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Farmers View 23rd October 2008

The national and international economic problems of the last month have been largely theoretical in nature but as we all know, the impact in the real world is not always predictable.  Those of us who remember ‘black Wednesday’ will be only too aware that, for anyone in the farming industry, ‘golden Wednesday’ would have been a better title since on that day, we entered a four year period of marked and sustained price increases for agricultural commodities.

So now that the ‘theoretical’ part of the economic crisis is over, businesses of all kinds are beginning to look at the potential impact these changes may have in the cold light of reality.  Figures from the Scottish retail consortium indicate that high street spending is already in free fall but in their provisional figures, sales of food items are going against the trend and actually showing a continued increase.  There may be some truth in the often-heard quip, times may be hard but people still have to eat.

True it may be, but there is more to it than that.  The sustained growth in food prices has come to a halt and as recession bites, retailers will begin to force prices down once again through a series of cost cutting exercises.  This will have the effect of, once again, putting additional financial pressure on smaller shops while the largest retailers, the supermarkets, may actually be strengthened by the experience as they use their muscle to squeeze the margins of everyone in the supply chain.

This supply chain management is something that all farmers have become familiar with in the last ten years but it is by no means certain that the supermarkets will be as successful on this occasion.

When our currency was at its strongest, commodity prices in the United Kingdom were at their weakest because imports from the European Union were so cheap.  At the same time, our ability to export to newly reopened markets in Europe was restricted by the fact that our products were too expensive in the Euro zone.  One benefit from the United Kingdoms current economic weakness is that, with the £ now 30% weaker, they no longer have us in that strangle hold.

In this environment, farmers can afford to be much tougher sellers than they have been but we will need some support from outside the industry to get us on to the front foot. With £Billions of UK taxpayers money now circling the globe in an attempt to keep the economy afloat, surprisingly little of it will find its way into farmers pockets yet, a little could go a long way to strengthen our hand in this particular price war.

Enter Scotland’s Cabinet Secretary for Rural Affairs and the Environment, Richard Lochhead who, speaking at the international food fair in Paris in October, committed the Scottish Government to a package of additional support for the Scottish Farming industry in view of the current economic climate. The key announcement in his package was the inclusion of two grants of £170,000 and £170,340 to Quality Meat Scotland to relaunch Scotch beef in France, Belgium and the Netherlands following last year’s export ban due to foot-and-mouth disease, and to identify and develop new markets for Scotch beef in those countries.

In the 1980’s, Scotland had a large, and growing, beef export trade to these countries which was based on a combination of demand for our quality product and affordability in the European marketplace. Access to that market was lost then regained at great expense to us all. Since the re-opening of the European market, our return has been hampered by concerns over bovine tuberculosis, foot and mouth and, most of all, the fact that our product was, thanks to the high value of the £ Sterling, much more expensive than it had previously been. These factors now seem to be receding all at the same time.

Richard Lochhead deserves praise for putting in extra financial support at a time when the beef industry can get real benefit, and in the way that is most likely to deliver. He has also given this extra money to the people who can make the best use of it. Scotland’s farmers have been divorced from the European market for too long and now is the moment for a triumphant return.

Scotland is well placed to cash in on its reputation for quality food. Export markets will deliver the best returns in years to come and this will strengthen our hand in negotiation with our domestic retailers. The success which I expect to see from this government action to boost beef sales must lead the way for others to become exporters of quality Scottish food.