Written evidence submitted by NFU Scotland (FS0050)

Food security submission

Introduction

  1. NFU Scotland (NFUS) welcomes the opportunity to respond and submit evidence to the Environment, Food and Rural Affairs Committee’s inquiry on Food Security, on behalf of its membership, which comprises over 8,500 farmers, growers and crofters in Scotland.
  2. Agriculture is the lynchpin of rural Scotland – directly employing 65,000 people in agricultural production whilst also indirectly supporting Scotland’s booming food and drink industry which employs 360,000 people. Scotland’s farmers and crofters act as primary producers in the food supply chain which provides high quality products for both commercial and domestic consumption in the UK.
  3. NFUS welcomes that food security is being taken seriously and that this inquiry is engaging with industry to understand and address barriers facing primary producers. It is essential that both the UK and Scottish governments take urgent measures to support primary producers so that we can maintain a competitive and resilient food supply chain.

 

What are the factors affecting the resilience of food supply chains and causing disruption and rising food prices – including input costs, labour shortages and global events? What are the consequences for UK businesses and consumers?

  1. Farm businesses are facing unprecedented increases in electricity and other input costs which are threatening to make production unviable. At a time when food production and food security are key global issues, many farms are making decisions on how to make ends meet to sustain food production in Scotland. Unless action is taken to address this quickly, we will be in short supply of home grown produce at a critical time when it is incumbent upon us to maintain our food production.
  2. Our membership has seen a staggering increase in all elements of their input costs. ‘Aginflation’ – the rise in costs that farmers face for their key inputs - is well over 30 per cent with some products much higher. The cost of fertiliser has increased to almost £800 per tonne (in August 2021 it cost approximately £320 per tonne) almost 60% increase in price. The cost of feed cereals has increased by 22% (feed wheat) and 27% (feed barley) in the same timeframe and carbon dioxide prices are forecast to increase 21-fold.
  3. Fertiliser is needed to produce food and issues in relation to fertiliser production due to market conditions have raised concerns amongst NFU Scotland’s membership about future domestic supply. The consequences of a reduced or uncertain supply of fertiliser, and more volatile prices include reducing agricultural production, which will directly impact the supply of food from the UK via lower crop yields and uncertain crop prices. These factors will reduce the supply of food from the UK, which could increase prices and will increase the need to import foo
  4. Additional to the unprecedented input costs, Brexit is another key factor in affecting the resilience of the supply chain. Export and border controls have stifled trade and added cost through the supply chain.

What is the outlook for UK food price inflation in the short and medium term? What policy interventions should the Government consider to manage these pressures?

  1. Input costs have risen exponentially and continue to increase with little sign of slowing down. Farmers are having to make planting decisions, weighing up the risk of high input prices, particularly fertiliser, against an uncertain reward. This could disincentivise areas planted, reducing grain and oilseed production and supply, resulting in higher prices and a food price inflationary effect in the short and medium term.
  2. Despite the increase for primary producers, food supply chain prices are not keeping pace with the cost of production. Prime cattle across Scotland was 360p/kg in 2020 and the average was 408p/kg in 2021. This represents a 7.8% increase in the price producers are paid from prime cattle, however if you take into account the above 27% increase in feeding crops, there is a huge amount of disparity for primary producers. There is a tremendous amount of work to do to rebalance the supply chain, so that farmers receive a fair price for their primary products.

 

Energy and fertiliser

  1. Much of the inflationary pressure in the food system stems from gas market inflation. It is critical that DEFRA and BEIS work closely together to understand the linkages between fertiliser and agri-food productivity and ultimately the contribution to food security. They should collectively manage risks and make joined-up policy and engage with relevant officials from the Devolved Administrations.
  2. NFU Scotland welcomed the support for businesses provided by the UK Government’s Energy Bill Relief Scheme (EBRS). Prior to this announcement, the cost of electricity was being seen as the final straw that could cripple some of our members’ businesses this year. One example from a Scottish vegetable grower reported a rise from around 12p to 71p per unit from the end of September. Their electricity bill for the year, primarily to cool and store potatoes and vegetables ensuring they can be supplied throughout the autumn and winter, would jump from around £140,000 to over £800,000, which would be completely unsustainable.
  3. NFU Scotland urges the UK Government to commit to provide an extended energy cost cap for farm and agri-food businesses as we are a key part of the Critical National Infrastructure (CNI). This will help to dampen further food price inflation and be of genuine benefit to our hard-pressed consumers. To provide security and certainty for food producers this should be announced at the earliest opportunity. It is vitally important for the farming sector and for consumers that the price cap is retained for our sector.
  4. It remains to be seen if the six-month commitment, with a review in three months’ time, will give domestic fertiliser production sites the confidence to restart production. The UK Government should consider the importance of fertiliser to food security when it carries out its interim review of the EBRS.
  5. Domestic production of fertiliser is important and the government should examine the risks created by structural changes in the fertiliser supply chain. Relying entirely on fertiliser imports would increase price volatility, cost, and the risk of shortages, making it near impossible for farm businesses to plan effectively. It will also likely lead to the UK off shoring its emissions, either through relying on foreign fertiliser production or substituting domestic food production with imports. Assessments and improvements to port and rail capacity to support fertiliser imports should also be carried out.
  6. NFU Scotland urges the UK government to: 

 

Labour

  1. There is a significant labour shortage in Scottish agriculture. A recent NFU Scotland survey showed that the reduced availability of labour and the difficulty in recruiting and retaining workers were due to the loss of migrant labour.
  2. The survey also showed that the limited numbers of the Seasonal Agricultural Workers Pilot (SAWP) scheme significantly contributed to the labour shortage in horticulture. The supply of UK workers with the required skills and experience cannot fill this gap and this has negatively impacted businesses. It has driven wage inflation, which in turn is affecting the capacity of farm businesses to produce food. In the survey, 52% of respondents stated they were currently short of labour and most had not recruited and retained enough workers to fulfil job vacancies in the last 12 months.
  3. Horticulture and/or potato enterprises are the most short of labour, closely followed by dairy. Other sectors such as pig and poultry are also vulnerable to labour shortages which are having a detrimental impact to their businesses. Members highlighted that as a result of continued shortages of labour, 42% planned to reduce production. Research has also emphasised that automation is not a realistic solution to the labour crisis as previously mentioned by the UK Government.
  4. Reduced supply will support food price inflation in the short and medium-term. The longer-term nature of fruit and vegetable production from high capital investment costs, large labour requirement, and production cycles of some crops means that these sectors are slow to taper down production, and then slow to taper it back up again. This would indicate that reduced production will have at least a medium-term food price inflationary effect.
  5. NFUS urges the UK Government to:

Fair supply chain

  1. In the longer term, retailers should be encouraged to treat suppliers fairly as they navigate the cost price process during this difficult time. A review of the Groceries Code Adjudicator (GCA) is currently underway which NFUS welcomes. The GCA’s powers and remit are functioning for large scale direct supplying producers however for the primary producer they are insufficient to give frontline producers a fair hearing on the challenges of the food chain. 
  2. NFUS wants to ensure farmers and crofters receive a fair and equitable return on the quality food and drink produced in this country. NFUS believes that the GCA’s remit should be modified as it currently neglects the earliest part of the chain involving producers supplying processors or producers suppling smaller retailers. It is also important to note that such changes would be of no cost to the consumer given the GCA is levy paid by supermarkets.
  3. Particularly now given the pressures of recent times, it would be more effective by enabling it to protect farmers, growers, and crofters from unfair trading practices. Furthermore, we would encourage the GCA to consider expanding to cover the food services sector as part of widening the remit of the GCA. NFUS’s Supply Chain Working Group would be happy to work collaborate with other stakeholders to take this work forward.
  4. Also in the long term, NFUS urges the government to ensure that future policy and the associated responsibilities to deliver on environmental targets are shared across the supply chain, not just the responsibility of the primary producer.
  5. Finally, the Agricultural Act 2020 must utilise its powers to protect small primary producers. The UK Food Strategy mentions the creation and integration of contractual practices in the Dairy sector, highlighting that this will be extended to the pig sector in the future. NFUS welcomes this policy progress on the principle that the contracts enable fair dealings between the processor and primary producer, as detailed in the Agriculture Act 2020. However, progress is ultimately too slow. Since the years which have followed the Milk contract legislations development, the herd numbers in Scotland have dramatically decreased by 11% since 2017. If you take this into consideration along with the pressures of the last two years, the dairy industry provides insight for the other sectors in primary production. NFUS urges the UK Government to work quicker to protect primary producers.

How are the rising cost of living and increasing food prices affecting access to healthy and nutritious food?

  1. In 2019 more than 430 kilotons of vegetables were produced in Scotland which contributes to fulfilling the 54% self-sufficiency of vegetables in GB[1].
  2. According to a 2018 report by Food Standards Scotland[2], Scottish households generally eat too many calorie-dense foods, and do not eat enough fruit, vegetables, oil-rich fish, and fibre. The average intake of fruit and vegetables between 2001 and 2015 was 3.2 portions on average (257g per day), which should increase to 5 portions a day (402g).
  3. The consequences of a continued shortage of labour will be a reduction in food supply, particularly in the horticulture sector. Fruit and vegetables are healthy and sustainable foods, and their production and consumption must increase, not decrease, to meet dietary guidelines.

How will the proposals in the Government’s food strategy policy paper affect:

the resilience of food supply chains?; the agri-food and seafood sectors?;

access to healthy, nutritious food?

Is the current level and target of food self-sufficiency in England still appropriate?

How could the Government’s proposed land use strategy for England improve food security? What balance should be stuck between land use for food production and other goals – such as environmental benefit?

  1. Although the above questions are specific to the food strategy and food security of England. NFUS wants to take the opportunity to remind DEFRA that the UK internal market is important for our sector. Given that Scotland’s agricultural industry is markedly different from the rest of the UK, it is important that Scotland can decide on agricultural policy priorities to suit Scotland’s unique farming and crofting landscape. NFU Scotland therefore supports Common Frameworks. We understand that UK Government Ministers have the power to disapply the market access principles set out in the Agricultural Act, where the UK Government has agreed with one or more of the devolved governments that divergence is acceptable through the Common Framework process. While we acknowledge that all four parties have agreed a process for considering exclusions, it is still unclear how this would work in practice.

September 2022

8

 


[1] https://www.ibisworld.com/united-kingdom/market-research-reports/vegetable-growing-industry/

[2] https://www.foodstandards.gov.scot/downloads/Situation_report_-_the_Scottish_diet_-_it_needs_to_change_-_2018_update_FINAL.pdf