£400m could be price of strong £ for farmers
By Tony McDougal
FARMERS are set to lose an estimated £300-400m over the next 12 months due to this weeks revaluation of the green rate, which will reduce intervention prices and export subsidies.
But requests for farm minister Douglas Hogg to seek compensation from the European Commission under an existing scheme to reimburse farmers for loss of income as a result of the revaluation have received little government support.
Mr Hogg has however asked the commission to freeze the green rate for direct payments, which will be worth around £200m over the next two years to the UKs arable farmers and £40m to livestock producers in 1998 (see Business p17).
Sir David Naish, NFU president, said the 5.4% revaluation of the green pound, due to sterlings strong performance on international currency markets, would affect intervention prices for cereal, beef and dairy products.
Describing the revaluation as "inevitable but deeply regrettable", Sir David said that if Mr Hogg refused to press for compensation, UK producers would be forced to compete on unequal terms.
Both German and Irish farmers received compensation when their respective currencies were revalued in recent months. Mr Hogg said in a letter to the NFU that he was not opposing a UK compensation package, but added that he was not minded to implement it unless the union could provide examples of hardship cases among farmers.
The governments position is complicated by the Fontainbleau agreement. It means that if the government matches European funding on a 50/50% basis, the Treasury will end up paying 75% because of the complex subsidy clawback regime agreed by former PM Margaret Thatcher.
Mr Hogg has also argued that there was little sign of farmers supporting the Treasury when there was a 27% devaluation of the green pound between 1992-95.
Tony Donaldson, NFU chief economist, said the NFU would be unable to press for a detailed compensation package until the end of the year, adding that its size would depend on the strength of sterlings performance. If sterling weakens, the compensation rate will fall.
As a result it will be up to the next government to make a decision on whether to press for compensation. Shadow farm minster Gavin Strang, said he would look at the inherited situation. "Much will depend on the strength of sterling," he added.
Paul Tyler, Lib Dem rural affairs spokesman, said beef and dairy producers would be hit the hardest.
farmers, already affected by market price reductions due to the BSE crisis and the OTMS and proposed selective cull would be hit hardest.
"It will be unacceptable if those who have suffered dont get compensated because of the manipulation of the currency market."
Douglas Hogg is not minded to introduce compens-ation unless Sir David Naish can provide examples of hardship cases among farmers.
Selective cull all ready to roll
TRACING of BSE cohorts will begin in the next few days after MPs approved the governments plans for a selective cull.
While MPs stressed there was no scientific justification for the cull of between 80,000-100,000 cattle, they agreed it was necessary to meet the Florence Agreement and lift the beef ban.
But farm minister, Douglas Hogg, was attacked by MPs for failing to take on board farmers concerns over the artificial and arbitrary definition of a targeted herd and the restrictive approach to the calculation of top-up payments.
Both Christoper Gill (Con, Ludlow) and Ieuan Wyn-Jones (Plaid Cmyru, Ynys Mon) said the only reason the government had taken the unprecedented step to include in-calf heifers in the herd definition was to cut the farmer eligibility to top-up payments.
Edward Garnier (Con, Harborough) and Northern Ireland MP Eddie McGrady (SDLP, Down South) said the top-up payments, which are being paid to producers who will lose between 10-25% of their herd, were ridiculous.
Both felt they should be distributed and calculated more liberally to compensate those who lost less than 10% or more than 25%.
Mr Hogg promised the cull would be flexibly administered, with slaughter beginning once the House of Lords approved the measures on Feb 3. Payments to farmers would be made within 21 days of slaughter.
Mr Hogg said farmers losing a large percentage of their herd could have them slaughtered in two groups, and in-calf animals would only be culled after calving and weaning.
And he is pressing the European Commission to allow suckler cow producers to continue to receive quota premium payments even if they have breached retention period regulations.
Responding to fears raised by Labours farm spokesman, Gavin Strang, that the selective cull would have to be re-examined if there was proof of maternal transmission of BSE, Mr Hogg said current evidence was inconclusive but that further research work was due to be published next month.
Mr Hogg also backed comments made by Tory backbenchers of the danger of replacement animals harbouring BSE being brought back into the UK from Europe because of the failure by member states to introduce a ban on meat and bonemeal entering the livestock food chain.