DAVID KNIGHT, FRUIT GROWER, KENT – WRITTEN EVIDENCE (HSI0005)

David Knight B.Sc ( Agriculture) M.Sc ( Agricultural Economics)

I am a Kent fruit grower with 50 acres of apples and 40 years growing experience.

I am also a past Chair of the Kent National Farmers Union, Past Chair of the British Institute of Agricultural Consultants, past Chair of the Apple Growers Association Ltd and a current or previous director of various agricultural and horticultural cooperatives. I am a Pilot Farm for the Environmental Land Management Scheme ( ELMS)

Introduction: This submission is in response to the present crisis in the Horticultural Industry.

The predominant issue is the unprecedented increase in costs with virtually no increase in prices. This puts the whole industry at risk. In my sector of apple growing, orchard crops are long term investments ( over 20years ) and cannot be easily or quickly replaced. They require high levels of expenditure in trees and the associated facilities for storage and packing to bring the crop to market. They are completely different to arable crops and grassland which can be rapidly increased or reduced in response to market conditions.

To put the situation in context, relevant figures comparing today in 2023 with pre-pandemic in 2019 are:

Costs:

Labour ( National Living Wage) £8.21/hour to £10.42/hour = plus 27% ( ex increase in NIC )

Fuel ( Tractor Diesel) 60.0 p/litre to 82.5p /litre = plus 38%

Machinery ( e.g Orchard Mower) £3395 to £4950 = plus 46%

Electricity day rate = plus 163%

Electricity night rate = plus 37%

Packaging, Transport and Other Costs all show 25% plus increases.

Average across all inputs in current year (BGA/BAPL*) = plus 23%

Returns:

Average across all retailers as paid to growers (BGA/BAPL*) = plus 0.8%

A survey by Andersons Consulting in 2022 ( BGA/BAPL*) concluded that growers needed an extra 10.2 pence per bag of Gala apples to cover the increased costs. On average, these bags retail at about £1.50 for 6 apples of approx 800 grammes in weight. The suggested price increase equates to under 2 pence per apple. The failure of retailers to reflect such an enormous cost increase in their payments to grower suppliers has put the whole apple and pear industry into jeopardy.

Other food products have had price rises to reflect increased costs but the fresh produce sector seems to have been largely disregarded. The consequence has recently been reflected in some food shortages and empty shelves. This situation will become more frequent and widespread in the future unless positive steps are urgently taken to address it.

Key challenges, risks and opportunities

The key challenge for producers is how to stay in business. The present situation, brought about by the combination of well documented international reasons, has led to very substantial cost increases but without recompense in prices. This is unsustainable and unlike other crops that can be fallowed or not planted, orchard crops are long term ones which need to be carefully nurtured and managed to achieve the fruit quality demanded by retailers and consumers. The costs carry on – if they cannot be recovered through sales the trees have to be grubbed out. Margins are tight at the best of times: no one can carry losses for long.

Risks: There are many risks in fruit growing. The obvious ones are weather and disease but lack of labour has recently become critical. The growing cycle takes a year whereas selling to end consumers can take only a few days. Risk sharing is not proportionate, neither is the share of the end price going to each party in the chain.

Opportunities: Fruit production is an exciting industry which offers many opportunities. New varieties allow a longer season. The main problem is lack of profitability hampering the uptake of new techniques and practices. Innovation including automation needs to be constantly progressed but depends on investment which is only possible if businesses are profitable.

Impact of Climate Change

Orchards are important in terms of carbon sequestration so any loss of trees will be negative. The conditions for fruit production may be better in future with the likelihood of hotter summers, providing there is sufficient winter rainfall to top up water reserves. Irrigation will prove more important to maintain healthy growth and appropriate fruit size. There will be need for new reservoirs and boreholes.

Skills and recruitment challenges

Sourcing of labour for the horticultural sector is vital. Nearly all developed counties rely on seasonal labour schemes to provide harvesting workers who need to be increasingly skilled. Continuity of such schemes year to year with guarantee of supply is essential. Although U.K. nationals form part of the workforce the seasonal nature is not attractive for those seeking more permanent jobs. Growers must have confidence in seasonal worker schemes which must be effectively administered.

Funding for science, research and development

Government support is essential as grower businesses cannot fund the necessary work on their own, especially as current “profits” do not allow it.

The main research drive is towards more environmentally friendly systems with less reliance on agrochemicals and artificial fertilisers. Huge strides are being made with such innovations as bio-insecticides and bio-fungicides to control pests and disease. These new techniques often apply across a wide range of crops though some need to be specific.

Other developments involve automation of machinery and equipment as well as climatic control in storage and transportation. Packaging needs to become recyclable or biodegradable. Plant breeding is fundamental to the industry as new and resistant varieties are developed.

The U.K. cannot rely on other countries so must join international projects as well as undertaking nationally based work.

Benefits and challenges of implementing technological developments.

Implementation of developments takes time, often many years, as well as requiring long term investment. Orchard growers work with a long-term crop and need to see a long-term future. If not, there is no incentive to invest. This is the immediate problem – short term pressure is hampering and delaying technological development and progress.

Resources and guidance

The lack of resources from within the industry has been highlighted. If Government wish to maintain a vibrant horticulture they need to actively support it . This is not purely about funding – more importantly it requires strong moral support and enlightened policy applying across the supply chain. It would be a great step forward if Government would positively encourage retailers to support British growers.

In recent years the proportion of homegrown apples has risen to near 40%. Imports are obviously necessary outside the British fruit season but with high tech controlled atmosphere storage and longer keeping varieties there is potential to substantially increase the home grown share. This would maximise efficient use of resources.

Impact of trade

After the U.S., the U.K. is known to have the cheapest food in the world. This results from the historic policy of free trade with minimal import restrictions. In some sectors there may be scope for cost reductions but in the fruit sector there is now serious under recovery of costs and apples are at the bargain basement level. Only bananas are lower priced per kg and they are reputed to be always sold without any margin for retailers.

Whilst growers constantly seek cost savings they operate in a sector with inelastic demand so there comes a point where all parties in the supply chain suffer. However, risks are not shared equally and whilst retailers and those in the middle of the supply chain can maintain their margins, when prices are squeezed the financial hit is almost entirely suffered by the grower.

Lessons from horticultural policy and practice from overseas.

There is a rigidity in the present U.K. supply chain which is not working in the interest of consumers or the environment. Fixed prices and lack of response to cost price increases is outdated and other countries exhibit greater flexibility. The supply chain should be symbiotic not antagonistic. The present imbalance between suppliers and retailers is a matter for great concern. When it translates into a crisis like at present it is proof that something is seriously wrong.

Other countries have policies to tackle unfair trading practices and in the U.K. the Grocery Code Adjudicator (GCA) has an active but limited role. Certain aspects, particularly pricing, are outside the remit. There is no wish by growers to change this as it would be anti-competitive but there is need for a Fair Trading Code to address other crucial issues. A topical example being the sale of large volumes of imported apples at the start of the UK season requiring British growers to incur the increased costs of cold storage but without recompense for the extra energy costs involved.

This high level of imports at the start of the UK season leads to a delayed start for British apple sales. Like all fresh produce, there are differences from year to year because of weather conditions so crop forecasts of volume and availability are somewhat erratic. Better technology is allowing more precision and forecasting is certain to improve in future. This should reduce the need for retailers and their importers to overstock with old fruit from the Southern Hemisphere which depresses early season prices. With Northern Hemisphere suppliers the UK is a magnet for smaller sizes which are saleable in the UK but too small for European and American consumers. Again, this can be a severe drag on the early season market. In other countries there seems to be greater support for home production and less of a race to the bottom on prices to the detriment of primary producers.

These issues could be addressed by a simple extension of powers for the Adjudicator and may not need additional legislation. If so, it could be implemented quickly in time for the next season. If not, just the prospect of such a change should have a constructive influence across the supply chain.

The effectiveness of government planning and policy making in relation to horticulture.

Although horticulture occupies a relatively small area of land compared to other land uses, it does produce a very high level of production in terms of value. (Statistics available from DEFRA). It is a valuable part of the U.K. economy which directly and indirectly provides many jobs in the food sector.

Over the years, the Government has supported horticulture through grant schemes, producer organisation funds ( part EU ) and financing of research and development. Because the sector is not subsidised it stands largely on its own feet. This makes it inherently efficient and nimble for the future. It would be tragic to lose sectors, such as apples, for no good reason with such adverse consequences for food security.

British Apples and Pears Ltd (BAPL) are now publicising British sales each month from all the main supermarkets to encourage them to support British growers. If Government wish to see British produce maintain, or preferably increase, market share this information should be used as a source of influence to provide targets and strategies going forward.

The impact of recent legislation including the Agriculture Act 2020 and the Environment Act 2021.

The Agriculture Act 2020 and subsequent associated documents including the UK Food Security Report 2021 highlight current production levels and set out support for home production at similar or better percentages going forward. This ambition can only be achieved with proactive Government support. The current crisis in the industry is seeing contraction which is the opposite of what Government policy is setting out to achieve.

There needs to be a defined statement of intent with meaningful targets and regular measuring of performance.

The aim of implementing environmental gains whilst still producing food economically is a major challenge. Farmers are seeking to achieve both objectives but are concerned at the lack of a coherent joined up policy. This needs to be urgently addressed by Government as the carbon footprint of home-produced food is significantly better than from imports. Losing orchards would be environmentally negative and this potential loss should be part of any evaluation.

The Environment Act 2021 is focusing on greater environmental protection and improved biodiversity. The positive impact of orchards is already partly recognised by the ELMS ( Environmental Land Management Scheme) standards but they need to be expanded with more practical applications.

Horticulture’s contribution to mental and physical health.

The positive health attributes of apples and pears as part of the “ 5 a day” campaign are well known. British people feel most positive if they know they are consuming British produce rather than imported where the provenance is less certain. Better still, when British fruit it is in prime condition in the right season.

The source of the fruit from the orchard has considerable resonance. This is why community orchards are popular and although some parts of the country have few or no commercial orchards most people see fruit trees in gardens and enjoy the sight of the spring blossom. Walks through orchards are a valuable recreational resource throughout the year. If orchards are lost there is a detrimental effect on the local environment in terms of the wildlife biodiversity.

27 March 2023