CLA CAP Talk Nov 13 - Land Partners

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The presentation given by Simon Dixon Smith of Land Partners at the CLA's CAP Update event held on Tuesday 3 December 2013 at The Bell Hotel, Stilton, near Peterborough.
Mr Dixon Smith discussed how CAP will impact on your farm business, using case study examples.

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CLA CAP Talk Nov 13 - Land Partners

  1. 1. 3rd December 2013 CAP Reform update Impact on farming business 2013-2015 Simon Dixon Smith MRICS FAAV Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  2. 2. DEFRA statements of intent • “We will seek to adopt the simplest approach which is most likely to minimise the burden on you and the RPA…” • “We will seek to implement a direct payment system which is simple and accessible to you, by eliminating unnecessary complexities and by avoiding gold plating” • “Simplicity, affordability and effectiveness will underpin our approach to implementing the new CAP in England and the policy choices we take. I am resolutely determined to avoid the mistakes of 2005.” Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  3. 3. Overall UK budget changes 2007 – 2013 • Pillar 1 £20.5bn • Pillar 2 £3.7bn £24.2bn 2015 – 2020 • Pillar 1 £17.8bn • Pillar 2 £1.84bn £19.64bn • Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  4. 4. DEFRA consultation • • • Accelerated Period 31st October to 28th November Some decisions made Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  5. 5. Who will be affected? • • • • • Largest farms Smallest farms Occupancy changes Young farmers Everyone else… Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  6. 6. Largest Farms If more than €150,000 after greening (c1750 acres cropped) Preference – Degressivity - 5% deductions - Unlikely to be any allowance for salaries Or – Re-distributive payments - Up to the first 54ha - Max 65% top-up >30ha arable – 3 crops to be grown Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  7. 7. Smallest Farms • Less than 5ha – no claim allowed • Less than 10ha of arable land – no crop diversification • Less than 15ha arable land – no Ecological Focus Area • Less than 30ha arable land- 2 crop to be grown unless  75% of holding grassland or  75% of arable area temporary grass Consider letting out some land to bring the holding under the thresholds Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  8. 8. Occupancy Changes Entitlements will roll over 31st December 2014 2015 claim area National Reserve Crop diversification if you rent out more than 50% of your land Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  9. 9. Young Farmers Someone under 40 the „head of the holding‟ Budget ceiling Minimum skills & training requirement? BPS top-up for 5 years Each claim before 40th Birthday Defer appointments? Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  10. 10. Everyone Else Direct Payments (Pillar 1): • Movement of area payments „uphill‟ 2015, before deductions (per hectare) SDA Moorland Current €242 €195 €34 Proposed • • • • Lowland €236 (-2.5%) €236 (+20%) €62 (+82%) Loss of entitlements in excess of eligible area Block cropping Potential Alternative Certification Scheme Ecological Focus Areas Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  11. 11. Everyone Else Direct Payments (Pillar 1): • • • • • • • Contracting agreements Permanent grassland restrictions Potential for group EFA‟s More crop codes Designation of Permanent Grassland Tenancy agreement review Computer literacy Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  12. 12. Everyone Else Obligations to be reduced: • 13 Statutory Management Requirements (SMRs) – from 18 • 7 Good Agricultural & Environmental Conditions (GAEC) – from 16 Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  13. 13. Ecological Focus Areas Options include: • • • • • • • Land lying fallow Landscape features (active management requirements?) Buffer strips Afforested areas (established under RDS) Short rotation coppice Areas with catch crops or green cover Areas with nitrogen-fixing crops Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  14. 14. Rural Development (Pillar 2) “Our aim will be to implement regulations in a way that is as simple, effective and affordable as possible, while seeking to achieve good value for taxpayers and customers” “I believe that transferring the maximum 15% from Pillar 1 to Pillar 2 would be the right thing to do….” Rt Hon Owen Paterson MP Level of P1 to P2 transfer to be confirmed by 31 December 2013 Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  15. 15. Rural Development (Pillar 2) Max budget for England £3.874bn incl. 15% transfer P1 to P2 • • • • • CLA/NFU advocating 9% transfer P1 to P2 Existing commitments carried forward c£2.1bn Headroom for NELMS - £600m to £1,500m No new ELS agreements until January 2016 National co-funding c£558m over plan period Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  16. 16. Rural Development (Pillar 2) New Environmental Land Management Schemes from 2015 (NELMS) - Site specific agreements (c.f. HLS) Area based agreements (targetted) Small scale capital grant scheme „Upper Tier‟ „Mid Tier‟ „Lower Tier‟ Expecting area of land under agreements to fall from 70% to 35-40% Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  17. 17. Rural Development (Pillar 2) In 2014 expiring „classic‟ agreements (other than ELS) will be renewable as ELS or HLS Risk of additional modulation? (10% + 9% in 2013) ELS features & EFA interaction Historically 83% of Pillar 2 has gone to agri-environment schemes Dual Use to be scrapped? Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  18. 18. Budget Constraints Re-allocation: • • • • • Movement „uphill‟ Young Farmers National Reserve Degressivity Movement between regions ? 2.5% 2% 3% 0.08% Possible cuts: • EU Budget cuts • Financial discipline Land Partners : CAP Reform update: December 2013 1.5% 2.45% www.land-partners.co.uk
  19. 19. Budget considerations • 1,000 acre north Essex/south Suffolk cereal farm Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  20. 20. Current Cropping – Winter Wheat, 2ND Wheat, OSR ELS – including 25ha of 6m Buffer strips ha Gross Margin Total WW1 127 1024 130,048 (10T at £150/T DC £476/ha) WW2 127 857 108,839 (8.5T at £165/T DC £546/ha) OSR 126 695 87,570 ELS 25 (3.5T at £320/T DC £505/ha) 12,150 338,607 Other Income SPS Overheads Contracting Others 85,000 110,000 (£110/ac) 54,000 (£54/ac) Net Profit (before Prior charge and Divisible) 259,607 (£260/ac) Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  21. 21. Case Study 1 Maintain ELS, Cropping WW1, WW2, OSR/25ha Winter Beans (3rd crop and EFA met by beans) ha Gross Margin Total WW1 127 1024 130,048 WW2 127 857 108,839 OSR 101 695 70,195 Winter Beans 25 615 15,375 (3.75T at £220/T DC £210/ha) ELS 25 12,150 336,607 Other Income BPS + Greening Overheads Contracting Others 80,000 110,000 (£110/ac) 54,000 (£54/ac) Net Profit (before Prior charge and Divisible) 252,607 (£253/ac) Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  22. 22. Case Study 2 Give up ELS, use buffer strips for EFA and 3rd Crop ha Gross Margin Total WW1 127 1024 130,048 WW2 127 857 108,839 OSR 126 695 87,570 Buffer Strips 25 0 326,457 (Could maintain ELS as well – make up points from other out of field options + £12,150, funds permitting) Other Income BPS + Greening Overheads Contracting Others 80,000 110,000 (£110/ac) 54,000 (£54/ac) Net Profit (before Prior charge and Divisible) 242,457 (£242/ac) Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  23. 23. Case Study 3 Maintain ELS, have 25ha fallow, use this for EFA and 3rd crop. Rotate the fallow around the farm to control Blackgrass!!!! (fallow might have to have a winter cover crop) ha Gross Margin Total WW1 127 1024 130,048 WW2 127 857 108,839 OSR 101 695 70,195 Fallow 25 ELS 25 12,150 321,232 Other Income BPS + Greening Overheads Contracting Others 80,000 110,000 (£110/ac) 54,000 (£54/ac) Net Profit (before Prior charge and Divisible) 237,232 (£237/ac) Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  24. 24. Conclusions • Actions now may impact on 2015 • Definition of EFA features will be critical • Bottom line may not be too bad Nothing is decided until everything is decided Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk
  25. 25. Land Partners LLP The Old Stables, Lyons Hall Business Park, Lyons Hall Road, Braintree, Essex, CM7 9SH info@land-partners.co.uk 01376 328297 Land Partners : CAP Reform update: December 2013 www.land-partners.co.uk

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