Gradual changes, not painful upheaval from CAP reform
Gradual changes, not painful upheaval from CAP reform
By Stephen Howe
CAP reform will be less severe than many growers fear, says Robert Gooch of Brussels-based agricultural policy agency, Eurinco.
"There are no reasons for immediate, cataclysmic CAP reforms, so no painful changes from Brussels. But UK growers need to be positive and restructure their businesses to reduce any negative impact."
CAP reform will be gradual to meet the twin objectives of a market oriented agricultural policy and a decoupled social and rural development programme, Mr Gooch told delegates at an RASE cereals conferences in York last week.
Until the world trade agreement runs out in 2004, CAP can continue on its present course, he said. Indeed, it is unlikely that there will be another WTO agreement before 2005.
Although the CAP budget was under strain, EU enlargement would not make it worse, because the acceding countries would not get CAP aid, he added. "The big challenge for the commission will be to arrange price convergence between the two areas. Agenda 2000 proposals are a step in that direction."
Based on current green rates, the Agenda 2000 proposals could reduce cereal intervention prices to £66/t and increase compensation payments to £300/ha (£121/acre).
"The short-term effect could be a rise in cereal stocks and further pressure on prices. That might encourage the commission to raise set-aside, possibly up to 20%
"Environmental cross-compliance will be more costly to UK farmers than modulation, which will be based not on area but a financial figure set by national governments," Mr Gooch added. *
Brussels watcher Robert Gooch reckons CAP reforms could boost wheat production, so forcing set-aside rates to rise.
Wheat gross margins
Pre-CAP 96 97 Agenda 2000 2004
Yield (t/ha) 6.7 7.4 7.3 8.3 9
Price (£/t) 90 100 80 70 70
Direct costs (£/ha) 170 230 240 270 250
Gross Margin (£/ha) 433 510 340 310 380
Area Aid (£/ha) – 267 257 311 –
Total GM (£/ha) 433 777 597 621 380
Wheat gross margins under Agenda 2000 proposals could be better than last years, provided growers can harness new technology to boost yield and cut costs, said James Townshend, chief executive of farm management company Velcourt. His figures, based on average yield, price and cost information from the 28,000ha (69,000 acres) the company farms, suggest a wheat gross margin of £621/ha (£251/acre) under Agenda 2000.
While that is down on the £777/ha (£314/acre) seen in 1996, it is up on last years £597/ha (£242/acre). But the figures assume yields will creep up 0.22t/ha (1.8cwt/acre) a year. The key to that is the adoption of technological advances. But costs must fall too, Mr Townshend stressed. "We must see a reduction in the cost of inputs. My company is already buying nitrogen fertiliser £30/t cheaper than last year. Other costs including land, rent and machinery must also fall. And we must learn to use fewer, better-trained employees."
If subsidies disappear after 2004, gross margins could tumble, he acknowledged. His estimates suggest a slump to less than £380/ha (£154/acre), below the pre-CAP figure of £433/ha (£175/acre).