ARABLE farmers should expect their final area aid payments to be about £13/ha less than last year's.

Peter Pitchford and Frances Mordaunt, partners in Andersons, remind farmers that the crop in the field is the last to attract a subsidy payment, as the new single farm payment will take over from January 1.

They said the sterling/euro exchange rate would bring about the reduced area aid payment. Although the pound was a little stronger than at the same period last year, it remained weaker than at any time between 2000 and 2002.

The SFP would see farmers grapple with one of the biggest policy changes since the repeal of the Corn Laws in the 1840s. Those who ignored them could lose out, but understanding the policy change and its implications would minimise farmers' business risk.

Everybody in agriculture would be affected and the key, as always, would be the future profitability of the individual combinable crop business.

Making combinable crops profitable without using the single farm payment to subsidise the enterprise should be the progressive farmer's aim.

While there would be cross-compliance conditions for receiving SFP, there would be no requirement to produce crops, thereby broadening the range of opportunities, including a reduction in crop acreage.

Fixed or overhead costs remained one of the target areas for improving profitability.

Output remains crucial and Andersons continues to urge its growers to concentrate on optimising yield and crop quality.

To achieve a premium price requires a high-quality product produced with detailed attention to production, storage and delivery. Without direct aid, the grower will be able to concentrate on market requirements.

This, dovetailed into the farmer's particular resources such as land, labour and management, and location relative to particular outlets, should ensure cropping and management decisions are improved on a national basis.

Contractual links between farmers and the primary processor are being increasingly forged to provide a level of security for both parties in a volatile market. These include long-term price agreements and production contracts, some with process or end-quality guarantees.

World price levels will nevertheless remain just as important, if not more so, than policy change. The explosive nature of the 2003 grain price rises illustrates the power of market forces and the increasing exposure to global market forces in a period of record low grain stocks.

While the outlook for the 2004 crop at the moment is not for such a rally, when farmers consider their grain marketing plan it would be shrewd to remember that, this time last year, few expected a sharp rally.

Any major shortfall in supply from the 2004 world crop would result in price increases, but the extent in the UK will depend on where the shortage occurs and on US dollar exchange rates.

The policy reform, coupled with an increasingly global market place and trends towards producer/consumer links, is throwing EU agriculture further into the twenty-first century.

There are exciting opportunities for all businesses, including those supplying goods and services to UK farms. The need to understand these far reaching implications on UK agribusiness is of paramount importance.