The Rural Bulletin: 28 December 2017

Brexit

Now eighteen months after the referendum vote, it appears not a lot has been finalised in terms of Brexit for the agricultural industry. The next 12 months should reveal plans in much more detail, but here is what we know so far:

• Trade deals: Despite negotiations, nothing has been firmed up as far as a trade deal with Europe goes. Theresa May is making preparation in case of no deal, but many industry bodies have continually stressed the importance of securing a free-trade agreement with the EU, highlighting the catastrophic effects a no deal scenario would have on UK agriculture.

• Subsidies: Farm support has been guaranteed until 2022, but as part of his Green Brexit plan, Defra secretary Michael Gove plans to cap subsidy payments post Brexit. Details are expected to be released in the New Year, but there will be a reduction in support payments to larger farms to fund other things such as improving productivity and the environment.

• Currency: Currency has fluctuated massively over the past 12 months – largely on the back of Brexit negotiations. The pound hit a six-month high in April, because of Theresa May’s call for a General Election, before slumping to an eight-year low against the Euro in August. For agriculture, the weaker sterling against the euro increased the value of CAP payments by just under 5%, year-on-year.

Legislation & Tax

There have been many tax and legislation changes over the year -  here are some of the key ones likely to affect farmers and landowners:

• The Electronic Communications Code: The new Electronic Communications Code comes into force on 28 December, giving operators wider powers and affecting all telecoms agreements. However, in contrast to some expectations, it does not mean a change to compensation-type payments for telecoms apparatus, with agreements still open to negotiation and rent to be paid at market value.

• Autumn Budget 2017: The autumn Budget highlighted several changes to benefit farmers and landowners, including a freeze on fuel duty, abolition of stamp duty on properties under £300,000, an increase to the personal tax allowance and a pledge of £15.3bn for rural house building over the next five years.

• Glyphosate: After months of debate, the EU Commission’s Appeals Committee finally granted a five-year renewal of the glyphosate license in November – with 18 member states voting in favour of the renewal and nine against.

• Neonicotinoids: The future of neonics remains uncertain going into 2018 after the EU vote to ban the product was postponed in December. The vote has been rescheduled for early next year. However, earlier in 2017, Defra secretary Michael Gove announced that the UK would support a full ban.

• The Local Infrastructure Tariff: Farming bodies fought back against the Local Infrastructure Tariff (LIT) which is proposed to replace the existing Community Infrastructure Levy – which imposes a tax on development to pay for local infrastructure. Given that farmers fund their own infrastructure, bodies like the NFU and CLA called for a zero-rate levy to be applied.

• TB: Following the TB testing update in December, routine six-monthly tests are to be introduced in High Risk Areas – with effect from January 2019. The update also saw Defra announce its evaluation of the 2017 badger culls. During the autumn, 19,274 badgers were culled across 19 cull zones – meaning badger population reductions to help keep a lid on disease outbreaks had been achieved.

Harvest

A drought in late spring followed by continual wet weather over the summer caused havoc for many arable growers this year. This was exacerbated in Ireland after widespread flash flooding that caused the loss of many hectares of crops. 

• Cereals: UK wheat production came in at 14.84m tonnes – 326,000t lower than last year – due to lower yields. Average prices fluctuated from £127/t ex-farm to £146/t. Spring barley continued to generate interest amongst farmers looking to tackle blackgrass, with an estimated 9% increase in area across the year – while malting varieties counted for 50% of the total GB barley acreage.

• Oilseeds: Oilseed rape values have fluctuated massively across the year – hitting lows of £299/t and highs of £358/t ex-farm. The crop area declined for the fifth consecutive year to 553,00ha – the lowest area since 2004.

Commodities

• Dairy: The dairy industry saw a massive recovery in prices this year with the farmgate price hitting 32.34p/litre in October – the highest level since April 2014.

• Beef: Between January and November beef and veal production totalled 809,400t – 2% lower than the same period in 2016. Increased cattle population data figures have also suggested a higher number of prime cattle next year. Finished beef prices started the year at 392.4p/kg and peaked at 388.9p/kg in September.

• Lamb: Sheep meat exports over the same period rose by 13% to 70,100t. Finished lamb prices moved significantly across the year, starting at 392.4p/kg and peaking at 509.4p/kg in June.

• Pigs: All pig prices started the year at 154.7p/kg – dropping to a low of 152.9p/kg in February and peaking at 168.5p/kg in July. In terms of global markets, export values peaked in the third quarter of the year, however, the latter half has seen a downward trend.

Contact the Rural Asset Management Team