Farm consultants have criticised last week’s CAP reform proposals for potentially unfairly penalising larger, more efficient farming businesses.
Many businesses are likely to have to make structural or operational changes to comply with the proposed rules, but those involved with contract farming agreements or joint ventures could be particularly disadvantaged.
Two areas of greatest concern are the “greening” and “capping” elements of the proposals. The former includes a requirement for farmers to cultivate at least three crops on arable land, with none accounting for more than 70% of the land and the third at least 5% of arable area.
In many arable contract farming or joint venture arrangements where land belonging to different single payment recipients is farmed as a single unit and block cropped, it could be harder for claimants to meet the criteria, Richard King of Andersons said.
“Any single payment holding could well end up with just one crop on their farm in a given season, so planning for these businesses will become a lot more complicated.”
Livestock businesses with arable land could face similar issues, he added. “A lot might just grow spring barley or maize and don’t want an extra crop, or don’t have the conditions to grow anything else. It could be made easier if temporary grass is allowed in the mix of crops, but this hasn’t been confirmed yet.”
It is also unlikely that contract labour will be included in the proposal to allow claimants to deduct salary costs from the value of their basic payment before capping reductions are applied to claims over €300,000.
“It seems unfair anyone who uses a large amount of contract labour should be penalised,” George Chichester of Strutt & Parker said. “It will cause a lot of complications for larger businesses and make them less efficient simply by having to comply with the rules. The whole regime is more complicated and I’m concerned that if the capping principle is adopted, it could pave the way for the threshold to be reduced in the future.”
Large share farming or joint ventures could be particularly affected and it may end up in contractors billing for two separate labour and machinery elements, Brown & Co’s Simon Mountjoy added. This in itself opened up other accounting issues and would be hard to administer. He also said it was difficult to define what constituted “labour”, as other factors such as payments to directors, or pension contributions could theoretically be taken into account.
Carl Atkin from KinnAgri suggested the salary offset proposal was “completely flawed” and would be unworkable on an administrative level. The anti-capping lobby was probably stronger than ever before, as countries such as Poland, Czech Republic and Hungary also had plenty of large farms, with relatively low labour bills, he noted.
Given all the uncertainty, farmers were likely to hold off making changes to business structure until more detail was available, Mr King said. “Two years in limbo does nothing to help the industry get to the structure it needs to be.”