Once farmers grew rich on letting their land lie idle. Now the golden harvest is over Now the golden harvest is over

Click to follow
The Independent Online
The amount of British farmland being deliberately left unused because of world grain surpluses - the controversial policy of set-aside - has begun to shrink dramatically.

If the trend continues, it will mean an end to the huge European subsidies being paid to farmers for simply allowing part of their land to lie idle.

Set-aside has had a huge impact on the countryside - so much so that Britain's own barometer of rural life, The Archers, has even developed a story about how millionaire landowner Brian Aldridge is making even more money out of it. But the good times for the Aldridges may soon be over.

The figures are dropping because long-running grain surpluses have turned into short- ages due to a combination of three factors: the world-wide success of the set-aside policy itself, a series of bad harvests, particularly in the US, and soaring demand from developing countries such as China.

In 1993, set-aside became virtually compulsory for almost all Britain's cereal farmers. They had to take 15 per cent of their land out of production to qualify for subsidies.

That proportion fell to 12 per cent the next year, then 10 per cent, and when the autumn-sown cereals are planted in the next month or two for the 1997 harvest of around 20million tonnes, it will be just 5 per cent. Last year, nearly 600,000 hectares of British crop fields were set aside.

Most farmers are happy with the trend because they are uncomfortable with the idea of growing large quantities of nothing.

"I think it's best if we're just left to get on with it," said Dan Bull, a Cambridgeshire farm manager.

The European Commission has proposed that for next year's harvest, the area payments for each hectare of cereal planted, part of the set-aside deal, should be cut by 7 per cent, and the set-aside payments themselves by nearly 27 per cent. The money saved is needed to subsidise beef farmers, hard-hit by the BSE disaster which Britain has given to Europe.

The National Farmers' Union says EU agriculture can no longer count on the generosity of Germany, the Common Agricultural Policy's (CAP) largest funder, because it is anxious to control its own spending.

But while set-aside is falling fast, few would dare to forecast its demise. For international grain shortages, which are driving the cuts in set-aside, may not last for much longer. If crop surpluses start building up again, the pressure to expand set aside will return.

How did this come about? 1992 was a time of surplus, with the world's great grain-exporting regions - North America, the EU, Australasia and Argentina - flooding the international market and lowering prices. In that year, EU farm ministers, wrestling with the problems of Europe's perennial surpluses, agreed to a great reform of the CAP, in which intervention prices, the guaranteed minimum price, were to be cut by 35 per cent over three years. Farmers would be compensated by receiving direct payments based simply on the size of the area they planted with grain - pounds 267 a hectare is this year's figure for Britain.

To qualify for these area payments, all but Europe's smallest farmers had to take 15 per cent of their arable land out of production to cut surpluses at a stroke. There were also payments for doing this - pounds 338 per set-aside hectare is this year's figure in Britain.

Although set-aside is often seen as a money-making perk for farmers, there are numerous rules which stop farmers profiting from it. There are laws about its ploughing and cutting, what can be grown on it and how it can be rotated around the farm.

If grass is grown, it cannot be sold for hay or silage. With the exception of a few industrial (non-food) crops, it cannot be used to grow anything of commercial value. Nor can it be used for non-farming or commercial purposes, such as building golf courses.

However, no sooner had mass set-aside been implemented than the world market price of grain started soaring. Europe's cereal farmers have been smiling all the way to the bank.

They could sell off all their grain at an excellent market price, and the falling guaranteed minimum price was an irrelevance. At the same time, they were receiving new area payments and set-aside payments.

None smiled more broadly than Britain's farmers, who saw the size of these payments shoot up thanks to the big devaluation of the pound. They enjoyed income increases which, in percentage terms, were com- parable with those of the privatised utility "fat cats".

But there are no certainties in farming. Since its April peak, the world price of grain has fallen by just over 25 per cent. The markets had over- reacted - bad harvests did not follow as predicted and more grain was being planted.

This means that the mid-1990s may be seen as the golden years of British cereal farming, a time when the wheat and barley barons prospered as never before.

The history of set-aside Set-aside began in the US before the Second World War. It started in Britain on a small scale in 1988 as a completely voluntary scheme.

The UK rule book governing set-aside is 26 pages long. There are four main options for set-aside, with various sub-options in each. The one most farmers take is confusingly called 'Flexible (obligatory) set-aside'. Hundreds of farmers have combined their set-aside with government-backed environmental schemes.

As a special measure during the BSE crisis, farmers can graze cows older than 30 months, which are banned from human consumption, on set- aside land.

Britain's grain harvest, now well under way, is Europe's third largest after France and Germany and will bring in about 21 millions tons. Most of the wheat and barley will be fed not to people but to poultry, pigs, cattle and sheep.