Oz FTA verdict, Commodity chaos, Vineyard chat

For my note this week I make no excuses for cribbing the main thrust of this week’s Farmers Weekly’s leader. Editor Andrew Meredith notes that the cost of farming inputs has risen by almost 25%, according to one respected index (see below for more details). At the same time, food price inflation at the retail end of the chain has risen by under 6%. For many families this hike in the cost of living will be hard to cover and it’s no surprise that food bank visits are surging. But if farmers cannot make money from growing food, many, as some egg businesses are already threatening to do, will simply cut production exacerbating the situation and threatening food security. Government policy is strong on the countryside delivering public goods, but interestingly food is not considered one of those goods. A return to production-based subsidies isn’t the answer, but policymakers need to understand that profitable farming has to be the bedrock of sustainable food chains and the delivery of public good.

Andrew Shirley, Head of Rural Research

In this week’s update:

• Commodity markets – Inputs and outputs continue to rise
• Trade – Australian deal scrutinised
• Scottish grants – Ag fund opens this week
• Vineyard opportunities – Listen to our new podcast
• Retirement – Lump Sum Exit Scheme opens
• Country houses – Prices recover at last
• Rural Report – Sign up to watch our ground-breaking video
• Overseas news – Global food prices rocket

Commodity markets – Inputs and outputs continue to rise

The upwards momentum in commodity markets has been maintained over the Rural Update’s Easter break with feed wheat pushing well past the £300/t mark and Oilseed Rape smashing the £800/t barrier. One of the most positive moves for the livestock sector has been a much-needed boost to pig prices, which are now over 12% higher than a year ago. However, higher energy and feed costs are crippling the egg sector, with seven out of 10 free-range producers threatening to pull the plug on supplies if prices don’t rise. Buying group Anglia Farmers’ Aginflation Index has risen by almost a quarter over the past six months with fertiliser prices up by a stonking 108%.

Trade – Australian deal scrutinised

The new Trade and Agriculture Commission (TAC) has delivered its verdict on the recently struck free trade agreement (FTA) with Australia that removes tariffs on most goods, albeit gradually over 15 years for agricultural products.

TAC’s remit covers three areas:

• Does the FTA require the UK to change its levels of statutory protection in relation to (a) animal or plant life or health, (b) animal welfare, and (c) environmental protection?
• Does the FTA reinforce the UK’s levels of statutory protection in these areas?
• Does the FTA otherwise affect the ability of the UK to adopt statutory protections in these areas?

Although farmers groups like the NFU remain deeply concerned about the impact of the Australian and subsequent FTAs on UK farmers, my reading of the report suggests a more sanguine conclusion by TAC.

Based on its terms of reference, the conclusion seems to be that in general the deal would not see a significant increase in imports of food produced to lower standards than UK legislation allows for thereby handing Australian farmers an economic advantage over UK farmers.

But it did acknowledge that we could potentially see the import of crops grown with pesticides banned in the UK and beef produced from intensive feedlot systems.

Scottish grants – Ag fund opens this week

Farmers in Scotland can apply to the £5m Sustainable Agriculture Capital Grant Scheme from 26 April to 1 June. The 40% grants under the scheme are intended to provide support to businesses so that they can invest in equipment to reduce harmful ammonia emissions and reduce adverse impacts on water quality resulting from the storage and spreading of livestock slurry and digestate.

Vineyard opportunities – Listen to our new podcast

With the help of Ed Mansel-Lewis, Knight Frank’s new Head of Viticulture, a recent edition of our Intelligence Talks podcast looks at England’s wine boom and how it is impacting the land market. English sparkling wine in particular has been portrayed as one of the wine world's big success stories. Overall, there are now over 700 vineyards in England and Wales.

Retirement – Lump Sum Exit Scheme opens

English farmers look to retire can now apply to capitalise a chunk of their future BPS claims. Tenants have until the end of September to claim up to £100,000 in return for surrendering or reassigning their tenancy. Owner-occupiers must sell, rent or plant trees on the majority of their land to qualify. The payment will be based on their average support claims in 2019, 2020 and 2021 (capped at £42,500) multiplied by 2.35. All entitlements claimed during the base years must be surrendered to the government.

Country houses – Prices recover at last

Driven by the “race for space” during the Covid-19 pandemic, the price of country idylls has at last recovered to the levels seen prior to the global financial crisis (GFC), according to new research from my colleague Chris Druce.

Q1 2022 figures for our Prime Country House Index, compiled by Chris, reveal prices grew at their strongest annual rate since Q3 2009 in March, taking average values to a new high.

The annual change was 11.3%, which was up from 10.6% in December. On a quarterly basis, prices increased by 3.5%. It lifted the Prime Country House Index 1% above its previous peak in the third quarter of 2007, before the GFC led to a slump in property values.

The Rural Report – Sign up to watch our ground-breaking video

The latest edition of The Rural Report, our unique publication for rural landowners and their advisors, was launched with a video highlighting some of its key content around the topic of ESG. If you missed it, you can sign up to watch on demand at your leisure. It was a lot of fun making it and includes a thought provoking interview on diversity, with Wilfred Emmanuel-Jones AKA The Black Farmer. I think you’ll find it both entertaining and informative.

Sign up to watch The Rural Report launch video

Overseas news – Global food prices rocket

Russia’s invasion of Ukraine and its impact on grain and oilseed exports has sent food prices around the world spiralling. The FAO Food Price Index (FFPI) averaged 159.3 points in March 2022, up 17.9 points (12.6%) from February, an all-time high since its inception in 1990. The latest increase reflects new peaks for vegetable oils, cereals and meat sub-indices, while those of sugar and dairy products also rose significantly.

While the hikes are pushing many poorer families across the globe into poverty and creating severe geo-political risks in developing economies, shareholders in one of the world’s largest agri-businesses are benefitting. Cargill is set to report record profits this year, reports The Guardian.