not taking the greening element, says Mr Edenborough.

“A Lincolnshire farmer growing 100ha of wheat and oilseed rape with no hedges would need a third crop and EFA to meet the greening requirements. Even assuming that peas or beans are allowed on EFAs, due to their weighting the farm would need to grow at least 15ha, which could cost more than £8,000 in lost margin. Assuming the greening payment is worth about £55/ha, foregoing it would only cost the business about £5,500.”

However, a farmer in the Welsh borders growing the same crops, but with plenty of hedges and other features might easily reach the EFA score. The farm would only need 5ha of peas or beans to satisfy the three-crop rule, says Mr Edenborough.

“Adopting greening makes sense on this farm, especially as its likely lower yields would also mean a smaller margin drop between wheat and pulses.”

Whether DEFRA plays ball remains to be seen, says Mr Gagen. “The rules around ‘opting out’ for the first two years are not yet nailed down by DEFRA in England, and additional sanctions might be applied to those found non-compliant.

“It might be that a small proportion of growers could be better off opting out of the SPS altogether, removing any sanctions linked to SPS.”