Beef 2020: review report

Maximising efficiency in the supply chain

Background discussion on improving the health status of the herd

The future shape of the Scottish red meat sector is dependent on security of and growth in cattle supply. Despite the continuation of a degree of decoupled support from the Common Agricultural Policy, the long term sustainability of the industry must be built on maximising efficiency and through that, margins.

Improving efficiency also brings benefits in terms of environmental sustainability, particularly reduced greenhouse gas emissions per kilogram of beef produced. Agriculture contributes significantly to greenhouse gas emissions and ruminants in particular account for around 20% of global methane emissions.

These emissions can be reduced by managing animals more efficiently, essentially reducing death, disease and lack of productivity. Areas that have been identified where significant improvements in livestock management can be made include breeding, nutrition and reducing endemic (or production) diseases in particular.

This is best achieved by "sustainable intensification". This means producing more food for humans from fewer natural resources, with less waste. It does not imply factory farming or solely large scale farming, and thus is applicable to all or most farming sectors - intensive indoor, outdoor breeding, mixed farming, crofting etc. It relies on the use of the most appropriate technologies and farmers being aware of the information available to best improve their efficiency.

Ruminants are generally less efficient than pigs and poultry when it comes to feed conversion, but they do turn an inedible matrix, grass, into a protein that humans can consume. The fact that 80% of Scotland's land is upland or hill grazing's means this valuable resource for food production can only be effectively utilised by the grazing of ruminants.

Infectious disease accounts for around a 17% loss in production in UK terms. Generally disease is preventable and it is therefore a good target for improvements - more food as outputs and less waste in inputs of time and costs.

There are a number of economically significant diseases and infections present in the Scottish beef herd the control of which would have immediate economic benefit to the industry.

Johne's Disease

Johne's disease is an infectious wasting condition of cattle which is closely related to the organism causing TB. Infection results in weight loss, reduced milk yield, infertility and early culling.

The disease is known world-wide and the incidence in the UK is increasing as herds become larger and stocking densities increase.

In 2002 the cost to the UK cattle industry was put at £13m per year or £16 per cow in a suckler herd with the presence of Johne's disease.

A survey of beef cattle in the United States showed beef cows infected with Johne's disease weaned calves 50 pounds (c.22Kg) lighter than normal herd mates. ^[20] Losses through Johne's disease were estimated by ADAS in 2012 to be over £4,000 per year for a suckler herd of 100 cows ^[21] .

Recommendation 14

Adopt an industry wide initiative to reduce and control Johne's disease.

Liver Fluke

Fluke infestation has escalated significantly in recent years, aided by prolonged wet weather in 2012 and 2013. Economic losses to the industry come through the downgrading or condemnation of livers, but also through poor animal performance, particularly growth rates.

Work by Sanchez-Vazquez and Lewis ^[22] estimated the loss of carcase value through reduced weight, carcase fatness and confirmation as 0.3% but this did not account for the increase in time, and hence feed cost, taken to reach slaughter weight. The 2013 ADAS ^[23] report quotes work by Harbro Ltd. which showed liver fluke infestation can reduce growth rates extending the finishing period by some 27 days to achieve the same sale weight as non-affected cattle, or reducing carcase weights at sale. This resulted in an estimated loss of £90 per affected animal.

Fluke infestation also has a direct economic consequence on the meat processing link of the supply chain. The Food Standards Agency reported that during 2013 one-third of cattle killed in Scottish abattoirs had liver fluke. Condemnation of livers reduces their market value considerably such that at the current level of condemnations the slaughter industry is losing in excess of £0.25m per year from this loss in value of livers. There is therefore considerable economic gain to be achieved by reducing the level of liver fluke infestation among the Scottish beef industry.

Recommendation 15

Adopt an industry wide initiative for the reduction and control of liver fluke.

Herd Health Plans

Other significant diseases, including respiratory diseases and scours, also impact on the physical and financial performance for the primary producer. By working closely with the veterinary profession to develop and apply herd health and animal bio security plans the health status of the Scottish cattle herd can be improved.

The 2007-2013 SRDP plan included support for animal welfare by encouraging the preparation of animal health and welfare plans. However the real driver for change has to be the application of those plans on farm. To improve the use of, and demonstrate the value of, herd health plans will require short term support to encourage their uptake and provide evidence of implementation of the plan for the benefit of animal wellbeing and performance.

Recommendation 16

Develop a rewards programme for meeting objectives of herd welfare plans.

Support new entrants

Purchase of livestock and access to land

A thriving Scottish beef industry is one that is structured to allow entrepreneurial spirit to thrive. Establishing or expanding a beef enterprise is a capital intensive exercise. In recent discussions with new entrants and others, access to working capital for livestock purchase was identified as a constraint on business development as was assured medium term access to land. To overcome some of these constraints requires a new way of thinking with respect to facilitating business opportunities for enthusiastic individuals, young or old, who would like to enter the industry.

Access to Finance

Establishing or expanding a suckler cow enterprise is, as a consequence of the biological process of cattle breeding, a medium term venture. It requires considerable working capital to facilitate herd establishment or growth. Many new entrants, or young farmers taking over existing businesses, can find it hard to demonstrate a track record in support of their business plans. In these specific circumstances access to supported start up finance would be a welcome resource.

Recommendation 17

Provision should be made within the Scottish Rural Development Programme to allow investment support for livestock purchases made by new entrants to beef production.

While targeted assistance for livestock purchase is one mechanism, consideration should also be given to a dedicated medium term loan facility at preferential rates for new entrants to the industry to support the wider working capital requirements of a newly established business where more than two-thirds of the budgeted income of the business would come from a beef enterprise.

Access to land

Following from proposals contained in the latest reform of the CAP with respect to crop diversity, additional quantities of grassland may be required on some arable farm businesses. Consequently, with the loss of livestock husbandry skills in some of these situations, opportunities may develop for enthusiastic livestock farmers/new entrants to facilitate and manage a cattle enterprise on these holdings.

Recommendation 18

A consideration for the Industry working group identified in Recommendation 1 should be to devise a model agreement to facilitate share farming of beef cattle on arable holdings.

World leading producer technical efficiency

Benchmarking

Earlier in this report emphasis was placed on the need for an improved skills base and access to suitable knowledge transfer programmes. Comment was also made of the potential to collect animal information into a central database. To compliment these initiatives and maximise their benefit, the production sector would also benefit from easy access to benchmarking of individual technical and financial performance containing peer group averages with the objective of identifying the strengths and weaknesses of an individual business.

While selling price is important to determining enterprise financial viability so too are the costs of production. Consequently benchmarking tools should focus equally on maximising revenue from the market place and managing costs of production.

To maximise the benefit of a benchmarking initiative it is necessary for individual producers to have access to the resources to measure and capture the basic data need to support benchmarking.

Recommendation 19

Develop web based benchmarking tools for the beef industry.

Performance Monitoring

It is very difficult to meaningfully alter something, never mind improve it, if you cannot first accurately measure what you are looking to improve. Access to accurate weigh scale facilities for every beef farmer in Scotland should be the ambition of our sector.

These systems, once integrated into the normal cattle handling system coupled with EID tags and auto readers make for easy performance monitoring on many progressive Scottish beef farms.

The provision of mobile systems which could be operated by, for example, a new entrant as an extra income source, would deliver both the labour required to handle the animals and the facilities to carry out the weighing in one move. This would overcome the capital investment and labour provision barriers for smaller units.

Recommendation 20

Provide support for the infrastructure required to support data gathering and access to industry data and knowledge e.g. weigh crates, ICT, co-operative action.

World leading processor efficiencies

By product re-classification

Although the processing sector's largest challenge is the decline in livestock numbers over the past two decades, they have also faced additional costs in respect of regulatory requirements for the management of waste and specified risk materials in particular. This latter challenge has been slowly relaxed since 2006 but there remain a number of cattle by-products that face restricted sale or require costly disposal options. Removing restrictions on these products, for example mesentery fat and bovine intestines, would offer immediate gains to the processing sector and reduce reliance on imports for example for haggis casings. Scottish industry estimates from 2012 put the loss of revenue due to the classification of mesentery fat as a specified risk material in the order of £1.5m per year and from bovine intestine in excess of £10m per year.

Recommendation 21

Work with the European commission to reclassify by product so as to reduce waste and increase value from the wider fifth quarter in the Scottish beef processing sector.

Improving the sustainability of the processing sector will also be dependent on minimising waste of all forms; for example, water, energy and refrigeration costs, and maximising the value of beef and its co-products, for example fifth quarter, hides, bones, blood etc.

Processors have recognised that cost savings or revenue gains can be made in respect of the above elements. However, notwithstanding the environmental gains that may arise and the wider benefits to efficiency the revenue gains are such that in many cases the payback period for the capital investment needed does not justify the level of expenditure required by businesses at the current time.

Recommendation 22

Provide investment support to encourage capital investment in new technologies that reduce or eliminate waste in the Scottish beef processing sector.

Improving access to technical knowledge

In developing this vision a wide range of measures to support and develop the supply chain have been identified. There is also a lot of work of both a research, advisory and consultancy nature currently being undertaken. One of the challenges identified for the producer is that this diversity of information is difficult to assimilate and access by many.

There is a role for an independent not- for- profit organisation to provide a single entry point for those seeking ideas and support to drive their business forward.

This organisation should act as a repository of information on a wide range of topics including details of all potential farm and industry support measures and recognised companies and individuals who have the relevant skills to support businesses through their development. The organisation would have at its core the objective of directing businesses to the best source of advice to improve planning and technical efficiency.

Recommendation 23

Establish a portal providing a single point contact to create a tailored business support package drawing on relevant technical expertise and funding.