Scottish Agriculture: Past, Present and Future

1. Scottish Agriculture: Past, Present and Future Alan Renwick and Andrew Midgley Presentation to SAC – AgResearch Rural Futures Conference Edinburgh, September 2009

2. Scene Setting • Overview of Scottish Agriculture • Typology • Output • Policy • Agriculture and the Environment • Future opportunities and challenges

3. Key Factors Shaping Scottish Agriculture • Physical Constraints • Soils • Topography • Climate • Policy Drivers • International • EU • UK • Scotland • Institutions • Markets

4. Agriculture in Scotland • Typology • Lowland Arable • Improved Grassland • Upland Grassland • Crofting

5. Crofting • Whilst important socially and culturally, covers nearly 10% of Scottish agricultural land with around between 10,000 - 12,000 crofters on nearly 18,000 crofts.

6. Agriculture in Scotland 2008 Gross Output £2.31 bn Total Income £630 m Support £578 m Source: RERAD

7. Market Returns and Support • Although periods of higher prices improve profitability, many sectors currently not economically viable without support Costs and Returns LFA Farms Support Costs Returns

8. Composition and Distribution of Support

9. Some Trends

10. Trends

11. Spatial variation in decline Source: Retreat from the Hills – Rural Policy Centre (2008)

12. Some Key Policy Dates • 1973 – Accession • 1984 – Milk quotas • ~ 1988 – Stabilisers, voluntary set-aside • 1992 – MacSharry reforms • 1999 – Agenda 2000 • 2003 – Mid Term Review • 2005 – Decoupling • 2008 – CAP Health Check

13. Importance of Policy MacSharry Foot and Mouth Join EU Decoupling

14. Importance of Policy Zero Set-Aside Set-Aside

15. Policy Shift • 1980s • shift in support from pure production • move away of Government from Research and Development and Extension • 1990s • widespread introduction of agri-environment schemes • Support for Organic agriculture • Regulation – Nitrate Vulnerable Zones • Post- Productivism

16. Total Factor Productivity Source: Barnes (2005)

17. Variation in Cost Efficiency Dairy Specialist cereals

18. Efficiency • Scope for cost efficiency improvement across the Scottish farming industry. • Positive relationship between historic support and inefficiencyeg Sheep versus Dairy • Most efficient farms have not been the most profitable under EU commodity regimes • Source Revoredo-Giha and Leat

19. A Diversified Industry Farm based enterprises = 377. Based on the number of farms, there is below average representation in the NW and NE and above average in the SW and SE. Over half from horticultural & beef and sheep units, poultry common as well. Concentrations near urban areas & favourable natural & infrastructural resources Source: Watts, Revoredo-Giha, Leat (2008)

20. Production as an Input • The food and drink sector is a key contributor to the Scottish economy with annual sales currently of some £7.5bn, Gross Value Added of some £2.7bn and exports of £2.8bn. The sector employs 49,000 people of whom 20,000 are in rural areas • Source: Rural Scotland: Better, Still Naturally (2007)

21. Supply Chain and Trade Scotland’s agricultural sector heavily dependent upon trade Source DTZ

22. Not just food Key ingredient into Drinks industry Source DTZ

23. Food and Drink Manufactured Exports

24. Andersen E. (ed.) (2003). Developing a high nature value farming area indicator. Internal report. EEA, Copenhagen Agriculture and Environment • Complex interaction between agriculture and the environment • Too much or too little?

25. Environmental Accounts: Public Good (Bad) Provision

26. Looking Forward Some Opportunities and Challenges • Increased demand for food – • Market volatility • Environmental constraints • Land-use competition

27. Market Changes • Growth in international demand • Development of local food agenda • Challenges if further trade liberalisation

28. Some challenges linked to Environment and Health A few examples • Climate Change • Water Framework Directive • Pesticide Ban

29. Climate Change • Potential advantages in climate change • However • Extreme weather • New pests and diseases • However it is policy targets and mitigation that may be seen to pose the biggest challenge • 80 per cent reduction by 2050 • 1.3 mt reduction from Land use sector from 2006 to 2030

30. Water Framework Directive SEPA estimate that despite Scotland's water environment generally being in good condition there are a number of local level problems which mean that over 40% of Scotland's waters failed the environmental standards required to support good ecology in 2007. SEPA anticipate 67% of our water bodies achieving at least good status by 2015. • SEPA (2008). Draft River Basin Management Plan for the Scotland River Basin District

31. Land-use Choices • During post-productivist period alternative land-uses (renewables etc) were seen as a solution to agricultural decline and less need for food production – diversification opportunities • However, re-emergence of food security issues mean that greater competition for land and harder to balance between the alternative policy objectives

32. Land use challenges • Example – renewable energy • Areas most suitable for SRC are also key arable areas Source: Towers (MLURI)

33. Domestic Policy landscape

34. Summary • How to satisfy growing demand and meet environmental and other challenges • How do you manage transition? • Neo-productivism? • Or just return to productivism • Or productivism with Corporate Social Responsibility?

35. Productivity increases …. happened before Source: Estimated by Douglas

36. Acknowledgements Andrew Barnes, Steven Thomson, Cesar Revoredo-Giha, Philip Leat