Austin7
Member
To Rent Review or not to Review, the only question can be when to go for the reduction.
An AHA 86 rent is based on a number of factors; primarily productive capacity and related earning capacity. It has been a good harvest but the wheat price has dropped £50 per ton since last year, looking forward there is nothing to indicate any recovery. With the weak pound costs will increase regardless of any possible additional tariffs imposed in a no deal scenario. In this case Uk borders will be open to cereals from anywhere in the world grown by locally subsidised farmers without environmental constraint. Clearly, given the key rent review elements of productive capacity and related earning capacity, this must lead to a reduction in rent.
Adding to all this uncertainty is DEFRA’s “Farming is Changing". I copy here three relevant extracts.
Delinking
We plan to ‘delink’ Direct Payments from the requirement to farm the land, and we plan to make these payments regardless of whether the recipient chooses to continue farming or not. We plan to consult on the detail of these changes and will share guidance with farmers in good time before delinking starts. The earliest we would delink payments is 2021. The delinked payments could be used in any way – for example, to invest in improving productivity, to diversify the business or to retire from farming. This should help to provide more opportunities for new entrants, and existing farmers wishing to expand, or to buy or rent land.
Lump sum
We’re also looking into the option of offering farmers a one-off lump sum in place of any further
Direct Payments they would have been entitled to receive. We plan to run a consultation with farmers later in the year to look into how this could work best. Regardless, the earliest we’d offer the lump sum would be 2021.
ELMS
We want to pay farmers and land managers for providing environmental benefits. In 2024, we plan to launch our new Environmental Land Management (ELM) scheme as one way in which to do this. This new approach isn’t a subsidy. Those who are awarded ELM agreements will be paid public money in return for providing environmental benefits.
At our last Review we resisted a 50% rent increase at Arbitration and won. I hasten to add this experience is not for the faint hearted. However it has left us with a detailed Arbitrators exposition of the buildup of our AHA rent. If we took that and substituted todays numbers the rent even before Brexit and DEFRA’s “Farming is Changing” would be more than cut in half.
“Farming is Changing” cuts the link between the UK wind down of the CAP area subsidy and the "productive capacity and related earning capacity” of the farm so under the legislation it should not figure in any rent calculation. Certainly any attempt by any landlord to lay their hands on any part of a Lump Sum has to be resisted. Furthermore DEFRA makes it clear that ELMS "isn’t a subsidy” in other words payments will not include a profit to the farmer which a landlord could claim.
The net effect of all the above is that rents assessed purely under AHA86 productive capacity and related earning capacity would be Zero.
This assessment agrees with Sean Rickard's 'half Uk farming will fail’ paper, his conclusion I copy here:
The agricultural sector in the UK faces significant challenges from No Deal, as tariffs and non-tariff barriers are erected to our exports at the same time as the UK Government largely removes tariffs on imports from third country farmers. British farmers will be caught between increased competition from third countries importing produce to the UK, and increased difficulty and cost when exporting to our biggest market, the EU. Free Trade Agreements to reduce those barriers will take many years to negotiate. Coupled with the loss of the Basic Payment Scheme of support payments by 2022, the driving down of farm revenues means that more than half of farms could go out of business.
The question is are we collectively strong enough to make it clear to all those who have had the sticky hands in our pockets for far too long that the party is over?
An AHA 86 rent is based on a number of factors; primarily productive capacity and related earning capacity. It has been a good harvest but the wheat price has dropped £50 per ton since last year, looking forward there is nothing to indicate any recovery. With the weak pound costs will increase regardless of any possible additional tariffs imposed in a no deal scenario. In this case Uk borders will be open to cereals from anywhere in the world grown by locally subsidised farmers without environmental constraint. Clearly, given the key rent review elements of productive capacity and related earning capacity, this must lead to a reduction in rent.
Adding to all this uncertainty is DEFRA’s “Farming is Changing". I copy here three relevant extracts.
Delinking
We plan to ‘delink’ Direct Payments from the requirement to farm the land, and we plan to make these payments regardless of whether the recipient chooses to continue farming or not. We plan to consult on the detail of these changes and will share guidance with farmers in good time before delinking starts. The earliest we would delink payments is 2021. The delinked payments could be used in any way – for example, to invest in improving productivity, to diversify the business or to retire from farming. This should help to provide more opportunities for new entrants, and existing farmers wishing to expand, or to buy or rent land.
Lump sum
We’re also looking into the option of offering farmers a one-off lump sum in place of any further
Direct Payments they would have been entitled to receive. We plan to run a consultation with farmers later in the year to look into how this could work best. Regardless, the earliest we’d offer the lump sum would be 2021.
ELMS
We want to pay farmers and land managers for providing environmental benefits. In 2024, we plan to launch our new Environmental Land Management (ELM) scheme as one way in which to do this. This new approach isn’t a subsidy. Those who are awarded ELM agreements will be paid public money in return for providing environmental benefits.
At our last Review we resisted a 50% rent increase at Arbitration and won. I hasten to add this experience is not for the faint hearted. However it has left us with a detailed Arbitrators exposition of the buildup of our AHA rent. If we took that and substituted todays numbers the rent even before Brexit and DEFRA’s “Farming is Changing” would be more than cut in half.
“Farming is Changing” cuts the link between the UK wind down of the CAP area subsidy and the "productive capacity and related earning capacity” of the farm so under the legislation it should not figure in any rent calculation. Certainly any attempt by any landlord to lay their hands on any part of a Lump Sum has to be resisted. Furthermore DEFRA makes it clear that ELMS "isn’t a subsidy” in other words payments will not include a profit to the farmer which a landlord could claim.
The net effect of all the above is that rents assessed purely under AHA86 productive capacity and related earning capacity would be Zero.
This assessment agrees with Sean Rickard's 'half Uk farming will fail’ paper, his conclusion I copy here:
The agricultural sector in the UK faces significant challenges from No Deal, as tariffs and non-tariff barriers are erected to our exports at the same time as the UK Government largely removes tariffs on imports from third country farmers. British farmers will be caught between increased competition from third countries importing produce to the UK, and increased difficulty and cost when exporting to our biggest market, the EU. Free Trade Agreements to reduce those barriers will take many years to negotiate. Coupled with the loss of the Basic Payment Scheme of support payments by 2022, the driving down of farm revenues means that more than half of farms could go out of business.
The question is are we collectively strong enough to make it clear to all those who have had the sticky hands in our pockets for far too long that the party is over?
