Weak i cuts arable aid for UK but not Continent

6 July 2001

Weak i cuts arable aid for UK but not Continent

By Robert Harris

ARABLE area aid payments have been hit by the weak k, leaving UK farmers worse off then their Continental counterparts and sparking calls for a fresh round of agrimoney compensation.

Modulation and over-planting penalties will cut support further.

The k-based area payments are converted into £s using the average exchange rate between the two currencies during June.

Unfortunately, the ks average value during the month slumped to just 60.8097p, 3.3% less than in June 2000.

So, while farmers in the euro-zone will receive 7% more aid for cereals and set-aside in 2001 to offset lower intervention prices, UK cereal and set-aside payments will rise by just 4%.

English growers will receive a gross payment of £225.60/ha for cereals and set-aside, about £7.60/ha less than had last years exchange rate been used. A similar shortfall leaves Scottish non-LFA growers with just over £217/ha, and Northern Irish and Welsh non-LFA growers about £200/ha and £198/ha respectively.

But these payments are subject to 2.5% modulation, introduced by the government to help fund rural development schemes. This shaves another £5.60/ha off the payment in England; slightly less in other areas.

English and Scottish growers are also expected to overshoot their arable base areas this year, probably by about 3% and 2.5%, respectively, says Richard King, of farm business consultant Andersons. If that is confirmed later in the autumn, resulting scale-backs would reduce final cereal and set-aside payments to just £213.41/ha in England, and £206.49/ha in Scotland, he says.

Proteins and oilseeds have also suffered sharper than expected falls. In England, oilseeds payments drop to £249.97/ha after modulation and predicted scale-backs, while protein crops attract just £245.59/ha (for full regional and crop list, see area aid table on page 30). "These falls will keep margins under pressure," says Mr King. "This is especially true for break crops. Back in 1999, before Agenda 2000, modulation and the weak k, oilseeds received £424/ha and protein crops £346/ha."

But all 2001 area payments are due some agrimoney compensation, to offset the effects of the weak k when converting subsidies and support prices to national currencies.

About £29m left over from the 1999 package will definitely be paid. This amounts to about £5/ha on cereals and £10/ha for oilseed rape (see table, page 30).

But the NFU will press government for a further £34m, or £7/ha, triggered by the poor 2001 exchange rate, and £23m left over from the 2000 package.

"There is certainly strong justification for payment," says economist Peter King. "Arable incomes are still at a very low level, and farmers need to have funds to invest if we are to retain a viable agricultural sector." &#42

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