English beef and sheep producers can now plan for the coming 18 months safe in the knowledge that all their existing subsidy entitlements will continue until the end of 2004. They also know they will have a new single farm payment system from 2005, and that this will be based upon the direct subsidy claims made in 2000, 2001 and 2002.
Producers should use the breathing space they have been given by the year's delay in the scheduled implementation of CAP reform to adapt their businesses to cope with the most fundamental shift in their farming goalposts since the UK joined the EU in 1973.
This is the latest EBLEX advice emerging from the Meat and Livestock Commission's close tracking of the complex process of CAP reform and its economic implications for the UK livestock industry.
The precise extent to which decoupling will be adopted in England has yet to be established along with the detailed rules by which it will work. Until then, it is impossible to assess the actual impact of the new system on either the national industry or individual farm enterprises. While there are likely to remain major uncertainties on both scores for some considerable time, this should not deter individual businesses from starting to plan ahead.
On the basis of a largely decoupled future, English producers need to examine how sustainable their farm businesses are likely to be from 2005. They need to begin planning ways of adapting their businesses to make the most of the new, more flexible environment they are likely to face.
Specifically, with professional help if required, they should take the opportunity to:
· Fully cost out their farm businesses without any of the existing direct payments;
· Consider the viability of various other potential farming mixes in a similarly decoupled situation;
· Assess how different parts of the farm business interrelate and could be adapted to better complement one another;
· Closely examine fixed costs and possible ways of reducing them; and
· Investigate the many different funding opportunities that will become available as part of the increased 'second pillar' rural development programme funding.
Only by starting to plan now for the future beyond 2004 will beef and sheep producers be able to take positive and timely action as soon as the full details of the reforms are known.
Cap Briefing MLC Sheep Economist Jane Connor, www.eblex.org.uk Tel. 01908 844268
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