27 February 1998


Agenda 2000 proposals for

CAP reform are set to cut

arable subsidies and

squeeze profits. But nothing

has been decided yet. Here

Johann Tasker, market

and commodities editor for farmers weeklys

interactive service, FWi,

examines the hopes and

fears of arable farmers

across the UK

REFORM of the CAP will be top of the EU agenda next month when farm commissioner Franz Fischler reveals just how he intends to turn CAP reform into CAP reality.

How much he plans to say remains to be seen. But farmers across the country will be one step nearer to counting the cost of complying with pressure for budgetary cuts from the EU and fair trade from the rest of the world.

Many UK farmers already fear Agenda 2000 proposals will have far-reaching and negative consequences. Mr Fischler has promised a radical approach rather than a piecemeal tweaking of existing farm policy.

In addition to reducing area aid payments, there is talk of forcing farmers to become more environmentally friendly, and imposing a ceiling on subsidies – known in Euro-speak as "modulation".

Modulation threat

Of these three main proposals, large-scale UK farmers fear modulation most. A subsidy ceiling could be related to farm size, the number of farm employees, or a maximum payment paid for each farm. But until Mr Fischler lets the CAP out of the bag, no one knows for sure.

From his office in East Anglia, Malcolm McAllister of Broadoak Farming is worried that any upper limit on subsidies could reduce arable incomes. He manages about 20,000ha (50,000 acres) of arable land from Edinburgh to Southampton and grows nearly all the major arable crops – from field-scale vegetables to winter wheat.

"Modulation is being talked about more and more," he says. "I just hope that once the politicians start looking at it in detail, theyll find that its an impossible minefield to cross."

Like many large-scale producers, Mr McAllister says UK farm minister, Jack Cunningham, must vigorously oppose Brussels talk of modulation. "If hes looking to maintain a successful and competitive British farming industry, hes got to realise farming was unprofitable in 1997 and 1998 looks like it will be very, very difficult as well."

If the politicians decide size-based modulation is unfeasible, they may decide to relate subsidy payments to the number of farm employees. That would favour the labour-intensive farms of southern Europe to the detriment of the UKs highly mechanised arable units, Mr McAllister argues.

"I would wonder how many daughters, infants and grandparents a peasant farmer in Greece is suddenly going to find to employ," he says. "And in any case, how would such a policy be policed?"

That leaves modulation based on a maximum subsidy payment. According to Bidwells consultant Charles Course, a £160,000 limit on aid to any one farm business is thought likely.

That would hit farms bigger than about 570ha (1400 acres). Such a policy would unfairly penalise large farms which benefit from better economies of scale than smaller holdings, Mr McAllister stresses.

Farms in countries other than the UK must change their ways and become more efficient, he says.

"You dont gain efficiency unless you work at it. All our employees contribute to reducing costs and we offer them bonuses if they help us achieve that. Its a continual focus, although however you look at a business, theres always the opportunity to cut costs."

The Broadoak strategy involves maximising profit by only applying accurate amounts of fertilisers and sprays at the optimum growth stage. Crops are constantly monitored throughout the season and the ratio of staff to machinery is regularly assessed.

"We are constantly looking to produce at a price at which we can sell with a margin," Mr McAllister says. "That will always be our focus – were determined to be here when other farm businesses might not be."

Tailoring input use to need also makes environmental sense. It fits in well with other CAP reform proposals to link subsidies to environmental measures rather than production.

The Wildlife Trusts group, for example, is pressing for payments to be linked to setting aside up to 10% of land for wildlife conservation.

"These proposals should not be feared, they should be viewed as a chance to take farming into the next century on a viable economic footing which would ensure a thriving countryside rich in wildlife," says John Cousins, director of agricultural policy at the Wildlife Trust.

Environmental links

At least one large-scale arable farmer in Scotland agrees. Doug Niven, managing director of MAMCO, farms 2000ha (5000 acres) in the Tweed Valley, 50 miles (80km) south of Edinburgh. His land ranges from heavy clay loam to lighter sandy soils, supporting winter linseed, wheat, oilseed rape and barley.

At the moment, Mr Niven grows hybrid oilseed rape on his set-aside land because it entitles him to a subsidy. But he would be willing to change if he is paid to do so.

"They could stop me growing oilseed rape by decoupling support from production and making direct payments to farmers instead," he says.

Mr Nivens farm is currently applying for accreditation to ISO 14001, an environmental management system administered by the British Standards Institute. He is aware of increasing consumer pressure for a greener countryside and has used yield-mapping for the past three years to reduce fertiliser applications.

"At the end of the day, the consumer is king," says Mr Niven. "Theyre the people who buy our produce and pay the subsidies and weve got to make sure weve got something they want. So were very much market orientated."

Yield-mapping has helped Mr Niven cut his fertiliser costs by 10% and pesticides by 15%. And talk that CAP reform could introduce a tax on nitrogen and pesticides has prompted him to seriously consider a move towards organic farming.

If the politicians adopt the Agenda 2000 proposal to slash cereal intervention prices by 20% to £69/t, Mr Niven says conventional farming will become unprofitable for him.

Last years wheat was grown at a cost of £85/t, because an extremely wet summer caused a 30% drop in yield. "We took a real double whammy because of the weather," says Mr Niven.

In search of premiums

"The lower yields knocked us and so did low market prices. And then we took another knock because the bushel weights were all low. Local people say making a profit of £70/t is just not viable for the average farm. But if we were organic at least we would be making a premium on what we sold."

Many politicians stress that the environment is an increasingly important issue in CAP reform. But most farmers worry that one particular proposal will do nothing but harm to the environment.

The proposal that area aid for oilseeds be reduced to the same level as for cereals, coupled with an additional supplement for protein crops, could prompt some farmers to stop growing rape altogether.

"Reducing area aid to the same level for all crops would mean an inevitable move to more wheat," says Mike Calvert, general manager of Leicestershire-based CWS Agriculture.

"On poorer soils, break crops like oilseeds help keep up fertility. But on the better land you can grow cereals year after year. And thats not good for the environment or anything else – it could flood the market."

American analysts appear to agree. According to a United States Department of Agriculture report released earlier this year, European grain output will rocket by 43m tonnes annually if the EU adopts existing Agenda 2000 proposals.

The politicians have some breathing space to decide what to do after Mr Fischler finally reveals whats on his mind next month. But they dont have long.

As part of the UKs EU presidency, Dr Cunningham will chair a meeting of EU agriculture ministers on Apr 20-21 in Luxembourg to consider the first stages of what many predict will be the most fiery debate in farming circles since British beef exports were banned. A further, informal meeting will be held one month later in Newcastle.

It is highly improbable that an agreement acceptable to all countries will be quickly reached. EU ministers are expected to defend their individual national interests to the hilt before accepting a compromise.

Germany – the EU country with the most farm workers – faces a general election this autumn and farm minister Jochen Borchert knows that if he accepts proposals unpopular with German farmers, he will be doing little to help his government get re-elected.

Meanwhile, farmers in Greece are up in arms over what they perceive to be the EUs attempt to bankrupt Greek agriculture, causing ongoing problems for farm minister, Stephanos Tzoumakas.

"The key thing is that everyone looks at all the options," says Mr Calvert. "Because at the end of the day, we all have to compete in the big, bad world." &#42

Environmental issues cant be ignored – MAMCO director Doug Niven.

Extra wheat production could flood markets – CWSs Mike Calvert.


&#8226 20% cut in cereal intervention prices to about £65/t.

&#8226 End to compulsory set-aside.

&#8226 Non-crop specific compensatory payment of £300/ha.

&#8226 Supplementary payment for protein crops of £29/ha.

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