NFU Scotland AGM
February 19, 2010
Cabinet Secretary for Rural Affairs Richard Lochhead
Mr President, ladies and gentleman, it is a great pleasure to be here at St Andrews, speaking to you for the third time as Cabinet Secretary - as Scotland's Minister for Agriculture!
This is a good choice of venue, because there are strong links between golf and agriculture. The Belgian Consul in Edinburgh is said to have reported once that: "in Scotland, most of the land not suitable for golf is used for agriculture". So this is indeed an appropriate location!
Last night, we enjoyed a fine display of Scottish produce courtesy of your East Central Scotland Region - and this morning a full Scottish breakfast. In between answering difficult questions at the breakfast table, I managed to enjoy the new low fat bacon produced by Irvine's of Perthshire and sourced from the Strathmore Farming Company at Glamis.
I have to say I'm bitterly disappointed I wasn't here the night before last for your annual whisky tasting evening - I can't believe you didn't invite me!
The food and drink we have enjoyed is proof of the fantastic products that come from Scotland's farms.
Scotland's reputation for food and drink makes me proud. In the last year alone, I've crossed Scotland, from Dumfries to Orkney, from Borders to Mull speaking to farmers, and had the same feeling of pride wherever I've been.
On these journeys, or as I travel between Holyrood and my constituency each week, I marvel at our iconic scenery, I pass whisky distilleries, I see our spectacular natural environment and wildlife, I pass through vibrant rural communities. I am reminded not only that you all play such a crucial role, underpinning some of our great sectors and caring for our countryside, but also that agriculture helps define the nation of Scotland.
Exceptional weather support
Of course, due to exceptional weather conditions in recent weeks, travelling has not always been easy.
In the worst of the snow, farmers did much more than the essentials, like defrosting pipes and feeding stock. You were out checking on your farming neighbours, helping others in your communities, even clearing roads in the towns.
I was in constant touch with the industry to ensure we understood the consequences for agriculture.
We saw some serious problems with farm buildings collapsing. NFUS came to the Government for help and we quickly set up a working group. The basic task of replacing a building is an insurance matter, but there are issues where it's right for government to be involved. Following the working group's recommendations, I'm pleased to announce that we are ready to step in and help.
Today, I can confirm that I am making available up to £3m to help many farmers recover from the damage. Our aid will help provide alternative housing for livestock in the interests of animal welfare. This aid will help get many of those businesses most affected back to normality.
Scottish Government's commitment to the farm sector
Recent events demonstrate two things.
First, how important farming is to Scottish life. Agriculture plays a role in the wider community and sustains jobs not only in primary production but throughout related sectors. For instance, last week when I visited a feed mill in Shotts I was reminded that the agricultural supplies sector alone employs 6,000 folk in Scotland.
Secondly, these events show how the Scottish Government is always prepared to stand by the sector in its hour of need.
I know the view of many farmers is that too many politicians deliver warm words that aren't backed up with action.
Mr President, as I have just demonstrated, and as I believe our track record illustrates, the Scottish Government believes actions speak louder than words. In the past three years, we've shown time and time again our commitment to Scottish agriculture and we will continue to do so in the future.
Economic context
As we know, the backdrop to the action we have been taking has been the recession.
EU's economy shrank by over 4% last year. In Scotland, in the third quarter of 2009 our GDP was down 4.6% year on year.
The good news is that, although some sectors are suffering tighter margins, food is generally a good business to be in during a recession.
Everybody has to eat. And agriculture fared relatively well compared with the rest of the Scottish economy. The fact that the demand for local food during these tough times has not slackened is a huge vote of confidence in your produce.
In particular, the beef, sheep and pig sectors have enjoyed strong demand. Lamb prices reached a record high last May, and are forecast to stay firm in 2010 - subject to how the exchange rate develops. Beef and lamb exports hit £56 million, and with extra levy income at their disposal, QMS will continue to champion the powerful Scotch brand.
Some observers are even suggesting that the decline in livestock numbers has bottomed out. Many producers I have been speaking to are, for the first time, in a long time, talking about increasing their livestock numbers. Time will tell, but the mood is encouraging.
Another sector doing well is horticulture, which grew by £18 million last year. In fact it has gone up every year since 2003.
On the other hand, some tenant farmers were unhappy with their rent reviews and the dairy and the cereals sectors had a tougher time. The slight drop in Total Income From Farming in 2009 was largely due to the low price of cereals, and 2010 looks like another challenging year for the sector.
I know, for instance, that growers are concerned about changes to the intervention system. The European Commission says that a "safety net" for wheat will support barley prices too. But I know you have doubts.
I plan to raise this issue again on Monday, when market management is up for discussion at the Council of Ministers in Brussels.
I share the industry's concern about the challenges facing the arable sector, including uncertainties around malting barley. NFUS itself recently advised cereal growers to think hard about their planting decisions this year: the market they are aiming for, and the costs they must cover. That market-based realism is important, and I welcome it.
But public support still continues to play a crucial role.
Recently there's been a boost in support through the Single Farm Payment which, because of the exchange rate, was nearly 30% higher than in 2007. Farmers rarely mention this windfall gain, yet it's worth over a hundred million pounds! We have the exchange rate to thank, but it's certainly a substantial cushion against the difficulties some sectors have faced.
So it's been an "up horn, down corn" kind of a year.
The good news is that future prospects look strong across the whole industry. It's true that markets will fluctuate, maybe more than in the past: that's an issue many industries have to deal with.
But fundamentally, the economic drivers for the farm sector are strong. The population is growing. Emerging economies are getting more prosperous, and their eating habits are developing. All of these factors suggest strong demand for years to come.
That's why, in the Lloyds/TSB survey, Scottish farmers' optimism for the future was its equal highest ever. Whenever I've spoken with farmers, such as during the Perth bull sales this month, I've felt optimism for the future coming through.
But it will be a different future. Countries will have to adapt to new challenges, so will sectors, and so will individual farmers.
Countries, sectors, businesses and individuals who don't adapt will get left behind. It's as simple as that.
My job is to help Scottish farming cope with those new challenges, because it's in all our interests.
Climate change
In his interim report, Brian Pack summed up these new challenges as the "five securities": food, water, energy, biodiversity and, of course, climate.
Climate change is one issue that's really risen to the top of the agenda in the last 12 months.
It will affect farmers just like it will affect every other industry and every family, in Scotland and throughout the world.
Extreme weather events and flooding will affect your business - maybe it has already. If we don't, as a society, mitigate the impacts of climate change, then your children, and your children's children might well inherit a world of calamity and dangers.
The decisions we take in the coming decades will determine the quality of life of future generations.
Farmers have a responsibility to help our national and international efforts on climate change. After all, rural land use alone accounts for around 20% of Scotland's emissions.
The good news is that agriculture can hugely benefit from Scotland's response to climate change.
Last autumn, I launched our Farming for a Better Climate programme which identifies ways to improve production efficiency and reduce emissions at the same time. That's good for the planet, and for the bottom line.
Our Focus Farm programme will help farmers see these win-wins in practice. Three Focus Farms - one arable, one dairy, and one cattle and sheep - will be chosen very soon. We have also established a Stakeholder Group on Agriculture and Climate Change, to make sure that we take proper account of practical realities.
This year, the government will publish detailed targets for emission reductions, and a report on the policies to deliver them. Those policies will potentially affect all parts of Scottish agriculture. The livestock sector may be especially interested, given the media coverage of recent months.
There are people who say "if you want to save the planet, eat less meat".
Mr President, my view is this. By 2050, there will be nine billion people on this planet. Every one of them will need to be fed. We have a responsibility to the world to produce food. And in most of Scotland, the only way we can do that is by grazing livestock.
In fact, we have no reason to be on the defensive. According to one study, beef production in Brazil emits 32 tonnes of CO2-equivalent per tonne of product, compared with only 24 for extensive beef systems here. If you cut down rainforest to make room for the cattle, the difference would be even bigger.
Our understanding of climate science is still developing, so figures like this need to be treated with caution. For instance, we're still learning about the role of grazing in storing soil carbon. But what the figures prove, is that anyone who tries to give simplistic solutions is usually talking nonsense.
We should avoid seeing everything as a threat.
Soon we'll have the results of our project on farm-level carbon footprinting. Remember, if we find we have a lower carbon footprint, or can achieve a lower carbon footprint, than our competitors, then the market will deliver a reward. That's the message from retailers and consumers - and it's a message we should heed.
I will defend the Scottish livestock sector to the hilt, because we owe it to the world to produce food. But at the same time, we have a responsibility to be as efficient as possible, including in greenhouse gas terms. The research clearly shows that you'll make more money too. So it's in the planet's interest, but it's in your interest as well.
Animal and plant health
One way to reduce emissions is by having healthy crops and livestock.
Some people say we're living through a quiet revolution on animal health in Scotland.
Our farmers have always been good stockmen. But through government and industry working together, we can go further. We can use animal health to reinforce Scotland's position in the globalised markets of tomorrow.
Together, we've been driving this agenda forward. You know the success of our joint approach on bluetongue: not just the vaccination programme, but the voluntary restraint on imports as well. We also had Scotland officially recognised as free of bovine TB. Overall the government spends £13 million a year on health programmes and surveillance.
Today I can announce that in the next few months, the government will consult on a possible BVD eradication programme. BVD is bad for animal welfare and bad for your profits, and it's our next target.
But it's ridiculous that after ten years, the Scottish government still doesn't have control over animal health budgets. The UK Government has agreed the principle of devolving the budget, now it must deliver.
We already have our fantastic reputation for quality produce. We are building on that, by adding high health status as our USP - our Unique Selling Point. This is a superb opportunity for Scotland, and we need to grasp it.
Other sectors use health status as a selling point too. The Scottish potato sector is worth £180 million. Last year we exported seed potatoes to 27 different countries. Our tatties are consistently successful in the international market, thanks to a high-health strategy.
The government has helped here as well. With the industry, we have worked to protect Scotland against new threats - like the new type of rot called Dickeya - and old ones, like Potato Cyst Nematode. Scottish seed potatoes are a world beater, and together we will keep it that way.
Research and development
The more Scotland produces and exports, the more we contribute to food security. And as we address challenges like food security and climate change, research and development will be essential.
Fortunately, Scotland has a world class agricultural research sector. Last summer, in an independent study of articles on agricultural science, Scotland topped the league in the number of citations per publication over ten years.
This vindicates our decision to protect our research budget of £70 million a year, while others having been cutting back. And with the merger of SCRI and the Macaulay Institute, we aim to position Scotland as a world leader in the integration of land use and crop sciences.
On that note, I'm delighted to announce a new 5 year breeding programme for raspberries. This will complement the work of the international ClimaFruit consortium, launched this week, and will have government funding of nearly £400,000. Our soft fruit sector has a great and healthy future.
Support for farm businesses
The research budget is part of an impressive overall package of support for farming. On top of Single Farm Payment, the Beef Calf Scheme, LFASS and the SRDP, there is also other support like the Whole Farm Review, and free advice on pollution control or climate change.
We also help farm businesses get the skilled staff they need, through Modern Apprenticeships and through Lantra.
I am pleased to announce a new 3 year contract with Lantra worth nearly half a million pounds per year. Lantra must ensure that the right training is available, to meet the needs of Scottish farms and land-based industries. I know some other ideas on training came out yesterday and I welcome these developments.
All this support is proof that Scottish society values farming, and is willing to invest in it.
Good administration
For that investment to work, we need to administer it well. This will be even more important in future. As public finances get tighter, we'll have to squeeze maximum value from every pound spent, on agriculture or anywhere else.
Good administration includes getting payments out on time. I'm delighted with our performance again this year. For instance, on Single Farm Payment, by the end of December we had paid 95% of Scottish recipients, the best performance amongst the UK's paying agencies.
Good administration also involves using a light touch wherever possible. Since the start of the SEARS project, we've reduced farm inspections by around 3,500. We knocked 70 questions off the census form last year, and 3,000 farmers were removed from the January sheep count. For the next steps, we are looking at giving access to a wider range of services from more SEARS offices, to make life as easy as possible for you the customer.
This is welcome progress. But there have been less welcome developments too. One of them is the change we've had to make on penalties for breaches of cross-compliance.
I know you feel strongly that penalties must be proportionate, and common-sense must apply. I agree! The changes were not our choice, they were because of the European Commission and its auditors. I know it's hard to accept, but the alternative could be far worse.
But I will not let the issue rest. I insisted the UK Minister raise it at Agriculture Council in December, and I will continue to press for sensible and proportionate rules.
Another frustrating issue has been sheep EID. But we've worked together to mitigate the impact. We won crucial concessions - although we need more, and we will continue to push for that! We put together a further funding package of £1 million. By talking through the issues, we have at least reduced the pain.
SRDP
It's important we administer policy well, but it must also be designed well. The SRDP we inherited required quite a bit of fine tuning, and that continues, but what a difference a year makes!
The government listened to concerns, we took action, and, in fact, every round of Rural Priorities has been a record beater. We increased grant rates wherever we could, including on slurry stores. We streamlined the application process, improved the training of frontline staff, and beefed up new entrant support.
And the progress is continuing. I know NFUS is particularly interested in the possible LMOs we agreed to consider for 2011, including one for grazing in the hills. That measure could be important, not only for the future of hill farming, but also for biodiversity.
2010 is the international year of biodiversity. But the world community has fallen behind its targets and we all need to do more.
There is growing recognition that biodiversity is about more than just preserving species. It's about other benefits that flow from a healthy environment, like clean water, flood protection, and tourism.
We'll hear much more about this in future, as EU policy develops. For a nation so richly endowed with natural resources, from bird and plant species to water and landscape, these developments must be good news.
So we've made progress with the SRDP. I'd like to add another step, by announcing an increase in the 2010 business development budget.
I am bringing forward £15 million from the later years of the programme into 2010. Surveys show that farmers want to invest more in 2010. This budget boost will help make that possible.
Future CAP/Pack inquiry
The SRDP is important right now, but we must look after the longer-term as well. We are approaching a crucial period for the Common Agricultural Policy. The post-2013 EU budget, and the future shape of the CAP, will be thrashed out in the next two to three years. It's vital we get them right.
We have to know what Scotland should aim for in those negotiations. That's why we launched Brian Pack's inquiry.
Many people have commented that the timing was absolutely right for this kind of in-depth analysis. For me, this was confirmed in last week's Scottish Farmer, where the inquiry featured in 9 different articles in the news pages.
Brian got the debate off to a great start with his interim report last month. It's an impressive and thought-provoking piece of work. I'd like publicly to thank Brian and his committee - Wilma Finlay, John Grace, Johnny Mackey, Davie MacLeod and Steve McLean - for their work so far.
The report sets out the big challenges that future policy must address. It confirms what many other analysts are saying: that the historic model of Single Farm Payment can't go on forever. I myself have said many times that in, say, 2013, it will be hard to justify paying farmers different rates just because of how they were farming a decade ago.
On top of that, new entrants will remain disadvantaged by the Single Farm Payment rules, until they change.
And the EU Member States won't accept the status quo any longer, especially the 12 new Member States.
As you heard yesterday, payments in the old Member States average nearly 300 euros per hectare. In the new Member States it's only 185 euros. Latvia averages less than 100 euros per hectare while Greece gets more than 500.
There are some who would have you believe that the status quo can drag on to 2020, and that we might want to encourage this.
But change is inevitable. Many farmers I meet are agitating for it. The question is not whether change will happen but when, and how Scotland can get the best out of it.
I know these are controversial issues. We could take the easy way out: hide our heads in the sand, and let Europe dish us up a fait accompli. Or we can face up to the challenges, work out what's best for Scotland, then take our case to London, Brussels and other member states, many of whom share our interests.
Mr President, I don't believe anyone in this room wants to bury their heads in the sand.
I am delighted the industry is engaging with Brian Pack and his inquiry. He has a tough job balancing interests from highland and lowland, east and west, livestock and arable as well weighing up food production and social and environmental issues.
I saw Brian last night for the first time since his round of public meetings - I was pleased he was still in one piece!
And he hadn't aged as much as I thought he might have in the past few weeks!
The meetings have been a huge success. Around 1,300 farmers attended - with some travelling for five hours to take part!
I met 20 farmers in Perthshire a few days ago, and got 20 different views on the future of Scottish agriculture. So I wish Brian strength in weighing up 20,000 different views!
A key issue is of course the future of direct payments. The interim report sets out one possible scheme, using area payments and a Top-Up Fund.
That is just an illustration, and no doubt the thinking will be refined between now and the final report. After that, the government will have to take its view on the recommendations. And we'll then have to negotiate in Europe, alongside everyone else.
But the important thing is that we shape our own destiny. We may be a small nation, but we can and we must influence the debate in Europe.
LFA support
Another issue in the interim report is LFASS. In the North and West and the islands, farmers impressed on Brian that all elements of future support must work together effectively. So the shape of LFA support will be critical. Brian has flagged up the need to look at this for his final report.
We also have to factor in Europe's review of the definition of LFA.
These are issues for post-2013, but there are more immediate questions. Last June I increased LFASS rates for the fragile and very fragile regions, as part of a package to help hill farmers and improve the link between payments and activity. NFUS have come forward with further suggestions, trying to improve the link with activity even more. These will now be analysed by our technical working group.
Timing of changes
The interim report also looks at the timing of changes to direct payments.
Many farmers seem happy with Brian's recommendation, that we should wait for the rules for post-2013 before we change the Single Farm Payment, rather than risk having to change twice. Opinion seems to be more mixed on Brian's suggestion that when we do change, we should do it quickly.
I look forward to hearing views on this and the rest of the issues. Your input to this debate is absolutely vital.
These are all tough issues that need aired and careful thought.
Europe
Once we know the road we want to take, we will make our case to Europe.
And we'll need influence the UK.
But I remain perplexed as to why the present UK government refuses to let Devolved Administrations play their proper role in agriculture negotiations.
Often during crucial Agriculture Councils, UK ministers negotiate with the Presidency, the Commission and other Member States, without Devolved Ministers present. Another example where we are locked out is the informal Council meetings, at which EU ministers discuss long-term policy.117. Despite these drawbacks, we have a great track record of influence in Europe. We secured a good deal in the CAP Health Check. We got crucial concessions on EID.
We broke new ground by getting official TB-free status.
Mariann Fischer Boel came to Scotland several times. I have already invited Commissioner Ciolos to visit this summer and I look forward to seeing him at the Council on Monday.
But these successes have come about despite the current system. A system that leaves us stranded at the bottom of the European league table for rural development funding.
So I ask every Scottish farmer - who would you rather have in the room batting on your behalf, a Scottish Minister who cares deeply about your future or a Defra Minister who might just be going through the motions?
And remember the Defra Minister usually has a Treasury Minister perched on his shoulder! And talking of the treasury, are you really happy with them representing your interests in EU budget negotiations.
Devolution has not gone far enough. That's why we had the National Conversation, and why we need a referendum on the options for Scotland's future, including the option of a place in our own right at agriculture negotiations.
Challenges to the next UK administration
In the meantime, with so many UK policies continuing to impact on Scotland, we can look ahead to the UK election - and I want to lay down some challenges to the incoming UK government.
The first is this: Devolved Administrations must have a bigger voice in negotiations in Brussels, so that I can properly advance Scotland's interests. Even under existing constitutional arrangements, we have access to bi-lateral meetings between the UK and EU on fisheries - we need the same for agriculture.
My second challenge to the new administration is to officially abandon the so-called UK vision for agriculture. When the UK government published their vision, the most telling fact was that they didn't even bother to analyse the disastrous impact beforehand.
When they did finally publish an analysis last year, it confirmed that the impact would be catastrophic for Scotland.
It's not a positive vision for our farming sector. And we don't know yet if any of the other candidates for No 10 Downing Street will take a different view.
Contrast that with the Scottish Government's vision, based on the best productive use of our fantastic natural resources. A vision based on a contract, through which society rewards farmers for the benefits they provide. A vision which challenges farmers to become more market-oriented, while recognising that financial support is essential. That's what I call a positive vision.
My third challenge is on the relationship between farmers and retailers. I welcome the entry into force of the new Grocery Supply Code of Practice. But if this Code is going to have teeth, we need a proper supermarket ombudsman to enforce it.
We need an ombudsman in place as soon as possible, with enough resources to be proactive and effective.
Food policy
I also hope the next UK administration will understand the importance of food production better than the current one. I know Hilary Benn announced a new food strategy last month. I welcome the fact that after treating the phrase "food security" as some outlandish concept not to be mentioned, UK ministers have moved on this issue as well. But we need action behind the words.
In the last EU discussion on rural development, UK officials gave their minister six pages of speaking notes. But the word "food" didn't appear once until I insisted they put it in. That speaks volumes - it tells us that food remains a much higher priority in Scotland's Government.
Our food policy is gathering pace. The Government's catering contract now sources all its beef and lamb from Scotland. Soon I shall be publishing a guide for SMEs on how to sell food and drink into the public sector.
In the last year we persuaded all the major supermarkets to sig our retailer's charter. We held 2 dairy summits, to identify ways in which confidence could be built within the supply chain.
I have asked the Food Standards Agency to produce guidance on origin labelling, so that consumers can make better informed choices despite the UK government wanting to backtrack on mandatory labelling. And in the spring I shall launch a catering provenance toolkit so that consumers can have clear and accurate information.
Our efforts, and those of the sector, are having a real effect. I announced last summer that sales of Scottish brands had increased across Scotland, England and Wales by 21% since we took office.
The food revolution continues. This week Simon Howie's reported butchery sales up 20%. Bartlett's potatoes, including the Rooster brand, were up 15%. And 40 percent of Scots visited a farmers market last year, up from 25 percent in 2004. This growth in farmers markets should continue, thanks to the government's £200,000 support package.
These successes show that a market-oriented approach has two parts. The producer needs to understand what the consumer wants, and to produce to specification. But government and industry can shape demand by promoting our products and informing the consumer.
That includes the consumers of tomorrow. I want children across Scotland, in our cities, towns and villages to learn about the food they eat, from plough to plate. I want to renew Scotland's relationship with food, with the land, and with our farmers. We will work with our schools to make this happen.
As a step on this journey I am today announcing a package worth over £250,000, for organisations that work with teachers and schoolchildren.
This package will support the Royal Highland Education Trust, and the Scottish Food and Drink Federation, to work with schools on food and farming events. It will support the International Eco Schools Conference in Scotland, where Food and Drink is the key theme, and a Secondary Schools Parliamentary Conference on food and the environment.
We can also make use of Scotland's curriculum for excellence. We are working with Learning and Teaching Scotland, to help teachers and children get to grips with the food and drink agenda across the curriculum.
The potential for food from Scotland is huge. We already have a fantastic reputation for quality, but there is much more we can do to build on it.
And the tourism sector can play a part. I have a young family, and, far too often, when we visit a tourist attraction, the food is a major disappointment. It's often overpriced and unhealthy. Worst of all, it's a missed opportunity to promote Scottish food. So I have made this a bit of a personal crusade!
In April, I will hold a summit with Visitor Attractions in Scotland. The idea is to learn from the best - because there are many good examples - and to encourage the worst to change their ways.
Friends, I want to turn every tourist attraction into a showcase of your quality produce, so that we can enjoy the best of our own produce and overseas visitors take home a great experience.
Conclusion
If we get it right at that end of the supply chain, then benefits can flow all the way back to where it matters for you, on the farm. The big successes come about through the individual stories on thousands of farms across Scotland.
Stories like Robert Cunningham's at West Mossgeil Farm, for example, and his new slurry store, one of 70 we've approved in Ayrshire alone. Pete Ritchie's 50% grant has paid for a new farm shop, café and butchery, creating new employment equivalent to 10 full-time jobs.
Michelle Hamilton's sheep genetics business at Lochpark is expanding into purpose-built facilities on the farm. There are many more examples.
Allow me to paint a picture of Scottish agriculture in the future if we play all our cards right:
- An outstanding reputation for food and drink that commands a premium in the marketplace, at home and abroad
- Combined with unspoilt landscapes, that are home to a rich variety of flora and fauna, and attract millions of visitors each and every year.
- All this delivered by productive, profitable and efficient agricultural businesses that have adapted to a low carbon future.
I'm committed to working with you towards that future. Mr President, there may be bumps in the road ahead but with government and industry pulling together in the same direction we can make that vision a reality.