Talking Point : Tim Porter 12/11/04

NOW THAT the mist is clearing and we are able to more easily read the small print, calculators should be out in farm offices up and down the country. It is time for businesses to sort out the mathematics of CAP reform.

What do we know? Well, to start with we know that a subsidy gap – the difference between the income received from production related subsidy and the money we will get from the single farm payment – has got to be filled if we are to maintain income at pre-reform levels.

We know that environment payments are going to become a genuine income stream and that we have got to maximise our efforts to exploit the money on offer for ticking the green box in our land management.

We have a fair idea that some owners of eligible land may well opt for a different involvement with practical farming than they have currently – and that, in turn, could throw up opportunities for joint ventures, share farming, lower-rent arrangements or profit sharing options.

Two things are certain. First, all farms who receive the single farm payment should treat it as separate income – a payment for the environmental goods they are providing and maintaining for the nation – and not use it to subsidise any form of production.

The whole purpose of reform is to force us to produce only that for which the market is prepared to pay a profit-generating price. We may, of course, decide to write in a lower figure for nominal rent as the single farm payment is paying for the environmental management of that land but that should be as far as any cross accounting goes.

The second and crucial point is that good advice is going to be vital in reaching the right planning and management decision on any given farm. Four options loom large – farmers must either get bigger, get more specialised, get diversified or look at ways, including taxation implications, of getting out from under what they may identify as the burden of practical farming. The maxim after January 2005 is clear – if it isn’t profitable there is no longer any justification for doing it.

All of these issues will be addressed in the Smithfield Show Farm Options section – an innovation Lloyds TSB is delighted to be staging in conjunction with farmers weekly at London’s Earl’s Court.

A range of partners has worked hard to put on a demonstration of all that is relevant to the new type of business that post-CAP reform agriculture will demand. From the Environment Agency to wind energy, from diversification in food and leisure to the nitty gritty of investment in a new enterprise, Farm Options will be a genuine one-stop-shop for the Smithfield visitor with more than just livestock and machinery in mind.

Above all, the aim is to focus minds on what has to be done to maintain income once the subsidy plug has been pulled. At present, Lloyds TSB and farmers weekly are touring the country with our CAP Reform Roadshow and a number of questions are cropping up again and again.

Confusion over set-aside, lack of information on how payments and eligibility are to be calculated are both regular topics brought up as the experts gather. Many farmers are asking whether or not they should sign up for Entry Level Environment Schemes – and how much easier that decision might have been had more publicity been given to the project schemes that DEFRA instigated around the country.

In addition, there are more fundamental issues about whether farmers are going to keep producing, whether they should seek partners or make other major changes to their business structure. Doing nothing on Jan 1, 2005 is not an option. In the face of such fundamental change businesses have to react. At the very least, owners, tenants and managers have to measure their strategy against the new criteria.

Farm Options, which will build its case on the experience of the road-show programme, will provide good counsel and some pointers for those negotiating the policy maze.

It will provide yet another good reason to visit the Royal Smithfield Show at Earl”s Court in London between Thurs, Dec 2 and Sun, Dec 5, 2004.