cla cap presentations from birketts and strutt & parker, 3 march 2014
DESCRIPTION
CLA CAP Update Workshop presentation given by Birketts and Strutt & Parker, Bedfordshire, 3 March 2014TRANSCRIPT
DOES THE NEW CAP FIT?
Rachel Mc Killop, Birketts LLP3 March 2014
Page 2
NEW SCHEME
• The new scheme will become effective on 1st January 2015.
• The new scheme payments will be made up of several different elements:-
• Basic Payment Scheme (BPS) – 70%;
• Greening Payment – 30%;
• Young Farmers Payment – up to 25% top-up.
Page 3
GREENING
• The Greening Payment is separate from the BPS.
• To qualify for the additional 30% you must satisfy the following:-
• Crop diversification.
• 10 – 30 ha of arable land - you must grow 2 crops. The main crop must not be more than
75% of the land cropped.
• More 30 ha of arable land - you must grow 3 crops. The main crop must not be more than
75% of the land cropped and the two main crops must not be more than 95% of the land
cropped.
Page 4
GREENING
• Ecological Focus Areas (EFA)
• More than 15ha arable land you must have 5% EFA on or adjacent to the arable land.
• E.g., nitrogen fixing plants, ponds, hedges and buffer strips (not an exhaustive list).
• Environmentally Sensitive Grasslands (ESG)
• This is a control on permanent grassland at a national level. No “on-farm” control so long as
the national level does not fall by more than 5%.
• EIA directives and undertakings under agri schemes remain in place.
• Exemptions
• E.g. organic farms, more than 75% pasture.
Page 5
YOUNG FARMERS
• Up to 25% additional payment for young farmers for each of the first five years of the operation of
their business.
• To qualify as a young farmer you must be:-
• A natural person; and
• Not more than 40 years old in the year you make your payment application; and
• Set up as a farmer or head of holding within the previous five years.
Page 6
ACTIVE FARMER
• You have to be an active famer to claim the payments under the new scheme.
• To be an active farmer you must carry out a minimum agricultural activity on the land.
• Payments will not be made to those on the “negative list”:-
• Railway services;
• Real Estate Services;
• Permanent Sport and Recreation Grounds;
• Airports;
• Water Works.
Page 7
ELIGIBLE AREAS
• Minimum area for a claim will be 5 ha.
• Departure from before and designed to get rid of small areas which were perhaps not being used for
agricultural purposes in the last scheme e.g. pony paddocks.
Page 8
MODULATION
There will be a movement of 12% from Pillar 1 to Pillar 2 in years 2015, 2016 and 2017. This may rise to
15% in the next review.
12%
Pillar 2Pillar 1
Page 9
NON-CAPPING MEASURE
The spectre of capping was I believe used again in the review so that member states would negotiate
on and accept more unpalatable measures. Whilst we have escaped it again this time around there is
what is being called a “degressivity” measure which basically means that although payments will not be
be capped at a particular level there will be a 5% reduction on payments over.
150,000
Page 10
CASE STUDY
• Joe Farmer is a co-owner of 1000 hectares with his brother Ben Farmer. They farm 900 hectares in-
hand and let 97 hectares to a neighbour called Mrs Sprout, which is due for renewal and the
remaining 3 hectares is let to Ms Toggi.
• Joe and Ben are also in the process of buying another 300 hectares from a neighbour.
• Joe and Ben grow spring and winter wheat, barley, rape and beans.
• Joe and Ben have an old written partnership agreement but Ben is thinking of retiring and Joe‟s son
Harry, who is also a farmer, may join the business.
• Harry has a small holding of 20 hectares but is keen to do more. He turned 33 on 11 February 2014
and may want to join his father in the partnership.
Page 11
CASE STUDY
Issues arising from the Case Study
• Transfer of entitlements when Joe and Ben are buying the additional land.
• As you were! – we will continue to include a clause in our sale and purchase agreements which
allows for the transferral of the specified amount of entitlements. It will ensure that the relevant
parties comply with the cross compliance matters, submission of the RLE1 form and provide
indemnities for any loss or reduction in the amount to entitlements transferred. This process has
been made a lot easier because it has been agreed that existing entitlements can be rolled over
instead of a whole new system being introduced.
Page 12
CASE STUDY
Issues arising from the Case Study
• Mrs Sprout‟s FBT
• We will continue to include clauses in our FBTs which will, in the majority of cases, allow for the
tenant to use the entitlements whilst in occupation and to transfer them back to the landlord at
the end of the term.
Page 13
CASE STUDY
Issues arising from the Case Study
• Ms Toggi‟s FBT
• Miss Toggi will no longer be able to claim under the new scheme as she only rents 3 ha which
is below the minimum eligible area threshold of 5 ha.
Page 14
CASE STUDY
Issues arising from the Case Study
• Crop diversification
• Joe and Ben‟s in-hand land – they will need to grow three different crops on this land. This
could be the wheat, rape and beans.
• They will need to have 5% of their land under EFA. If DEFRA decide that a nitrogen fixing crop
is an EFA then the beans could also count as an EFA.
• Cropping licence v FBT – there has been debate about the use of cropping licences since the
days of the FVP arrangements. The RPA have never really taken the point but the academic
debate has raged. It is probably better from a pure land law point of view and cross compliance
control point of view to have an FBT rather than a licence but no doubt licences will be used.
Page 15
CASE STUDY
Issues arising from the Case Study
• Crop diversification
• Harry‟s Land – Harry will only need to grow 2 crops on his land because he is within the 10-30
ha threshold.
Page 16
CASE STUDY
Issues arising from the Case Study
• Young Farmers and business restructuring
• Harry could qualify as a young farmer and obtain the top-up payment on the land he owns.
• What if he became a partner in his father and uncle‟s business – probably not as he would not
be the head of holding and any split of the business would be heavily scrutinised by the RPA.
Unless there are other sound business reasons to restructure the business this additional
payment incentive would probably not warrant a restructure of a business either in terms of the
success rate or the professional costs involved.
Page 17
UNANSWERED QUESTIONS
• EFA – what are they?
• ESG – what land will be designated?
• How will the existing agri-schemes be affected by greening?
• How will the national reserve scheme work?
• Will dual claims be allowed?
Page 18
THANK YOU
CAP Reform Workshop
Monday 3rd March 2014
Christopher Monk
CAP Reform- Implications for your Farm
• Entitlements
• Greening Measures
• Environmental Stewardship Overlap
• Case Studies
• Degressivity
• Active Farmers & Young Farmers
• 2014 SPS Applications
CAP Reform Workshop
Entitlements
CAP Reform Workshop
New Basic Payment Scheme introduced on 1st Jan 2015
Single Payment Entitlements ‘rolled over’ in England to Basic Payment Entitlements
Need to transfer Single Payment Entitlements by 19th Oct 2014
Surplus Single Payment Entitlements will be lost
Basic Payment Entitlements can transfer from 15th Jan 2015 to 2nd April 2015?
Entitlements – implications
Make sure in correct ownership
If taking on/giving up land in September – act quickly
Do sums now- sell surplus
2 year use rule
Cap Reform Workshop
Greening Measures
Will make up 30% of the new annual payment
Non compliance penalty to rise to 37.5% by 2018
Ecological Focus Area (i)
Crop Diversification (ii)
Permanent Grassland (iii)
CAP Reform Workshop
i) Ecological Focus Area (EFA)
5% of arable area (7% in 2018?)
Range of options
Nitrogen fixing crops – Input restrictions
Landscape Features
Exemptions: > 75% perm grassland or organic
Overlap with Environmental Stewardship
Cap Reform Workshop
Ecological Focus Area
Source: European Commission
EXAMPLE EFA WEIGHTINGS
Landscape Features Unit Equivalent EFA area Comments
Hedges /m 4.5 Up to 10m
Wooded bank /m 12
Isolated tree /m 30 Crown >4m
Trees in line /m 6 Crown >4m
Field copses /m² 1.5 Overlapping crown <0.3ha
Field margin /m 9 >1m
Ponds /m² 1.5 <0.1 ha
Ditches /m 3 <6m
Fallow /m² 1
Buffer strips /m² 9 >1m
Agro-forestry /m² 1
Forest edges /m² 9 >1m
Short rotation coppice /m² 0.3
Catch crops/green cover /m² 0.3
Nitrogen fixing crops /m² 0.3
CAP Reform Workshop
Environmental Stewardship Overlap
Now closed existing schemes continue to end of term
No double funding allowed but;
Pre 2012 Agreements likely to allow options to be used for EFA
Post 2012 Agreements likely to suffer reduction where conflict with EFA
Some options can be used for ELS & EFA
New Environmental Land Management Scheme (NELMS) starts January
2016
CAP Reform Workshop
ii) Crop Diversification
2 crops if over 10 hectares
3 crops if over 30 hectares
Main crop up to 75%; 2 main crops together not more than 95%
Third crop could be EFA but input restrictions
Exemptions: holding is organic; or
>75% of the holding is permanent grassland and arable area is <30h
>75% of the arable area is grassland/fallow and arable area is <30 ha
> 50% of the arable new and not declared previous year- primarily for specialist cropping
arrangements
CAP Reform Workshop
iii) Permanent Grassland
Defined as grassland- established more than 5 years
Possibly grass margins?
2012/15 reference year – 5% tolerance
Administered at National level
CAP Reform Workshop
Case Study 1 80 Hectares CFA Block Cropped
Pre reform rotation: year one 1st wheat, year two 2nd wheat, year three: OSR
Basic contractors charge: £250/ha, Farmers first charge £250/ha, 50% divisible surplus
Greening rotation: 50% first wheat, 45% OSR, 5% fallow + increased contractors charge £275/ha
Consider opting out of greening
CAP Reform Workshop
Pre CAP Reform With Greening (10%
Increased Contractor
Charge)
Opting out of Greening
(30% Reduction in SP)
Average Arable Output £100,801 £93,960 £100,801
Gross Margin £55,867 £51,440 £55,867
Single Payment (£200/ha) £16,000 £16,000 £11,200
Net Margin £38,067 £33,240 £33,267
Divisible Surplus £18,067 £13,240 £13,267
Farmers Return £29,034 £26,620 £26,634
Contractors Return £29,034 £27,520 £26,634
Case Study 2 300 Hectares (Combinable) Farmed in Hand
Pre reform rotation: 1/3 1st wheat, 1/3 2nd wheat, 1/3 OSR
Greening rotation: 95ha 1st wheat, 95ha 2nd wheat, 95ha OSR, 15ha fallow
Not worth opting out of greening
CAP Reform Workshop
Pre Cap Reform With Greening Opting out of greening (30%
Reduction in SP)
Arable Output £378,000 £359,000 £378,000
Gross Margin £209,500 £199,025 £209,500
Single Payment (£200/ha) £60,000 £60,000 £42,000
Profit (before rent) £134,500 £125,525 £116,500
Case Study 3300 Hectares (High Value Crops) Farmed in hand
Pre reform rotation: 50% 1st wheat, 1/6 sugar beet, 1/6 onion, 1/6 pots
Greening rotation: 143ha wheat, 47ha s - beet, 47ha onions, 48ha pots, 15ha fallow
* Rent paid for fallow land £7425, £475/ha (£200/ac)
Consider renting in ‘green’ area
CAP Reform Workshop
Pre Cap Reform With Greening Opting out of greening
(30% Reduction in SP)
Renting 15ha
Fallow from 3rd
party*
Arable Output £886,500 £838,425 £886,500 £886,500
Gross Margin £614,200 £580,632 £614,200 £614,200
Single Payment (£200/ha) £60,000 £60,000 £42,000 £63,000
Profit (before rent) £404,200 £370,632 £386,200 £399,775
Degressivity
‘Degressivity’ instead of Capping – obligatory
5% above €150,000
Based on Basic Payment element only (not greening)
Salary offset – not available in UK
Up to 2275 acres – no deduction
4000 acres – £4830 deducted
CAP Reform Workshop
Other details
Active Farmer rule:
„Minimum Level of Agricultural Activity‟
„Negative List‟
Young Farmers’ Scheme:
Under 40 years old; Head of Business
25% top-up, for first 5 years, limited area
Estimate £22,000 over 5 years?
CAP Reform Workshop
2014 SPS Applications- Action
Entitlements in correct name
Calculate number of Entitlements – sell excess
Woods registered
Online preferred
Check Crop Coding – grassland and margins in ELS
CAP Reform Workshop
Summary
Basic Payments less
Greening – Final details to be confirmed
Simplification?
Mapping features – changes online – one set maps
Farm cropping/policy needs review – opt out/rent in
CAP Reform Workshop