European ways can reduce wheat costs
EUmust again reform CAPto meet trade deal
FURTHER reform of the common agricultural policy is inevitable if the EU is to meet its world trade commitments and avoid a significant hike in farm support costs.
Speaking at this weeks Agra-Europe Agenda 2000 conference in Brussels, EU consultant Brian Gardner said the agreement reached last March in Berlin was no more than a "short-term solution to a budgetary problem".
In particular, the "modest" price cuts for the major commodities would not free the EU from using export subsidies to clear its surpluses. This could lead to problems meeting the demands of the last GATT deal, let alone any new World Trade Organisation agreement.
Prospects for a turnaround in world markets were not good before 2003, he suggested, which created particular problems for arable farmers. Because of the adjustment in the relative profitability between grains and oilseeds, Mr Gardner predicted a 6% increase in EU cereal output, leading to a 26% growth in the export surplus.
"I am convinced that further reform is inevitable because of the market problems."
Architect of the Agenda 2000 reforms, farm commissioner Franz Fischler, also hinted that the Berlin package did not go far enough.
"It is open to question whether the price reductions adopted in the final compromise will be sufficient," he told the conference.
But Mr Fischler was adamant that the reforms agreed so far would not be re-opened in the impending WTO talks, which get under way in Seattle in November.
Senior US trade representative, Mary Revelt, said there was already "deep disappointment" in Washington over the reforms, which left the EU dependent on export subsidies to clear its surpluses. "We remain committed to eliminating export subsidies," she said.
But senior commission civil servant, Maeve Doran-Schiratti countered that the EU was equally interested in seeing an end to trade distorting export credits, which some countries (the US) had used increasingly to maintain market share.
Meanwhile, a new report published by the Agriculture Select Committee reveal MPs believe the Agenda 2000 reforms were so badly bungled they will be renegotiated within two years.
Failing to secure radical reform means new countries cannot join the EU on the same terms as existing member states, says the report.
The current agreement will prove unsustainable as a negotiating position if the WTO talks are to succeed, it adds. *
Agenda 2000 warning
CEREAL farmers in the UK will be far worse off after the introduction of Agenda 2000 if sterling remains strong, and will only maintain current incomes if the £ devalues by at least 12%, a new study by Barclays Bank has revealed.
The figures assume a 400ha (1000-acre) farm which grows winter wheat on half the area, producing a yield of 9.26t/ha (3.75t/acre). Winter barley and oilseed rape each take 80ha (200 acres), yielding 8t/ha (3.25t/acre) and 3.45t/ha (1.4t/acre). The remaining 40ha (100 acres) is down to set-aside.
Assuming a wheat value of £76/t and area aid of £236/ha (£96/acre), the farm can expect to make a trading margin (before rent, interest and drawings) of £113,655.
Once Agenda 2000 changes are taken into account, including a 15% cut in the intervention price, the margin falls dramatically at the current k market rate of 65p.
The same farm in 2002 (by which time Agenda 2000 will be fully in place) would be selling wheat for just £63/t, and area aid would remain at £236/ha. Trading margin would slump to £87,060.
With intervention support and cereal aid dependent on the £/k exchange rate, the strong £ could prove very costly, says John Page, managing director of Barclays Agricultural Banking. Sterling would have to weaken by 12% (k1=74p) by 2002 to maintain the trading margin near its current level. At this rate of exchange, the wheat price would increase to £70/t and arable aid to £262/ha (£106/acre), producing a margin of £111,000. *
Making hedges pay: David Stacey, regional director of Sentry Farming, with some of the new hedging planted on David Rallis Panworth Hall Farm, near Ashill, Norfolk. Some 4800m of hedges, mainly hawthorn, are being restored under a ten-year Countryside Stewardship Scheme, following Norfolk FWAG guidelines. They are protected by 2m and 6m grass margins totalling 2.5ha. The wider strips also make good spray buffer zones. Maintenance grants and capital payments produce a gross margin of £583/ha on the CSS area – better than peas, says Mr Stacey.
European ways can reduce wheat costs
ARABLE farmers struggling to achieve high wheat yields could make big savings by adopting central European practices to reduce inputs to more realistic levels, says Sentry Farmings Trevor Atkinson.
Wheat yields across the 8000ha (20,000 acres) in Poland and the Czech Republic run by the company average 6.5t/ha (2.6t/acre). Variable costs in 1998 amounted to just £21/t.
The typical UK farm would spend £34/t, says Mr Atkinson. "There is no significant difference in product price. But we match the use of inputs to crop potential."
Reduced fungicide use triggered the biggest savings, despite little difference in disease pressure. "We use a sniff of fungicide rather than a full UK-type programme." Average fungicide spend last year was £18/ha (£7.30/acre), compared with £48/ha (£19.40/acre) in the UK.
Big savings were also made on herbicide and fertiliser, he adds (see graph).
The gap grows when operating costs like cultivations, establishment and combining are included. In central European countries, these total £119/ha (£48/acre) compared with £225/ha (£91/acre) in the UK. That means it costs £37/t to produce wheat in central Europe while the UK spend soars to £67/t.
Machinery costs, at £145/ha (£59/acre), are about £30/ha (£12/acre) cheaper in central Europe, says Mr Atkinson. That is mainly due to lower repairs and depreciation costs.
Labour savings amount to about £100/ha (£40/acre). But this is likely to close as skills improve. Ignore labour costs and central European countries still save £123/ha (£50/acre), notes Mr Atkinson. At a price of £75/t, that equates to over 1.5t/ha of grain.
That means UK farmers growing that much more than their central European counterparts can justify the extra spend, he explains. "But there are good arguments falling into place that those growing less than 8t/ha should move to a lower input style of farming." *