By Peter Crichton
NOW that more of the details of the 30 March agricultural summit have emerged, there are options available to pig farmers looking for a share of the 26 million on offer.
The overall payout could be as high as 78m in total because the 26m is available for this year only, and the scheme is designed to run for a total of three years.
The EU-funded package was submitted by MAFF on 30 March under Article 88 of the Treaty according to the “Community Guidelines on Sate Aid for Rescuing and Restructuring Firms in Difficulty.”
Approval of the package is not yet guaranteed but is expected to be received within two months provided that all the guidelines are compiled with.
The scheme has been split into three sections which include:
- Total Exodus, for those pig farmers who wish to quit agriculture completely.
- Outgoers, for those who wish to cease pig farming but to remain in other forms of farming.
- Restructuring, for those pig farmers who wish to remain in the industry but wish to restructure their business to make it viable in the longer term.
Applications under No 1 and No 2 are likely to be dealt with more quickly than three.
Total Exodus payments may also be available to those producers who have already left the industry and for outgoers funding will be subject to the applicant demonstrating that the remainder of their business is viable.
The restructuring rules appear more complicated and open to doubt over what funds, if any, will be available out of the 26m already claimed by Total Exodus and outgoers.
Before any restructuring payments can be made there must be a reduction over the pig sector as a whole of 16%.
This is calculated from the June 1998 census date when the UK herd capacity stood at 778,000 sows and means that there needs to be a reduction in sow space to 653,520 head before any restructuring payments become available.
It is important to note that the 16% reduction refers to the capacity of the industry measured in sow places taken out of production rather than in actual sow numbers.
Applicants who wish to claim Total Exodus or Outgoers payments will submit bids to MAFF for the costs of effectively putting their units and fixed equipment into a form of permanent “setaside”.
This will entail either demolishing or gutting pig buildings.
Producers will estimate the cost of this work and MAFF will then look at the most cost effective bids received nationally to reduce sow capacity by the stated 16%, ie 124,000 sow places.
The cheaper the bid the better the chance of success which is likely to be in the form of a 50% grant towards the destructuring costs plus a further 20% bonus of the bid costs.
As set earlier, applications for Restructuring payments will only be effective once the 16% reduction in herd capacity has been achieved nation-wide.
To have any chance of success Restructuring grants will only be paid to those producers who can produce an approved Business Plan to their bankers that passes all the tests of commercial viability.
There also needs to be a residue left in the 26m annual fund.
Grant payments will be based on 5% of the size of funding received by the producer from his bankers in the first year with details for the following two years to be confirmed.
The National Pig Association and MAFF have promised to help producers to cope with the details of all three schemes and to try and answer many of the questions which will be raised along the way.
However, with pig prices on the move and better signals all round in the market place the signs are that for those UK producers left in the industry their priorities will be to capitalise on higher prices and to see what can be done to recoup the massive losses suffered over the past two years.
- Blair announces 203m aid package, FWi, 30 March, 2000
- Peter Crichton is a Suffolk-based pig farmer offering independent valuation and consultancy services to the UK pig industry