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7 Organic farming and growing in Scotland

7.1 As discussed in Chapter 2, the large majority of organic land in the Organic Aid Scheme in Scotland is in grassland and only c. 5% is in crops (arable and horticulture). This is probably one of the lowest percentages in Europe. Foster & Lampkin (1999) report that organic arable accounted for, on average, 18% of the total organic land area. The dominance of LFA land farmed extensively with beef and sheep in Scotland is likely to induce an arable percentage below the European average. However, there is scope theoretically for expansion, given that the organic area is only half of the 10.6% that crops occupy as a proportion of total agriculture in Scotland (Anon., 2003a).

Farming and growing in Scotland

7.2 Our research generated a listing of certified producers in Scotland. The information was sourced from SOPA, the Bio-dynamic Agricultural Association, and the Soil Association listings in 2003. The listing provided a total of 658 producers across Scotland and allowed us to characterise them by farm type and by geographical distribution (Table 7.1). These are now discussed.

Producer activity

7.3 The number of producers varies across farm types. The data reinforces the conclusions elsewhere in the report that there are a high number of livestock producers and a low number of arable producers in Scotland. We have been able to characterise 355 of the 658 producers in our typology. Of these, over half (53%) are livestock producers, nearly a third (31%) are mixed, 12% are engaged in horticulture, whilst only a minority are engaged in aquaculture or arable (3% and 0.3% respectively).

Geographical distribution

7.4 Figure 7.1 together with geographical mapping (Appendix C) reveals the largest numbers of producers are located in the South West (Borders, Dumfries and Galloway) and the North East (Grampian and Tayside). Given the large numbers of livestock and mixed producers, these are similarly distributed across the South West and North East. Many of those engaged in horticulture operate in the South West and North East but also in a corridor from Skye to Inverness. Aquaculture meanwhile is located in the coastal areas of the West (Ayrshire and Argyll and Islands) and the North (Western Isles, Orkney and Shetlands).

Level of support in Scotland vs. other European countries

7.5 Payment rates vary widely between countries, and in some cases between regions within countries. Lampkin et al. (1999) reported that, in 1997, all states apart from Great Britain and France were making post-conversion payments. The size of these payments was as high as 326 ECU/ha (£260/ha) for arable crops in Austria, but most countries paid at about half that rate. These payments have only recently been introduced in the UK, seven years later, and at a significantly lower level. This delay is bound to have had an impact on the relative competitiveness of UK organic produce with imported goods, particularly for commodity goods such as grain. Interestingly, Lampkin et al. (1999) report that in several countries specialist cropping farms (both arable and horticulture) and intensive pig and poultry producers were less inclined to convert than mixed farms and low intensity livestock farms, even where post conversion payments were substantial. Concerns about lack of market demand and poor availability of information were thought to be the underlying factors, consistent with results from the producer and researcher consultations undertaken within this study (see below).

7.6 An updated study of relative support rates and their likely impact on organic conversion is beyond the scope of this report, but such a study may be necessary to advise SEERAD on future levels of post-conversion payments necessary to encourage increased arable conversion, and maintain domestic competitiveness.

Source: SOPA, Bio-dynamic Agricultural Association, Soil Association 2003

* The number of arable farms looks unusual but is based on the data provided to us. A possible explanation is that the 303 'unknown' producers may contain a slightly higher proportion of arable.

Figure 7.1 Geographic distribution of Scottish organic producers: farm type by Local Enterprise Company area

Research needs and challenges

Perspectives from farmers and growers

7.7 It is safe to conclude that the feedback from the producer consultations is robust. Consistent messages were received at all three meetings. Issues raised were further validated through the responses of advisors, sector bodies, researchers and academics involved at grass roots level, and were in line with recent surveys of producer opinion in Wales and England (discussed below).

7.8 The overall clear priority issue with producers surrounds difficulties in marketing, particularly lamb. Without further development of the market, technical and science research is of secondary importance to most producers.

7.9 There is a feeling of disconnection between producers and other sectors higher up the supply chain. This is felt both in terms of the lack of an overall perspective on the potential size and direction of the organic market, and a lack of transparency in how costs and returns are apportioned across the supply chain. These views are not unique to organic farmers, as there is also a wide degree of general 'distrust' amongst conventional farmers.

7.10 Better co-operation between producers would be beneficial, but this has not worked well in the past. Further socio-economic investigation may be appropriate, possibly including novel methods of co-operation.

7.11 More co-ordinated promotion of Scottish organic lamb would be beneficial, and the use of organic producer levy money was questioned for the generic promotion of lamb. While there is generic promotion of lamb, there is nothing specific to promote organic livestock that reflects the levy being paid.

7.12 Although local/regional branding and supply networks are ideally favoured by the organic movement, it is recognised that the multiple retailers will have the biggest impact on ultimate market share.

7.13 A major constraint emerging from our consultations with producers is a perceived lack of information on market requirements, prices, supply and demand, sources of inputs and on particular technical issues. However, we note the following:

• information on buying and selling of inputs should be improved by the launch of the Soil Association / Scottish Enterprise "Organic Marketplace" website
• concerns about lack of access to technical information are surprising, given that SAC is providing well-respected help by various media. Limits to the resources available for free extension services were quoted as a possible limiting factor.

7.14 Technical constraints were consistently of less concern than marketing or information. Among those that were raised, perennial weed control, animal health, sources of protein feed, and the availability of suitable crop and forage varieties for Scottish conditions were the most common issues identified.

7.15 A number of issues relating to Organic Standards were raised:

• the rules and inspection costs for markets, abattoirs and butchers create additional cost and paperwork, and are a disincentive for these (often small) organisations to handle organic animals
• the scientific validity of some standards was questioned
• the need for a better enforcement of non-organic seed derogations by certification bodies
• concerns about the cost and resource implications of the ending of the seed and animal feed derogations for non-organic inputs.

7.16 Environmental benefit/dis-benefit issues were not raised spontaneously by the producers. However, several did believe that there were benefits from conversion on their farms, specifically in terms of greater biodiversity. However, there is uncertainty as to precisely what environmental benefit is required of producers. In particular, does SEERAD (or consumers in general) have a prioritised list of definitive environmental 'wants'. Some further research into consumer expectations regarding the environment might be informative. Farmers may be more proactive if environmental objectives were clearer.

7.17 A limitation of the producer consultations is that it was focused on existing organic producers in Scotland. The responses were therefore largely the concerns of upland beef and sheep farmers, as these predominate at the moment. However, to gain an insight into reasons why more arable and horticulture farms have not converted, we have reviewed three recent studies in England and Wales.

Review of the England Organic Farming Scheme (2002)

7.18 As part of an economic evaluation of the England Organic Farming Scheme for Defra, the University of Cambridge Centre for Rural Economics Research surveyed 400 scheme participants and a control group of 400 conventional farmers (Anon., 2002a). Questionnaires were returned by 180 scheme participants and 126 conventional farmers. The questionnaires included a number of open questions seeking the views and perceptions of these farmers.

• Question posed to both groups: "In your opinion, what is the single most important barrier to the development of the organic sector in this country?"
• out of 100 responses to this question by Scheme participants, only two gave technical reasons (a lack of research), all others citing marketing, financial or administrative issues.
• out of 100 responses from conventional farmers, only one gave a technical reason (weed control), all others citing marketing, financial or administrative issues.

7.19 This survey is interesting because it asked for a prioritisation of issues. The result was clearly an overwhelming concern about marketing and profitability.

Review of obstacles to meeting the ' Defra Action Plan' targets for organic cereals ( Defra project OF0334).

7.20 This review, completed in 2003 by ADAS and EFRC, included consultations with advisers to organic farmers, with grain traders and end users (Anon., 2003b). Although it was conducted largely in England (where most of UK production, large-scale traders and end users are located), the findings may be taken as relevant for Scotland and the wider UK.

7.21 The dominant constraints to further conversion to organic methods were once again concerns about marketing and profitability. These concerns were not specific to cereals which have remained relatively profitable, but were more related to falling prices for other products such as potatoes and some vegetables. These potentially high gross-margin crops are the key to whole-farm profitability in arable systems.

7.22 The fragmented nature of supply with many farms selling small quantities of grain makes sourcing supply of consistent quality difficult for the large purchasers. Some large buyers said that it was easier to source consistent supplies of appropriate quality by importation, compared with dealing with a large number of individual UK producers. Co-operation, with regional cleaning and storage facilities, was suggested by many as a way to compete more effectively with imports. However, the price for organic grain grown in the UK will largely be set by the price of imports, the availability of which will be driven by the substantial post-conversion payments made on mainland Europe. Work to improve information and collaboration has been started by Organic Grain LINK with Defra support under the England Rural Development Programme ( http://www.organicgrainlink.co.uk/).

Survey of Farmers in Wales (2002)

7.23 The annual December survey of Welsh farmers in 2002 included some questions on registration with organic farming bodies and the reasons for non-registration (Anon., 2003c).

7.24 The survey received just over 3,000 responses of which around 2,400 (nearly 80%) answered the organic questions. From the responding holdings, 98 (4%) stated that they were registered with an organic farming organisation. Those holdings that were not registered as organic were asked their reasons for not being organic. The following options were given, and the farmers were asked to tick all that applied:

• cost of converting
• size of the premium on organic products
• lack of a market for organic products
• complexities of organic farming
• lack of information.

7.25 In general, the main reasons for a farm not being organic were (a) the lack of a market for organic products and (b) the relatively low level of premium that they would attract. These were stressed more than the cost and complexity of organic farming or the lack of technical information.

Perspectives from research and advisory services

7.26 We held consultations with key staff in the Scottish Agricultural College ( SAC), in the University of Aberdeen and the Macaulay Land Use Research Institute ( MLURI).

7.27 SAC are the lead organic research and consultancy organisation in Scotland. Funding for SAC research has been through SEERAD, Defra and the EU ( http://www.sac.ac.uk/cropsci/external/orgserv/).

7.28 We consulted Dr Jamie Robertson, the only active organic farming system researcher remaining at the University of Aberdeen. The Kintail Land Research Foundation, sponsored by The Robertson Trust, has been a major supporter of organic work at the University and has supported projects on bracken control, organic dairy cow management and biological control of slugs. The Kintail Land Research Foundation is also keen to promote transfer of information to the agricultural community and to organic sector bodies such as The Scottish Organic Producers Association. A new website has been established at http://www.abdn.ac.uk/organic/.

7.29 The Macaulay Institute carries out research to meet the needs of sustainable rural development in Scotland and internationally. It focuses on quality of life, public good and wealth creation issues; the impact of land use on the quality of our environment; and evaluating the trade-offs between environmental, economic and social objectives for land use. The Macaulay has no current organic farming studies but has extensive knowledge of land use in Scotland and has past experience of organic farming.

7.30 According to SAC specialists, constraints and research needs fall into two defined areas:

• to support existing producers - mainly upland livestock farmers
• there are standards and animal health technical problems, but issues are mainly related to marketing and infrastructure
• to meet SEERAD's aim of increasing the area of organic arable and horticulture.

7.31 In their view, the mid term review ( MTR) of the CAP may encourage a move to mixed farms in the Lowlands which could lead to increased interest in conversion, availability of markets permitting.

Production related issues identified

7.32 In our expert consultations, the key production-related issues to emerge were as follows:

• protein (grain pulses) crops for animal feed
• there will be a marked increase in demand for organically grown protein feeds when the current derogation ends in 2005
• earlier maturing bean cultivars will be needed suited to the relatively short growing season in Scotland
• research is required on methods of production and harvesting peas (e.g. swathing)
• Phosphorus and potassium - long term issue of where these nutrients can be sustainably sourced to maintain soil fertility
• plant breeding for organic systems
• need to evaluate current varieties in organic systems
• identify traits (i.e. genetic characteristics) that are better suited to Scottish conditions. This could be used to inform plant breeders' efforts, for example, capacity to fix nitrogen at lower temperatures in legumes
• varieties must be suited to Scotland's short growing season
• collaboration with Iceland/Scandinavian programmes was raised as these may be more relevant than looking southwards to England or mainland Europe
• perennial weeds in grassland
• disease and pests of vegetables and potatoes
• soft fruit growing systems
• overcoming short growing season by agronomic means
• animal health issues
• parasite control
• preventative health techniques
• development of herbal and homeopathic remedies
• breeding for parasite resistance (also applies to conventional production systems where resistance to existing wormers is becoming increasingly common).

7.33 Additional technical issues raised with us during expert consultations include:

• Anthelmintics are widely used on a regular basis - certification bodies may be too lax on this. Alternative treatments need evaluation
• control of docks
• more research is needed on cultivar suitability for Scottish conditions
• concerns expressed that food quality is declining over time - lower mineral content
• farmers do not make enough use of data in the management of their farms - there should be better use made of records and recording systems to guide their businesses
• many farmers lack an understanding of their true costs of production and this leads to a lack of realism
• soil mineral availability
• determining nutritional value of organic foods

Standards

7.34 On standards, the following issues were raised during expert consultations:

• there are unhelpful differences between certification bodies over how they interpret standards with producers. SOPA is considered to be less flexible than the Soil Association
• (we understand that SOPA has recently rewritten its set of technical standards. SOPA considers that the new standards document is clearer and written with future UKAS accreditation under EN5011 in mind)
• interpretation of standards for abattoirs may be too stringent and could be simplified
• there should be a collation by the Advisory Committee on Organic Standards ( ACOS) of compliance and derogation statistics to allow and facilitate fair application of standards and to give ranking of priority issues.

7.35 The issue of contamination with GMO genetic material, and threshold levels for organic produce, was not raised in any of our consultations. However, this is an important issue and if set at too restrictive a threshold level, could make organic production of some products impossible in Scotland.

Environmental impact

7.36 On environmental matters, the following issues were raised:

• the principal impacts of organic conversion in the uplands are likely to be in sheep stocking rate and wormer use (although the latter may in practice be little changed). It was agreed that the environmental impact of conversion is unlikely to be as large as on a Lowland mixed or arable farm
• care needs to be taken in extrapolating results from other countries to the environment and landscape in the Scottish uplands
• impact of scale on environmental aspects, both positive and negative, need investigating. Larger scale organic conversion may be better in delivering environmental benefits e.g. for birds, but may lead to more disease inoculum and problems in crops
• the organic movement would prefer that the environmental impact of organic methods be assessed in a holistic whole-system approach. However, it would be sensible to find which elements of the organic system are giving environmental gain. For example, on arable farms, what do field margins contribute compared with field centres?

7.37 It was suggested that SEERAD could assist in the following ways:

• identify which environmental benefits are of most importance to their policy objectives
• fund research to identify which elements of organic systems give those benefits, and
• investigate whether there are ways of getting those benefits that are more cost-effective than organic conversion
• as many non-organic research projects will be of relevance to organic farmers, these should be reviewed in order to disseminate their potential relevance and application for organic systems
• land use mapping as conducted by MLURI is likely to be similar for organic and conventional systems of production. However, there may be a case for reviewing this in relation to e.g. nutrient retention by soils; climate suitability for e.g. arable conversion or for assessing the impact of climate change.

Marketing and infrastructure

7.38 Our expert consultees re-emphasised that the over-riding current issue for organic producers is marketing and infrastructure.

• producers need better knowledge of what the market needs in terms of quantity, quality and timing to help co-ordinate production
• there is a need for a body to collate information
• research is needed into information requirements and effective information transfer
• an understanding is required as to why organic farmers cannot co-operate better
• farmer groups need further encouragement
• processing infrastructure is inadequate. There is a lack of small-scale processors and the centralised retailer distribution network is a problem for remote producers
• some money could be re-directed from supporting production to supporting processing and added-value activities.
• as conventional systems change due to pressures from retailers and others to use less pesticides etc. they will become more similar to organic, the difference between them will be less clear, and this may lead to reduced rate of growth of sales
• a substantial number of farmers are likely to stop organic production when conversion aid ends. This will have some stabilising impact on supply.

Issues facing farmers in conversion

7.39 Our consultation with Dr Ken Davies, SAC Edinburgh focused more on the issues facing farmers in conversion to organic arable systems. He agrees that organic farmers are concerned about marketing as a primary issue, but suggests that more help and advice is needed for farmers converting - in particular a 'prescription' to guide them through conversion and develop a sustainable rotation etc. His view was that there was plenty ofinformation out there but it needs to be better drawn together with more handholding for converters.

7.40 He also advises the following:

• de-coupling under the MTR of the CAP may give some encouragement to organic conversion
• stockless systems may not be an appropriate solution. As they rely on set-aside, they have perennial weed problems and phosphorus and potassium supply problems, as mentioned earlier
• an alternative could be the 'partner farm' concept, as in Holland, where arable and livestock farms swop manure for grains and fodder. This ensures feed for livestock and fertility for stockless farms. But farmers do not have a reputation for co-operation.
• more generally, bracken is an increasing problem on both organic and conventional land. Control is difficult.

Emerging issues and research needs

7.41 Although there are a number of significant technical issues that would benefit from research funding, the dominant issue with existing organic farmers is marketing of produce. They are concerned about oversupply; a lack of information on supply and demand; a lack of co-ordination of the promotion of organic food; decreasing price premiums and great uncertainty about future prospects.

7.42 There is a shortage of hard data from Scotland on why there is reluctance by arable and horticulture farmers to convert to organic production. However, the results of three surveys in England and Wales, and the views of the researchers and advisers we consulted, agree that the predominant reason is almost certainly a concern about marketing.

7.43 Producers are concerned about future prospects for profitable production, particularly where the time from start of conversion to first sales could be three years or more. The potential loss of profit during conversion to arable and horticulture can also be significantly greater than on livestock farms.

7.44 For Scotland to realise a significant increase in arable and horticulture conversion, resolution of these issues is of a greater priority than technical problems. This is supported by the high proportion of current and recent science research that has been devoted to cropping, but which has not resulted in a concomitant increase in organic area in the UK.

7.27 There may be a case to establish a new mechanism to collate and co-ordinate marketing and technical information. The case for a 'centre', virtual or otherwise, which could fulfil a role similar to Organic Centre Wales should be appraised in the context of the recommended exploratory research. This Centre draws together, synthesises and make available technical information, developments in standards issues and overall market intelligence. In essence, it acts as a central repository of information, but also as a focal point for the organic sector. (However, it is unlikely that, on a national basis, this kind of mechanism would co-ordinate supplies with market demand, as suggested by some producers. Such an overall market co-ordinating role would be very ambitious, and based on other experiences of agricultural co-operation, organic and conventional, would be unlikely to succeed.)

7.32 Priorities for scientific and technical research are discussed further in chapter eight.

Recommendations

• an updated study of relative support rates and their likely impact on organic conversion is beyond the scope of this report, but such a study may be necessary to advise SEERAD on future levels of post-conversion payments necessary to encourage increased arable conversion, and maintain domestic competitiveness.
• further research is needed to provide greater clarity on what environmental benefits are required to be delivered by producers, by SEERAD in particular and by consumers more generally. Research is also required to determine whether support for organic farming is the most cost-effective way of gaining desired environmental benefits nationally.
• enhanced methods to improve access to market and supply information are required. As concluded from the producer meetings, there is a case for SEERAD to fund a study to identify the most effective methods of information provision to producers, and in a form likely to promote better understanding and uptake. Despite present efforts, there remains a perceived gap.
• to address the need to improve elements of the infrastructure, there is a requirement to determine more fully why abattoirs are not interested in handling organic animals - is it cost, added complication? - and to develop innovative ways to overcome the constraints. The nature of any market failure needs to be explored and if failure exists, the case for public sector support for new investment carefully examined.
• there is a need for further study of how best to encourage effective and lasting co-operation between farmers, including novel business models for co-operation, such as partner farms. It is probable that co-operation on a regional or local basis is likely to be more successful as it is consistent with themes of local production, identity and branding. The approach is more likely to generate better member loyalty, as well as making infrastructure and physical linkages easier.
• research is required to determine reasons for arable and horticulture farmers who have considered organic conversion, not proceeding with that conversion. There is merit in reviewing levels of conversion and post-conversion payments for arable and horticulture organic farms. Would higher payments encourage more conversion? If so, how high would they need to be?

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