Select Committee on Welsh Affairs Minutes of Evidence



Memorandum submitted by the Farmers' Union of Wales (FUW)

  The Farmers' Union of Wales welcomes the Welsh Affairs Committee's decision to follow up some of the recommendations made in the Second Report of Session 1997-98 into the crisis in the Welsh livestock industry.

BACKGROUND

  1.  Agriculture continues to be the backbone of the rural economy, and livestock products generate around 90 per cent of the Welsh agricultural GDP. By the nature of its terrain, climate and farm structure, Wales is predominantly a livestock producing area, and the scope for viable alternative farming enterprises is limited. The livestock sector, therefore, has a more important role in the context of Welsh farming than is the case for the rest of the UK as a whole, where other enterprises such as farm cropping can be more extensively practiced.

  2.  80 per cent of the Welsh land mass is classified as "less favoured area" which, by nature of the soil, terrain and climate, is particularly difficult to farm. This land is predominantly grazed by sheep and cattle, and the production system is extensive by nature.

  3.  The Welsh dairy herd represents 11 per cent of the total UK herd; the beef herd represents 13 per cent of the UK national herd, and 25 per cent of the national sheep are kept in Wales. Statistics show that the number of farm holdings is declining over time with dairy holding numbers falling from 9,945 in 1977 to 3,522 in 2000. (See Annex 1)

  4.  The current decline in agricultural fortunes has to be redressed. Foot and mouth disease has meant that 2001 has been a dreadful year for Welsh farming. The wider measures needed to control the disease—the closure of export markets and livestock markets, and the tough restrictions on livestock movements—have inevitably hit farm incomes very hard indeed. The wider rural economy has also been badly affected in many areas. No cases of the disease have been experienced in Wales since 12 August 2001.

  5.  In the decades following the end of the Second World War, the policy in Britain and the EU was clear. The goal was to strengthen domestic food production to avoid food shortages. The globalisation of world trade has undermined this objective. The pressure of World Trade Negotiations and the resulting CAP reforms of 1992 and 2000 have left European agriculture much more exposed to global competition. Barriers to food imports from third countries, in terms of tariffs and quotas, have been eroded, and the scope for subsidising food exports has been reduced.

FARMING AND FOOD PRICES IN WALES

  6.  The National Assembly for Wales has recently published a vision document "Farming for the Future" which provides a 10 year strategy framework for the agricultural industry in Wales. This document highlights the choice of direction which faces the industry—whether to compete in markets for basic agricultural commodities or alternatively, to seize those markets which offer opportunities to add value.

  7.  The Welsh Food Strategy aims to develop high quality, value-added, branded products, which are aimed, where possible, at more specialist markets and niche markets. Such markets are developing rapidly as prosperity increases in the EU. Exploiting these markets will involve creating a much more integrated Welsh agri-food industry, where farmers and food processors work together to produce food products, which are targeted at consumer demand. The FUW recognises that the successful development of an agri-food industry, competing in markets for differentiated food products, will be a major factor in combating the trend towards fewer farmers and larger farms.

  8.  The FUW was instrumental in bringing the issue of the five main supermarkets dominant purchasing power to the attention of the Welsh Affairs Select Committee and welcomed Committee's recommendation that there should be an investigation into the relationship between the major retailers and their suppliers.

  9.  It would appear that the supermarkets have been very active in trying to "water down" the original proposals as published by the Competition Commission. The major retailers may think that it is in their best interests to dilute the code but any concessions to safeguard profit will merely exacerbate the problems which currently face the farming industry.

  10.  The FUW have argued that if consumers are to benefit from the new code, then suppliers must have the confidence to invest in their businesses and require a level of financial return which ensures that such investment is possible. Welsh agriculture is losing a generation of farmers due to the current crisis within the industry and existing producers are finding it difficult to make the investment necessary to compete in the increasingly global market place.

  11.  The FUW has also highlighted the increasing number of supermarket imposed costs which do not result in any financial benefit to the producer. Whilst the Welsh industry has embraced farm assurance schemes and has also invested in the promotion of beef, lamb and milk through initiatives by the MLC, Welsh Lamb and Beef Promotions and the Milk Development Council, any additional costs incurred are largely borne by the primary producer.

 

  12.  Producers found it hard to reconcile the emerging code with the original DTI "purpose and the intended effect" statement which was produced as part of the regulatory impact assessment.

  13.  Farmers have stressed that there must be regular, independent reviews of the operation of the code with due account being given to the views of suppliers of the major retailers who were given to understand that the code would deliver a more equitable framework for the sale of their goods to supermarkets.

  14.  The Prime Minister has acknowledged that supermarkets have farmers within "an armlock" and the FUW has raised concern over the fact that the foot and mouth disease (FMD) crisis exposed the undue influence of supermarkets on meat prices. Prices quoted to farmers for beef, lamb and pork were in many instances lower than they were prior to the FMD, and despite the supermarkets claim that meat prices had to increase in the shops to reflect a situation of shortage. Imports were being sucked in prior to the foot and mouth crisis on the basis of price and this factor was used to dictate the price paid to UK farmers for their livestock. During the months immediately post FMD outbreak supermarkets claimed that they had to charge more for meat at a time when farmers received less for their livestock than they did prior to 23 February. The decline in the proportion of the end value for sheep meat returning to farmers is clearly demonstrated in the retail price spreads at Annex 2.

  15.  The sheep industry in Wales is very dependent on sheep meat exports and 36 per cent to 40 per cent of production would normally be exported to mainland Europe. The partial lifting of the export ban on sheep meat had a dramatic impact on prices. The provisional average market price paid to producers for the week ended 3 November 2001, was 154.5p per kilo deadweight. The price being offered to producers for lamb sold in the week commencing the 26 November, is 210p with an additional supplement for lambs qualifying for export. The announcement that exports could commence, therefore, triggered an almost instantaneous response from the market.

  16.  The FUW has nevertheless welcomed a number of initiatives by supermarkets such as the recent announcement that Tesco, will buy over 5,000 tonnes of Welsh Reared Beef, from St Merryn Meats new custom built factory in Merthyr Tydfil. The 30 million deal launched in conjunction with Welsh Lamb and Beef Promotions should result in the procurement of over 30,000 cattle from Welsh farms.

  17.  Following pressure from the FUW on the issue of clear labelling to assist the consumer to make a decision in favour of high quality Welsh produce, Tesco's Welsh Reared Beef will be clearly labelled to highlight its Welsh origins and each pack will carry a high visibility "Welsh Reared" logo.

EXAMPLES OF FARMERS AND FARMING GROUPS BECOMING MORE INVOLVED IN THE FOOD CHAIN

Farmers First

  18.  Farmers First Plc is the holding company for a Group which comprises Farmers Ferry Ltd, Farmers Fresh and Farmers Fresh Cymru. The overall aim of the Group is to improve the financial returns for livestock producers. Farmers Ferry, the first company in the Group, was established in 1998 with donations from 6,000 producers with the aim of re-establishing the export of live sheep to continental Europe. Operating a roll-on roll-off ferry between Dover and Dunkirk the company works on the principle that increased demand from European customers and the reduction of supply of sheep in the UK resulting from increasing the volumes exported, helps to firm prices for sheep on the domestic market. To date Farmers Ferry has shipped some 2.54 million animals with an estimated sales value to UK producers of 75,085,911, and consequently prices for UK stock have risen.

 

  19.  Farmers Fresh is a meat processing business, procuring and processing sheep for export in carcass form. This business operates from an abattoir in Warwickshire and became fully operational in May 2000. The plant averages a throughput of 10,000 carcasses per week and with HAS scores [Hygiene Assessment Scores] of 84 and 91 the Farmers Fresh plant is one of the best in the UK. Farmers Fresh Cymru was launched at the Welsh Winter Fair in December 2000 as a truly Welsh arm to the business. It will market the strong Welsh image of lamb born and reared in Wales and look to develop sheep meat products in a range of potential markets.

Lleyn Beef

  20.  The aftermath of BSE provided the spur, which led to the formation of the now highly successful farmer, led producer group Lleyn Beef. The group was founded in 1997 following a public meeting held in Sarnm, by a group of 40 beef farmers. The focus was to develop a strategy capturing specialist markets by adding value to their beef. The market group, which now boasts a membership of 250, was established to identify and market their own cattle to local butchers, hotels and restaurants, using a strict traceability protocol and membership of Farm Assured Welsh Livestock (FAWL), as a condition of being a member.

  21.  The market potential of this product was soon recognised by Cwmni Cig Arfon; a farmer owned Meat Company, who identified a specific niche market for it. Initially, selected local retailers and catering butchers were targeted. In the autumn of 1988, the product was launched nationally under the brand "Extra Mature Welsh Beef", as a result of a contract with Booker. Lleyn Beef now supplies approximately 3,000 cattle through Cwmni Cig Arfon.

The Snowdonia Cheese Company

  22.  The Snowdonia Cheese Company (SCC) was established in June 1999 and was born out of a co-operative of 80 milk producers in North Wales. They set themselves two main objectives:

    —  to secure a better return from a wider market for their milk producers; and

    —  and to develop a marketing advantage by adopting the Snowdonia brand as a distinct quality image for the product.

  Research carried out by the Producer group indicated potential for branded niche market products and as a consequence, in November 1999, Snowdonia Cheese Company was established.

  23.  The main product was truckle cheeses, regarded as a traditional Christmas product. Snowdonia Cheese Company saw potential to extend sales beyond that traditional period and as a result of good research, marketing and sales, the company is developing a "year through" demand for their product. Three varieties of cheese—Red devil, Green Thunder and Little Black Bomber have attracted 20 distributors in the North West of England and North Wales with 50 new distributors being identified to extend the market opportunities to South Wales, the South West and London.

  24.  One of the company's strengths is the mutually beneficial link with the dairy processing company Associated Co-operative Creameries (ACC), Llanddyrnog. Producer group milk is processed at the milk plant and stored by Snowdonia Cheese Company at its premises in Denbigh. ACC allow SCC to use their laboratory facilities for the development of new varieties. The company is working on three new truckle varieties, which should be ready to market by early 2002.

 

 

THE WELSH MEAT COMPANY

  25.  The Welsh Meat Company PLC is a new all Wales farmer-controlled livestock co-operative, developed as part of the recommendations of the Agri-Food Partnership action plan for lamb and beef. It aims to provide a "one-stop" procurement and marketing service for cattle and sheep on behalf of its farmer members, and purchase stock from those members for onward sale to abattoirs and other customers.

  26.  A new joint venture between the Welsh Meat Company and Oriel Jones and Son, Llanybydder, has seen the launch of the Welsh Lamb Sausage. The idea of the sausage came about following an effort to return a better share of profits to the farming community and is part of a venture which brings together leading players in the food and tourism industries. It is hoped that the benefits of down-market involvement will be passed back to the farmers who own the company. The sausage, which was introduced to Sainsbury's in October 2000, and Oakwood Leisure Park, Pembrokeshire in July 2001, is already proving popular, and will soon be available in other tourist outlets and supermarkets.

LLAETH Y LLAN

  27.  Llaeth y Llan is an expanding village dairy in North Wales, and is recognised throughout the UK for its exclusive yogurts and desserts. In 1980, Gareth and Valmai Roberts wanted to explore possibilities to develop their village milk round and began to look at other milk product ventures. Valmai enrolled on a yoghurt making course at Rease Heath College of Agriculture whilst Gareth began training with the Clwyd Rural Enterprise facility at Llysfasi College in Denbighshire, where he worked on enhancing his creative skills.

  28.  The Roberts' wanted to take an innovative approach to developing and enhancing their product and approached the Welsh Development Agency for support with marketing. They also sought professional guidance on product development and the result was a new range of liqueur yoghurts. Llaeth y Llan has received many awards for the quality of its produce. The Roberts' are now working closely with Coleg Menai on developing an effective product management system to ensure that these high standards expected by the consumer are met. Ten years ago, the market for Liaeth y Llan products was very localised, selling products to corner shops and small retailers. Within the last five years, wholesalers have been targeted with the result that Llaeth y Llan products are now supplied to supermarkets such as Waitrose and Safeway.

CONCLUSION

  29.  The foot and mouth crisis has presented many challenges for farmer controlled businesses and one of the greatest problems for those companies seeking to re-establish and develop post foot and mouth disease is immediate working capital requirements. Many of these businesses are facing capital shortfalls and available support in the form of various grant schemes are widely perceived as being too cumbersome and too late, The post FMD recovery programme, therefore, needs to be commercially relevant, more immediate and much more practical, in order to ensure that those businesses which seek to maximise the returns to producers are able to survive and develop to the future.

 

Sion Aron Jones

Policy Officer FUW

November 2001

ANNEX 1

 

Table 1(a): AGRICULTURAL HOLDINGS IN WALES

Year

Number

1977=100

1977

31,996

100

1981

29,567

92

1984

29,752

93

1987

29,985

94

1990

29,646

93

1993

29,916

93

1996

28,090

88

2000

28,410

89

Source: Digest of Welsh Historical Statistics and
Welsh Agricultural Statistics.

   

 

Table 1(b): DAIRY HOLDINGS IN WALES

Year

Number

1977=100

1977

9,945

100

1981

7,566

76

1984

7,262

73

1987

6,441

65

1990

5,867

59

1993

5,238

53

1996

4,752

48

2000

3,522

35

Source: Digest of Welsh Historical Statistics and
Welsh Agricultural Statistics.

   

 

ANNEX 2

 

PRODUCER PRICES

 

Cattle
All prime
p/kg lw

Sheep
GB SQQ
p/kg lw

PIGS
AUKSA-GB
p/kg dw

1995

123.0

111.0

118.7

1996

105.5

132.6

136.5

1997

96.9

120.9

110.2

1998

86.1

90.4

80.7

1999

92.4

84.5

78.7

2000

89.8

92.2

94.6

 

UK SLAUGHTERINGS

000 head

Cattle All prime

Cows/bulls

All calves

    Sheep CleanEwes/rams

    Pigs Clean

Sows/boars

             

1995

2,480.8

785.4

26.3

16,755.2

2,555.8

14,021.3

354.7

1996

2,100.5

190.3

23.9

15,616.7

2,432.6

13,897.1

323.8

1997

2,263.0

1.0

20.1

14,736.4

1,923.7

15,132.9

362.7

1998

2,270.0

1.0

31.8

16,443.2

1,963.8

15,678.1

411.1

1999

2,215.7

1.1

75.1

16,827.8

2,288.0

14,349.7

378.7

2000

2,278.8

1.0

153.0

15,957.3

2,423.8

12,369.3

321.5

 

UK PRODUCTION

000 tonnes

Beef

Lamb

Pork

Bacon

Red meat

Poultry

1995

973.7

364.4

760.7

244.6

2,343.5

1,415.4

1996

701.3

345.1

777.7

240.6

2,064.7

1,475.8

1997

695.7

321.3

874.7

238.8

2,130.5

1,519.7

1998

696.9

351.0

923.5

236.3

2,207.8

1,545.2

1999

677.6

361.5

829.2

232.7

2,101.0

1,524.7

2000

708.2

359.3

728.2

211.1

2,006.8

1,512.6

 

UK IMPORTS

000 tonnes

Beef

Lamb

Pork

Bacon

Poultry

1995

172.7

138.3

137.9

226.4

232.0

1996

187.4

149.1

165.1

236.2

280.6

1997

226.0

139.8

154.6

229.4

276.5

1998

174.0

129.4

170.3

248.0

316.0

1999

193.3

127.1

221.4

246.2

349.1

2000

204.7

123.3

264.0

258.8

355.2

 

UK EXPORTS

000 tonnes

Beef

Lamb

Pork

Bacon

Poultry

1995

273.6

147.4

149.5

4.7

163.5

1996

58.1

130.2

155.9

5.8

172.6

1997

0.0

108.0

199.4

4.9

212.6

1998

0.0

98.5

245.1

8.6

197.3

1999

0.0

109.8

235.6

6.3

186.7

2000

0.0

96.6

207.3

9.0

173.7

 

UK CONSUMPTION

000 tonnes

Beef

Lamb

Pork

Bacon

Poultry

1995

901.2

351.0

748.5

466.9

1,480.7

1996

739.4

365.8

784.9

471.1

1,582.1

1997

851.7

350.9

827.5

461.4

1,560.4

1998

887.8

382.2

846.7

476.7

1,649.4

1999

917.1

379.8

818.6

470.5

1,696.0

2000

957.8

390.6

792.1

461.6

1,707.5

 

ANNUAL HOUSEHOLD CONSUMPTION OF MEAT AND MEAT PRODUCTS (EXCLUDING CONSUMPTION OUT OF THE HOME)

 

1995

1996

1997

1998

1999

2000

Beef and veal

368

310

339

336

339

385

Mutton and lamb

166

202

172

182

177

173

Pork

218

225

229

233

215

211

Total carcass meat

753

736

742

751

732

768

Bacon

233

236

222

233

211

221

Ham

119

126

127

123

122

128

Total bacon

352

362

349

356

332

348

Cooked poultry (not canned)

67

69

101

100

109

123

Broiler chicken, uncooked

434

391

416

415

401

445

Other poultry, uncooked

224

323

262

258

222

221

Total poultry

724

783

779

774

732

789

Liver

20

16

15

13

12

11

Other offals

6

6

5

4

5

5

Total offals

26

22

20

17

17

16

TOTAL OF ABOVE

1,855

1,903

1,891

1,898

1,814

1,921

Rabbit and other meat

6

4

3

5

4

3

Corned meat

47

36

40

35

35

34

Other cooked meat

29

33

23

20

20

25

Other canned meat/products

117

96

99

95

95

101

Pork sausages

121

146

152

147

136

146

Beef sausages

70

50

45

41

45

41

Meat pies, ready to eat

39

41

42

42

37

40

Sausage rolls, ready to eat

19

23

22

24

19

23

Frozen burgers

61

49

49

51

50

50

Frozen meat pies, pasties, puddings

47

38

44

42

46

41

Other frozen convenience meats

137

118

145

146

165

183

Pate

10

9

9

9

9

9

Delicatessen sausages

17

20

19

15

16

20

Meat pastes and spreads

6

4

4

3

4

2

Other meat pies, pasties and puddings

105

98

88

94

96

105

Ready meals

26

66

75

86

86

111

Takeaway ready meals

80

88

82

93

88

81

Other meat products

92

71

62

59

64

74

TOTAL MEAT AND MEAT PRODUCTS

2,884

2,892

2,893

2,905

2,829

3,011

Source: National Food Survey.

ANNEX 3

Farm to retail price spreads

1999

2000 p per kg

2001 (a)

Average farm price

179.7

196.1

202.2

Average retail price

446.3

452.3

487.1

Actual price spread

266.5

256.2

284.8

Per cent price spread

59.7

56.6

58.7

Note: Data for England and Wales only. (a) Data for January-September only.

Source: MLC.

     

 

Chart 1: Net Value Added at Basic Prices

Source: Farm Incomes in the UK, and National Assembly calculations.

Note: Net Value Added (NVA) at basic prices is a measure of the value of output generated by the sector less intermediate consumption and consumption of fixed assets (depreciation).

 


 
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