It’s a great pleasure to be here in Cumnock today, and to have the chance to speak to you about the sheep sector and the future of the Common Agricultural Policy. It’s an extra special pleasure to be here in such a prestigious venue for the National Sheep Association Scotland flagship event.
So before I begin, I’d like to congratulate the hard working organisers from the NSA for putting together such a wonderful programme; also to Morrison’s for hosting us at Dumfries House today; and to the Bank of Scotland, the major sponsors of today’s event.
Already there is a great buzz about the place reflecting the confidence throughout the sheep sector, from the lowlands to Scotland’s hills and uplands. The recent Bank of Scotland report shows that optimism is high and farmers are investing for the future. The recent report on hill farming from SAC, tells a similar story.
And you are right to feel positive. Because there’s a huge amount to be positive about, as we look forward to the future. A future that looks bright for the sheep sector, but there are also challenges to be overcome.
The good news for your industry is that agriculture is coping with the challenging economic conditions much better than many other industries.
The sheep sector in particular has enjoyed a sustained period of strong performance. The last couple of years have seen sheep prices reach unprecedented levels, with the average lamb price for 2011 20% higher than the previous year.
And it’s just not just the price of lamb: wool prices are up 22% - the fourth rise in consecutive years – some welcome relief because I recall soon after being appointed to this job that the sector often raised with me the low price of wool.
And although lamb prices have eased back in recent weeks, the Bank of Scotland forecasts suggest that prices are expected to remain firm for the foreseeable future with demand for lamb and sheepmeat on the up.
No doubt much of that demand will be driven by overseas markets. According to the latest figures, exports of Scottish food [and drink brands] have grown by a massive 62 per cent over the last four years; and food and drink is now Scotland’s fastest growing export sector.
The reasons for this success are plain to see. Last year I was at the Bocuse d’Or, what they call the Olympics of the food world, when Scotch Lamb was the centrepiece of the entire event. So you can be assured that the very best chefs working today recognise the quality of your products.
It is therefore not surprising that demand for red meat continues to grow. You will know that Sheep export sales for 2011 were up by 11% year on the year. And this positive trend has continued into 2012, with exports for the first quarter of the year up a further 7% on 2011. Our beef and lamb exports are already worth over £100 million a year.
If we want to maximise our growth we need to be able to respond to the marketplace by making the most of Scotland’s key strength - the quality and reputation of our Scotch beef and lamb.
We must capitalise on this strength. Despite the continuing financial and banking woes of the eurozone, Europe remains the key market for our exports, accounting for over ninety per cent of all red meat exports.
The QMS strategy, launched last year, has specifically identified potential growth in the Nordic countries and Germany. Thankfully, perhaps some of Europe’s strongest and more stable economies. So there is a great opportunity there to develop new high value markets for our premium brands.
The strategy also recognises the need to continue to support our presence in established markets, such as France, Italy, The Netherlands and Belgium. I am fully behind what QMS are trying to achieve with this strategy and have provided £300,000 of support to take this forward.
Of course, it’s also very important that we continue our efforts to exploit previously untapped markets around the world. But it’s not enough for the Scottish Government and industry bodies like QMS to be working away to open up these new market opportunities for our quality meat exports.
The whole supply chain has to be ready to take full advantage of these opportunities. It’s no good opening new markets if we do not have the additional product available to make a positive and lasting impact.
That means our processors will have to start planning ahead now to ensure there is enough stock around to meet demand in these new markets. But our processors alone cannot make this happen.
Our primary producers also have to play their part by ensuring we have sufficient prime stock on the ground here in Scotland. I know some farmers have been tempted to cash in on the high market prices by selling breeding stock.
But I’d urge producers to keep an eye on the long term as they take advantage of the short term. I would also echo James Withers at Scotland Food and Drink when he said there has never been a better time for farmers to expand and invest in their industry to reap the benefits of this growing export demand.
It will be a missed opportunity if the industry fails to respond positively – imagine if our exports markets take off as we hope but we can’t supply them! Scotland and the world needs the food you produce – all sheep producers have a role to play in delivering food security.
The primary purpose of Scottish agriculture should be food production but sheep farming provides society with additional benefits. Our nation treasures the landscapes you maintain.
The excellent NSA report that I read recently highlights the environmental benefits sheep faming bring to remote and disadvantaged areas. And when Europe is debating how to green the CAP, this is an important dimension of your industry which you have done well to highlight.
And given the many benefits delivered by sheep production from food to environmental benefits, support measures, particularly for hill farms, will continue to have a part to play. That’s why I am determined to get the best possible outcome for Scotland from the CAP reform process.
These negotiations are now entering a crucial phase. The final outcome will shape the future of farming for the next decade, and beyond. It will be especially important for Scotland’s sheep sector, which has its roots in the hills.
Everyone knows hill farming is uniquely challenging. That, in turn, means CAP support is even more significant to maintaining sheep farming in these areas. And, of course, sheep farming in the lowlands depends on stock reared by the hills and uplands producers.
So the future shape of the next CAP will impact on the entire supply chain, from top to bottom. It is important therefore in this latest round of CAP Reforms that Europe gets it right.
So what is the Commission proposing? On Rural Development, under Pillar 2, the proposed Regulation is pretty similar to the current one. So here it’s a case of evolution rather than revolution. The Direct Payments Regulation, under Pillar 1, is a different story, however. It proposes a completely new system.
If we want to secure the best deal possible for Scotland, we need to know what you are thinking. What we can deliver will be very much determined by the size of the budget.
Everyone recognises that Scotland’s current share of the CAP budget, as negotiated by past UK governments, is absolutely pitiful. We get the 4th lowest Pillar 1 and the lowest Pillar 2 allocation in Europe. And as things stand, the Baltic States are seeking a solution where if there is no change for Scotland we will end up with the lowest share in Europe.
We therefore need a much fairer allocation of CAP funding, and a bigger Scottish share, under both Pillars 1 and 2. We need the flexibility to deliver a CAP that meets the needs of Scotland’s farmers. In particular, it is essential that all New Entrants are provided for in the new system.
We also need the ability to carry on paying coupled payments, which are vital for Scotland’s livestock sector. The proposed 5% limit is a welcome improvement on the current 3.5%. But, Brian Pack, in his Inquiry, recommended that we should be able to go up to 15%. So we need that 5% figure to be higher still.
There are plenty of other issues being actively discussed in Brussels: such as activity requirements, the Small Farmer and Young Farmer schemes, the transfer of funds from Pillar 1 to Pillar 2, capping, and so on.
However, NSA has asked that I concentrate on a couple of issues: greening and changes to LFA boundaries.
On greening, Scotland along with UK and many Member States expressed serious concerns about the Commission’s proposals. It was therefore pleasing to see the Commission showing the first signs of movement at last month’s Agricultural Council.
Their movement on the three-crop rule is helpful but we need the threshold raised even higher from 10ha to 20ha. Thanks to much lobbying from Scotland, the Commission has also changed its thinking on permanent grassland.
Making sure heather is eligible has been a priority for us – provided it meets the activity requirements, of course. The latest moves by the Commission are a big step in the right direction.
We also need to make sure that if Europe insists we have Ecological Focus Areas (EFA), then farmers get credit for all the good things they’re doing already.
This is only the start of the process. A lot of work is still required if we are to achieve a workable greening framework. But we’re in a much better position than we were a few weeks ago.
Turning to the new EU rules on defining LFA land – or, as it is to be re-titled, Areas of Natural Constraint or ANC. The Commission have proposed new scientific criteria for designating land as ANC.
These new ANC biophysical criteria – such as soil quality, slope, temperature etc - will be set in the EU regulation itself. The change is being proposed because the current scheme has been criticised for not being scientifically robust.
The European Court of Auditors (ECA) found that some Member States had been abusing the current system. They were designating Land as LFA they shouldn’t have, and then making payments on it - not Scotland or the UK I hasten to add. Of course, in theory, a change like this has the potential to be really significant in a country like ours, with 85% LFA.
In practice, Scotland’s existing LFA designation is already scientifically based on factors very close to the Commission's proposed criteria. So, unlike some other parts of Europe, we’re not looking at a major change.
But nonetheless, we need to get it exactly right. Land which deserves to be ANC must be in and land which doesn't deserve ANC status should stay out. That’s the basis on which we’re negotiating the future CAP in Brussels.
The other big European issue which I know you are concerned about is sheep EID. EID does have its plus points, as you can find out today at the QMS stand, but it is far from perfect. The Commission needs to be convinced that these rules need to be built around the practicality of modern day sheep farming.
The continued efforts by Scottish industry to engage their sister groups in Europe to secure meaningful change to the EU EID regime is the right approach. We are working on your behalf too. The Commission have agreed to look at the results of evidence based research we continue to gather from the ScotEID pilot with your help.
I am committed to providing evidence to the Commission to allow them to consider a revaluation of the Regulation. Getting Regulation fit for purpose has never been more important
That is why the Government has made a commitment to reviewing all the red tape you’re subject to – not just the CAP. I was delighted when Brian Pack agreed to run this review for us.
The aim is simple: to help farmers free up time for farming by further reducing the burden of unnecessary red tape. I have now received Brian’s proposals on taking forward the review.
Brian has called his report “Doing Better”, acknowledging the good progress we have already made in reducing bureaucracy, but also the scope to do more. Brian’s report sets out his plans for reviewing the whole raft of current regulation and data requirements faced by farmers and land managers.
The aim is to identify where changes can be made that reduce red tape and bureaucracy and save time. The review will be based on evidence gathered from both the regulators and the farming industry. Brian has designed an exciting and innovative method for carrying out the review – something never before done in Scotland.
Based on this approach, I am delighted to confirm today that I have given Brian the green light to go ahead with his review. I would encourage you to read the report, get involved in the review, and have your say. Because when Scottish Government and Scotland’s farmers work together, that’s when we get results. Especially in the livestock sector.
Scottish Ministers understand and value the sector’s pivotal role in underpinning rural employment and communities. And the contribution it can make to accelerating economic growth in the face of global challenges.
The forthcoming reforms give us an opportunity to influence the future direction of agriculture policy in Scotland and to tailor the arrangements to meet our own circumstances and strategic objectives. Hopefully by working together we can get the best results for Scotland and the best results for Scotland’s sheep sector.