12 September saw the publication of the Agriculture Bill. This Bill has met a mixed response from the agricultural industry and various other interested groups.
Fundamentally the Agriculture Act, if passed, would be an enabling Act. This means it gives powers to Defra, for England and some devolved administrations power to make regulations. Until the Act is passed and the regulations are made a lot of detail is still unknown.
What we do know is that direct payments are scheduled to continue until 2021 and then be phased out over a 7 year transition period. During that transition period payments may be de-linked which we assume means that they can be received without the need to hold agricultural land. The de- linking of payments will no doubt give rise to some interesting questions in the short term. For example how will a de-linked payment impact on agricultural rents? If the payment belongs to the tenant and he does not need the land to claim the payment will it fall out of consideration in the rent review? How will it affect sales? If payment is de-linked from the land can the right to payment be sold? If not how will it land affect values?
The de-linking of payments may be seen as an encouragement for those who wish to leave farming as it enables them to give up their land but retain their payments. If this results in many retirements with a lot of land being sold without entitlements going on the market, it may affect values.
Looking at the longer term the Bill enables the relevant authority to provide financial assistance. In keeping with much of the rhetoric prior to the publishing of the Bill the assistance is for a number of purposes including environmental protection, managing climate change, public access to land, animal welfare and the health of animals and crops.
There is no power to provide assistance purely to support food production, an aspect which has attracted much criticism.
Assistance can be given to help improve farm productivity. Also there a various powers that may be to try and strengthen farmers position in the market. Power is given to regulate the contracts for the sale and purchase of agricultural commodities, to regulate the marketing of commodities and to allow the formation of producer groups. So whilst food production may not be supported, assistance may be given to prepare for change by improving productivity and to try to level the playing field between farmers and the big food retailers.
However the Bill does not, and really could not deal with, the most crucial question facing farming businesses. What will our trading relationship be with the rest of the world? What tariffs will farmers face when selling abroad and what tariffs will be imposed on goods coming in. Until this is known sale prices and input costs cannot be predicted with any real certainty.
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