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3. Food production and marketing
Goal
A Forward Strategy for Scottish Agriculture made it clear that Scotland needs a successful and profitable farming industry built upon the use of good business practices and meeting the needs of our wider food and drink industry, of which farming is an integral part. This goal remains unchanged, but CAP reform, and other issues discussed in section 2, have changed the context within which it will be delivered. The industry needs to work together and collaborate closely with the rest of the food and drink industry to help create a more profitable and sustainable future. This will help ensure that there is effective sharing of essential market information throughout the supply chain.
Our first goal, therefore, is that:
Scottish food producers, food processors, retailers and the food service sector should work together to identify, inform and meet market demand, drawing on business advice and sharing resources and experience to control costs and increase incomes.
Progress
Over the last five years there have been a number of useful initiatives developed jointly by the industry and the Executive. The Farm Business Advice and Skills Service (Farm BASS) has helped over 1,000 farmers to improve their business development and planning skills. Monitor Farms have been established to help groups of farmers to share experience, develop best practice and work with local businesses to improve performance. The Animal Health and Welfare Strategy has been introduced together with farm health planning schemes to protect livestock, reduce disease, reduce veterinary costs and improve productivity and profitability. The Scottish Agricultural Organisation Society ( SAOS) has promoted initiatives to increase co-operation and collaboration and to shorten the food chain. Progress has also been made through the Organic Action Plan, voluntary food labelling and quality assurance schemes. We must now enhance and reinforce this work in order to improve and sustain profitability in Scottish farming. As we go to press with this document, we are acutely conscious of the importance of re-opening beef export markets and the significance of imminent EU decisions on this. When these markets are re-opened, they will offer a major opportunity for Scottish beef producers.
Maintaining momentum
Sustainable and profitable food production is the core activity of the farming sector. It supports economic activity in rural areas, and the Scottish food manufacturing industry relies on Scottish farmers for 36% of its total inputs. Farming also makes a major contribution to the environment and can have a positive influence on the nation's eating habits, health and well-being. To deliver these benefits, however, we need to build an industry which is enduringly successful, confident and profitable. This means helping primary producers to obtain proper rewards for their skills and hard work, creating a vibrant industry which will help to sustain rural life and will attract enterprising young people.
Competition in global commodity markets will always be a serious challenge for Scottish producers due to their relatively small scale of operations and the frequently difficult farming conditions. This highlights the importance of product differentiation, taking advantage of the fact that Scottish produce has a good story to tell in terms of tradition, quality, environment and animal welfare. Consumers primarily buy on price, but their buying decisions are also influenced by quality. There is certainly a market in quality produce, reflected in the significant and growing market for premium products. Consumers are also showing greater interest in healthy, nutritious and locally sourced food. Thus, there is a real marketing opportunity for the Scottish provenance. There is, however, a constant need to explain to consumers what is special about Scottish produce, for example in terms of its quality, value, nutrition, environmental friendliness and local production. We must also ensure that these standards are constantly monitored and maintained to promote consumer confidence. As well as farmers, this will benefit processors and the food service sector, where growth in food tourism has built on Scotland's reputation for high quality food. Work has been undertaken with local authorities to define best value in public procurement, recognising the quality of Scottish produce, and this should also be taken forward.
Market information is essential for farmers to work with other parts of the food chain in order to understand and meet customers' demands. A number of organisations and individual companies have demonstrated the importance of collaborative supply chains in promoting innovation, competitiveness and market responsiveness. We believe that this is also an area where there is important potential for further development. We also wish to encourage the further development of food processing industries and to promote a culture of innovation in the agri-food sector. Scottish Enterprise has identified the food and drink sector as a national priority industry and it is vital that agricultural industry stakeholders remain closely involved in the future development of this food and drink industry cluster. The Executive makes food processing and marketing grants available to help address market failure and promote public benefit. We have already initiated a productive dialogue with members of the Scottish Food and Drink Industry Strategy Group to improve cooperation and information flow.
Supermarkets are a major force, providing important markets for producers and choice for consumers. We are aware of recent publicity about the role of supermarkets. The Office of Fair Trading is currently reconsidering its decision not to refer the grocery market to the Competition Commission for investigation. There are also concerns about the perceived attitudes of the competition authorities to the dairy sector, given the need to restructure in order to be internationally competitive. While competition law is a "reserved" matter, it is also extremely important for Scottish agriculture. We must continue to work with UK authorities to address competition issues.
Fundamentals of cost control and good husbandry will always be crucial to farming success. Practical farming skills are a continuing core strength of the industry but the value derived from them can be enhanced through more widespread use of business skills. Many of the most successful farm businesses already provide excellent examples of how skills in marketing, co-operation and innovation can be used to best advantage. There are, however, many other businesses which, for a variety of reasons, are not deriving the same benefit. This presents the challenge of improving the tools for business success, both in terms of quality and quantity; ensuring that they are readily available and easily understood; and persuading the wider farming community to use them. Our aim is for more farmers to move towards the top of the performance scale.
Actions
- Improve the availability and use of market information by farm businesses to help identify market opportunities, target the most profitable areas, encourage innovation and new product development, and promote local processing and marketing in line with the Scottish Food and Drink Strategy.
- Strengthen the links between primary producers and other food industry sectors, including processors, retailers and the food service sector (including those responsible for public procurement).
- Promote wider use of the principles of collaborative supply chains, with producers, processors and retailers working together to develop markets, share information and achieve sustainable contracts.
- Consult key stakeholders on priorities for future food processing and marketing grant schemes.
- Work with the wider food and drink industry to develop messages for consumers about the benefits of buying Scottish produce.
- Examine consumer preferences in terms of clarity of labelling to identify scope for further improvement.
- Further develop the Monitor Farms initiative to increase the number of farms across Scotland and widen the scope of their activity.
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