Uncertainty reigns in Scotland as Brexit looms

Business plans


EDINBURGH, U.K. — British farmers need to start preparing for all contingencies once the United Kingdom gives up membership in the European Union.

“If farmers stopped thinking about the politics of Brexit and started getting some business planning in place so that when the implications of Brexit actually do come to rest, their mindset is in a proactive mode rather than a reactive mode,” said Gavin Dick.

“At the farm level, they should be managing for change.”

Dick, whose family farms near Edinburgh, Scotland, is manager of the Agriculture and Horticulture Development Board’s cereals and oilseeds division. The board is an umbrella organization for British commodities and is supported by producer levies to promote agri-food and provide farmer education.

Agriculture has been far down the list as negotiators work through the complicated divorce involving 19,000 laws and regulations covering a long-term trade and cultural relationship.

Related stories in this Special Report:

The only certainty is uncertainty.

When the final deal is signed, farmers do not know how much power Scotland or Wales may have over their own agriculture policy, but it is hoped new legislation written in London recognizes the differences among the three jurisdictions.

Business plans

A major focus for farm groups is developing more extension and education for producers to adapt to inevitable changes linked to Brexit.

“This is going to give the growers a nice boot in the backside to actually do what they should have been doing already,” said Dick.

Scotland has fewer diversification opportunities because of topography and climate. However, it does offer some unique goods and exported about $24 billion worth of agri-food and beverages last year with plans to step that up to $48 billion by 2030.

Scotch whisky is a global commodity and adds about $8 billion to the British economy.

“At the moment whisky is tariff free so they are not foreseeing huge issues directly,” said Dick.

“Their biggest threat is uncertainty, and uncertainty stops people buying and trading.”

The industry has said it wants business certainty and protection of the product in international markets. It also wants a domestic tax and regulatory agenda that allows it to grow.

Under World Trade Organization rules, whisky benefits from a zero tariff on exports to the EU, the United States, Canada and Japan. The industry does not want this status sacrificed.

Whiskey and BREXIT

Scotch whisky must use Scottish water and be made and aged in Scotland. Distillers have a policy of using Scottish grain first, and if they get the quality they want they support the domestic product. Pure single malt is supposed to be 100 percent Scottish, and some distillers contract direct with local farmers.

For example, Glenfiddich uses grain from a local producer group, but it is providing only 10 percent of what the company needs, so malt barley may be imported.

One of the big byproducts of the whiskey trade is wet distillers grain for the livestock sector, but distillers can now be paid to convert the spent grain into a dry product that is burned for energy.

That product was a mainstay for some livestock producers, and they have lost it.

ADVERTISMENT

Cereals and oilseeds

Malting barley is the largest component of the grain industry because of the size of the whisky business.

About half is grown on contract and half is sold on the spot market, said Dick.

“It is all for whisky. We can’t actually grow enough barley in Scotland for whisky and it is very much a growing market,” he said.

The development board participates in variety trials to test grains for malting and high quality distilling. Scottish barley for whisky is below 1.9 percent nitrogen content.

Fall rye is grown for biofuel and may need up to 150,000 acres in the future. It could replace oilseed rape because the hybrid rye is good for rotations.

“Oilseed rape was very profitable under the whole support scheme where you were paid by your crops. Everybody jumped onto winter rape,” said Dick.

Clubroot became a problem, and now only resistant varieties are allowed in a seven year rotation, and these are lower yielding.

Beef, lamb and pork

Quality Meat Scotland is a producer-funded organization to promote beef, lamb and pork at home and abroad.

The organization is funded with a mandatory levy collected at time of slaughter on all cattle, sheep and pigs. The checkoff is $8.84 for cattle, $1.30 for sheep and $1.93 for pigs.

“It gives us a levy budget of about four million quid ($6.4 million),” said Stuart Ashworth of Quality Meat Scotland, which also operates a farm assurance scheme that carries a special EU sanctioned logo to identify the geographical location of production.

“It is food trustability and the regulators love that,” said Laurent Vernet, head of marketing for the organization based in Edinburgh.

The EU introduced the logo in 1996, and it has spread to other countries. It is accepted among trading partners and covers a range of food products.

England is not part of this program, but Wales recently joined.

Without that logo QMS would not be able to promote the brands Scotch Beef and Scotch Lamb under EU regulations.

Pork products are labelled, but hog production is low in Scotland with about 38,000 sows.

The Scottish cow herd is stable at 430,000 head, and most are pure beef breeds that are not crossed with dairy cattle.

Scottish beef’s best customers are Sweden, France, the Netherlands and Belgium. They are demanding customers but are willing to pay more.

“We are focusing our marketing on people who can afford to pay more for our product,” Vernet said.

“We are interested in the consumers who are eating less meat but are increasing the quality.”

ADVERTISMENT

Scottish representatives have travelled to Canada to see what opportunities might exist but see it as a niche opportunity.

“It will be minimal. Some of the retailers may be happy to have it as a point of differentiation,” Vernet said.

Nothing much is happening as exporters work through regulations and specifications under the Comprehensive Economic Trade Agreement signed by Canada and the EU. Paperwork and customs clearance are cumbersome.

“They say it is a free market but it is not that free,” Vernet said.

“After CETA we were told, yes, technically we should be able to trade. We are going to send just a few boxes to see how it is going to work.”

The Philippines and other Asian markets recently opened to the EU. Ireland, France and Denmark are already exporting to that country, and Scotland is playing catch up.

There are concerns about tariffs and quotas following Brexit.

“In relation to lamb, 30 percent of what we produce is exported to Europe free of tariff. We back fill with product from New Zealand on a seasonal basis,” Ashworth said.

New Zealand has a TRQ of 228,000 tonnes to the EU, and Britain takes up to 80,000 tonnes of that product. No one knows how that quota might be split under a new trading agreement.

“If we don’t have some free trade with Europe, then potentially lamb prices will be halved,” Ashworth said.

The Scottish lamb industry was already in decline when EU payment schemes changed. The flock was around 110,000 ewes but is down to about 98,000. The tradition is to raise lamb on the hillsides and marginal land and then send the live animals for finishing in England and Wales.

Horticulture

Soft fruits such as strawberries, raspberries, black currants and blueberries are grown in a small corner of Scotland.

Most went for processing, but in the last decade strawberries became popular for the premium fresh market.

“When it was processed, every farmer had a few acres of soft fruit. Now it has come back with a small number of very professional specialists, growers who are supplying table berries for the whole of the U.K,” said Dick.

Labour is the main issue for that sector. Many were Eastern European labourers who pick fruit and then shift over to the potato harvest.

No work permits were required under the EU, but no one knows if workers will be able to move as freely as before.

“There’s lots of questions but no answers coming,” said Dick.

Potatoes are a major crop for Scotland, which grows about 500,000 tonnes of certified seed a year, of which 100,000 are exported.

England is the largest market for seed potatoes, and 100,000 goes to the rest of the EU. Egypt takes about 50,000 tonnes of Scottish seed a year.

ADVERTISMENT