Food production; foreign trade and flightpaths for chiffchaffs – Full Report

BCPC/Farmers Club Technical Seminar 12 May 2022.

Food production; foreign trade and flightpaths for chiffchaffs…

Chairman’s introduction
Stephen Howe, BCPC Advisory Board

This is the fifth in the series of technical seminars organised by the British Crop Production Council in conjunction with The Farmers Club and on this occasion is focussing on the delicate balancing act of farming, food production and protecting the environment, and the challenges that presents if the industry is to remain profitable in the increasingly dynamic, competitive, global world of food production.

The demand for affordable food is no different today than it was in the period leading up to the Repeal of the Corn Laws more than 174 years ago. But for UK farmers the dynamics, economics and environmental pressures of producing it are now vastly different.

Following our departure from the European Union, the challenges facing UK agriculture on both sides of the farm gate have multiplied: not least of those is the significance of increasingly dynamic global trade and much greater interest and focus on food supplies and cost from consumers, suppliers and, no doubt, government particularly its impact on inflation.

Meanwhile, our industry is coming to terms with the implications of the 2020 Agriculture Act; the 2021 Environment Bill; the Government’s 25- year environmental plan initiated in 2018 and its National Food Strategy of 2020. Together, those are designed to change the direction of UK farming from one of progressive intensification, seen over the past 50 years, to one based on sustainability aligned to the provision of public goods focussed on environmental concerns, not least of which is climate change including a reduction in carbon emissions to net zero by 2040.

For farmers that means a progressive decline in direct payments over the next six years with any future financial support linked to environmental projects such as the Environmental Land Management Scheme and contributions towards certain approved capital investment projects designed to improve productivity launched in a barrage of grand statements by government.

The fact remains: profitable UK farming, the countryside it protects and the environment are inextricably linked. It is not possible to have one of those components dominating the other at any time. Least of all with global demand for food continuing to increase and future food security high on the agenda at home and abroad.

What does the future hold for UK food production?
Allan Wilkinson, Head of Agrifoods, HSBC Bank
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UK agriculture faces a bright future – despite the huge challenges faced by many farm businesses, says Allan Wilkinson, head of agri-foods at HSBC Bank.

“As an industry, we must take ourselves forward,” Mr Wilkinson told a meeting of the British Crop Production Council. This means working more collaboratively, showing government that short-termism is not the answer and demonstrating that we are “best in class”.

British food is important. There is growing consumer interest in food provenance. And food businesses are improving local access. First Milk, for example, has just rolled out its first on-farm milk vending machines in Derbyshire.

Retailers too are increasingly keen to back British suppliers. As well as the Co-op, Lidl and Tesco, Aldi has a five-year commitment to boosting sales of British food and drink. Morrisons is also urging suppliers to source more food domestically.

That said, price is important too.

About 60% of food on British plates is produced in UK – including most grains, meat, dairy and eggs. But there is a major deficit in terms of fruit and vegetables. Overall, UK self sufficiency in food is declining – it was 78% in the mid-1980s.

The UK imported about £48 billion of food, feed and drink in 2020. About £21.4 billion was exported – but much of this was Scottish whisky. “As an industry, we need to explain better where we are and where we need to get to,” said Mr Wilkinson.

An adequate, safe and secure food supply is vital for any country. Lack of food disrupts governments. Currently, export bans and protectionism are increasingly disrupting global food markets – largely in response to weather and politics – the biggest influencers of supply.

In extremely volatile times, such as now, price becomes less important than availability. A just-in-time supply culture doesn’t leave much leeway for things to go wrong. Supply chains need to be resilient – capable of dealing with uncertainty and coping with shocks.

At the same time, society expects food production to be sustainable. Farmers cannot ignore climate change just because they want to ramp up output. Dealing with uncertainty and the pace of change can feel comfortable but we need to rise to that challenge.

Why carbon-friendly farming is good for business
Jon Foot, AHDB, Head of Environment
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Growers should take steps to measure and reduce their carbon footprint – or face the prospect of restrictions that will limit the market for their crops.

Forthcoming legislation will require UK farmers to deliver more sustainable food production, says Jon Foot, head of environment and resource management at the Agriculture and Horticulture Development Board. In fact, it’s already happening.

These changes are being driven by society and consumers, which means they are unlikely to change over the long term – despite tighter supplies of agricultural commodities caused by the Russian invasion of Ukraine.

Big industry players – including food retailers and processors – are already changing the way they do business. They are reducing their own carbon footprint, and expecting suppliers to do the same. Unless farmers respond, their market will be limited, said Mr Foot.

As of 6 April 2022, the Task Force on Climate-Related Financial Disclosures requires more than 1,300 of the largest UK-registered companies and financial institutions to disclose climate-related financial information on a mandatory basis.

This requirement is likely to be extended to smaller companies too.

Farmers need to start thinking about this sooner rather than later. It will include changes to building design and changes to slurry spreading – such as direct injection and trailing hoes, rather than spreading – and restrictions on when different manures can be applied.

Without adequate preparation, new policies like these can seriously disrupt the way farming works This means farmers should work to optimise what they do – otherwise it will be difficult for them to meet new legislation when it comes in.

At the same time, the UK Climate Change Committee is calling for diet change. This is a win-win for politicians. They see eating less meat as good for climate change targets and good for public health. And it only affects a small proportion of society: livestock farmers.

To meet these challenges, the AHDB is are encouraging farmers to be more productive, promoting healthy balanced diets which include meat, and talking about land-sharing rather than land sparing when it come to planting trees.

Thanks to its climate, geography and abundance of grass, the UK is one of the most sustainable places to produce beef and dairy products. Without grazing ruminants, more than 60% of UK agricultural land would be taken out of food production because it is unsuitable for crops.

To take advantage of this, UK farmers must demonstrate that British food has a lower carbon footprint than imported food. A first step to achieving this means growers and livestock producers should measure the carbon footprint of their farm business.

Unless UK farmers can demonstrate they are carbon friendly, supermarkets, processors and other buyers will look elsewhere for suppliers who can. Any carbon footprint is largely driven by controllable costs – such as fertiliser and feed – which can be reduced.

The AHDB is supporting all farm sectors by showing growers and livestock producers how they can prepare for the future – and demonstrating way that controlling their climate footprint is good their farm business as well as for the environment.

“There is no magic bullet,” says Mr Foot. “But you need to measure to manage.”

“Focus on profitability – controllable costs such as feed, fuel and fertiliser. And provide evidence of any environmental co-benefits. Focus on the details that matter and set baselines for things like carbon offsetting.”

Export promotion should be a priority for food and farming businesses who want to exploit overseas markets, says an expert.
John Giles, Divisional Director Agri Food, Promar International
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Export promotion should be a priority for food and farming businesses who want to exploit overseas markets, says an expert.

The UK is a niche player when it comes to global trade, says John Giles, agri-food divisional director for Promar International. This is the same across a range of agri-food products he told the British Crop Production Council meeting in London.

As an example, the UK produces about 1% of the global apple crop, said Mr Giles. This compares to 48% produced by China and 5% produced by the USA. At the same time, the UK is a high-cost producer, which makes it hard to compete on price.

“Are we going to march into world markets being 1% and high cost? Probably not. So we are going to be looking at niche markets. The UK is a niche player when it comes to exports. We’re not going to be taking on China.”

That said, UK food exports have been growing for a number of years – largely to Europe, including Ireland, France, Netherlands and Germany. But exports are increasing to markets further afield too – especially when it comes to products like whisky and smoked salmon.

Rather than relying on trade deals, producers should look at what they can do themselves. Big corporations and retailers are moving more quicker than government – they have a commercial imperative to do so, said Mr Giles.

“China is a highly challenging market. But if you’re good at marketing, you don’t necessarily need a trade deal,” he added. “We need to a change in culture to make exports a priority, rather than leaving export promotion to Friday afternoon.”

At the same time international competition is stiff. Overseas food promotion bodies are often well-funded, aspirational and focused on exports. They frequently have best-selling ‘hero products’ and five-year plans with clear priorities. Exports are in their DNA.

“We’re great at writing strategies but not so good at implementing them,” said Mr Giles.

Despite these and other challenges, UK producers had a secret weapon – the British ‘brand’ was desirable and well respected. People were prepared to pay for it. “We should play to our strength – being British is something other countries can’t be,” explained Mr Giles.

Rather than shipping containers of meat and cheese around the world, that meant making sure British food exports were best of class – high-value niche products. It also meant making sure good marketing and promotion was at the heart of any export strategy.

Dealing with changes in land use while protecting the future profitability of your farming business
Edward Hutley, Partner, Ceres Rural
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Productivity and good cashflow management will be key to farm profitability as input costs continue to rise and the basic payment is phased out.

Many farms will achieve a net margin in excess of £500/ha (£200/acre) in 2022, says Ed Hutley, farm business consultant and partner at Ceres Rural. But the future is more uncertain as farm support changes.

A Ceres Rural survey of 171 farms across all crops types suggests growers “got themselves out of jail last year,” says Mr Hutley. Crops were drilled in a difficult autumn, followed by a dry spring and a lacklustre summer.

Many achieved a net margin of £500/ha in 2021 but the general set-up is quite fragile. With wide variations in machinery and labour costs. Since then, ag-inflation has seen an 8-10% increase in spray costs and a 300% increase in fertiliser prices.

Crop prospects for harvest 2022 look better than last year although lack of rain in much of the country is starting to impact on yield potential. “Most people are comfortable with their position for 2022 – but beyond that it is more uncertain,” says Mr Hutley.

With another reduction in basic payments due this year, productivity will be key to maintaining farm incomes. “Perhaps we are facing a choice between high input/output and low input/output agriculture – or maybe a change in farming system altogether.

Arable margins might be attractive at the moment due to high commodity prices – but farmers should consider the risk over the longer term. Some less productive areas of land might be better off in countryside stewardship, for example.

“Oilseed rape this year might be as profitable as winter wheat – but how many bad years have we had? A low yielding bean crop could be less risky. And countryside stewardship is less risky still because the income is guaranteed.”

The government’s forthcoming Sustainable Farming Incentive would never replace income lost as the basic payment scheme is phased out. But it could provide a useful source of revenue for farmers – especially for growers already meeting its requirements.

Other potential sources of income included carbon sequestration – although it was a fledgling sector with more questions than answers and should be approached with caution. Biodiversity Net Gain could be more attractive in the near future, especially for farms near the urban fringe.

Tight grain supplies have profound implications
Cecilia Pryce, Head of Compliance, Shipping and Research, Openfield
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Global cereal supplies remain especially tight – with profound implications for growers and consumers, listeners at the BCPC seminar were told.

Worldwide cereal consumption had mirrored production for the past five years, said Cecelia Pryce. Cecilia Pryce, head of shipping, research and compliance working for Openfield. This was different to previous years, when production was higher than consumption.

“There isn’t much wriggle room,” said Mrs Pryce.

That volatility is expected to continue. When it came to UK production, for example, harvest 2022 was likely to see a 14-14.5m tonne wheat crop. “That is about just enough to get us home and dry – it won’t stop market volatility,” said Mrs Pryce.

The market would always achieve a commodity balance in any given year based on supply and demand, she added. But external market influences and ongoing uncertainty meant prices were particularly volatile.

This meant consumers should ensure they secured their supply lines. It would be wrong for consumers to automatically assume that grain supplies would be available when they wanted them, just because they were the buyer.

“There are a lot of consumers in this country who click their fingers and expect every merchant to run around and fill their grain store for them. Or to deliver it on a certain Sunday, when nobody wants to work.”

Ultimately, everything relied on the supply chain working – and everyone in it to trust and work with one another. That meant farmers had to be willing to load on certain days. But consumers also had to realise that they shouldn’t make unreasonable demands.

“Supply chains aren’t broken – everything in the supply chain is hyper-efficient,” said Mrs Pryce. “It is fully traceable and we do everything we can to keep costs down. But the same cannot be said for all farmers and consumers.”

Some farms took four hours to load a wagon with grain. Some mills made lorries wait for five hours before allowing them to tip a load. The supply chain could be better but it needed full buy-in – especially when it came to grain quality, sampling, loading and tipping.

Chairman’s Summing up – Raft of challenges can be overcome
Stephen Howe, BCPC Advisory Board

Summing up the seminar, BCPC chairman Stephen Howe said it was evident that UK farmers faced a raft of complex challenges.

These challenges must be overcome for farmers to successfully produce a secure and safe supply of food while protecting and enhancing the environment, Mr Howe told listeners at the Farmers Club.

It was vital for farmers, policy-makers and influencers to understand the detail of the changes taking place and their possible impact, many of which could have a lasting impact on food supplies and food security.

UK farming systems had changed greatly over the past 50 years, with a general trend away from mixed farming. This had resulted in some polarised views and lack of understanding about the industry as a whole.

In fact, there’s a danger that many of key issues are being considered in isolation with a silo mentality. But there is no one-size fits all when it comes to UK agriculture with its different systems of land ownership and tenure.

Upland livestock farms are very different to intensive arable unit on grade one land in the east of England. So the solutions required for individual farmers to overcome the challenges they meet are vastly different too.

Influencers, politicians and their advisers need to recognise and understand this when it comes to considering food production, food security, foreign trade and, indeed, those flight paths for chiffchaffs.

There is only one common denominator which is that profitable UK farming and the countryside it protects are inextricably linked and – when it comes to change – the details must be based on facts, not fiction or wishful thinking.