East of England Commentary 2011/2012

Transcription

1 East of England Commentary 2011/2012 This report includes data collected from the Farm Business Survey for the 2011 to 2012 financial year, relating to the 2011 crop harvest. Please note that due to a change in farm classification, results from the 2010/2011 and 2011/2012 years are not directly comparable with results prior to that date. Please see the explanatory document at for further details of these changes. The Farm Business Survey is conducted on behalf of, and financed by the Department for Environment, Food and Rural Affairs, and the data collected in it are Crown Copyright. Nature of Farming in the region The majority of the farmed area of the East of England is focussed on combinable crop production due to its climate, landscape and suitability of soils. In the northern part of the region, fenland and silt soils permit production of sugar beet, potatoes and field scale vegetables. Pig and poultry production is important in rural East Anglia due to the proximity of production of grain for feed. Horticultural production is concentrated in the proximity of London and to the north of the region. Grazing livestock utilise grassland throughout the East of England with higher numbers in the area of the Norfolk Broads and in Hertfordshire. The Norfolk Broads are the East of England s National Park. This designation covers two per cent of the East of England. Areas of Outstanding Natural Beauty (AONBs) account for six per cent of the region (15 per cent across England) 1. Contribution of farming to the region s economy Based on Defra statistics for 2010, some 39,903 people were employed in agriculture in the East of England. As a share of the total workforce, the agricultural workforce represented about 1.43 per cent of the total. Contribution of the region s farming to national farming The East of England had the largest Gross Output of any region in England at 3,412 million in This was 19 per cent of the national output. After deduction of Intermediate Consumption of 2,108 million, the Gross Value Added was 1,304 million. A total of 189 organic producers farmed 16,000 hectares in They accounted for just under five per cent of the organic land area in England and a total of 1.1 per cent of the region was farmed organically. This represents a decline in popularity in organic farming as 35 producers ceased organic farming of 1,000 hectares in the year in the region FBS year Weather The prevailing weather in 2010/2011 is summarised in the sunshine and rainfall anomaly chart at Figure 1. 1 East of England Regional Sustainable Development Indicators Factsheet, 25 February 2010

2 Figure 1 Sunshine and Rainfall Anomaly, January 2011 to March 2012 East Anglia September October November December January % February March April May June July August sun rain Autumn 2010 was characterised by good conditions for winter crop establishment. Very cold weather halted drilling in late November. The winter of 2010/2011 was unusually cold and dry characterised by the coldest December for 100 years 2. This was followed by the warmest spring since the start of records in The absence of precipitation that gave rise to the 2011 drought brought exceptional sunshine, with the East of England receiving 30 per cent more sunshine than average. March 2011 was the driest for 60 years as only 13.3 millimetres of rainfall fell in England, only 20 per cent of the long term average 3. On 16 May, after ten weeks without significant rainfall, drought crisis talks were carried out between Defra, the NFU, the Environment Agency, Natural England, Water UK and the UK Irrigation Association 4. By this time, cereal crops were showing severe water stress with yellowing of leaves. At the end of the month, agronomists suggested that 85 per cent of cereal crops had been affected by drought, and 20 per cent of wheat and barley severely hit 5. By this time, the East of England was facing its driest season for 101 years 6. A drought order was issued for Lincolnshire, Cambridgeshire, parts of Bedfordshire and Northamptonshire, and western Norfolk on 9 June In these areas, 100 farmers were asked to cease irrigation and a further 200 farmers in Suffolk were warned that the Environment Agency may need to stop irrigation by the end of the month. In East Anglia, just 28.1 millimetres of rain fell between March and May, whilst only 49.4 millimetres fell in south east, central and southern England in the same period. Rain fell in the summer, with the result that it was a wetter summer than 2010, but not as wet as the very wet years of 2007 to The autumn was a little drier and warmer than usual, but generally provided favourable conditions for the autumn cultivations and root harvesting. 2 Met Office, 3 Farmers Weekly Interactive, 5 April Farmers Weekly Interactive, 16 May Farmers Weekly Interactive, 1 June Farmers Weekly Interactive, 6 June Drought management briefing, Environment Agency, 9 June 2011

3 Economic Background The economic environment was characterised by recession, austerity measures and serious concern about the economy of the eurozone. In December 2011, the possibilities were that one or more countries could default or leave the eurozone or the single currency could collapse 8. The year was characterised by a weakening euro. In early 2012, this signalled the possibility that the UK s agricultural commodities would be less competitive on the world market, but inputs would be more affordable 9. Fertiliser prices reduced in 2011 following significant worldwide investment in production capacity, but rose later in the year in response to demand for agricultural commodities 10. Analysts at UBS ranked price drivers of all commodities in spring 2011, placing crude oil and the metal palladium highest, followed by phosphate and potash in third and fourth place 11. From 210 per tonne in June 2010, the ammonium nitrate price rose to 260 per tonne in September and 295 in October, at the same time, urea cost around 220 per tonne, rising to 320 per tonne in October In September 2010, triple super phosphate (TSP) sold for 325 per tonne rising to 392 in October although the price of muriate of potash (MOP) was little changed at around 332 per tonne during the two months. In the spring, ammonium nitrate reached 350 per tonne and urea 340 per tonne, whilst TSP and MOP traded at 385 and 330 per tonne respectively 15. Farmers faced an 18 per cent increase in agri-crime with thefts amounting to 8 million in value according to NFU Mutual 16. Policy and Market Developments Rural Economy Growth Review In November 2011, Defra launched the Rural Economy Growth Review. This included initiatives such as: - consulting on the more flexible use of farm buildings - improving rural broadband - promoting tourism in rural areas - supporting the upfront costs of developing renewables projects Rural and Farming Networks In January 2012, Defra Secretary of State Jim Paice announced the formation of Rural and Farming Networks that will give rural business leaders a hotline to the heart of Government. They will identify and feed back local issues and concerns in order to make policies more rural-friendly. The networks will bring together people from rural communities, rural business and the food and farming industries. By May 2012, there were 17 such networks. In the East of England, these networks were Essex Rural Partnership and Farming Food and Rural Network East (which covered the East of England excluding Essex). Rural Development Programme for England (RDPE) 8 Farmers Weekly Interactive, 14 December Farmers Weekly Interactive, 12 January Focus on Gleadell, Gleadell Agriculture 11 FarmBusiness.cc, farmbusiness.cc, 8 April Farmers Weekly 18 June Farmers Weekly Interactive, 20 September Farmers Weekly 22 October Farmers Weekly 18 March Business Weekly, 7 August 2011

4 From July 2011, responsibility for the Rural Development Programme for England (RDPE) was transferred from the Regional Development Agencies (EEDA in the East of England) to Defra. The 20 million Farming and Forestry Improvement Scheme (FFIS), part of the RDPE, was launched by Defra in November The FFIS is part of the Rural Development Programme for England (RDPE) and is a scheme of support, developed to help farming, forestry and horticultural businesses in England to become more efficient at using resources. This scheme aims to help make your business more profitable and resilient whilst reducing the impact of farming on the environment. The scheme permitted grants of between 2,500 and 25,000 for schemes that: - save energy and reduce carbon emissions - reduce dependence on artificial fertilisers - Improve soil quality - Improve animal health and welfare - Save and recycle water - Promote woodland management by processing timber more efficiently. Nature Improvement Areas (NIAs) Defra launched 12 Nature Improvement Areas in February These designated areas were selected from 76 applications in a competitive bid for a share of 7.5 million from 2012 to Candidate NIAs typically exceed 10,000 hectares, include a variety of land uses, and provide opportunities to enhance the ecology and link with existing landscapescale initiatives. In the East of England, the Greater Thames Marshes NIA was selected for inclusion. Local Enterprise Partnerships Local Enterprise Partnerships (LEPs) replaced the Regional Development Agencies in LEPs are locally-owned partnerships between local authorities and businesses and play a central role in determining local economic priorities and undertaking activities to drive economic growth and the creation of local jobs. They are also a key vehicle in delivering Government objectives for economic growth and decentralisation, whilst also providing a means for local authorities to work together with business in order to quicken the economic recovery. 17 In the year, more information emerged about the vision and aims of the LEPs, some of which overlap in the land that they cover with other LEPs. The Greater Cambridge and Greater Peterborough Local Enterprise Partnership had ambitions to create 160,000 new jobs by 2025 in an internationally renowned low carbon, knowledge based economy. It intends to broaden and deepen the Peterborough Environment City current designation to become the UK s Environment Capital, and the strengths, opportunities and synergies of their market towns and rural economy. These aims appear to endorse the importance of agricultural and other rural land. Meanwhile, the New Anglia Local Enterprise Partnership, encompassing Norfolk and Suffolk, set out to be a catalyst for achieving sustainable economic growth. Small Medium Enterprises (SMEs), transport and communication, and improving broadband coverage featured amongst the priorities of the LEP. Essex, Southend and Thurrock fall within the South East LEP. Fruit and Vegetable Exceptional Aid Scheme Marketing of fresh produce, namely tomatoes, lettuce, endives, cucumber, sweet peppers and courgettes was disrupted by an outbreak of E. coli in Germany. The outbreak, which resulted in the deaths of 20 people, was initially, wrongly, blamed on cucumbers 18. An EU 17 Communities and Local Government, 18 Farmers Weekly, 10 June 2011

5 funded scheme, to a maximum value of 210 million euro across the EU, was launched to compensate producers who withdrew wares from the market between 18 and 30 June The exceptional aid scheme provided additional assistance to the fruit and vegetable sector following market disruption caused by an outbreak of E coli in Germany 20. Tomato, lettuce, endive, cucumber, sweet pepper and courgette growers were eligible to participate in the scheme which funded the withdrawal of produce from the market as well as non-harvesting measures and green harvesting. Payments averaging 25,372 were made to 22 separate claimants in October Business Agricultural Commodities and Produce Following the rise of commodity prices in 2010, there was considerable change among businesses dealing with agricultural commodities in The Glencore Xstrata merger of two global commodities businesses, created Glencore International, a business with a combined world market value of 56 billion. BOCM Pauls, which was formed in 1992 following the merger of BOCM Silcock and Pauls Agriculture, was taken over by Netherlands based ForFarmers Group. The combined business became the largest animal feed supplier in Europe, marketing 8.8 million tonnes of which 1.9 million tonnes are in the UK. The UK management team was expected to retain a high degree of autonomy according to a company statement. Countrywide bought Heart of England Grain Co in August 2011, marking a return to crops marketing for the purchaser. In February 2012, Gleadell Agriculture bought out the pea and bean seed company, Dunns (Long Sutton) Ltd. The development recognised the synergy of Dunns expertise in seeds and pulses to Gleadell as an international trader of pulses. Gleadell is owned by Toepfer and Invivo. Smiths Flour Mills, with sites in Worksop, Langley will in Nottinghamshire and Holbeach in Lincolnshire, were purchased from their receivers in January 2012 by Northamptonshire based Whitworths Bros. Camgrain now operates two stores in Cambridgeshire, one in Warwickshire and its new Advanced Processing Centre in Northamptonshire, two miles North of Kettering. The combined stores have the capacity to handle 400,000 tonnes of grain, oilseeds and pulses each year. The Northamptonshire site had 55,000 tonnes of capacity for harvest 2012 with plans to expand this to 90,000 tonnes. Canned foods specialist, Princes, acquired the canning operations of Premier Foods at Long Sutton and Wisbech, together with brands including Crosse and Blackwell, Farrows and Smedleys. Farmers markets closed in the Norfolk villages of Burston, Snettisham and Dersingham in summer The reasons were reduced footfall as well as reduced availability of vegetables. Watton Produce announced plans to close its factory in Shropham in May A collaboration among farmers saw the creation of English Mustard Growers in September The suppliers to Colmans were able to review trading relationships between the growers and processor, in which the growers took responsibility for seed development and 19 Rural Payments Agency, July Rural Payments Agency, 13 September Eastern Daily Press, edp24.co.uk, 5 June Eastern Daily Press, edp24.co.uk, 21 May Farmers Weekly Interactive, 26 September 2011

6 agronomy, now subcontracted to Elsoms and Farmacy respectively. The group currently has 14 members. Anglia Free Range Eggs is an egg packer that was established in In 2011, the business opened its 3.5 million packing centre at Attleborough, partially funded by EEDA 24. The business, which sources eggs within an 80 km radius of Diss, has plans to process 1.6 million eggs per week when it reaches full production. The Supply Trade The supply trade also saw considerable change during Through a strategic alliance from September 2011, Openfield s customers were supplied with crop protection products directly from Agrovista s depots. Koch concluded its purchase of J & H Bunn, the compound fertiliser specialist in April Origin Enterprises, the Irish owner of Masstock Arable and Origin Fertilisers acquired UAP (United Agri Products) in March Later in the year, Origin took over the fertiliser subsidiary of Carrs Milling. Bayer Cropscience announced plans to sell its Norwich herbicide plant and surrounding land as a going concern. The intended buyer was Aurelius AG of Munich, Germany. In early 2012, it expanded its seed division into Europe by establishing a new facility in Belgium and by acquiring Raps Gbr in Germany. Wheat breeding is to be conducted from a centre in Germany and new breeding stations in the Ukraine and France. In a global machinery deal, Norwegian cultivator manufacturer was sold to Kubota. John Deere dealer P Tuckwell of North Suffolk and took over Bedfordshire based J E Buckle Ltd. Anglia Farmers, in a subsidiary called AF Land Services, took over Eastern Machinery Ring in April Changes at the Biotechnology and Biological Sciences Research Council (BBSRC) were expected to result in the loss of up to 50 researchers at Rothamsted and Brooms Barn. Near market research, including herbicide resistance, nematology, and anaerobic digestion were among the areas subject to reduced expenditure. The national body of Farming and Wildlife Advisory Group (FWAG) entered administration in November 2011, following loss of direct funding and reduced work on applications for Higher Level Stewardship (HLS) schemes. However, this was not the end for the brand, which continued in Norfolk as a not for profit company named Farm Conservation Limited. Easton and Otley colleges, based in Norfolk and Suffolk respectively, announced in 2011 that they plan to merge whilst retaining the full range of courses on both sites 25. And Easton College announced plans to offer a BSc degree in agriculture from September 2012 through a memorandum of understanding with the University of East Anglia 26. Some 50 students were expected to join in the first year. Apex Agronomy, is a newly established team of experienced agronomists based in East Anglia 27. Two long established land agency firms merged in September 2011 to create Maxey, Grounds and Co 28. One of the former businesses, Grounds and Co, is known to have existed since at least 1792, and eight generations of the family are known to have worked in the firm. 24 Farmers Weekly Interactive, 30 August Eastern Daily Press, edp24.co.uk, 23 June Eastern Daily Press, edp24.co.uk, 29 June FarmBusiness.cc, farmbusiness.cc, 4 September Farmers Weekly Interactive, 9 September 2011

7 A new Essex based agricultural agency was created in February Land Partners LLP carry out land agency, tax planning, property management, rent reviews, valuations and farm contract agreements among other services. Energy Crop Production and Biomass Technology in the East of England Under the Renewable Transport Fuels Obligation, the UK faced a 2011/2012 target of inclusion of four per cent of biofuel as a proportion of total fuel by volume. During the year, fuel suppliers achieved an inclusion rate of 3.6 per cent 30. The 38MW Elean power station, in Ely, Cambridgeshire, uses more that 200,000 tonnes of straw to generate 270GWh of electricity. Some 80 per cent of the crop is sourced within 80 kilometres of the plant. In 2011, the plant used about 15,000 tonnes of Miscanthus straw. In 2011, solar installations of less than 50 kilowatt of generation capacity were fitted to farm houses and farm buildings whist a number of farmers opted to create free standing solar installations. However, a number of intended developments were halted due to the reduction in feed in tariff for new installations of more than 50 kilowatt from 43.3 pence per kilowatt hour to 21 pence per kilowatt hour from April During the year, opportunities for the production of solar energy through feed in tariffs inspired farmers to evaluate schemes for energy farms, often sited on less productive land within their farm business. These farmers were located right across the East of England. The revision to the payment rates for solar schemes in April 2011 resulted in the discontinuation of these intended projects. FBS results by farm type All farms Figure 2 compares the average FBI performance of farms in the East of England in 2011 /2012 with the previous year. The results for pig and poultry farms relate to the whole of England. Figure 2 Farm Business Income Per Farm by Farm Type, East of England, 2010 /2011 and 2011 /2012 farm business income ( per farm) FBI Business Weekly, 28 February Renewable Transport Fuel Obligation statistics, assets.dft.gov.uk, 1 November 2012

8 Cereals and General Cropping farms saw reduced FBI on a farm basis in 2011, although FBI increased on an area basis. Output from oilseed rape increased but this was a year of low potato prices. Lowland Grazing Livestock, Dairy and Mixed farms saw an increase in FBI, resulting from increased prices for their production. On Pig and Poultry farms, higher feed costs were the main driver of reduced FBI. Figure 3 summarises output and its constituent variable costs, fixed costs and FBI across all farms in the East of England in 2010/2011 and 2011/2012. Figure 3 Fixed Costs, Variable Costs and Farm Business Income, All Farms, East of England 2010 and 2011 per farm quartile group fixed costs variable costs FBI Across all farm types, fixed costs increased by 4.5 per cent, and variable costs were virtually unchanged. The output from agri-environment scheme participation, diversification and single payment that are carried alongside the core agricultural activity are shown by farm type in Figure 4. Figure 4 Output from Agri-environment, Diversification and Single Payment by Farm Type, 2011 /2012 non agricultural output ( per hectare) Cereals General Cropping Dairy Grazing Livestock Mixed agri environment diversification single payment The figure shows that agri environment scheme output varied across all land-using farm types, and was most important to Grazing Livestock farms. Single payment receipts were similar across most farm types, but lower on Grazing livestock farms because these farms typically occupy land on arrangements in which the landlord retains the single payment.

9 Agri-environment Uncertainty about future land use conditions resulting from CAP reform has led some producers to postpone commitment to agri-environment schemes. The fear is that the CAP requirements may be additional to those of ongoing agri-environment scheme commitments and therefore may create an excessive burden on producers. A joint HLS scheme in Cambridgeshire has permitted the creation of the Thorney Farmland Bird Friendly Zone 31. The scheme involves 14 farmers over 1,618 hectares of fen land, in an environment of arable cropping and man made water courses. Regional Entry Level Stewardship (ELS) targets have been set for birds, wildlife and arable plants as shown on Map 1 below. Map 1 Entry Level Stewardship Priority Areas for Farm Wildlife Diversification 2011/2012 saw strong growth in total output from enterprises diversified out of agriculture, with output from all 311 farms rising to 16,334 per farm, an increase of 16.8 per cent on the previous year. Analysis of the component parts of diversification does however reveal differing fortunes for enterprises. Output from rental income, the largest component part, rose a modest 2.2 per cent to 9,134 per farm, perhaps reflecting resistance to rental increases. While output from food processing and retailing rose 27.5 per cent to 2,320 per farm and output from recreational activities rose 41.6 per cent to 2,052 per farm, reflecting an increase in activity in these enterprises. The rise in output 31 Farmers Weekly Interactive, 22 February 2012

10 from agricultural contracting was the first increase for three years. This probably reflects increased activity and higher contract charges in line with rising mechanisation costs. The contribution of output from diversification in 2011/2012 varies greatly across farm types, proportionally being most important to Cereals, Dairy and Lowland Grazing Livestock farms, while being least significant on Specialist Pig and Specialist Poultry farms. Proportionally Cereal and Grazing Livestock farms had the highest level of rental income. Dairy farms had the highest output from food processing and retailing. Grazing livestock farms proportionally also had the highest level of output from tourism and recreation. Mixed and General Cropping farms proportionally had the highest level of output from agricultural contracting. The allocation of costs to enterprises diversified out of agriculture allows the margin on diversified activities to be examined. In 2011/2012 this margin rose to 8,368 an increase of 4 per cent on the previous year and equated to 11.4 per cent of farm business income. However, the significance of this margin varied greatly across farm types, being most significant on horticultural units (29 per cent of FBI) and least significant on general cropping (8.0 per cent of FBI) and pig farms (9.3 per cent of FBI). Single Payment In the 2011 Single Payment year, the flat rate element of the payment had risen to 90 per cent and the historic element correspondingly reduced to just 10 per cent. Combined EU and UK modulation remained at 19 per cent. The exchange rate used for converting single payment from euros to sterling at 30 September 2011 was one euro to and about 0.7 percent higher than in The resulting flat rate payment was about after modulation. In its final year, the protein premium was about after modulation. In our report this protein premium is included within the gross margin calculation. The combined flat rate and historic single payment was 214 per hectare on Cereals farms and 209 per hectare on General cropping farms in the East of England in Farmers letting land on short term arrangements, typically for potato or vegetable production, were more likely to opt to use properly drafted cropping licences following increased scrutiny by the Rural Payments Agency. Balance Sheets and Capital on Farms in the East of England Land Throughout 2011, land prices continued to increase; grade 3 arable land in England increased in value by six per cent to an average of 14,950 per hectare. It was arable land that was most in demand and good quality land in the Eastern Counties led this growth. In an exceptional development, a single lot of hectares of Grade 1 silt land near Boston, Lincolnshire achieved a record sale price of 44,614 per hectare in a sale in October This was believed to be a record price for bare land, albeit for land that is regularly double cropped. Higher land prices are believed to be the main reason for increased supply of land in 2011; some 9,160 hectares were advertised in the year to April 2011 compared to 7,200 hectares in the previous year. The increase in supply was greatest in the East and South East with increases of land marketed of 42 and 35 per cent respectively. Some 16 per cent of sales related to debt, the highest proportion since Private investors, institutions and overseas owners were all net sellers of agricultural land in 2011; Danish owners represented five per cent of sellers in England and ten per cent of sellers in the East of England. Farmers, expanding their farming activities, were net buyers of land accounting for 54 per cent of buyers in the East of England.

11 Recent improved financial performance of arable farming has created the opportunity to invest in infrastructure on the farm. Grain storage has been a priority for many farmers. And in the context of successive dry growing seasons, the construction of winter storage reservoirs has been attractive. Single Payment Entitlement Trade in flat rate single payment entitlement gave an average price of 250 per hectare for the 2011 season, rising to 275 late in the season. This is a little lower than calculated value of single payment entitlement on Cereals and General Cropping farms used in the FBS of 287 and 277 respectively at the end of the year. Machinery Favourable trading conditions on arable farms have permitted reinvestment in farm businesses, further encouraged by the reduction in the HMRC s Annual Investment Allowance (AIA) from 100,000 in 2011/2012 to 25,000 from Aril Machinery and grain storage have been the priorities for investment on arable farms. Grain storage investment includes both on-farm investment and investment in grain cooperatives. Ahead of changes to the AIA we observed significant investment in plant and equipment with many farms taking advice, as tax relief changes made investment timing vital. Following a period of investment in combines, tractors and crop establishment machinery, we have seen considerable expenditure on crop sprayers and machines with a longer life, such as grain trailers. Liabilities Total lending to agriculture increased by six per cent to 12.4 billion in the year to March Farmers access to finance was variable and depended on the balance sheet strength and profit record of the individual business. Tenants with a more challenged balance sheet may have found it difficult to raise additional finance. Where finance has been advanced or even just reviewed, rates over base seem generally increased with some very significant loan arrangement fees or renewal fees charged. In order to secure finance, some businesses have avoided issues with their bank by taking on additional hire purchase, or by paying for working capital, such as fertiliser, later by agreement (usually at a higher price). Banks have continued to lend willingly to owner occupiers with strong balance sheets, and have not increased lending rates to these businesses. Banks have typically asked farms that run large overdrafts to transfer their borrowing onto staged loans to allow a more formalised approach to borrowing. Crop Performance for the 2011 harvest year Winter Wheat The 2011 wheat crops were of favourable quality, especially in terms of Group 1 milling protein, and relatively high specific weights for all groups. At the time of drilling in 2010, the November wheat price stood at 130 per tonne, but with uncertainty about the final price. Rising prices in 2011 followed tight supply and demand due to reduced supply from Russia and Ukraine and(?), increased demand in the US for maize for bioethanol. During the 2011 harvest, farmers responded to the increasing straw price and were able to make opportunistic sales. From 40 per tonne at harvest, the price of big square baled wheat straw rose to 62 per tonne in May In the drought conditions, drilling date is considered to have been critical to wheat performance; earlier established crops with good root development were observed to outperform later drilled crops and later maturing crops receiving rain in June and July

12 typically yielded well. In Essex, wheat crops on light land died in the drought of spring 2011, but some heavier land still produced reasonable yields. Growers reported inconsistent winter cereal crop yields, both between and within farms. Winter Barley Winter barley quality was poor in the East of England with average nitrogen at 1.9 per cent. Gleadell Agriculture reported that less that one third of samples reached the 1.85% nitrogen threshold for malting use. Quality problems in East Anglia brought problems for local malting plants. At harvest, malting barley with 1.65 per cent nitrogen traded for 230 per tonne. In December, the price of 1.84 per cent nitrogen malting barley was around 200 per tonne, representing a premium of around 60 per tonne. From 65 per tonne at harvest, the price of big square baled barley straw rose to 69 per tonne in June Spring Barley Spring combinable crops often failed to develop roots that could access water and the result has been low yields. Spring barley crops, like the winter varieties carried high nitrogen levels. The nitrogen content of Tipple ranged from 1.68 per cent in the South West to 1.88 per cent in Eastern England. Winter Oilseed Rape Good conditions for establishment in the autumn of 2010 allowed crops to develop a root system which exploited the dry spring conditions. The cold winter brought pigeon problems from which most crops recovered well. From 368 per tonne in July, news of favourable yields reduced the price to 361 per tonne in early August. Reports of poor quality soya crops in the US, and reduced plantings in Germany took base oilseed rape values to 364 per tonne in August Prices were around 280 per tonne in December In January 2011, the price was around 355 per tonne. By April, prices had reached 390 per tonne following reduced production estimates from South America. Peas for Combining In February 2011, contract prices for 2011 harvest marrowfat peas were around 260 per tonne. By April 2011, driven by higher commodity prices, the prices for the 2011 harvest were around 200 per tonne for feed peas and 260 for marrowfats. The impact of dry conditions on growing crops was most apparent in Essex and Norfolk in June But marrowfats looked to be of good quality prior to harvest. At harvest, firm prices were reported for good quality large blue peas at 250 to 270 per tonne, with similar prices for marrowfats. Against a feed price of about 190 per tonne, blue peas achieved a premium of 40 to 50 per tonne and micronising peas a premium of 15 to 20 per tonne in September By November, blue peas were worth 250 per tonne. Market shortages in February 2012 took the price of blue peas to 250 for samples of very good quality. Despite ample supply, reduced stocks, and reduced production in France and Canada maintained feed pea prices at 189 per tonne in February Beans Harvested Dry High levels of bruchid beetle damage were a problem in bean crops, and especially in the South East, human consumption crops achieved prices of 205 to 210 per tonne in September Traders reported good demand for human consumption beans in early Prior to harvest, a fall in the wheat price was the driver for reduced bean price of 200 per tonne, from around 240 per tonne.

13 At harvest, feed bean traded at around 220 per tonne, there was only limited demand for feed beans at harvest. It was not until March 2012, that shortages of beans pushed prices for human consumption beans to over 300 per tonne; merchants were more tolerant about bruchid damage due to the demand for the crop. Sugar Beet Growers welcomed the early start to the harvest because the experience of frost conditions, resulting in crop loss, in January 2011 was still fresh in the minds of farmers. Most growers are happy with average yields after a very dry growing year but dry lifting conditions caused difficulties on some soil types. Growers delivering their full contract tonnage in 2011 were refunded 50 per cent of the cost of seed purchased. The 2011 sugar beet price was per tonne (a reduction on the 26 per tonne paid in 2010). British Sugar later agreed to extend this price to all crop delivered and to pay Transport Allowance and Late Delivery Bonus on additional tonnage. This was possible due to favourable market conditions for sugar and ethanol. The press reported exceptional yields of sugar beet on some farms; a Norfolk farmer is reported to have grown tonnes of crop per hectare, which equated to an adjusted yield of tonnes per hectare, albeit in a sample dig. By the end of 2011, 88 per cent of the contracted tonnage had been delivered, this was a significant improvement on the previous year when only 63 per cent had been delivered. Potatoes Dry conditions in September disrupted the potato harvest, and forced some producers to irrigate the crop prior to harvest. Despite generally good yields and bold samples, prices were much lower than in the previous year. From about 167 in June, the free market potato price fell to 105 per tonne in August reflecting an excess of supply relative to market requirements. In November, the average price was 104 per tonne. Low prices persisted through the marketing season. Cereals There were 81 Cereals farms in the sample in 2011, averaging 170 hectares (77 farms averaging 176 hectares in 2010). The average farm was 76 per cent owned and 24 per cent rented. Among the sample, there was an apparent reduction in the area of winter wheat and increase in winter and spring barley. The average East of England Cereals farm experienced a two per cent increase in FBI to 461 per hectare. Cereals farms in all other regions experienced greater increases in FBI which averaged 499 per hectare in England. Variable costs of 408 per hectare and fixed costs of 519 had increased on the previous year Of the total output, of 1,474 per hectare, 1,141 per hectare related to agriculture, 35 per hectare to agri environment, diversification 84 per hectare and 214 to single payment. The total crop output was 1,033 per hectare; wheat contributed 56 per cent, a reduction from 66 per cent in the previous year due mainly to the reduced price. The oilseed rape output contributed 24 per cent of crop output (19 per cent in 2010). The increase in agricultural costs reflected higher energy prices and was especially apparent in fertiliser expenditure which averaged 139 per hectare across all crops ( 128 per hectare in 2010) and machinery fuel of 56 per hectare ( 47 per hectare in 2010). The average net worth of Cereals farms increased by seven per cent, to 10,900 per hectare. This reflected the increase in value of land and buildings in the same proportion to 9,659 per hectare through investment and revaluation.

14 Farmers spent an average of 115 per hectare on machinery ( 123 per hectare in 2010) bringing the closing valuation of machinery to 580 per hectare, some three per cent higher than at the start of the year. General Cropping The 65 East of England General Cropping farms averaged 294 hectares (265 hectares in 2010) and were 67 per cent owner occupied and therefore 33 per cent rented. They grew winter wheat on 29 per cent of the farm whilst sugar beet and potatoes occupied three and 12 per cent of the farm respectively. The FBI was 346 per hectare, representing a 24 per cent reduction on the previous year. Agricultural output of 1,253 per hectare was higher than in 2010 whilst output from agri environment at 55 per hectare and diversification at 57 per hectare were little changed. Single payment averaged 209 per hectare. As a share of crop output, winter wheat was unchanged at 29 per cent, however, it was the reduction in the potato price that determined the financial performance of General Cropping farms and output from this crop fell from 27 per cent to 16 per cent. The improved performance of the oilseed rape contribution from five per cent to nine per cent was insufficient compensation. Fixed and variable costs were broadly in line with the previous year. Investment in machinery, of 133 per hectare was unchanged on the previous year and contributed to the four per cent increase in the value of machinery in the year. As observed on other types of farm, revaluation and investment in land and buildings contributed to an eight per cent increase in value of these assets at the year end of 7,681 per hectare. Borrowing increased by six per cent giving a net worth of 8,696 per hectare at the close of the year, also an increase of six per cent. Horticulture Horticulture businesses were represented by a slightly reduced sample of 217. Their average FBI increased by 15 per cent to 116,000 per farm. However, this is a very diverse group of businesses supplying a wide range of edible and ornamental markets, directly, through cooperatives, wholesalers and multiples, and there were considerable differences in the fortunes of individual businesses in the sector. Output from soft and top fruit increased whilst output from field and protected vegetables was lower. Total output from these businesses averaged 402,708, an increase of 15 per cent in comparison with the previous year. Of this, horticultural production accounted for 91 per cent of output and for 64 per cent of the FBI. Diversification accounted for six per cent of output; half of this related to food processing and retailing. The net worth of the average horticultural business increased by seven per cent to 849,106, due mainly to expenditure on, and revaluation of assets, albeit with increased loan liabilities. Suppliers of flowers to supermarkets typically reported favourable trade, and even increased sales. Despite the current weak economy, consumers apparently opted to cut out major expenditure, such as holidays, but remained willing to purchase small items because flower purchases from multiple outlets perhaps appear affordable when made along with weekly food purchases. In November 2011, Sainsbury s announced its intention to double the amount of British produce that it stocks by The company took the opportunity of high yielding crops to source over 1,000 tonnes of cabbage, 635 tonnes of cauliflower, 940 tonnes of broccoli, 500 tonnes of sprouts, and 2000 tonnes of onions from Cambridgeshire, Lincolnshire, Cornwall and Scotland over the 2011/2012 winter. This optimism was reflected in March 2012 when Morrison s announced its 32 The Vegetable Farmer, December 2011

15 intentions to become the country s largest manufacturer of fresh food by 2015, and at the same time the biggest customer for UK farms 33. In its Catalyst for Change report, the NFU highlighted the barriers to production of some horticultural produce 34. Cucumber, salad onions, onions, beans, tomatoes and mushrooms were described as endangered whilst Brussels sprouts, cauliflowers. Lettuce and leeks were considered to be at risk. The reasons that gave rise to this situation were considered to be a lack of trust and confidence within the supply chain (over riders, verbal margin agreements, lack of price certainty, late payment), retail promotions made at great cost to producers, lack of commitment to production programmes by buyers, a short term trading culture and tension between price driven retail buyers and the corporate sustainability objectives promoted by retailers. In ten years to 2011, the UK s self sufficiency in indigenous vegetables fell from 73 per cent to 60 per cent, even though Defra s Fruit and Vegetables Task Force had identified the importance of domestic production on the grounds of cost, availability and quality 35. An important development in field scale horticulture in the East of England in 2011 was the return of Anglian Pea Growers to production with a contract to supply Ardo UK with around 14,800 tonnes of peas form 3,500 hectares, from the group in Under the new arrangement, pea preparation is carried out at the Norbert Dentressangle plant at Oulton Broad near Lowestoft, but the crop is packed in Charing in Kent. Some 150 farmers supply the group. The group invested in three harvesters ahead of the new contract. The vining pea harvest started 10 to 14 days early after drought and frost had reduced the yield of the crop, with yields predicted to have fallen by 20 per cent. However, the quality of peas was generally good and yields improved by the middle of the season. Dry conditions caused great difficulty for growers attempting to maintain continuity of supply of produce, although there were also some compensations. The year included a delay in planting out of young sprout plants due to lack of soil moisture, creating a risk of a break in the harvesting programme. increased early season demand for salad, asparagus and soft fruit with harvests typically starting two to three weeks earlier than usual. a favourable harvest of grapes for UK wine production. Fenland top fruit producers experienced a frost of -4 C in late May, resulting in loss of dessert apples, and especially younger trees 36. Despite the early drought, later rainfall supplied water to the developing fruit and fruit size was satisfactory. Cooking apples, mainly the traditional Bramley variety, yielded better. Fruit growth stalled in drought conditions in June. There are indications that traditional forced daffodil production is probably not economically sustainable into the future. The reasons are the higher cost of bulbs, reduced production from a tonne of bulbs and rising fuel costs. In addition, shorter, generally milder winters mean that the outdoor flowers are arriving sooner and clashing with the traditional forced indoor market, but customers are choosing the cheaper outdoor grown variety. Similarly, we sense concern of increased pressure on margins from early UK strawberry crops due to higher planted areas and more cheaply produced Dutch crop. 33 The Vegetable Farmer, April Catalyst for Change: Better ways of doing business in the horticulture and potatoes sector, NFU, July Farmers Weekly, 15 July Eastern Daily Press, edp24.co.uk, 10 September 2011

16 Dairy Dairy farmers continue to operate in a challenging market place; rising feed and fertilizer prices, bovine TB and the new schmallenberg virus, all excerting pressure on profitability. Cattle numbers in England fell by 2.9% to 5.3 million head in December 2011, of which the dairy herd accounted for 1.1 million head, a fall of 3.7%, These numbers perhaps reflect concern over high production costs, and a fall in domestic sales of beef and dairy products, due to the UK s continuing economic downturn, which has not been offset by exports. 37 This was also reflected in a reduction in dairy farm numbers in the East of England, however the reported number of dairy cows per farm in the region rose from 141 to 143, an increase of 1.5%. The average dairy farm area was 192 hectares (180 hectares in 2010), whilst output from livestock was 1,792 per hectare, of which milk and milk products contributed 1,415 per hectare, a fall of 10 per cent from the previous year. Livestock specific costs, excluding labour, amounted to 819 per hectare. The FBI of dairy farms was 416 per hectare ( 79,884 per farm) of which the single farm payment and agri-enviroment scheme payments contributed 214 per hectare. For comparison, all English dairy farms in the FBS achieved a FBI of 608 per hectare of which 212 per hectare was derived from agrienvironment and single payment schemes. The average 2011 prices for feed wheat and dairy ration rose by 31.1 per cent and 19.9 per cent respectively. Ammonium nitrate fertilizer prices continued the upward trend, by showing a 38.6 per cent annual increase 38. The value of a newly calved heifer was 1,343 at the beginning of the period and 1,689 by the end 39. Farmgate milk prices, including bonus, did rise in the period, from an average of pence per litre in 2010 to an average of pence per litre in 2011 and 28.07ppl for the 12 months to 31/03/2012, a 10.90% increase from 2010 to The net worth attributed to East of England dairy farms was 8,742 per hectare at the end of the period, as against 8,254 at the start, reflecting higher land and livestock values. The annual investment in plant machinery equipment and building improvements remains relatively static at 185 per hectare (last year s investment was 192 per hectare) partly due to continued investment to meet changing environmental standards. The period ended with the announcement from Dairy Crest of the imminent closure of its Fenstanton plant, as part of various measures to deal with pressures on its own profitability 41. The effect on dairy farmers in the region has yet to be analysed but will further reduce their already restricted marketing options. Lowland Grazing Livestock There were 18 farms in the sample (21 in 2010). The average farm size was 139 hectares (155 hectares in 2010) of which permanent grass accounted for 111 hectares, temporary grass 11 hectares and arable 3 hectares. The sample was 67 per cent tenanted and 33 per cent owner occupied, almost the reverse of the national pattern of 40 per cent tenanted in the England sample reflecting the way that grazing often uses land that is not suitable for arable production; much of the land in this sample was marsh and river bank grazing, often hired from statutory bodies and authorities. Average stocking rates were 24 beef cows (32 in 2010), other cattle 89 (100 last year), breeding ewes 67 (85) and other sheep 71 (92). 37 Defra.gov.uk/statistics 38 Dairy statistics 2012 published by DairyCo, a division of AHDB 39 fwi.co.uk, 30/12/2011 and 07/01/ Defra.gov.uk/statistics 41 Fwi.co.uk, 17/04/2012

17 The Farm Business Income was 256 per hectare, an increase of 27 per cent on the previous year. The gross assets in the sample were 5,932 per hectare, an increase of 369 or 6.6 per cent. The net worth after deducting liabilities of 413 per hectare was 5,519 per hectare at the year end. This represented a return on net capital of 4.8%. Note that this figure will be influenced by the proportion of land owned (this represents a low yield in rental terms) and farming assets other than land. A more meaningful figure is working capital (often referred to as tenant s capital, calculated as total assets less land and buildings) as this is not directly affected by the changes in farm land values which have been quite dramatic. The working capital averaged 1,589 per hectare at the year end, an increase of 3 per cent and about in line with inflation. Breeding livestock represented 202 per ha with machinery 387 per hectare. Non breeding livestock are entered under current assets and not differentiated. Liquid assets (mainly cash and debtors) were 392 per hectare. Agri environment schemes are critical to the profitability of this group of farms, and amounted to 80 per hectare. Diversification output was 48 per hectare and the Single Payment was 180 per hectare to give a total of 308 per hectare. Without these sources of output, the farms would have suffered unsustainable losses from their agricultural activities. Sheep Sheep meat prices have been generally firm. Lamb prices hit an unusual high of around 540 pence per kilogramme deadweight in May 2011, (443 pence in 2010) tailing off as normal over the summer to 380 pence but with a welcome uplift to around 460 pence at the year end. Prices for the first half of 2012 have been more stable, at around 430 pence. Cull ewes followed their usual pattern, peaking in April at around 80 per head falling to around 50 to 60 in October / November though there was a marked upturn at the year end, as for lamb, and prices reached 75 to 80 at the end of December. Over the year there was little significant change in cull ewe prices (Farmers Guardian Market prices). Supplies of domestic sheep meat followed the normal seasonal patterns. UK slaughtering bottoming out in April at around 180,000 head per week and reaching an autumn peak of around 300,000 per week in late September. (DEFRA slaughter statistics). The UK became a net exporter of lamb for the first time in 17 years according to a Farmers Weekly report (Feb ) exports at 98,500 tonnes were up 11 per cent with France the main market, taking 60 per cent of the trade. Imports into the UK fell by 13 per cent to 88,000 tonnes. Wool prices have rallied sharply in recent years. From a low of 33 pence per kilogramme in 2008, to 102 pence in 2010, and an estimated figure in the region of 130 pence for 2012 (BWMB). A lively demand from China is thought to be a factor in this welcome increase. An average fleece is now worth around 5, but four years ago the figure was just over 1 which often did not cover the cost of shearing. The impact of the Schmallenberg virus on the UK sheep and cattle industries remains uncertain. The disease causes still births, foetal deaths and abortions in both sheep and cattle. It is spread by midges and is widespread in Northern Europe. Adult stock show few if any signs of the disease and it is thought that natural immunity is quickly established. However, there was a disturbing report in the Farmers Weekly (16 November 2012) to the effect that a large number of scanners were reporting abnormally high levels of failed pregnancies and dead foetuses in cattle and sheep. Work on a vaccine is in hand. Beef Prices in June 2012 were around 340 pence per kilogramme dead weight and have been rising steadily since. (Farmers Guardian). This is an increase of some 17 per cent up on a year earlier and 75 per cent higher than in late There were fewer calf registrations in 2010 against 2009 which is working through to reduce supplies (Savills). UK prime cattle slaughter in the year to 1 July 2011 was 2,022,500, 7 per cent down on the previous 12 months. Calf registrations to July 2011 suggest a stabilisation of beef supplies for the coming year (DEFRA) but after a very poor season for forage, cattle may fail to do as well this winter as last leading to lower supplies and higher prices. Limousin was the most