IP Dairy Farmer - April 2021

The run up to the spring flush is now fully in train and spot milk prices have dipped below 25ppl, delivered. At farmgate level only a handful of brokers and middle ground liquid processors have dropped their milk price in 2021, with others holding or increasing prices - in particular all cheese processors, First Milk, Muller and Arla whose farmgate milk prices have been held up primarily by a relatively high cream values. Milk brokers with little processing and who duck and dive grabbing opportunistic deals have many financially battered suppliers and some liquid processors with all their eggs in one basket also have farmers who are hurting. 

With an exceptionally strong GDT auction coming close to record levels, driven by phenomenal demand from China and its Asian neighbours, it should be a stand on for prices through this year’s flush. If that happens it will be a great result. Let’s keep our fingers crossed that no factory suffers a breakdown on peak dates or that a burst of warm weather and increased grass growth doesn’t come in late March. 

One eagle eyed farmer was keen to alert me to the fact that last time the GDT Auction average was high at this time of year was back in February 2014. At that time he was paid over 35ppl, now, seven years later, he received 30ppl during another similar GDT high. As he said, “seven years ago the UK was at 12 o’clock and coming off a high. Maybe today we are just entering a high!”. Let’s hope so. 
With the average season farmgate pay out for New Zealand farmers supplying Fonterra looking like it will be around 30ppl it’s a fact that if this spike in global prices continues, we could see farm building firms very busy down under. Simple housing systems would increase milk output, improve animal welfare, help protect the environment and facilitate the introduction of new technology.  

Judging by the increased calls to our office many farmers have realised that 2021 signals a reduction in BPS payments and the start of a radical change in how the Government funds agriculture. The farmers clearly want to investigate existing and new funding opportunities. The phased reductions in BPS start now, with the 2021 claim many of you have yet to submit ranging from a cut of 5% to 25%. There will be zero payment in 2028, by which time businesses need to be profitable without any subsidy or do something for it under the new Environmental Land Management Scheme. 

The Government’s Agricultural Transition plan will batter farm payments, especially for those who choose to completely ignore the Environmental schemes and payments on offer. But BPS will be substituted by the new Environmental Land Management Scheme, which basically rewards farmers for delivering a range of public goods, which most farmers should be able to tap into with some transitional guidance. Farmers will basically have the option to be paid to improve animal health and welfare, the environment and reduce carbon emissions. While we have been reassured that there will be the same funding available for post Brexit agri-environment, the price we pay for Covid is likely to be top sliced from all public spending and it would be naïve to assume that the farming sector will evade that appointment with the barbers.  How gruesome that haircut will be remains to be seen but those who sit and watch the opportunities in front of us now in the form of agri-environment slip away in hope of greener pastures will look back and replay this moment.

It’s likely a significant number of livestock farmers will see the abolition of BPS in 2027 and the offer of a lump sum to exit farming (details due next year) as a way to honourably exit farming and pass onto a younger generation. That’s what is keeping the value of entitlements high, in the expectation they could be converted to a golden handshake. 

Fortunately for me I’ve got insider insight of what’s coming down the road on all of this as my son Jack has worked in the farming environment world for a number of years, more latterly as a senior specialist for Natural England. He is now helping farmers set up new stewardship agreements, renew existing agreements and to submit BPS claims. Many farmers get caught on the hook of what he describes some agents as modern-day Robin Hoods without masks on, charging farmers between £250 to £700 to do less than 30 minutes work submitting the same BPS claim they did in 2020 and several years before. Ouch. 

The intensification of dairy farming is regrettably viewed as being a contributing factor for the escalation of nutrients getting into water courses and causing environmental harm. Apparently around 60% of incidents are dairy related in some catchments.
The repercussions of the pivotal Dutch Nitrogen Case of 2018 means that local planning authorities are starting to refuse plans for new housing developments where the local natural water courses are deemed to be in an unfavourable condition. So what has this to do with me and the dairy industry?

Well, you will be aware that the Environment Agency inspect farms which generate slurry to ensure that they are compliant with the Silage, Slurry and Agricultural Fuel Oil Regulations 2010. Particularly relevant in this context is whether the slurry lagoon is of sufficient capacity for the number of stock on-site. If the storage is not sufficient then a new lagoon or an extension to an existing will be required to avoid enforcement proceedings which often requires planning permission. If that is not granted then an enforcement procedure can force a reduction in stock on the farm to a level at which the existing slurry storage can accommodate.
When a new or extension to a slurry lagoon is submitted for planning permission, and the farm is within the catchment of a nature conservation site affected by nutrients, the Planning Authority must consider what the fall-back position is in the absence of a permission. If granting the permission will lawfully permit a higher level of stock than the stocking level if permission was not granted, the authority must consider the effect on the nature conservation site of more stock, and the added nutrients they generate. 

This is an area of planning which hit the housing development sector hard a few years ago and is showing signs of trickling into the farming industry. Its relevance to farmers within the catchments of these nature conservation sites will depend on how swiftly the planning authority in the area have implemented the effects of the Dutch Nitrogen Case. If your farm is within one of these catchments and does not have sufficient slurry storage for the stock onsite, if, and when, the case is implemented in your area, then approval for a slurry lagoon application or extension may be a costly and rocky road to navigate. It's another area of environmental legislation all dairy farmers will eventually have to navigate and comply with, irrespective of whether they receive any public money, be it stewardship or ELMS. Most, if not all, of you will have to change the way you farm and manage the land in future, or face non-compliance penalties. We can only hope that the results of government policies over the last few decades will not come crashing down on the farming industry but one thing is for sure, we will have to be on our toes.

Comments to ianpotter@ipmsltd.co.uk