Cabinet Secretary for Rural Affairs and the Environment Richard Lochhead MSP
Scottish Beef Cattle Association and National Sheep Association Conference
January 12, 2009
Good afternoon, ladies and gentlemen. Thank you very much, Mr President, for the invitation to speak at your conference today which I was delighted to accept.
John Cameron is of course an industry stalwart whose loyalty to the industry is renowned and whose deeds have earned him a reputation for being a powerful voice for, and supporter of, Scottish agriculture.
I am delighted to be in the company of many of Scotland's other producers - producers who help underpin a vital Scottish industry and who deliver many benefits for the people of Scotland and for our rural communities in particular.
Can I use this opportunity to add my welcome to John Bell to his new role and to say how much I look forward to working with him in the times ahead as well. I have also known John for a few years and know that he too is a very effective champion for the industry.
I was slightly perturbed to read a profile of him at the weekend where he said that his ideal other job would be as an opposition MSP - albeit because it is what he deems a well paid easy number - I wasn't sure how to take that - perhaps it was a back handed compliment that Ministers are poorly paid for very difficult jobs! But I was relieved when he said that he had no plans to become an opposition MSP in the Scottish Parliament!
And he certainly went up in my estimation when he said he was a fan of The Glenlivet and Glenfarclas malts! So I was impressed by that.
I know you are all ready and willing to face the challenges and grasp the opportunities of the New Year after, what I hope, was an enjoyable festive period - when many Scots including myself of course were enjoying your products.
And I have no doubt that many more Scots from around the world will enjoy Scotch beef and lamb in this the Year of Homecoming where our food and drink will be showcased to many people visiting Scotland from around the world.
During your conference you will all be reflecting on how 2008 was a demanding year as you sought to recover from the well-documented difficulties of the recent past and cope with volatile commodity markets in particular for fuel and feed.
And as we look forward to this year, we do so in the knowledge that no-one is really able to predict what lies ahead, given the largely unprecedented economic climate that forms the backdrop to your meeting here in Bridge of Allan. Of course you'll have seen headlines last week that two thirds of consumers will be spending less on eating out at restaurants. The Scottish Government is doing all it can to help Scottish businesses both this year and in the future and LFASS payments will start going into some accounts this Friday.
Although there are many clouds of uncertainty for livestock producers in Scotland, there are also grounds for optimism.
Many producers I have spoken to, even just in the last few days, have been upbeat about the future. And I noticed one headline this week in one of our agricultural publications that said "Best Opportunity for Farming in a Decade".
The combination of tight supplies, the exchange rate, which we've just been hearing about from Stuart Ashworth, and falling prices for some inputs, is providing favourable trading conditions for livestock producers. We couldn't have imagined a year ago that beef prices would have reached close to 300p per kg, or that new season lamb prices would have topped 350p per kg.
One thing is clear. 2009 is going to be a pivotal year for the Scottish agricultural sector - a year of big decisions that will set the direction of travel for the foreseeable future. And today I want to set the scene for Scottish agriculture as at January 2009.
Where we are
So where are we now? Well, the world is - as they say - shrinking, and trends and developments in the wider world increasingly impact on us here. The current economic turmoil makes that abundantly clear.
We live in a world whose population - and therefore the demand for food - is increasing at an alarming rate.
In a world with new emerging markets - and as producers, you will be aware that as wealth increases the demand for red meat should increase as well.
So you might think that will lead to increase in demand for your product, but of course world markets are complex.
For instance, demand for sheep meat in developing countries is stimulating production in those areas of the world to cope with that increase in demand.
And we are seeing a decline in sheep numbers in Scotland which is mirrored across the major trading communities including Europe and New Zealand.
Meanwhile, for beef, the world trend is for increasing production particularly in South America and the United States. The capacity for large scale production in these countries is immense.
The increase in production in South America is largely expected to meet growing demand in that region. Again, the production trend in Europe is downwards and in Scotland we have seen a decline in recent times as well.
In Scotland we don't have the capacity to compete in these cut-price commodity markets as the bigger nations.
We therefore need to continue to concentrate on delivering a quality product that fits the niche markets - for sheep and beef. That's not a new message.
Scotland is a small nation but we have a big reputation for quality food production - especially for our Scotch Beef and Lamb. But we can't be complacent and we must constantly strive for improvement.
As Cabinet Secretary for Rural Affairs and Environment I very much appreciate the scale of the challenge facing many livestock producers in making production economically viable, particularly in more remote parts of Scotland.
It is in all our interests that we maintain agricultural activity everywhere including the hills, wherever it's appropriate, to deliver a range of public goods.
Farming activity - and livestock production - shapes the environment that enhances bio-diversity and attracts tourists to our landscapes.
Hill farming also plays a huge socio-economic role and sustains communities.
And livestock production throughout Scotland is important to food production and sustaining the industry's wider infrastructure. We really need to maintain a critical mass.
Hill farming has received particular attention in recent months and I have read the numerous reports on the subject. All of the reports have been invaluable contributions to the debate about the future of the industry.
I know that you want to see action from the Scottish Government on this. We will act, but I have to say that few farmers I speak to can agree on the solutions.
And I am sure you would rather that we took the right action - action that delivered the outcomes we all want to see for Scottish agriculture and Scotland, that does not lead to unintended consequences.
Many producers tell me that to some degree the challenges we face are the result of a Common Agricultural Policy that did not modernise quickly enough.
Over a number of years, some farmers got used to over-producing, taking their eye off the market, and some put quantity before quality.
The decoupling of support from production, therefore, meant a fall in livestock numbers was to some extent inevitable. However, it has allowed some producers to perhaps focus more on quality. And it is useful to note that some have not seen their output of kilos of lamb and beef decline at the same rate as livestock numbers.
So it is clear that in this constantly changing world, we can't stand still.
2009 - a pivotal year
2009 is therefore a pivotal year - for hill farming and for all livestock production.
We have some major policy decisions to make, and we need you to help us decide the best way forward. CAP, LFASS and the SRDP are the key resources involved, and our work in these areas will help set the direction for rural Scotland from 2010 to 2013 and beyond.
And we have to recognise that economic constraints that we deal with in other parts of the Scottish Government apply to Scottish agriculture as they do to other parts of Scottish life. This makes it even more important that we use the considerable resources we already have in the best possible way for rural Scotland.
And that means we need a CAP that can deliver for Scotland.
I am pleased with the agreement we managed to achieve in Brussels during the recent Health Check - it is a good deal that gives us flexibility for the future. And I want to thank the industry, represented in this room, for their contribution to the Health Check.
The regulations have been finalised - and while we are still waiting for the implementing details, it is now time for us to start taking decisions on the way ahead. We need to get these decisions right because we will have to live with them at least until 2013 and possibly beyond.
For many of you, I realise that decisions on use of Article 68 - the national envelope - are crucial since they provide the means to try and halt the decline in livestock on the hills. Through dogged negotiation, we managed to secure the flexibility that we wanted to. But we now need to decide what we want to do in terms of the Scottish Beef Calf Scheme for instance and other possible use of Article 68.
On the Calf Scheme. I know that this has provided valuable additional support to farmers particularly in our more remote areas. The environmental benefits have been more difficult to quantify. But I imagine that this is something that you will want to continue, but we need to consider whether the Scheme should continue and if so, in what form.
The decline in the number of sheep on the hills is, of course, particularly apparent. We will therefore also need to consider whether it would be possible for us to use Article 68 to support that sector - and, if so, the pros and cons. Your views on that will be invaluable.
However, we will have to work within the legislation and there are some quite tight constraints on what can be achieved.
The outcome of the Health Check negotiations also marked significant progress on modulation, as we secured greater parity with other Member States. And our deal on capping is also good for Scotland as we saw off huge cuts in some farm payments.
We also have new possibilities under the National Reserve that might be able to help Scottish farmers. We will be looking closely at the detailed rules when they emerge to see whether this measure can indeed help new entrants to farming.
There is a great deal of flexibility over the move to a flatter rate for payments, with the new Regulations allowing Member States a range of bases for area payments, and several options for making the change. Some Member States will want to move swiftly to a new payment system. Others will make more modest changes to ease the introduction of a flatter rate payments system from 2013. We are under no obligation to change but we must consider what actions will best help Scotland face the challenges ahead.
Farmers keep telling me for instance that the historic basis for paying Single Farm Payment is increasingly indefensible. And many of you tell me, and I agree, that we need to take steps to ensure that support is linked to activity.
So my firm view is that the sooner we take these decsions about what the options are the better - and then we need to decide the timescale for implementing these changes for these options.
Major decisions also lie ahead with regard to the future of LFASS and I was hearing that the applicants for this scheme are possibly about 1,000 more for the same period as last year.. With 85% of our land in the LFA and £61 million available annually for the Scheme this is clearly a significant support scheme for Scotland. That message was clear to me when I was the first Minister to attend the NFUS LFA Committee last month.
Our consultation on the future of LFASS ended on 19 December. Thank you for letting us have your views on the sort of scheme you want to see for the future. We are currently considering the responses to the consultation.
We recognise that linking LFA support to farming is an important way of helping to ensure that production levels are maintained in our more remote areas. I fully understand how important it is to you and also to those involved in the wider infrastructure dependent on livestock production to be sustainable in the remote areas as well. The Scottish Government recognises the importance of every region of Scotland being thriving and sustainable. That cannot happen if our hills and remote areas are cleared of farmers.
So, how we target our support schemes is one of the most important questions we need to address this year.
As I explained at the Oxford Farming Conference last week, I already have sections of industry wanting support to be concentrated on those areas that produce the most. And other parts of the industry telling me that these areas already get a disproportionate share, and support should be targeted where it is needed most - in the fragile communities that are more remote from their markets and where the challenges are perhaps the greatest.
Again, as I said in Oxford, perhaps that tells me that there is no simple one-size-fits-all solution, and that support needs to be shaped and moulded according to the nature of land and farming activity in different parts of the country.
It also tells me we need to avoid a flat payment across the whole of Scotland when we move from a historic-based payment to area-based payments.
The final major area of policy development that I want to talk about is the review of the Scotland Rural Development Programme and in particular the Rural Priorities which is one of the eight elements of the SRDP.
Targeting direct support is important for the future, but farmers making the right decisions for their own businesses is equally important. Reducing costs and improving efficiency can make a difference in the livestock sector, as elsewhere. The SRDP offers support for these aims.
The Programme is generating - and will continue to generate - economic, environmental and social benefits for the whole of Scotland.
Nevertheless, now that the Programme has been in operation for about a year, I would like to ensure that it still meets the needs of rural Scotland. As we move ahead we have to take account of lessons learned from experiences gained so far. In addition we are witnessing a major economic downturn and I need to be confident that the SRDP is doing all it canto help rural Scotland in meeting the challenges we are now facing.
So I will be shortly discussing the review with the Programme's Monitoring Committee and stakeholders with the aim of having the review underway and completed by the first half of the year.
Any changes to the SRDP would have to be approved by the European Commission - and that process takes months. But it is worthwhile if the result is a Programme wholly suited to Scottish needs and in the meantime we've been looking at ways of streamlining the process.
Whether it is the CAP Health Check, LFASS or the SRDP, the common thread in all of this, is our wish to work together with you and other stakeholders to determine what is the best way ahead for the Scottish livestock industry. That is again especially important at this time of economic challenge. We value your opinions and knowledge as custodians of the land.
Oxford Farming Conference
As I have mentioned, I attended the Oxford Farming Conference last week and I want to reiterate the vision for Scottish agriculture that I set out last week.
I explained that my vision is to have agri-food and land based industries which produce for the market - whether that means food, energy or other markets such as tourism. But which also gain recognition for the public goods that they provide - whether economic, social or environmental. This vision reflects the distinctiveness of Scotland - its land, population, culture and so on. It also sits within the Scottish Government's single national purpose - sustainable economic growth.
In Oxford, I was keen to identify a couple of key differences between the Governments north and south of the border.
The UK envisages a Common Agricultural Policy with no direct support. The Scottish Government cannot agree with that policy when, without such support, farmers in much of Scotland, and particularly in our marginal areas, would struggle to survive.
Another key difference from the UK vision is that it focuses very heavily on the environment. Now the rural environment is hugely important to Scotland and we ignore it at our peril. But an approach that ignores other public benefits of farming - not least the supply of food - is simply far too narrow.
What we need for the future is clarity about what outcomes are expected in return for public support. I have described this as essentially a new updated contract between farmers and society.
A contract that recognises that the primary purpose of agriculture is food production, but also requires the delivery, of course, of other public goods. To enhance and safeguard our environment and sustain rural communities.
Food security
There is no doubt in my mind that the public will always expect the core activity of our farmers in Scotland to be the production of food. And maintaining the skills and capacity to produce food is in the national interest.
I am pleased that the UK Government is now also talking up food production but I am not sure how the UK will deliver when they are talking down direct support. In many parts of Scotland ongoing direct support is absolutely necessary to maintain livestock.
The issue of food security should be high on the agenda of every government and it should be central to CAP and national agricultural policy.
And comsumers want to support producers, and they want to know, how, and where, their food is produced.
That underlines the need for appropriate labelling of food - an issue close to your hearts.
But I'm afraid the EU legislation on labelling is inconsistent and confusing, and most worryingly of all it can leave the consumer confused.
Let me try and clarify what is and isn't covered by the legislation.
For beef, it is not the case that beef from outside Scotland can be passed off as Scottish or Scotch. To be called Scottish, beef has to come from animals born, reared and slaughtered in Scotland. And to get the registered PGI label of Scotch Beef, meat has to meet those same requirements plus quality assurance. Scotch Beef is a world renowned product of which we are justifiably proud.
However, confusion remains about the distinction between Scotch and Scottish product - as we saw from a recent Consumer Focus Scotland survey. This could damage the brand and so we are considering with Quality Meat Scotland how this matter might best be tackled.
Turning to lamb, the labelling rules are different. Under the Scotch Lamb PGI, lamb sold as Scotch must be born, reared and slaughtered in Scotland and quality assured, like Scotch beef. But unlike beef, lamb can be labelled Scottish without necessarily having been born, reared and slaughtered here.
This confusion and inconsistency is not acceptable, and Scottish Government wants origin labelling to be accurate and meaningful for the consumer. So-called British Bacon made from Dutch Pork is an example of what we do not want to see.
We are arguing - alongside the Welsh and Northern Irish governments - that the UK position on the proposed regulation should allow us to introduce mandatory Origin Labelling where there is a clear case for doing so. This has yet to be debated in Europe.
I believe that we need to facilitate real change in our food culture, in the way that we behave as well as our attitudes toward food. We have spent the last 18 months developing a more coherent and consistent approach through our work on a National Food and Drink Policy for Scotland.
Introducing this Policy was one of the Government's first acts after being elected and time has proven that this was a good decision. The National Food and Drink Policy aims to promote Scotland's sustainable economic growth by ensuring that the Scottish Government's focus in relation to food and drink addresses quality, health and wellbeing and environmental sustainability. We recognise the need for access and affordability for all.
Policy development continues. Part of our work has been about consumer choices and reputation. We have focused on consumer knowledge about food origins. I want to see consumers questioning food provenance and quality when they purchase in a shop, restaurant or pub. We are developing a project that will demonstrate effective messaging on origin labelling in the food service sector. We are also funding an investigation into Scottish Product Origin Labelling. I hope that the findings will help inform how the industry can tie in attributes such as quality, health and sustainability into origin labelling on their products.
That is why I have invited Ministers from the devolved nations to join me in Edinburgh for a summit to discuss global food issues, and the future of UK food in a global market place.
And of course, Hilary Benn did express support for better food labelling at Oxford last week.
Other pressures
In taking decisions on the key policy areas, we need to take account of other pressures on the livestock industry. You will tell me that there are many - and I accept that there are.
Towards the top of your list will probably be bluetongue. Given the losses that would arise in the event of bluetongue reaching Scotland - and the devastating effect this would have on production - it is crucial that we manage the risks well.
Careful handling by Government and sensible precautions by industry - including avoiding imports from risk areas - will help to safeguard our stock from this disease.
We have of course started compulsory vaccination of cattle and sheep in Scotland. We have provided funding of £2.6 million for the vaccination programme. And we are all confident this is the best way to address the threat. We should, however, remain vigilant for any signs of disease.
I share the industry's frustration that EU regulations do not always support our policy aims, particularly in relation to bluetongue, and be assured we continually lobby the European Commission for changes.
We have an excellent record on animal health, underpinned by our scientific community in Scotland, which of course is largely funded by the Scottish Government. And that record pays dividends for producers. Nevertheless, as we all discovered during foot and mouth in particular, our animal health policy will be undermined until we get full control of the animal health budgets here in Scotland.
Another pressure on sheep farms is the compulsory introduction of sheep electronic identification by 2010. Not easy, or as many of you would tell me, not possible, with a national herd of over 7 million sheep. The Scottish and indeed UK Governments have challenged the Commission to revise its impact assessment, to confirm that EID is the most cost effective way to meet the objectives of the Regulations.
We made strong representations on the detail of EID during meetings in Brussels, and this has helped us so far win valuable concessions. We are continuing this work because we do not think the regulations are sensible in the Scottish context. We must avoid sheep farmers exiting the industry because of EID. The Scottish Government funded EID trials will provide us hopefully, with the evidence to keep up the pressure on Brussels and next month, at our invitation, Commission officials are visiting Scotland to look at the issues.
It is also worthwhile mentioning EID for cattle at this point. As we are aware, the Commission are starting to consider this as a possible future proposal. Some of you may see that this would be an easier transition, as cattle are already individually identified and several of our Scottish cattle keepers already use EID successfully for farm management purposes. However, if the time does come for cattle EID we will be involved with the EU negotiations and I will do all I can to ensure that we get the most appropriate system for our Scottish cattle farmers.
Meat Hygiene Service charges are another area of concern. Scottish Ministers made it clear to the Food Standards Agency that earlier proposed increases to inspection charges were simply unacceptable. Especially given the other costs already being charged to the industry - for example water charges - and the lack of a full economic impact assessment which is now going to be taking place at the Scottish Government's request. The move to time based rather than throughput charging is a welcome one - but we will need to monitor further developments.
Climate Change
Perhaps the biggest changes we are likely to see affecting farming in Scotland relate to our climate. Before I finish, I would like to say something about that.
We can't escape the fact that sheep and cattle production leads to greenhouse gases, whether from fertiliser, livestock emissions, vehicle emissions or other means. But it would be simplistic to say - as some might - that the answer is to reduce Scottish livestock production numbers. The situation is far more complex. As long as people want to eat beef and lamb there will be a market for it in Scotland and if the meat is not produced locally then it will be imported. This simply moves the greenhouse gas problem to another part of the world.
We in Scotland have set some of the most ambitious targets in the world for the reduction in greenhouse gases. We recognise that there are big challenges for agriculture. This is one problem to which there is certainly no short-term answer. But Government is working closely with industry to try and find a win-win solution.
Other forms of support
Of course, although there are serious challenges facing the industry we need to remember that much support is already available. For the future, the expectation is that we will be looking more and more for the industry to be proactive and help itself. This forward looking approach is already encouraged through the SRDP, for example through the Skills Development Scheme and Whole Farm Reviews. Other initiatives like monitor farms are important in this context. I was lucky enough to enjoy a visit to the monitor farm near Kelso last month. And I have to say that the enthusiasm and the work that is being done is impressive. The potential benefits for everyone involved are clear. For every pound spent the industry benefits to the tune of £6.50
In last 20 months the Scottish Government has listened to our farmers and acted. We have worked with you to tackle animal diseases and deal with the impacts.
We are working with QMS, the Scottish Agricultural College and research institutes to deliver solutions that will make your sector more profitable, healthier and greener.
We are taking a range of steps to act on the concerns of farmers and land managers. We are reforming the appeals procedure for agricultural support, we are working with the Tenant Farming Forum to address the need for new entrants.
And we are tackling red tape by ensuring that public sector organisations in rural Scotland, like SEPA and SNH and our own officials are working together to avoid duplications, and reduce inspections and so on.
And we are supporting rural development through planning reform, introducing a presumption against the closure of rural schools, and we are tackling the lack of affordable housing.
And we are working hard to ensure your cash flow is in order in these uncertain times by issuing Single Farm Payment and LFASS payments at record speed.
And, crucially, where you tell us we need to do better, we are willing to make changes.
Conclusion
In conclusion Mr President, 2009 is indeed going to be a pivotal year for the sector, especially as we face major decisions on implementation of the CAP Health Check, the future of LFASS and the review of the SRDP.
I have placed our primary producers at the very heart of our food policy in Scotland.
We have shown in the past 20 months that when we are faced with challenges in Scotland, the Government and industry can work together to overcome them. We can tackle the threat of bluetongue, that is the latest example of the Scottish Beef Cattle Association and National Sheep Association Scotland working together with the Government.
We must grasp the opportunities that are available for your members.
I am confident that we will do that. Let's leave 2009 with forward-looking policies and a stronger, modern industry that is well prepared for the future. I look forward to working with you and wish you all the best for the year ahead.