The CLA

Covid-19 and Food Supply

EFRA Select Committee: Call for Evidence

April 2020

 

 

Written evidence submitted by the Country Land and Business Association (CLA) (COV0011)

 

 

The CLA (Country Land and Business Association) welcomes this inquiry into Covid-19 and the food supply, given the importance of the food sector in the UK, the integrated nature of the supply chain, and the impact of coronavirus so far.  Ensuring an adequate supply of food and maintaining the effectiveness of the supply chain during the Covid-19 outbreak – and indeed beyond – are vital.

 

Key points for the Committee

 

The CLA asks the Committee to consider:

 

 

 

Have the measures announced by the Government to mitigate the disruptions to the food supply chain caused by the pandemic been proportionate, effective and timely?

 

  1. The Government’s measures have sought, in the short term, to introduce an element of certainty in supply and to manage demand. Measures to improve retail distribution, with longer driver hours and increased delivery windows have been helpful.

 

  1. However, the supply chain is highly complex as a result of its integrated nature. When one element of the supply chain is disrupted through, for example, the lack of a raw material or a higher level of staff illness than normal, as in abattoirs, the fragility of the whole supply chain becomes clear. Examples include the pressures on egg producers caused by wood shavings shortages through the closure of local saw mills, abattoir closures putting pressure on the rest of the livestock chain, and the closure of fast-food outlets leaving potato growers without a market outlet. Many food products are highly perishable with short shelf lives, which leads to acute problems in a short space of time. If milk cannot be collected through a lack of tankers or tanker drivers, it will go to waste. Such instances create many direct and indirect issues, including significant hardship and mental wellbeing pressures for the farming sector.

 

  1. There have been cases where the supply chain has been able to adapt to changes in supply and demand. New chains have quickly developed, such as local food networks and home deliveries to help in the redeployment of resource. But the scale of the Covid-19 outbreak is so extensive that it is inevitable that there will be problems in supply and targeting. The collapse of the food service sector has already led to a massive redeployment of produce to the retail sector. Sales in supermarkets have increased by between 25% to 30% for a number of products, such as flour, eggs and mince.  

 

  1. However, it can be argued that this redeployment has not been quick enough or responsive enough to market signals. Some dairy producers are seeing the milk price fall significantly as their contracts are directly linked to the food service sector, in which demand has evaporated. The supply chain has been unable to cope with the speed or nature of Government decisions to impose the lockdown.     

 

  1. This illustrates the constraints of the supply chain. It also highlights a failure in the relationship between all those in the food chain. The need for a more transparent and effective relationship between producers, processors and retailers is now paramount. To bring this about, the Government needs to extend the scope of the Groceries Code of Practice and increase the powers of the Groceries Code Adjudicator to all those in the supply chain.

 

Are the Government and food industry doing enough to support people to access sufficient healthy food; and are any groups not having their needs met? If not, what further steps should the Government and food industry take?

 

  1. We believe that the Covid-19 crisis presents a clear opportunity to re-evaluate the operation of the food supply chain to meet the needs of consumers more closely. One effect of Covid-19 has been the recognition of the need to further develop direct marketing and the significant re-emergence of local food networks which can cater for those unable to leave their homes. At present, the impact has been limited although one organic producer has informed us that as a result of the collapse of his traditional market outlet in the food service sector, his online box scheme has exceeded all expectations to the point that more staff have had to be employed to meet demand whilst not adversely affecting turnover for the overall business.

 

  1. Such a situation may have arisen out of necessity but it does not mean that the ability to redirect product within a local supply chain is without merit. We would strongly suggest that, with the right foundations in place (eg: the necessary digital skills to market and promote), a form of food localism can add resilience and agility to supply chains that, otherwise, are unable to adapt quickly. This is also an opportunity to re-connect consumers with how their food is grown, and show different ways of buying it and consuming it, with potential positives for the nation’s diet and carbon emissions. 

 

 

What further impacts could the current pandemic have on the food supply chain, or individual elements of it, in the short to medium-term and what steps do industry, consumers and the Government need to take to mitigate them?

 

  1. As noted above, the speed and scale of the Covid-19 outbreak itself and the measures taken by the Government to control and contain the pandemic have had a series of knock-on impacts which could affect the food sector for months and possibly years to come.

 

(i)      UK-grown fruit and vegetable supplies

 

  1. The major issue remains the availability of seasonal workers to plant, pick and pack as season develops. The CLA has estimated that, with the reduction in the availability of migrant workers coming to the UK, as a result of travel restrictions in their native countries, and assuming an infection rate of 20% for on-farm domestic labour, the sector could be short of some 80,000 seasonal workers.

 

  1. Although we welcome the Government’s decision to allow furloughed workers under the Job Retention Scheme to undertake additional paid work, there are no guarantees that this additional labour force can be sufficiently tapped, nor that it will stay in the sector once lockdown is over. To address the shortfall, Government needs to introduce considerably more flexibility in allowing migrant labour to come to the UK to work in agriculture and food processing, while at the same time fast tracking the development of automation in the sector.

 

  1. There is a real risk that if labour availability is not guaranteed, then some growers may feel that the risk of planting and growing a crop that cannot be harvested is too great. The effect will be a reduction in output which will affect producer margins, as well as both availability and price for consumers. Imports should not be relied on to fill the gap, as other countries seek to maintain food security for their own citizens. Such moves have been widely reported in the media. Given the current self-sufficiency rates of UK domestic production, which mean the country is already heavily dependent on imports, a tightening in labour availability could have a seriously negative impact on future food supply, leading to food price inflation. 

 

(ii)    Meat supplies

 

  1. The meat sector is already showing signs of stress and fragility. Reduced access to livestock markets and abattoirs is leading to livestock remaining on-farm after their optimum weight, with a consequent reduction in prices. In cutting plants, there are issues regarding the application of social distancing which cannot be enforced effectively without undermining the efficiency of the plant.  

 

  1. Farmers and meat processors are finding it hard to find alternative markets for some cuts. Mince has become much sought after in the retail trade as it is easier to freeze. However, for higher quality cuts, previously destined for food service, there is no longer a market meaning increasing volumes in cold storage. There is a growing argument that the Government needs to use intervention in order to stabilise market prices to underpin producer prices. 

 

  1. In terms of exports, major issues are likely to arise for lamb. It is possible that UK lamb exports to its main markets in the European Union could substantially reduce. If this was the case, it would lead to higher volumes coming onto the UK market. This will lead to a reduction in retail prices which, although beneficial for consumers, is likely to hit the sector hard at a time when producers are already operating on very tight margins. In such a scenario, there will be increasing calls for public intervention which would put a severe strain on available cold storage capacity.

 

  1. The poultry sector (both eggs and poultrymeat) seems better able to meet market demands. However, there remain issues. As stated above, there are shortages in raw materials and a shortage of personal protective equipment for workers in poultry units as a result of the re-direction of clothing.

 

  1. Current evidence suggests that the pigmeat sector is able to maintain margins with prices stable although pressures are beginning to build. As with the poultrymeat sector, there are shortages in raw materials, in this instance, concrete for unit foundations.

 

(iii)  Dairy

 

  1. There is growing pressure and disruption to the milk supply chain, as a result of the types of contracts being held. The knock-on impact of the current closure of the food service sector has resulted in falls in milk prices and missed collections resulting in disposal of fresh milk by farmers.

 

  1. Pressure is building on prices, and there are calls for public intervention and private storage aids for butter and skimmed milk powder in order to underpin prices.

 

  1. In addition, we hear of adverse impacts for niche market producers, such as specialist cheesemakers, whose route to market include specialist retailers and restaurants, now closed. The ability to sell online has increased along with an increase in local door step delivery services in some areas but this is unlikely to absorb a large enough proportion of their product.

 

(iv)  Imports

 

  1. The ability to import both raw materials and product is crucial to the model of the UK food chain. Shortages of raw materials exacerbate producer costs. At the same time, higher costs associated with importing scarcer essential ingredients for certain products are likely to lead to pressure on retail food prices which could be passed onto consumers.

 

How effectively has the Government worked with businesses and NGOs to share information on disruptions to the supply chain and other problems, and to develop and implement solutions? How effectively have these actions been communicated to the public?   

 

  1. The Covid-19 outbreak has meant a new process of communication between Government and the food chain sector, which has been set up quickly and has enabled us to share intelligence based on feedback from members on the ground. From the CLA’s perspective, a number of things have worked well, such as:

 

 

  1. While the short-term response and communications has been good in difficult circumstances, there is a need to continue to assess the developing market disruptions in the medium term. The government needs to be prepared to take early actions where there is an ongoing or potential threat of market disruption that will have a significant adverse effect on agricultural producers. This is important to ensure the retention of the productive capacity of the British farming. Market disruptions could include changes in consumer patterns, or changes in import and export markets.

 

  1. It is easy to assume that given the demand for food through retail outlets, farmers will be able to take advantage of the opportunities. This may be the case for some products, but for many the farmgate prices are not reflecting the demand, and much of the value is retained elsewhere. There are also instances of poor practice on contracts and contract negotiations that do not reflect the true costs of production, especially where costs have increased as a result of Covid-19 actions.

 

  1. It will be critically important that both government and the food and farming sector learns from the impacts and effects of the Covid-19 crisis, in terms of how future trade relationships are fashioned, and how to adapt far more quickly to market signals and changes in market conditions. The crisis has highlighted the fragility of our food system, and it may be a good time to consider other risks to the supply chain, and how the UK would cope if another large-scale crisis was to emerge.

 

  1. The CLA would encourage the Committee to consider what can be done to increase consumption of UK-grown crops and livestock, and to nurture the emerging direct market and local home delivery services that have been born out of Covid-19. We think that business adaptation and supply chain agility need to become key measurables when UK agricultural policy transitions from basic payments to the delivery of public goods through ELMs.    

 

  1. Given the current disruption in market channels and market volatility – and the likelihood that there will be continuing disruption as the country comes out of lockdown - farming businesses will need sufficient time to recover and to stabilise food logistics. With this in mind, it is essential that the government reconsiders the plans under the Agriculture Bill to start the transition from Direct Payments in 2021, with a delay of at least one year. The detailed rationale for this is set out in the CLA transition document from August 2019 and updated in March 2020.

 

 

 

The CLA (Country Land & Business Association) is the membership organisation for rural landowners and businesses. The organisation has over 30,000 members who own or manage around half of the rural land in England & Wales. Four in five CLA members are involved in farming and it is the majority income source for over half.

 

Rural landowners and farmers play an active and vital role in land management. They also take a long-term view to both business planning and environmental management.

 

 

 

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