OSR area aid cuts will be deeper than expected

By Philip Clarke

DEEPER than expected cuts in oilseed area aid are in the pipeline, after the publication this week of the first legal texts on Agenda 2000.

The documents, which still have to go to the European parliament and council for ratification, add important details to the outline agreement reached by EU heads of state at their recent Berlin summit.

They confirm that oilseed payments will drop in three equal stages until they match cereal aid in 2002/03. But this is now put at Euro63/t (£42/t), instead of the Euro66/t (£44/t) agreed by farm ministers a month ago. At current exchange rates this would pay just £249/ha to English growers and £239/ha in the Scottish lowlands.

But the greater concern is what happens to oilseed payments in the next two years. Farm ministers originally said support would not drop below Euro66/t (£44/t) throughout the reform period, a move welcomed by UK farming unions who have seen aid cheques cut by Blair House penalties for over-planting.

But the new document specifies that oilseed area aid may not fall below the cereal rate, in other words Euro58.67/t (£39.3/t) in 2000/01 and Euro63/t (£42/t) in 2001/02.

Only when oilseed and cereal aid rates are equalised in 2002/03 will the Blair House penalties vanish altogether.

“This makes it much more difficult for oilseed producers,” says NFU arable adviser, Jonathan Pettit. “It is good there still is a floor, given the extent of our current penalties. But it is much less supportive than we had hoped for.”

But despite the disappointment, the Home Grown Cereals Authority remains bullish about oilseeds. Apart from the agronomic benefits as a break crop, gross margin analysis shows that oilseed rape could actually outperform wheat, depending on market price movements.

“If wheat prices remain unchanged at this seasons average of £71/t in 2000/01, then rapeseed would only need to average £130/t to compete under the first year of Agenda 2000,” says HGCA economist, Peter King.

The HGCA also estimates that in the second year of reform, with wheat earning £69/t and rapeseed £130/t, and with both getting the same area aid, oilseeds should be making a higher gross margin at £503/ha compared with £487/ha.

  • The legal texts also confirm the end of the reference price system, which cuts area aid when market prices are high. A further review of the oilseed market is also called for within two years, to assess the effect of reform.

  • See more