CLA CAP Talk Nov 13 - Land Partners

CAP Reform update

Impact on farming business 2013-2015

Simon Dixon Smith MRICS FAAV

www.land-partners.co.ukLand Partners : CAP Reform update: December 2013

3rd December 2013

www.land-partners.co.uk

DEFRA statements of intent

• “We will seek to adopt the simplest approach which is most likely to

minimise the burden on you and the RPA…”

• “We will seek to implement a direct payment system which is simple

and accessible to you, by eliminating unnecessary complexities and

by avoiding gold plating”

• “Simplicity, affordability and effectiveness will underpin our approach

to implementing the new CAP in England and the policy choices we

take. I am resolutely determined to avoid the mistakes of 2005.”

Land Partners : CAP Reform update: December 2013

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Overall UK budget changes

2007 – 2013

• Pillar 1 £20.5bn

• Pillar 2 £3.7bn

£24.2bn

2015 – 2020

• Pillar 1 £17.8bn

• Pillar 2 £1.84bn

£19.64bn

•

Land Partners : CAP Reform update: December 2013

DEFRA consultation

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

• Accelerated Period

• 31st October to 28th November

• Some decisions made

Who will be affected?

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

• Largest farms

• Smallest farms

• Occupancy changes

• Young farmers

• Everyone else…

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If more than €150,000 after greening (c1750 acres cropped)

Preference – Degressivity

- 5% deductions

- Unlikely to be any allowance for salaries

Or – Re-distributive payments

- Up to the first 54ha

- Max 65% top-up

>30ha arable – 3 crops to be grown

Largest Farms

Land Partners : CAP Reform update: December 2013

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Smallest Farms

• Less than 5ha – no claim allowed

• Less than 10ha of arable land – no crop diversification

• Less than 15ha arable land – no Ecological Focus Area

• Less than 30ha arable land- 2 crop to be grown unless

75% of holding grassland or

75% of arable area temporary grass

Consider letting out some land to bring the holding under the thresholds

Land Partners : CAP Reform update: December 2013

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Occupancy Changes

Land Partners : CAP Reform update: December 2013

Entitlements will roll over

31st December 2014

2015 claim area

National Reserve

Crop diversification if you rent out more than 50% of your land

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Young Farmers

BPS top-up for 5 years

Minimum skills & training requirement?

Someone under 40 the „head of the holding‟

Defer appointments?

Each claim before 40th Birthday

Budget ceiling

Land Partners : CAP Reform update: December 2013

Everyone Else

Direct Payments (Pillar 1):

• Movement of area payments „uphill‟

• Loss of entitlements in excess of eligible area

• Block cropping

• Potential Alternative Certification Scheme

• Ecological Focus Areas

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

2015, before

deductions

(per hectare)

Lowland SDA Moorland

Current €242 €195 €34

Proposed €236 (-2.5%) €236 (+20%) €62 (+82%)

Everyone Else

Direct Payments (Pillar 1):

• Contracting agreements

• Permanent grassland restrictions

• Potential for group EFA‟s

• More crop codes

• Designation of Permanent Grassland

• Tenancy agreement review

• Computer literacy

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Obligations to be reduced:

• 13 Statutory Management Requirements (SMRs) – from 18

• 7 Good Agricultural & Environmental Conditions (GAEC) – from

16

Everyone Else

Land Partners : CAP Reform update: December 2013www.land-partners.co.uk

Ecological Focus Areas

Options include:

• Land lying fallow

• Landscape features (active management requirements?)

• Buffer strips

• Afforested areas (established under RDS)

• Short rotation coppice

• Areas with catch crops or green cover

• Areas with nitrogen-fixing crops

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Rural Development (Pillar 2)

“Our aim will be to implement regulations in a way that is as simple,

effective and affordable as possible, while seeking to achieve good

value for taxpayers and customers”

“I believe that transferring the maximum 15% from Pillar 1 to Pillar 2

would be the right thing to do….” Rt Hon Owen Paterson MP

Level of P1 to P2 transfer to be confirmed by 31 December 2013

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Rural Development (Pillar 2)

Max budget for England £3.874bn incl. 15% transfer P1 to P2

• CLA/NFU advocating 9% transfer P1 to P2

• Existing commitments carried forward c£2.1bn

• Headroom for NELMS - £600m to £1,500m

• No new ELS agreements until January 2016

• National co-funding c£558m over plan period

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Rural Development (Pillar 2)

New Environmental Land Management Schemes from 2015

(NELMS)

- Site specific agreements (c.f. HLS) „Upper Tier‟

- Area based agreements (targetted) „Mid Tier‟

- Small scale capital grant scheme „Lower Tier‟

Expecting area of land under agreements to fall from

70% to 35-40%

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Rural Development (Pillar 2)

In 2014 expiring „classic‟ agreements (other than ELS) will be

renewable as ELS or HLS

Risk of additional modulation? (10% + 9% in 2013)

ELS features & EFA interaction

Historically 83% of Pillar 2 has gone to agri-environment schemes

Dual Use to be scrapped?

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Budget Constraints

Re-allocation:

• Movement „uphill‟ 2.5%

• Young Farmers 2%

• National Reserve 3%

• Degressivity 0.08%

• Movement between regions ?

Possible cuts:

• EU Budget cuts 1.5%

• Financial discipline 2.45%

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Budget considerations

• 1,000 acre north Essex/south Suffolk cereal farm

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Current

ha Gross Margin Total

WW1 127 1024 130,048 (10T at £150/T DC £476/ha)

WW2 127 857 108,839 (8.5T at £165/T DC £546/ha)

OSR 126 695 87,570 (3.5T at £320/T DC £505/ha)

ELS 25 12,150

338,607

Cropping – Winter Wheat, 2ND Wheat, OSR

ELS – including 25ha of 6m Buffer strips

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Other Income

SPS 85,000

Overheads

Contracting 110,000 (£110/ac)

Others 54,000 (£54/ac)

Net Profit (before Prior charge and Divisible) 259,607 (£260/ac)

Case Study 1

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Other Income

BPS + Greening 80,000

Overheads

Contracting 110,000 (£110/ac)

Others 54,000 (£54/ac)

Net Profit (before Prior charge and Divisible) 252,607 (£253/ac)

ha Gross Margin Total

WW1 127 1024 130,048

WW2 127 857 108,839

OSR 101 695 70,195

Winter Beans 25 615 15,375 (3.75T at £220/T DC £210/ha)

ELS 25 12,150

336,607

Maintain ELS, Cropping WW1, WW2, OSR/25ha Winter Beans

(3rd crop and EFA met by beans)

Case Study 2

ha Gross Margin Total

WW1 127 1024 130,048

WW2 127 857 108,839

OSR 126 695 87,570

Buffer

Strips

25 0

326,457

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Other Income

BPS + Greening 80,000

Overheads

Contracting 110,000 (£110/ac)

Others 54,000 (£54/ac)

Net Profit (before Prior charge and Divisible) 242,457 (£242/ac)

Give up ELS, use buffer strips for EFA and 3rd Crop

(Could maintain ELS as well – make up points from other out of field options +

£12,150, funds permitting)

Case Study 3

ha Gross Margin Total

WW1 127 1024 130,048

WW2 127 857 108,839

OSR 101 695 70,195

Fallow 25

ELS 25 12,150

321,232

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Other Income

BPS + Greening 80,000

Overheads

Contracting 110,000 (£110/ac)

Others 54,000 (£54/ac)

Net Profit (before Prior charge and Divisible) 237,232 (£237/ac)

Maintain ELS, have 25ha fallow, use this for EFA and 3rd crop.

Rotate the fallow around the farm to control Blackgrass!!!! (fallow

might have to have a winter cover crop)

Conclusions

• Actions now may impact on 2015

• Definition of EFA features will be critical

• Bottom line may not be too bad

Nothing is decided until

everything is decided

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

Land Partners LLPThe Old Stables, Lyons Hall Business Park, Lyons Hall

Road, Braintree, Essex, CM7 9SH

info@land-partners.co.uk

01376 328297