This week, I look at the problems and challenges facing another farming business and discover a big number of unknowns as the grower faces into another production year. The major unknowns relate to share-farming and greening.

The problem in the basic rules is that each individual applicant will need to comply with greening requirements. So for an entitlement-holding landowner who is share farming with a larger tillage operator, he/she will need at least three crops if more than 30ha of crops are involved.

This situation is seen as unaceptable to commercial growers, who tend to block-farm many of these shared arrangements with mainly one crop. Having to have three crops on a relatively small tillage area would make many of these arrangements quite unattractive to active growers.

This situation is acknowledged by the Department. Teagasc, which has been very active in the promotion of share-farming, has been looking for solutions to this problem which could make share-farming quite unappealing to commercial growers.

A potential solution has been mooted, but this has not been agreed at European Commission level and so, as of now, there is no solution to this problem.

The absence of a solution at this point means that share-farming arrangements may still need to comply with individual crop diversification requirements. Decisions are currently being made at farm level but the absence of the details of the new rules is adding to the compliance challenges at farm level.

Many tillage farmers now have a number of share-farming agreements and if each share-farming landowner has to have three separate crops, then the practice of share-farming will be less viable for active growers.

If no solution is forthcoming then landowners currently involved in share-farming arrangements will have to individually meet all the crop diversification and ecological focus area (EFA) requirements.

A proposed solution to this problem involves the submission of a single application for all of the owner’s and share-farmed land. It would seem that if a single application is used then the active grower can operate both crop diversification and EFA across the entire single holding rather than on individual farms.

But, once again, this is not yet a real option and may not be accepted and so cannot be taken as a real solution at this time. As of now, if a landowner involved in share-farming wants to draw down his/her own entitlements in a share-farming situation, it is necessary to submit a separate application for the new Basic Payment Scheme (BPS) payment and to comply with greening requirements.

Three crops

While having to have at least three crops may not be a major issue for the landowner, it may be a major issue for many active growers who will have to service a number of smaller crop areas. This would increase the amount of time spent on the road, thus increasing costs and decreasing efficiency.

If growers were forced to have at least three crops on every shared farm, this would either bring the practice of share-farming to an end or result in what is being termed “tarmac farming” (continuously on the road).

The solution suggested by the Department is to have the share-farmed farms entered on a single application – probably the grower’s application. If all of the fields were on one application, then greening requirements would operate on this single farm.

So the option for growers to block-farm share-farmed land could be possible, providing landowners allow their land to be submitted on the grower’s BPS application. However, this is not yet an option.

If farmers are willing to submit their combined parcels on a single application, then greening could apply to the extended farm as a whole. This is providing landowners agree to have their land submitted on the grower’s application and that the option is allowed at EU level.

While active growers may be concerned about these developments, landowners will also be reluctant because of the various changes implemented in the current CAP reform.

As part of this process, individuals who were not deemed to be actively farming their land in 2013 had to either sell or lose their entitlements.

Landowners with entitlements are now worried that the same thing could happen again sometime in the future. They are concerned that their entitlements might be at risk in the long term if they do not make an individual application in their name.

However, if the proposed solution is put in place, it is hoped that each landowner will still be seen as an individual applicant and will receive his/her BPS directly, rather than having it paid as part of a bulk payment to the applicant.

If the proposal is put in place, it is hoped that each landowner will be identified as a specific entity for BPS entitlement payments. But if there is doubt about the long-term recognition of the share-farming landowners, they will be very reluctant to opt for a single application solution.

Concerns

While the initial requirement of having at least three crops on share-farmed land might be resolved through a single application, this is likely to lead to many other concerns for the grower.

In a single application scenario, who will be responsible for the EFA? If a single application is allowed, will this also place the full responsibility for EFA on the single applicant?

This would be a lot of additional work and risk for the active grower, especially if it involved the planting of crops to meet the EFA requirement. Whose land would EFA crops be sown on if the active grower is responsible for EFA on all of the share-farmed land?

In a situation where a number of different entitlement holders are involved in a single application farming business, what would the situation be in the event of a penalty being imposed? Would there be specific individual landowner penalties or would any penalty imposed apply across the entire application to the different landowners? Or would the actual applicant be forced to carry the full penalty from his/her BPS payment?

Operational challenges

In most share-farming arrangements, it is common that the landowner is not registered for VAT while the active grower is generally registered. This often means that in the sharing of input purchase, the landowner purchases the seed and fertilizer (no VAT) and the grower (generally VAT-registered) purchases the chemicals.

And as the active grower is generally the person who applies the different crop protection products, he is also the one who keeps the crop protection records for all the landowners.

So what would happen in the event of a problem with product accountability with the grower? Could any associated penalties be attributable to the full farm unit, including all the share-farming landowners?

In many share-farming agreements, the individual landowner is responsible for the nutrient plan and the use of the relevant fertilizer within the prescribed limits. If excess N or P were applied on one of the farms, would the other parties operating under the umbrella of a single application also be subject to the same cross-compliance penalty?

Where a landowner submits share-farmed parcels on a different grower’s application, can this same landowner be involved in a separate share-farming arrangement with another farmer, possibly in a different enterprise?

Many questions remain to be sorted before individuals involved in old or new share-farming agreements can realistically decide on where the balance of benefit lies from such an arrangement in the future.

Meanwhile, winter crop producers and landowners involved in share-farming agreements up to now need to decide on their best approach for the future, but the details are just not there yet.

Farm example

Take an example of a real tillage farmer who is involved in share-farming arrangements with three other farmers, all of whom have a combination of crops and grassland. The land use details for the individual farmers/landowners are shown in Table 1.

This farm business involves a home farm plus three different share-farming arrangements with landowners. The combined unit has six different crops growing on 352.03ha plus a further 25ha of temporary grassland out of a total claim of 526.76ha. While all of the farms have some grassland, they all have more than 30ha of crops and so they are all subject to greening. But what needs to be done?

Allowing for the general concerns expressed previously, the active grower would have a preference to block-farm the share-farmed land (if allowed) and so a single application solution may be best for him. But with the land use areas set out in Table 1, each of the four farms satisfy the crop diversification requirements.

All the individual farms have a level of grassland and this accounts for 84.6% of the land use on Farm 3. However, this farm has more than 30ha of crops and so is subject to the greening obligations, like the other three farms.

On Farm 1, the biggest crop is winter wheat at 61.6% of the arable area and the smallest crop is temporary grass at 8.1%. Farm 2 has 65.9% of its arable area in winter wheat but a worrying 5.1% in temporary grass as the third crop. And Farm 3 has 46.4% in winter wheat and 25.3% in temporary grassland.

So individually, these farms could stack up on their own based on this stated land use, but individual farm arrangements will vary from year to year and this could constrict his cropping options in time. If the four farms created a single application, this would provide much more flexibility to the grower.

The combined businesses have six crops. The largest is winter wheat at 51.7% and the third and subsequent crops are just over 38% of the total area in arable.

But if the applicant is responsible for the EFA requirement on all of these farms, this in itself could be an obstacle to continued share-farming. The combined EFA requirement from the four farms comes to a minimum of 18.852ha. This is made up of 9.781ha on the home farm, 3.531ha for Farm 1, 3.037ha for Farm 2 and 2.503ha for Farm 3.

This combined application would put the crops area at 352.03ha, the grassland area at 174.19ha and the arable area for EFA purposes at 377.03ha.

Equivalence for crop diversification

While many farmers question the logic behind crop diversification, most are aware of the benefits of rotation for crop performance.

However, for those who spent a lifetime earning contracts to supply malting barley from all of their land, the prospect of having to grow three crops represents both a huge inconvenience and a loss of contract.

To help accommodate individuals, like malting barley growers, who wish to remain with only one crop, the Department developed what is called an equivalence measure which is deemed to be useful for the environment and can be used to replace the crop diversification obligation for two or three different crops.

The proposed measure allows growers to have fewer crops than is needed for crop diversification in return for the equivalence measure to plant a catch crop in the autumn after the malting crop, but before the next one is planted the following spring. The option seems attractive on the face of it but it is not yet known what proportion of the total crop area will have to be catch cropped.

However, that said, the major concern with this equivalence option is that it can only be done through the new GLAS scheme that is set to be introduced next year. The problem is that GLAS is controlled by a different section within the Department and if the scheme is not up and running by next backend, then a one-crop farmer will not be greening-compliant.

The problem is the risk posed in the first year. This option will work in time but it could leave growers vulnerable in year one. As of now, the nuts and bolts of GLAS are a long way away but they will get sorted. However, uncertainty about when GLAS will kick off means a real risk for growers at this point.

For those growers who want to avail of a single crop for the immediate future, the advice must be to hold firm until springtime when more will be known about the workings and dates of the GLAS scheme.

If at that time there is still a risk that the scheme will not be up and running, growers might consider a few spring crop options. If one commits to planting a winter cereal crop shortly, the equivalence option will be of no benefit if the details of the GLAS scheme are finalised by springtime.