Manage grazing lets to secure tax relief

Landowners who let grass on seasonal agreements must play an active role in its management if they want to claim business tax relief, according to a recent ruling.

The decision concerned landowner John Allen in Northern Ireland, who let 4ha of pasture to a neighbour for seasonal grazing and silage.

As well as using the land for keeping animals sold in the market and grazing it himself over the winter, Mr Allen supplied fertiliser to the tenant and engaged a contractor to cut weeds and hedges.

When Mr Allen appealed after HMRC rejected his claim for capital gains tax taper relief (now abolished) the tax tribunal ruled he had occupied the land and had taken responsibility for its husbandry and should, therefore, be allowed relief.

“This new decision adds further weight and clarification to the previous case law,” said Jeremy Moody, secretary and adviser at the Central Association of Agricultural Valuers. “Although the case revolves around a conacre [seasonal grazing] agreement in Northern Ireland, the ruling is extremely pertinent to landowners with grazing or cropping agreements across the UK.”

Dawn Mayo, senior tax manager at Evolution ABS in Somerset, said: “This case highlights that landowners producing grass who wish to be treated as farmers for tax purposes, must play an active role in managing the grass crop. It is important that they take responsibility for fertilising, weed control and boundary maintenance if they want to qualify for tax reliefs.”

‘Don’t rely on insurance for fracking damage’

Farmers and landowners are warned not to rely on insurance to protect them against losses that may arise from nearby fracking operations.

Malton-based rural broker McClarrons has seen an increase since last summer in enquiries by worried land and property owners in Ryedale, where North Yorkshire County Council recently approved fracking plans at Kirby Misperton.

Chief among their concerns are damage to built property, groundwater contamination and potential for damage to land, crops and stock.

“Many think their insurer will pay for all losses they suffer and then simply claim the money back from the operator but it isn’t that simple,” said Becky Ireland, farm account executive at McClarrons.

“Most insurers do not recognise fracking as an ‘insured peril’ under a farm combined or similar policy, as opposed to traditional standard perils such as fire, theft or flood.

“Damage caused by earthquake and subsidence are generally covered under buildings insurance and if fracking led to these insured events, a claim would likely succeed. However, unlike home insurance, commercial buildings often do not have subsidence included as standard and cover may need to be added as an optional extra.

“Commercial property insurance wordings vary considerably and similar issues may arise in relation to damage to land, for example contamination or damage to crops.”

Most home and commercial property insurance policies also exclude losses arising from pollution or contamination. Environmental liability policies also vary, with some excluding losses caused by fracking, said Miss Ireland.

Clean-up costs normally fall to the polluter but proving the source may be difficult and costly, especially as it may occur over a long timescale and the polluter may no longer be in business or may not be worth pursuing financially.

Farmers and landowners needed to review cover and consider cover for legal costs to pursue damages claims and to deal with any environmental investigations should a loss occur, said Miss Ireland.

Last year the Infrastructure Act gave landowners protection from liability for third-party claims for loss or damage arising from fracking, for example where neighbours or their property suffer damage.

Milk price hopes as GDT auction rises again

A 3.9% increase in the Global Dairy Trade index marked the continuation of a rising trend for the fortnightly online dairy commodity auction on Wednesday (1 June).

This latest increase will inject hope that farmgate prices will steady. The index has risen since marking 628 in mid-March, to 697 this week.

The EU Commission has also said it will increase the tonnage of skim milk powder that can be bought at intervention prices.

The ceiling has been raised to 350,000t, up from the 218,000t limit, which had been hit earlier this week. The commission had already doubled this year’s original ceiling of 109,000t in April.

MULLER FREEZE

⁕ Muller has frozen its milk price for the first month this year.

About 1,200 farmers in the Muller Milk Group will in July be paid 18.66p/litre for a standard litre, while the 650 members of the Direct Milk producer organisation will receive 18p/litre.

Producers will get slightly more on their cheques from the retail supplement, linked to sales at Aldi, Lidl and Morrisons.

FIRST MILK ‘BONUS’ AND CUT

⁕ First Milk is to pay farmers a bonus to reflect the co-op’s better performance.

Suppliers will receive a supplement worth 2p/litre, paid in stages. The first injection will come in June, with a 0.25p/litre dose.

However, First Milk has cut its “A” milk prices, effectively cancelling out the bonus. After the supplement, farmers across the six main milk pools face a drop of 0.32-0.44p/litre, to between 14.94 and 16.74p/litre for “A” litres.

DAIRY CREST CUTS

⁕ Dairy Crest has cut a penny off its milk price for the second month running. The 400 or so farmers supplying the processor’s Davidstow factory will from July be paid 20.72p/litre, based on a manufacturing standard litre. Dairy Crest has also promised no more cuts until at least September.

Rushed beef grid changes and penalties ‘unfair’

Two-fifths of steers are killing out above tougher weight limits, according to a study into the uproar over new beef grids and penalties.

More than 40% of British steers slaughtered in February had carcasses weighing more than 380kg, the maximum abattoirs are working towards through harsher deductions. That was a rise from 36% in the same month last year.

The research from AHDB Beef and Lamb showed less than 60% of young bull carcasses hit the 260-380kg target range this spring.

Heifers performed better, with 85% in the preferred range. But the proportion between 380kg and 420kg rose from 7% to 9% over the year.

Several big processors introduced new payment grids over the past six months, with penalties for heavier carcasses more strictly enforced.

Farming groups claim millions has been wiped off the value of cattle, adding to the pain of a price slump. But the meat trade defended the changes, saying retailers only wanted cuts of a certain size.

AHDB’s research also shows beef producers are meeting the standards fairly well for fat, with four-fifths of steer carcasses in February classified as 3 or 4L.

Interest in native breeds may grow as processors seek lighter carcasses

FLPA/IMAGEB/REX/SHUTTERSTOCK

However the conformation results raise questions. In February nearly half of steers and heifers made an R, which was slightly higher on the year.

But animals that killed out at Es and Us, high conformation grades that often score bonuses, were mostly in the heavier bracket, which draws more deductions.

AHDB market specialist manager Stephen Howarth said those animals currently fetched some of the best average prices – but the overweight penalties could now hurt their value.

“This could potentially have significant implications for those producers who are currently aiming to deliver animals with the highest conformation,” he said.

“They might need to adjust their system towards producing lower conformation, lighter animals.”

AHDB’s report is the first in a series aimed at improving the transparency of price reporting for beef.

The next, due by the end of June, will ask whether spec changes are linked to the slump in cattle prices.

The GB all-steers average has risen for the past four weeks, up 7.6p/kg to 318.4p/kg since the start of May. But prices remain more than 7p/kg down on the year.

NFU chief livestock adviser John Royle said the results showed farmers had not been given enough time to change their rearing and finishing systems.

He said the penalties may be nudging producers away from continental breeds, which produce high lean meat yields at a heavier weight, towards traditional, native breeds.

“Even though processors say they are going to reward the cattle they want, they cannot just change [specification] overnight,” he said. “Any changes need to be communicated well in advance.”

National Beef Association chief executive Chris Mallon said the weight limits were just an excuse for processors buying cattle more cheaply.

Farmers had been told to produce high-conformation, goodquality animals, but were now being punished, he said.

fwbusiness@rbi.co.uk

Dairy farms ‘by stealth’ claims rejected by NFU

A report claiming the British dairy industry has introduced intensive indoor dairy farms “by stealth” has been slammed by the NFU.

The report, by World Animal Protection (WAP) UK, accuses developers of increasing dairy farm sizes gradually, and then applying for planning permission retrospectively. Although no official figures exist, the study authors claim their research has shown there are nearly 100 “intensive indoor dairy farms” in the UK, with a “further 43 suspected”.

“These systems can hold over 2,000 cows and now account for up to a fifth of the milk produced in the UK,” says the report.

“Cows in these systems never go outside, are pushed to their limits to produce more milk, and are at higher risk of suffering from lameness and udder infections.”

Andrew Ayrton, a pasturebased dairy farmer from Skipton, Yorkshire, is quoted in the report saying: “Very few people are aware of intensive indoor dairy farming, and most believe that all cows go out to graze on grass.

“This way of farming causes lameness and health problems associated with standing in slurry all year. To go outdoors is a basic freedom that every cow should have.”

However, the NFU said it was “disappointed” with yet another report that “paints a false image of the UK dairy industry”.

To make matters worse, the report is published at a time when dairy farmers were struggling with unsustainably low prices, below the cost of production.

Sian Davies, NFU chief dairy adviser, said: “UK dairy farmers take the health and welfare of their dairy cows extremely seriously and it’s not in anyone’s benefit to see this change.

“More than 90% of the milk produced and consumed in the UK is inspected for environmental, animal health and welfare and food safety standards under the Red Tractor scheme, and consumers can be confident in dairy products dis playing the Red Tractor logo.”

She added: “It is a fact that dairy farms have increased in size over the years – we now have about 1.895 million dairy cows on 13,355 dairy farms in the UK and the average herd size is about 123 cows, according to AHDB.

“Unlike what WAP states, there is no evidence to prove that the health and welfare of the dairy cow is compromised due to the scale or the system of the farm. Far more important is the management of the system to best suit the needs of the cow.”

MPs demand policy changes to improve our soils

A cross-party group of MPs has called for action to protect soil health, warning that some of the most productive land in England is at risk of becoming unprofitable within a generation because of soil erosion and loss of carbon.

The Environmental Audit Committee (EAC) has published a report which calls for a review of cross-compliance rules and a rethink about the subsidy regime which encourages the growth of maize for anaerobic digestion (AD) plants.

The report said that the government relied on the cross-compliance rules associated with the Basic Payment Scheme (BPS) to regulate agricultural soil health, but crucial elements such as structure and biology were not assessed at all.

The rules were also accompanied by minimal inspections, which meant only two breaches were detected in 2015.

“The cross-compliance rules which regulate agricultural soil health must be revised with greater scope, force and ambition,” said the report, published on Thursday (2 June).

“Currently the rules do not cover some important aspects of soil health, are accompanied by a minimal inspection regime, and focus only on preventing further damage to soil rather than restoring and improving soil health.”

MAIZE SUPPORT

MPs also called for the double subsidy for growing maize for anaerobic digestion to be withdrawn, arguing it was counterproductive to managing soil sustainably.

At present, maize grown for AD is supported by renewable energy subsidies, as well as the normal BPS payment.

The committee pointed to evidence submitted to it over the course of its enquiry that the growth of maize for AD was a major cause of soil erosion.

“Renewable energy subsidies for anaerobic digestion should be restructured to avoid harmful unintended consequences,” said the report.

“Revisions should either exclude maize from the subsidy altogether or impose strict conditions on subsidised maize production to avoid practices in high-risk locations which lead to soil damage.”

The report suggested that the UK’s arable soils have seen a worrying decline in carbon levels since 1978, with widespread and ongoing reductions in peat soil carbon.

If carbon continued to be lost into the atmosphere it would make it harder to meet targets to limit the effects of climate change, it said.

It was also a threat to the sustainability of food production.

Mary Creagh, EAC chairman, said: “Soil degradation could mean that some of our most productive agricultural land becomes unprofitable within a generation. Every tonne of carbon we can retain in soil will help us meet our carbon budgets and slow climate change. The government wants to see all soils managed sustainably by 2030, but their current actions will not be enough to reach that goal.”

‘Plans to cut tariffs threaten future of farm biogas’

Farm leaders have expressed deep disappointment over proposed cuts to Feed-in Tariffs (Fits) for anaerobic digestion (AD) plants.

They warn that any cuts to tariffs could sound the “death knell” for the future of on-farm biogas installations.

The Department for Energy and Climate Change (Decc) has issued a consultation which says from January 2017 tariffs for plants under 500kW will be cut by 27%.

Meanwhile, the tariff for plants over 500kW will disappear completely, moving from 7.8p/kWh to zero. Tariffs for existing installations will remain unchanged.

The government also wants to minimise the use of crops as a feedstock for AD plants, so is looking at limiting Fits payments to electricity generated from biogas derived from waste and residues.

Jonathan Scurlock, NFU chief adviser on renewable energy, said the union would be fighting the proposed cuts, which came on top of slashed support for the solar and biomass industries.

“Yet again, this government seems determined to throttle the life out of the emerging renewable energy market,” he said.

Dr Scurlock pointed out that only two years ago the Fits for small- and medium-scale AD plants were 14-15p/kWh, nearly three times the rates proposed from 2017.

But there had been no corresponding reduction in capital costs.

“The multiple environmental and soil management benefits from widespread deployment of on-farm anaerobic digesters will be lost, including the huge potential for avoiding farmyard methane emissions from manure and slurry – a bit of an own-goal for Decc, given that this is a powerful greenhouse gas,” he said.

Charlotte Morton, chief executive of the Anaerobic Digestion and Bioresources Association, said the consultation did nothing to address Decc’s fundamental lack of ambition for AD and community-scale renewables.

“Instead, it proposes restrictions to plant sizes and feedstocks that will make it even harder to deploy viable AD plants using waste, crops or agricultural residues.

“Removing support for new plants above 500kW is completely unjustified and will kill off projects which could otherwise have delivered Decc’s objectives while representing good value for money.”

But TFA chief executive George Dunn said he welcomed the move. “The TFA has been the only farming organisation calling on government to stop the public subsidy of crop-fed AD systems, because of the impact on land rents and soil management.”

Dairy farm locked in battle over plans to expand biogas operation

One of the UK’s largest anaerobic digester (AD) plants is facing a battle to continue operating at its current scale.

Crouchland Farm, in Plaistow, West Sussex, has had its retrospective planning application for expansion of its AD facility refused and it is now appealing that decision with a case due to be heard in September this year.

West Sussex County Council’s planning committee rejected the application against their officers’ recommendations.

Crouchland began operating an on-farm AD unit to process its own waste from its dairy herd in 2009 to generate electricity to power the farm and export the surplus to National Grid.

But since then, the company, Crouchland Biogas, has enlarged the site without planning permission to an industrial-sized AD plant and has been exporting biomethane by tanker to enter the National Grid, near Portsmouth.

Crouchland had its retrospective planning application to upgrade the farm’s AD plant refused in March 2015.

In addition, the company has received two council enforcement notices to remove the unauthorised, operational infrastructure and to stop the export of biomethane.

It is appealing the two enforcement notices, which will be heard after the appeal against the refusal for retrospective planning.

Crouchland has insisted the plans would provide renewable biogas to 3,850 West Sussex homes, secure more than 20 local jobs and ensure the future of its dairy business. In addition, the farm sources feedstock from more than 20 local farms, which it says “rely on our biogas plant”.

Leon Mekitarian, Crouchland’s managing director, told Farmers Weekly the expansion of the AD facility was an essential compond nent to ensure the survival of the business.

Mr Mekitarian said prices were “terrible” in dairying and he had sought to diversify to stay afloat.

He added: “Every farm in its own way is faced with these dilemmas. We just happen to be a large dairy farm in a corner of West Sussex and we are the last man standing.

“You have got to make the best of what you have been given and the opportunities that are available to you locally.”

However, there were over 400 letters of objection from the local community and 1,100 people have signed a petition by local campaign group Protect Our Rural Environment (Pore), against the retrospective planning application.

Clarissa Bushell, a spokeswoman for Pore, said: “The community has campaigned against the industrial-sized AD plant due to its inappropriate location in a rural, tranquil area of West Sussex, which does not have the appropriate highway access and has caused safety issues on the rural lanes.

“We believe that if Crouchland Biogas had applied for planning permission before they built their industrial plant, they would never have got planning permission because it is too large a site in too rural a location.”

Local residents are also concerned about heavy vehicle movements from HGVs to and from the site and the effect on country lanes, associated noise and safety issues.

Meanwhile, the Environment Agency has launched legal proceedings against Crouchland Farm in relation to an alleged incident of pollution of the River Kird in December 2013.

The agency is also investigating separate liquid waste leaks, including one in June 2015 and another in March 2016.

One of the leaks, in June 2015, concerned a digestate spill on land belonging to sheep farmers Lynda and Richard Whittemore.

German government pledges £76m in aid for stricken dairy producers

Beleaguered German dairy farmers are to receive at least €100m (£76m) from the federal government in a bid to try and keep them in business.

Germany’s minister of agriculture Christian Schmidt announced the package this week following an emergency milk summit in Berlin.

“We all agreed that on the one hand we need structural improvements, but on the other that we need to provide short-term assistance to farmers,” he said.

“The federal government will provide the farmers with a package of €100m plus X.

“I am in talks with the finance minister and will talk to Germany’s states and Europe to determine how large the X is.”

It is anticipated that the aid will include loans, support for accident insurance and tax relief to the farmers.

Mr Schmidt has hinted in the past that reducing supply is also needed to address the demand supply imbalance, a move that he has been criticised for.

“Farmers and dairies have to match supply and demand better than they have until now,” he said. “We have to achieve an upto-date and flexible way of controlling of supply.”

Germany is the EU’s largest milk producer and, like most countries in Europe, its dairy farmers are operating at a loss.

Mr Schmidt suggested further EU aid was unlikely.

Retailers told to offer milk in ‘food-to-go’ deals

Supermarkets across Scotland are being encouraged to reposition fresh milk as a healthy alternative to fizzy drinks in “food-to-go” deals.

Following a successful farmerled campaigns in Devon and Cornwall, NFU Scotland has written to the nation’s major retailers – including Morrisons, Sainsbury’s, Asda and Tesco – and asked them to make milk a more convenient option for shoppers.

NFUS milk committee chairman Graeme Kilpatrick said: “As dairy farmers, we want to see shoppers given the opportunity to choose fresh, nutritious milk over sugary soft drinks in supermarket chillers, selling it alongside sandwiches and snacks.

“The dairy farming crisis is deepening with the majority of Scottish farmers now receiving less than 19p/litre and, for some, their milk price has sunk as low as 11-12p/litre.”

He added: “Many hard-working, long-established family dairy farms are under threat and this presents an opportunity to grow the market.”

ARLA AIMS FOR CONVENIENCE

* Farmer-owned dairy company Arla Foods is taking its filtered milk brand, Arla Cravendale, into the convenience soft drinks aisle with the launch of a 250ml bottle.

The Co-op will stock the semi-skimmed 250ml bottles of Cravendale milk.

Claire Mackintosh, brand manager at Arla Cravendale, said: “Milk is widely recognised as being part of a balanced diet, and with consumers demanding greater on-the-go drink options we are responding with the launch of Arla Cravendale 250ml, a healthier, natural option to fizzy drinks and juices.”