cla cap talk nov 13 - land partners
DESCRIPTION
The presentation given by Simon Dixon Smith of Land Partners at the CLA's CAP Update event held on Tuesday 3 December 2013 at The Bell Hotel, Stilton, near Peterborough. Mr Dixon Smith discussed how CAP will impact on your farm business, using case study examples.TRANSCRIPT
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
www.land-partners.co.uk
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…
www.land-partners.co.uk
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
www.land-partners.co.uk
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
www.land-partners.co.uk
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
www.land-partners.co.uk
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
01376 328297