Agriculture champions: interim discussion document

Themes

As this document is about a strategy not a detailed policy prescription, the policy details will of course need to be filled in over time. However, a clear overall strategy is required for all those working on the details, thereby providing the industry and stakeholder communities as well as government with clarity on what is trying to be achieved.

We have identified six strategic themes.

1. Continuity over the next five years, including securing the payments to which Scotland is entitled

It is widely accepted that Brexit is the biggest challenge faced by the agricultural sector for a generation. It is not our job to enter into the politics of Brexit. There are some who see it as an opportunity to produce policies better suited to our needs, and to strike trade deals separate from the EU-27. Others point out that there is much to do even just to avoid losing the trade deals that currently apply to us as part of the EU, and highlight the risks to our ability to export, to future support funding, and to the workforce (not only farm workers but inspectorate staff, scientists, official veterinarians and many others).

Farm policy has always been subject to change, but previous reforms in the last few decades have taken place at a pace, and with certainty sufficiently far in advance, such that the industry had time to adjust. What is beyond doubt in the case of Brexit is that the pace and uncertainty pose major threats to an industry in which many operators are already struggling with chronically low incomes.

Average Farm Business Income

Therefore we feel that seeing the industry through the next five years is not a mere tactical detail, but should be the first plank of a 10-15 year strategy. It should include keeping a close eye on CAP reform developments within the EU to ensure regulatory alignment and competitiveness.

Whilst continuity should be the watchword for the next five years, that does not mean no change. That period will also be the time when we set off in the future direction of travel. There are aspects of current policy which could be improved upon – as the EU itself is recognising at it plans the next CAP reform.

The Scottish Government has already, in the last reform, introduced capping of Pillar 1 payments, and we feel this concept should be examined more closely. Area-based payments are better suited to some types of farming than others, and where they are a bad fit with Scotland's large, extensive hill units, alternatives should be explored. For the slightly longer term, we envisage moving towards a more targeted, less 'one-size-fits-all approach' to farm policy, and we are attracted by the possibility of payment according to outcomes if that can be achieved with reasonable administration and audit.

The rest of our themes are about planning for the new world we will be moving towards.

2. Assisting the Scottish agriculture industry through a period of major transformational change

A transformational change is required to encourage individuals and businesses to be progressive, resilient and compliant. This will only come about if farmers are helped to tackle their greatest challenge – change in mindset.

Scottish farming is very diverse, in terms of sectors and land quality but also business models. We have world-class operators who have continuously evolved their businesses to match the best food producers anywhere. We have producers whose options are severely limited by their location and physical assets, but who in many cases produce food while also generating other benefits that society values – supporting the local community and economy, preventing land abandonment and depopulation, and farming in ways which protect our globally important wildlife and landscapes.

We would classify each of these, different though they are, as examples of active and professional farming. Like any good business, they align themselves to what their customer wants - whether that customer is the food supply chain, or the government as the customer for public benefits on behalf of society. Those businesses are also the best placed in terms of the resilience needed to mitigate and withstand the shocks of the market, changing weather patterns and reducing support payments.

But this level of professionalism is not universal. For a long time EU agriculture policy encouraged farmers to produce whatever they could or whatever they chose, and tried to guarantee them a living come what may. There are some within the industry whose mindset is still in that place. Their business model is often based on what they have always done. When they have hit problems of low profitability, in the absence of new injections of public money their financial situation has often deteriorated.

Our industry is lucky to enjoy huge public goodwill, but it is not unlimited and it must continue to be earned. Consumers are ever more discerning and the industry has to read these trends and adapt. Public-funded farm support is not an automatic right, it is an asset offered to promote self-betterment and it should be used as such.

We therefore see the need, not for the whole industry but for some parts of it, for a change in mindset which should in turn lead to a new confidence. This is no small ask, particularly for those who have already been in the industry for many years, and it should be supported by government. It is already a key element of initiatives such as Scottish Enterprise's Rural Leadership programme, but the farmers who take part tend to be self-selecting and those whose mindset is already forward-looking. We believe the government should look at developing a programme to support mindset change and business skills across a wider audience.

3. Enhancing Scotland's Natural Capital

'Natural Capital' can be an off-putting phrase for farmers when they hear it from the mouths of lobbyists or NGOs. But farming has always been about preserving and enhancing natural capital – soil, water, wildlife and other assets which are vital for the long-term future of the business as well as the environment.

Farmers must receive the credit that they deserve for the work they do to protect natural capital, whether that is in the form of support payments or just recognition of the role they play – including their part in educating and informing. Those who are active and proactive in this role as stewards of the land should be financially rewarded. But equally the industry must face up to the evidence that there are environmental issues. We do not believe that the vast majority of farmers would deliberately go out to damage the environment. But things can be done inadvertently, through lack of knowledge or awareness; or short term financial pressures can lead farmers to do things which in their hearts they realize are not in the best long term interest.

The evidence shows that biodiversity has declined, and water quality is still a serious issue in some areas. On climate change, the government has not singled out farming for especially strong measures – indeed it has acknowledged that food production without emissions is not possible – but it expects every part of society to play its part including our sector.

So there must be, in our future strategy, a strong theme of making optimal use of our natural capital, for economic as well as environmental reasons. Human nature means that we all prefer carrots to sticks where possible, and we certainly envisage a major role for support and encouragement, but an underlying layer of regulation is also bound to be needed. The good news is that we believe the scope for win-wins between production and environmental considerations has not yet been fully exploited – as demonstrated by the Farming for a Better Climate programme.

We feel that a new focus on soil health is needed. Improved management of nutrients and other inputs can lead to less waste of expensive fertiliser, better water quality, reduced greenhouse gas emissions and an improved bottom line. Encouraging appropriate grazing levels and tillage systems could help avoid soil erosion and underpin long term sustainable production.

We believe there are also win-wins to be had in improved plant health and animal health and welfare, supported by investment in areas such as handling systems and training, forage analysis, performance recording and market data. Scotland's high health status is a huge asset, which we have traded on successfully. But to keep ahead of the competition, we need to keep investing in it – as has been done, for example, on BVD.

There will also be an increasing need for collaborative and multi-disciplinary approaches, within Scotland and across the UK as well as internationally. One example already exists in support of the livestock sector, where concerns about various animal borne diseases have resulted in a centre of expertise for livestock being established ( EPIC). There are other examples, but there are also important gaps and the collaboration that is taking place has risen up without a planned approach. We see a strong need to make greater use of such collaboration in the future.

A key area to start would be in plant health. There are over 900 pests and pathogens recorded as being a threat to arable crops, trees and horticulture. With crop protection coming under increased scrutiny, it will be all the more important in future that Scotland is prepared against plant health shocks.

We also see a need for better integration of policy across different land uses. The present system suffers from being fragmented because of different policy imperatives, for example on forestry expansion and timber supply, on renewable energy installations, on biodiversity protection, on protecting wildland, on flood management and on agricultural support. The Land Use Strategy has made important first steps in drawing these policy threads together, but this must be continued.

Farmers themselves must also embrace this multi-objective approach. Many already do, seeing themselves as land managers with a range of opportunities at their disposal. But there are still those who see, for example, any woodland creation however carefully planned as a threat to the farming industry. That cannot be a healthy attitude, when planting trees has such an important role to play in carbon management and sequestration – not to mention in flood prevention and in livestock shelter and management.

4. Helping to improve the productive efficiency of Scottish agriculture

Farm productivity in Scotland and elsewhere in the EU has not moved significantly since the 1990s. Some have suggested to us that this is because farm support payments cushion farmers against the forces that prompt them to innovate, others that farmers' hands have been tied by increasing amounts of regulation. Either way, low productive efficiency leads to low profitability which is a widespread problem.

It is well known that the difference in performance between the top third and bottom third of the industry is huge – but it has been pointed out to us that unless they really study their figures, everybody thinks they are in the top third. Without recording and measuring activities it is not possible to effectively manage them.

Average Farm Business Income 2015/16

Our recommendation about mindset change is closely related to this. The first step towards improving is to acknowledge the need to improve. We should not shy away from comparing ourselves with international competitors, nor from learning lessons between different sectors within Scotland, including those which have traditionally had little or no support from the CAP. Our research sector is world class, and good work is being done on knowledge transfer under programmes such as Monitor Farms and Farming for Profit, but we have to improve the transmission of proven research findings into farm practice across the whole industry. The development of innovation centres of excellence could contribute to progress in this area.

We believe there are lessons to be learned from programmes in Ireland. We will not be able to match their extraordinarily generous level of EU funding, but some of their most effective initiatives do not rely on big injections of public money but on embracing change.

The result is likely to be a diverse patchwork of farm businesses, but agriculture should be doing its research as to where the demand for product lies. For some, expansion and economies of scale may be the right way forward, while others will prosper by focusing on new emerging markets. Diversified income streams will be important for many. This diversity is a strength - one-size-fits-all does not apply to business models any more than it does to policy. Government support should not aim to tell businesses what to do, but to help each to work out the best way forward for them.

Profitability can also be improved by farmers capturing more value-added. In this regard we believe short, local supply chains – for example existence small-scale horticulture for local niche markets – have a role to play for those with the appropriate skills and land.

5. Illustrating the huge opportunities for careers in the rural sector

The age demographic of Scottish farming has long been a cause for concern, as has a lack of succession planning in many businesses (whether within-family or moving towards share farming or contract farming). We recognise the efforts of the Scottish Government and others to help new entrants join the industry, through initiatives such as Farming Opportunities for New Entrants ( FONE) and the SRDP Farm Advisory Service's new entrant programme. New entrants with their drive and enthusiasm are required in the industry, though there needs to be a relaxation in the planning laws to allow more housing for this to happen.

But the future need goes much wider than farmers and crofters themselves. We will also need a new generation of agronomists, engineers, food processing staff, and all the other supporting professions with which farming is mutually dependent. We need to shine a light for both rural and urban communities on how we increase appreciation and invest in innovation for the future. The focus on CAP-related issues for many years, both by government and industry, has perhaps led to this area being overlooked. That means there is huge scope for positive action. Rural Scotland has potential careers to offer for all, but we need to publicise, encourage and deliver that aim, and this may require an investment or funds being rediverted to give this the priority position it merits.

This area is largely unrelated to Brexit and as a result is fertile ground for early action. From a national perspective we have identified a number of key challenges which merit further attention such as: improving vocational and qualification pathways and infrastructure; increasing the degree of 'career inspiration' work in the pre secondary and early secondary school; using new creative ways to engage employers with a focus on microbusinesses; and adopting an evidence-based approach to ensure public-funded skills interventions reflect labour market need.

Annex A shows some specific ideas which we hope may be able to be pursued on a quicker timescale than some of our other recommendations.

We have looked at different segments of the careers market:

• The 16 year old school leaver
• The teenager who wants to stay on at school but is undecided what to do
• Mature student/Career Changer/ Self Employed

Most teenagers choose their subjects at Secondary School at the end of third term in their second year. At present there are 'Skills for Work' Rural Skills National Progression Awards at levels 4 and 5, but numbers are tiny and too often this is seen as a subject for the 'low achiever'. There are some excellent examples of school-business liaison, for instance in Moray and in Dumfries & Galloway, and involving a variety of industry figures ranging from STEM Ambassadors to RHET volunteers, Forestry Ambassadors and Lantra Champions . The good examples need to be rolled out much more widely.

We have looked closely at apprenticeship provision. At present there is no pre-apprenticeship option for rural skills, but we believe this principle would be beneficial and should be worked up drawing on the lessons of the well-established internship programme run by Ringlink. Modern apprenticeships in land-based subjects have leveled off and are heavily concentrated in the Central Belt and South. For many farm businesses, taking on an apprentice and fulfilling the requirements expected of the employer is hard, so we are very interested in the pilot projects in the North East and in Fife on apprenticeships shared across a group of businesses. This model may have great potential.

Agricultural training of occupiers/managers

We believe it is essential these career opportunities are made available across Scotland, in urban as well as rural areas. As well as ensuring rural businesses can draw on the widest possible pool of talent, this will help improve the understanding of farming and food production in the population as a whole.

6. Improved integration of the whole supply chain for the benefit of all

Most farmers have not reaped huge benefits from the spectacular growth of Scotland's food and drink sector in recent years. The failings of our supply chains are well-documented. But the solution must be for the various players to work together – it cannot possibly be that the long-term answer lies in primary producers distancing themselves from, or being in conflict with, the businesses that buy their products.

Better information to the public about Scottish farming and its products has the potential to help, and future campaigns should be government led and owned. But in our market economy, it would be naïve to think that this alone will result in farmers receiving more sustainable returns from the supply chains they feed. The fundamental economic reality, that most farmers and crofters are small businesses selling their products to much bigger businesses, will remain.

In other countries, producers have addressed this reality by making much greater use of collaboration than in Scotland and the UK. We have discussed collaboration at length with our contributors and are struck by how many benefits it can bring: economies of scale in purchasing and selling; sharing of specialist machinery and staff; market information; risk management; logistics; branding and marketing. Perhaps most importantly of all, collaboration is a fantastic tool for enabling small producers to better produce the volume, quality and specification of product that their customers want – a basic requirement for a successful business in any sphere. We therefore see great potential in encouraging greater use of collaboration and building on the excellent, if sometimes unrecognised, work of SAOS.

Ratio of agri co-op revenue to national farm output (2013)

For some producers the right commercial strategy will be to feed into a national or international supply chain, competing on price as well as quality. For others, the future may lie in short supply chain relationships with the local retail and hospitality sectors. Our strategy should not dictate to any business what is the right approach to take, but it should encourage the provision of support and training so that each business can take well-informed decisions based on what the market wants. If we overproduce what we cannot sell, then that quality product goes into the commodity market where Scotland is not well positioned to compete.

Regulation of supply chain activity is also crucial. The grocery sector code of practice has had a positive impact, but more progress is needed to prevent bad practice in supply chains by those who hold disproportionate power, and there are also issues in competition law which need clarifying. It was probably right for the code of practice to begin with the major retailers, since their power is the greatest. But most producers do not deal directly with them, and the benefits of better supply chain relationships need to be felt along the whole chain. We would like to explore with stakeholders and the Scottish Government how best this can be achieved, which could include the retailers becoming more involved, for mutual benefit, in a partnership role with initiatives further upstream.