With the consultation period now over, having closed for comments on the 28th November, all that is left for us to do is wait for more details of the direction that the Government will send farming in the UK until 2020. News on these decisions has been promised before Parliament breaks for Christmas on 19th December.
We already know a number of key decisions that have been made, not least the confirmation that there will be a ‘roll-over’ of the current SPS entitlements into the new Basic Payment Scheme (BPS) in England. Announcements such as this can only be good news for English farmers currently claiming SPS on their land, as this avoids the added paperwork and expense that would have accompanied the development of a totally new entitlements system. The other big development is the increase of the minimum claim size from one hectare to five hectares. This has been increased in an attempt by DEFRA to remove claimants who are not ‘active farmers’. This is, in their eyes, claimants owning small parcels of land used for non-agricultural purposes, such as pony paddocks.
The outstanding issues still under consultation however have the potential to reshape the future outlook of the CAP. Perhaps some of the bigger decisions yet to be finalised are on the modulation rate, a possible decision to ‘move money uphill’ (between the Non-SDA land and the SDA land) and how best to implement greening.
If the suggested plan to ‘move money uphill’ goes ahead, this would result in a small reduction in the basic payment received by farmers claiming Non-SDA entitlements, whilst SDA and SDA Moorland farmers will see significant rises in their annual basic payments.
The continuing debate about what level of modulation should be set means that any answers could be delayed until the Spring, as the Government considers its options and consults with environmental bodies and farming groups.
There are still a number of decisions to be made on the proposals for the implementation of greening, however the European Commission has set out three areas of greening requirements; crop diversification, maintaining permanent grassland and Ecological Focus Areas. The Government has made it clear that they intend to introduce as little new legislation on top of these as possible to ensure that many of the requirements can fit neatly within practices already undertaken by farmers under the direct payment Regulations.
Entitlement trade – early season update
We have seen a strong early season trade in Non-SDA entitlements. While there was a steady trade prior to the release of the consultation document, since its publication we have noticed the increase in both vendors and purchasers as the certainty of the entitlements future boosts confidence. Currently, trade has settled in the region of £300 per hectare plus VAT, meaning that purchasers in 2013 can hope to see a return on this investment in one and a half years, and would be in profit for five and a half years. However as the market continues to pick up in the new year prices may yet rise again.
SDA trade has been slightly slower to get going, as both vendors and purchasers wait for a confirmation on the future payment level. If the ‘move money uphill’ plan does go ahead we will see roughly a €25 per hectare increase in payment compared to the 2012 rates. If this is confirmed then we expect prices to reach as high as £290 and perhaps higher as we move towards the 2nd April trading deadline.
SDA Moorland looks set to continue with its trend of recent years, already being in high demand but finding that supply remains low. Trade is presently in the region of £50 per hectare, but could rise in the new year as a result of the proposal to ‘move money uphill’. Again this would see an increase of approximately €25 per hectare on 2012 rates and result in a payment, after relevant reductions and assuming modulation is set at 15%, of approximately €62/hectare.