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12/02/16 14:47

Speech to NFUS AGM 2016

Rural Affairs Secretary Richard Lochhead
St Andrews
12 February 2016

I’m delighted to be here once again in what is my 9th year having the honour of addressing you all.

I enjoyed last night’s dinner - a number of you said that as this is Valentine’s weekend, you were going to shower me with love this morning! However, others said a reenactment of the St Valentine’s Day massacre was more likely!

Boy, where has the time gone?

I feel just as proud to be Farming and Food Minister today as I did when first appointed in 2007 - it has been a privilege to work with the men and women who work our land, nurture our environment and put food on our tables.

And on the subject of great people in your industry, I was pleased to learn that Lachlan Maclean was posthumously awarded the Miskelly Award.

Along with the late Bert Leitch, another great character we all miss, Lachlan was someone whom I admired greatly and whose advice I valued.

On my visit to Mull soon after being appointed Lachlan and Bert persuaded me to change the LFASS rates and I’ll always remember that visit and their hospitality.

From our hill farmers on Mull, to arable farms in Lothian, to the crofter on Skye, this is an industry that represents tradition but also cutting edge innovation, that works round the clock in all weathers and often in dangerous and even isolated conditions.

It’s an absolute privilege for me to hold this role.

But believe me it doesn’t get any easier!

In some ways your industry has changed over the years but much has remained constant.

One thing that’s not changed is the unwavering commitment and support the NFUS provides to progress your cause.

It’s that engagement – on cold winter nights in Orkney, Dumfries and Mull or wherever that makes the difference in ensuring your voice is heard.

And we need to hear your voices, and listen to you, now, more than ever.

Farmers are used to ups and downs, good years and bad.

But normally, at any one time, there are some sectors doing well – hence the saying ‘up horn, down corn’ and vice versa.

But in the last year or so we’ve seen an unprecedented coming together of difficulties for almost the whole industry – a perfect storm.

We’re all well aware of the problems in the dairy sector.

I heard this at first-hand earlier this week when I met a large group of Ayrshire dairy farmers who are feeling the full impact of rock-bottom prices.

Lamb prices ended the year about 13% down on December 2014.

Pig meat prices, an issue you highlighted earlier this week, were generally about 15% lower in than in 2014.

The beef sector faced price volatility, fluctuating exchange rates and competition from imports.

Egg producers got by.

But in poultrymeat, prices were 8% down, with the sector feeling the impact of structural changes throughout the supply chain, and stiff competition from imports.

And in cereals, 2015 milling and malting prices were at least 10% down on 2014. Yet, one malting plant I visited recently is preparing to expand.

This is all reflected in recent Income From Farming figures, which show us that 2015 was the 2nd lowest in the past decade.

At the same time, we’ve seen some of the most extreme weather conditions you’ve had to deal with.

2015 was officially the warmest year since records began, beating the previous record in 2014.

It was also one of the wettest years on record, with December seeing more rainfall than any other month in history.

- Floods have devastated prime farm land.

- Rain has saturated our lush feeding grass.

- Just as I saw for myself when last month I visited the Strachan’s at Lochlands Farm in Blairgowrie, where the flooding on the farm and beyond was almost biblical.

And those market and weather conditions have coincided with the biggest CAP reform ever.

If that doesn’t constitute a perfect storm, I don’t know what does.

In those circumstances it’s natural that farmers seek government help.

There are governments who care, and try their best – and there are governments who think you should just be left to sink or swim.

I know you’ll always be asking me for more.

We listen to the industry. And we do our best to respond.

We may get some things wrong – but I believe we get a lot right.

In this Parliament alone,

- we supported farmers facing unprecedented blizzards and snow damage in 2011;

- we found extra money for new entrants to bridge the gap between the old CAP and the new.

- we found £45 million for the scheme we’ll open this year to help the beef sector cope with the transition and encourage transformational change.

More recently:

- we’ve given additional support to Bute dairy farmers to help them mitigate the worst of the swinging price cuts imposed on them;

- we’ve just set up a £1 million scheme for flood bank repair works

- we worked with you to deliver help to Orkney farmers hit by poor weather

That’s just a snippet of this Government’s record in supporting agriculture in its time of need.

And we will keep on doing our best.

But I know that cashflow is a big issue right now and bills need paid.

That’s why I’m only too aware of the importance of getting CAP payments out the door more quickly.

Under the old CAP, the Government had an outstanding record in making payments when the window opened in December.

We always knew that this year would be more difficult.

For the first time ever Pillar 1 and Pillar 2 were reformed at the same time.

You’ve all heard me say time and again how complex the task is that we faced this year.

We had to calculate around 4 million hectares-worth of new payment entitlement values, not just for 2015, but for the whole transition period up to 2019.

Major one-off tasks that need to be done in year 1.

We’ve launched nearly 20 different schemes across both Pillars. Nearly all of those schemes are brand new or significantly changed from the previous CAP.

In the old CAP, we had 2 schemes in Pillar 1 – the single farm payment and the beef scheme, both of which applied uniformly across the whole country.

Today, we have six schemes —basic payment, greening, young farmers top-up, mainland beef, island beef and upland sheep— every one of which involves geographic targeting.

I fully accept the current situation is not good enough, and I’m sorry that we are not getting payments out the door more quickly.

We all knew that there was a high risk to the payments timetable due to the move away from historic payments, and the decisions we took here in Scotland to meet the industry’s needs.

During the negotiations, with the NFU and other stakeholders, we jointly decided to be outcome focused.

Indeed, your own views could not have been clearer.

Could not have been more forceful.

NFU Scotland even warned me at one point not to shape my policy by what suits “software designers” rather than “Scottish policy requirements”, or I quote “by focusing solely on what fits computer systems and the payment date”.

This is message you conveyed throughout 2014.

I listened to what you said and we jointly agreed to focus on Scotland’s needs in the full knowledge that it would make delivery more challenging – so we went for three payment regions, new headage schemes etc to target activity with our reducing budgets.

And I said in all good faith that we would still strive to get the payments out as early as possible but we all accepted that delivering payments under the same timetable as the old CAP was a tall order.

When NFUS agreed that trade-off, you didn’t know what the market and the weather would do between then and now.

But nor did anyone.

But I want to be straight with you, because I’m as frustrated as anyone about the slow pace in getting payments out the door.

It is taking too long to process applications - which we have to do under EU rules prior to issuing payment.

Like you, I’m concerned about the knock-on impact on other schemes. Such as LFASS and the coupled support schemes.

I’m doing everything possible to minimize the impact on them.

And we’ve had some movement this week, with both the results of the 2015 Agri-Environment-Climate scheme round and the opening of the 2016 round.

The new IT system is generating payments.

As of today, 7306 payments have been processed to over 40% of our farmers and crofters.

And we’re working every day to improve the system with staff working round the clock.

And more local staff are working overtime processing applications. I gather Allan paid tribute to them yesterday and I thank him for that.

So as I said recently, we are working flat out to get as many payments as we can out the door by the end of March – and I’m committed to giving weekly updates on progress.

However, we know there will be complex cases, such as those that have been inspected, that will take longer.

The banks, whom I met yesterday, have urged customers to err on the side of caution and contact them sooner rather than later. That’s what I would do.

I know that the wait for payment is causing financial difficulties for some and we’ve always made clear that those who are finding it tough can make themselves known to local offices.

But we want to do more to help. So today I’m announcing more help for genuine hardship cases.

I can confirm that we are establishing a scheme backed by £20m of Scottish Government resources to ensure those most in need can access loans whilst waiting for their subsidy payments.

For those who have not received their payments we hope these loans will help tide their businesses over – help pay feed bills, auction marts and so on.

We will discuss with the industry the detail and how we can get the scheme up and running quickly.

In the meantime, we’ll work flat out to issue the CAP payments which is the best way to reduce the demand for hardship loans.

Self-evidently, the CAP remains vitally important to Scottish agriculture.

But as we focus on the delivery of the new CAP and its complexities, we must remember what we achieved in negotiating it.

For the first time ever we are able to support young farmers and new entrants properly.

This work is a major breakthrough, and will mean that direct support will be flowing to nearly 800 producers over the next 6 years.

And we have been able to better target genuine activity so, for the first time, we can tackle slipper farming.

In doing that we’ve made more money available to real farmers, and we’ve prevented a million hectares of unproductive land coming into the CAP.

We have been able to target our resources to create a new beef coupled support scheme with an island top up to recognise the additional challenges for our island communities, alongside a new sheep support scheme.

And, in addition, we will soon launch the revolutionary £45m Beef Efficiency Scheme – that will help improve the efficiency of the Scottish herd; increase on-farm profitability and contribute to our carbon reduction targets.

We have an agriculture and food policy that reflects Scotland’s priorities and that was developed by widespread consultation in recent years.

But we can’t stand still.

Our time and attention have been dominated by the CAP.

When you’re in the eye of the storm, as we are now, it’s really hard to lift your eyes and see the future.

When today’s tough, it’s hard to find the time and space to think seriously about tomorrow.

But we have to do that – and do it together.

It is my intention to address the fundamentals that are holding us back and to grasp the opportunities the future will bring.

We must be ambitious, radical and innovative but at the same time recognize the ongoing reduction in financial resources at both in the EU and domestically.

That’s my plea to you all of you today: that we give added focus to the future.

The NFU is ideally placed to provide the leadership that’s required in these changing times.

We owe it to the industry. Because there are major issues we need to address now.

Long-term issues, on which we’ve made progress – but where much more is needed in the coming years.

Like feeding our people and the rest of the world.

The food and drink sector continues to break record after record, target after target.

Since 2007:

- Growth targets smashed early

- industry growing and double the rate of the UK’s!

- 25% increase in the number of new food businesses

- Value of retail sales of Scottish brands across the UK up 35%

- Exports up 57%

- Industry turnover up 24%

What we have witnessed in recent years is a genuine revolution.

Consumer attitudes have changed and expectations are high.

Farm shops are bustling.

Farmers markets are more common place.

Menus are proudly displaying Scottish.

Quality local food is in demand.

So the opportunities that lie ahead are boundless both at home and abroad.

More and more producers are adding value to their own raw materials - as I travel round our country I see more and more farmer- led food enterprises and they are doing well.

And many are involved in exports.

And I remain convinced that, for those who can, targeting international markets is a good move.

The size of the markets are jaw-dropping.

In North America, it’s estimated that getting just one tenth of 1% of the beef market could be worth £40 million.

And the US cheese market is forecast to reach 26 billion dollars in 2016 - if we could capture just 0.1% of the market it could be worth around £18 million pounds to Scotland.

There are huge opportunities for Scottish farmers to grasp in the coming years.

I’ve been fortunate enough to meet chefs and buyers from around the world over the last few years - most recently, with NFUS, NSA, QMS and others in the US and Canada.

In October last year, Scotland Food & Drink, SDI and its partners brought 150 buyers from 20 countries to Gleneagles.

We took these buyers to breweries & distilleries, bakeries and livestock farms – to see for themselves our provenance story.

When I came to office in 2007, delivering an event of that scale, with Scotland having that pulling power around the world, was unimaginable.

Many countries now look to Scotland as a model in terms of developing a national brand for food and drink.

It’s no surprise that both Northern Ireland and Wales are establishing similar bodies to Scotland Food & Drink.

However, we can still learn.

I look at New Zealand and see a nation geographically peripheral like Scotland.

With climatic challenges like Scotland.

With a population smaller than ours.

They only produce a little over 2% of the world’s milk, yet they now account for over a third of the global trade in dairy products.

A new strategy is being written for the sector by Scotland Food & Drink and all its partners, including NFUS.

It will build a vision for 2030, articulate the kind of industry we want to see and what we need to do to get there.

It will influence millions of pounds of investment over the next 10-15 years.

Agriculture must be the building block of this new plan.

There are many successes in our journey since 2007, but I don’t believe we have properly connected farming to our food and drink strategy.

I urge you and NFUS to engage with this process.

This strategy should be your strategy.

It will require new thinking for sure.

If we are doing things in agriculture because that’s how they have always been done, we must challenge them.

I want to explore directly connecting farmers with export opportunities. Our forward-thinking meat processors already explore international opportunities but I believe we should look at other models.

As such I will be asking Scotland Food & Drink to work with its partners this year on an initiative to explore a new model of exports, working directly with farmers, to forge new premium market opportunities.

So exciting times ahead.

But I remain convinced that one aspect we must work hard to fix is the dysfunctional supply chain.

Whilst all our sectors have their own distinct challenges, this is at the core of the problems.

Time and time again, I hear horror stories of producers being relentlessly squeezed in pursuit of profit.

Producers at the mercy of powerful buyers who wield their influence in the knowledge that others must comply in order to retain business.

Our big retailers and food service sector organisations provide many great things to Scotland and our economy.

We want and need them here.

But the balance of power has moved too far and it must be addressed.

We know business can be tough. We know that it can be ruthless. Farmers understand that.

But we need to put our producers on a more equal and fairer footing to ensure the long term viability of the industry.

I understand that issue will be sought to be tackled by the Agricultural Markets Task Force set up by Commissioner Hogan.

This Force will provide a report in August 2016 on steps to be taken to improve the position of farmers in the food chain.

This is welcome, but long overdue, and we must make our voices known in this debate.

And we must insist on action from the UK government as well.

And I will continue to call on the DEFRA Secretary of State to convene a summit of retailers’ CEOs to sign them up to an agreement on issues like contracts, sourcing and shelf mixing.

Such an agreement where the retail and the food service sectors adopt new supply chain standards would greatly help Scottish producers.

You know, Ayrshire dairy farmers I met earlier this week told me they are non-aligned and get 14p a litre for their milk – an insult – while others get double that or more.

At the same time our supermarkets stock and promote imported cheeses, yoghurts and butters.

The experience of our hard working dairy producers illustrate perfectly why our supply chains are dysfunctional and must change.

We’re doing our bit and our Dairy Plan is targeting new exports markets with our new dairy brand and seeking to attract new processing capacity to Scotland. The signs are encouraging and in the coming months we hope to have some positive news.

In the meantime, the UK Government should call the supermarkets together and bang heads.

We need profitable agriculture if we are to attract new blood into farming.

We need to focus harder on the next generation.

Only 12% of farm occupiers in Scotland are under 45 years of age.

So we must act now to ensure that the raw materials can continue to underpin the phenomenal success of Scotland’s Food and Drink industry.

In my time in office we have achieved:

- first ever targeted new entrant grants, which we expanded;

- bridging help between old and new CAP;

- much fairer access to CAP, leading to a genuinely level playing field over this CAP reform period.

But still need to do more, and I think access to land is key.

And that’s why our current proposals for agricultural tenancies are important.

Earlier this week prior to my appearance before the Parliamentary committee to move amendments on the Bill, one 28 year old tenant farmer from Argyll emailed me to tell me what I was proposing “would really make a difference to the tenanted sector, for the better.”

As an aside to this reform, many will know I tasked a group last year to deliver proposals to maximise the number of starter unit opportunities on publicly owned land.

In advance of their report, I’m pleased to confirm that the Group have been able to identify imminent letting opportunities that will be announced soon.

Another key issue for the future is the environment.

Clearly, for land-based sectors like farming, environmental regulation isn’t going to go away. But CAP Greening doesn’t really work for Scotland.

It does little to address climate change and is not sufficiently flexible to meet Scottish environmental needs.

I know that greening has been a challenging element of the new CAP for farmers.

I listened to your concerns about crop diversification and sought approval from the Commission to replace this with alternative practices, like leaving stubbles on 25% of arable land over the winter.

The James Hutton I