Brexit Bites – UK Farmers after CAP

On January 26, the future of post-Brexit agricultural policy in England became clearer as the government announced six new standards under its existing farming incentive. While English farmers may cautiously welcome this long-awaited update, serious challenges remain for the sector in England and across the UK. Marian Landstel reports.

In the first week of January, British farmers travel to Oxford for not one, but two agricultural conferences. Conventional farmers and representatives of agrochemical companies are expected to be at the Oxford Agriculture Conference (OFC); The Oxford Real Farming Conference (ORFC) tends to be the meeting place for small and diverse family farms, as well as anyone interested in organic and renewable agriculture.

Because of the pandemic, both conferences have been held online for the past two years. Therefore the mood was optimistic, it was good to meet other farmers in person again. But it was equally clear that farmers had many problems to contend with. The fallout from the pandemic and the war in Ukraine is hitting farmers hard across the EU and the UK. All have to deal with increased costs for energy, food and fertilizers. But in addition, British farmers have to deal with the consequences of Britain leaving the European Union, which became a reality at the end of January 2020.

The true impact of Brexit is only now becoming clear

A consequence of Brexit is the end of direct payments based on the Brussels hectare under the Common Agricultural Policy (CAP). The legislatures in Scotland, Wales and Northern Ireland are responsible for agricultural policy. As for England, agricultural policy is decided in Westminster.

One ORFC session took stock of where the UK’s four nations stand today with post-Brexit farm policy. James Woodward of the NGO Sustain said England was leading the way when it came to ‘public money for public goods’ but, at least at this stage, there was a “lack of vision and ambition for sustainable agriculture and uncertainty about the direction of environmental land management plans”. He said that four million children lived in food insecurity, the country depends on importing fresh food, and the government is not making an effort to deal with it, on the contrary, there is a fear “that we are going in the other direction, relying more on it. Trade”.

In England, as Environmental Land Management Schemes (ELMs) are rolled out into the CAP network, the old hectare-based subsidy scheme continues, but payments are reduced year by year until they end completely in 2027. This year, small English farmers can expect their direct payment to be cut by -35% During a speech in Oxford, Agriculture Secretary Mark Spencer announced an additional one-off payment of up to £1,000 to compensate farmers for the time it takes to sign up to the Sustainable Farming Incentive (SFI) scheme. Farmers at both conferences were unimpressed. “SFI standards change all the time. Time, we need clarity,” was a common response. After a government announcement on January 26, uncertainty for English farmers is at least somewhat reduced.

ELMs – finally some clarity but joint action is needed

There are three pillars within ELMs: Sustainable Agriculture Incentive (SFI), Rural Management and Landscape Restoration. Following the government’s announcement at the end of January, six additional standards will be added to SFI, which will expand the range of environmental actions for which farmers can be paid. The previous local nature restoration plan was canceled in favor of expanding the rural classification.

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In 2022, around 85,000 farmers in England became eligible to join SFI but only 1,829 actually applied. Others may have felt that the payments per acre were too low to justify the time required to fill out the forms. Farms in England are an average size of 85 hectares. When the UK was still in the EU, farmers received an average of £230 (€260) per hectare. In 2022, soil improvement measures under the SFI would be worth £22 per hectare for the entry level, or £40 for the intermediate level.

On 26th January DEFRA finally arrived with details of payments. A 101-page document lists the payment rates for up to 280 individual operations that farmers can perform. They range from £10.38 for the establishment of a larkspur plot or £22 per hectare for a land assessment and land management plan to £1,920 per hectare for maintaining land used for organically managed top fruit production or permanent shrub crops.

Some of the payment plans will open this spring, others will only be activated later this year or next year. Farmers will now need to understand which measures may be suitable for their farm and how programs can be combined. Mark Tufnell, president of the State Land and Business Association, said the payment rates were in line with expectations, but there was “little new in this for those on the bog lands, or the hard-pressed hill farmer struggling to make ends meet”. Martin Lines, chairman of the Nature Friendly Farming Network, criticized the lack of a coherent strategy: “Individual actions alone will not achieve our climate and nature goals. (…) There remains the need to connect actions to avoid a partial approach.”

Brexit, trade and regulation

Brexit will result in a large number of new trade agreements that will provide huge opportunities for exports – this was the promise of “Brexiters” such as then Prime Minister Boris Johnson when Britain left the European Union. Since then, the UK has signed trade agreements with New Zealand and Australia. Both articles have come under fire from agricultural organizations such as the National Farmers Union. The criticism: animal welfare standards in both countries are lower than in the UK. The agreement disadvantages British farmers and the domestic market is expected to be flooded with cheap beef and lamb, especially if and when demand in China declines. Even George Eustice, the man who headed DEFRA when the agreements were signed, said in a speech in November 2022 that the agreement with Australia was “basically not a good deal”. And: “Overall the truth of the matter is that Britain has given far too much for too little in return.”

EU countries remain the UK’s most important trading partners, but non-tariff trade barriers such as phytosanitary inspections and documentation have made the import and export of agricultural and food goods more expensive and time-consuming. Researchers from the London School of Economics calculated that in the first two years of Brexit, 2020 and 2021, British consumers had to spend an extra £6 billion on food. They say Brexit alone is leading to a 3% year-on-year price increase. Before Brexit, 77% of all food imports came from EU countries. After Britain left the EU, companies in EU countries did not hesitate to pass on the additional administrative costs they incurred.

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And things could get worse. Britain is still headed for the “bonfire of EU law” by the end of the year. POLITICO reported in January: “Ministers set out the work their departments are doing to ‘take full advantage of our regulatory freedoms and remove years of burdensome EU regulation’.” For food exports it is likely that companies will have to provide additional proof that their products meet EU standards. And it’s anyone’s guess what will happen if England passes the controversial legislation to allow the cultivation of genetically engineered crops, especially if there is no need to state this on the label when a food product is created using genetically engineered organisms.

A lot of pain for little gain

In food, the margins are tight and in the UK, it is the supermarkets that are raking in the biggest share of the profits, leaving almost nothing for the farmers. This was the result of a study done by Sustain. A packet of four hamburger patties has a retail value of £3.50, the net profit is just 8.7 pence, of which the farmer receives just 0.1 pence. Or take the price of a 480g pack of cheddar: consumers pay £2.50, production costs to the farmer are about £1.48, the profit, again, comes to less than a penny. “Farmers bear a disproportionately high amount of the risk when it comes to food production, but receive a disproportionately low amount of the reward, reflecting their relative weakness in the supply chain,” Vicky Hird, head of Sustain told Farmers Weekly magazine. It is unlikely that the situation will change in the near future. “Supermarkets source the vast majority of their food from the UK and know they have to pay a sustainable price to farmers,” Andrew Opie, director of food and sustainability at the UK Retail Consortium told Farmers Weekly. “However, they also face additional costs and are working very hard to limit price rises for consumers during a cost-of-living crisis where many people are struggling to afford the essentials.”

Outlook 2023

In the magazine’s final 2022 edition, Farmers Weekly gave a bleak economic assessment for the new year: “Total UK farming profits are expected to fall by up to a third next year compared to 2022, as the industry feels the full effects of rising costs.” Last year many farmers still had ‘cheap’ fertilizer from purchases in 2021 and the dramatic rise in energy costs only fully fell towards the end of the year. For tillage farmers, the outlook is still relatively good if they are able to work even more efficiently. Sheep breeders will definitely feel the 35% decrease in subsidy. Until the UK left the EU, basic payments accounted for around 50% of farm income. Last year, drought and insufficient grass growth combined with export problems adversely affected the profits of sheep and beef producers.

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The worst hit are pig farmers who lost 600 million pounds (close to 680 million euros) in the last two years. Like their EU counterparts they have suffered from high feed and energy costs and the effects of African swine fever, but another problem in the UK is the lack of capacity in slaughterhouses due to the shortage of butchers. Months passed until the government finally increased the number of visas for butchers who then had to recruit from as far away as the Philippines. According to Farmers Weekly, the National Pork Association believes that 80% of pig farms could go out of business in the next 12 months if the situation does not improve.

Even in horticulture, the lack of seasonal labor remains a huge concern. Just before Christmas the government announced that 45,000 seasonal worker visas would be available in 2023. Fruit and vegetable growers alone need between 70,000 and 90,000 workers. The National Farmers Union has estimated that in 2022 £60 million worth of fruit and vegetables will remain unharvested or forced to be plowed up due to labor shortages. As a result, many growers have reduced the area they plant, switched to other crops or left farming altogether.

Egg and poultry producers are in a similar situation. Those who need to upgrade their production system face huge investments. Supermarkets charge more for eggs, but the little they pass on to farmers does not compensate for the huge increase in energy and feed costs. Since the summer, therefore, many producers have not fully returned to their farms, leading to egg shortages and supermarkets in some cases limiting sales to a dozen eggs per customer per shopping trip.

How serious the situation became at the end of November in a speech by the former head of the secret service, MI5, Lady Manningham-Bowler: “I argue that food is part of our national security, including those ‘essential workers’ who grow and harvest it, and produce crops, vegetables, fruit and even wine .” According to her, food production in Britain has been taken for granted for too long and is now a weakness in the country’s security. “Doubling fertilizer prices, rising energy costs, a shortage of seasonal workers, plus fears of trade deals that may favor places where farming standards are low and imported supplies could be disrupted – all affect the farmers who produce our food and we urgently need policies to address this.”

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