opinion GETTING THE FACTS RIGHT


Compounders compete. That is, they compete in world markets for supplies of raw material ingredients and they compete in the market place to sell their products. Naturally, they have their customers’ interests at stake and those interests include their customers’ ability to generate sufficient cash flow, over the medium to long term, to both remain in business and to invest for their future. Currently, livestock farmers’ incoming cash flow consists of a number of components. There is cash generated by their agricultural activities. There is


cash received via numerous agri-environmental and other schemes. There is cash generated by diversification, ranging from Ye Olde Teashoppe to full-blown poultry processing plants. And then there are direct payments to farmers received through


the Single Payments Scheme, soon to become the Basic Payments Scheme. The latter is alternatively known as ‘subsidies paid to rich farmers’.


And it is true that there is a lot wrong with the system, even as ‘reformed’ under the CAP reforms agreed in Brussels last June. As the DEFRA paper ‘Implementation of CAP Reforms in England’,


published in October 2013 confirms, ‘The UK has always made clear that its aim is a move away from subsidies and market interventions’, adding, ‘there is scope for using taxpayers’ money to pay farmers for public goods that the market otherwise would not reward, such as protecting the natural environment and supporting biodiversity.’ This last sentence would appear to have been the driver behind DEFRA’s initial decision to implement the full permitted extent of modulation between Pillar One payments – Direct Payments to Farmers – and Pillar Two payments – Environment and Rural Development – resulting in a 15 per cent shift from Pillar One to Pillar Two. This shift was subsequently reduced to 12 per cent but, nevertheless, still represents a considerable transfer of resources away from the Basic Payments Scheme. There is little doubt that the Basic Payments Scheme will continue


to be damned as a subsidy to rich farmers and there is also little doubt that most of the feed industry would, instinctively and in principle, favour phasing out of the payment to their livestock farmer customers. Many of their farmer customers would as well, as opinion surveys have shown, if only for the reason that they are fed up with excusing themselves to their critics. However, the fact that they have continuously to excuse themselves is a measure of the fact that neither the function of the Single Farm Payment nor its financial significance for many, if not all farmers, is poorly understood. The CAP has come some way since the days when payments were linked to production, resulting in the embarrassments posed


by grain and butter mountains and wine lakes. Such payments were originally intended to stimulate output; so they did, in spades. As a result of increasing pressures, they were replaced by decoupled payments, where the link between production and payment was severed. It is, in a sense, true that, as DEFRA argues ‘In many respects the direct payments can be thought of as compensation for previous reforms when market support and coupled payments were reduced. And it is argued by some that they are intended to provide a form of income support for farmers’. Nevertheless, the Single Payments Scheme and its successor, the Basic Payments Scheme, constitute an essential element in the income stream of many farmers in general and the feed industry’s livestock customers in particular. There are lies, damned lies and statistics, it is often


maintained. In the current context, the word ‘statistics’ may be replaced by


‘averages’. The latest data for the twelve months ending February 2013 suggests that the ‘average’ dairy farmer in England received 45.9 per cent of his Farm Business Income in the form of the Single Farm Payment. Grazing livestock farmers – beef and sheep – both received in excess of 90 per cent of their farm business income in the form of the payment. Less substantially, the ‘average’ pig farmer received 18.8 per cent – not far off a fifth – of his Farm Business Income from this source. Only the specialist poultry farmer could claim absolution with a mere 6.5 per cent of the Farm Business Income appearing in the form of a ‘subsidy’ cheque from the Rural Payments Agency. It is true that 2012-13 was a hard year for many livestock farmers


in that trading incomes were depressed by high costs, notably for feed, and low returns, due to external factors such as international commodity markets and the squeeze on consumers’ incomes. It is also true that, behind the ‘average’ farmer, there is a great


diversity in terms of individual farm size – small, medium and large – and, perhaps more pertinently, individual farmers’ performance – below average, average and above average, however that is defined. What is important to note is that the current level of farm


production in England and in the devolved administrations reflects a continuum of inputs and outputs of which the Single Farm Payment has been, and its successor will be, an essential component. It is true that the payment is financed by taxation. Remove the


payment, and a strong argument can be made that, to maintain production levels, an equivalent amount would have to be provided via the check-out in the shape of higher retail prices. But, whatever the argument, there is an urgent need to get the facts about the Single Payment – and its successor – right.


PAGE 2 JANUARY/FEBRUARY 2014 FEED COMPOUNDER


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68