APPENDIX 1
Memorandum submitted by Mr Tim Finney,
Managing Director, Eastbrook Farm Organic Meats Ltd (F 1)
Thank you for your note regarding the committee's
upcoming inquiry into UK organic farming and associated issues.
I am pleased to be given the chance to make some points. I'll
try to take them point by point from the press release.
EXPANSION IN
VARIOUS UK ORGANIC
SECTORS
Being driven quite properly mainly by commercial
pressure from retailers/manufacturers/wholesalers, all of whom
are responding to consumer demand. Government organic conversion
aid is not being wasted, but if aid is the main driver in a farmer's
conversion decision, then it's a poorly made decision. There is
plenty of growth room available in the following sectors—beef,
pigs, cereals, where prices will remain strong for the next five
years if products are marketed well and organic standards are
not allowed to slip. We are a major player in the UK organic pig
market, and our marketing ambitions give us a growth forecast
of tenfold increase by end 2004. Others will be thinking similarly.
The lamb sector is close to capacity at this stage, unless there
is a tumble in prices, or better marketing, leading to demand
increase. Poultry is finding growth hard because high grain prices
mean high product prices and there is consumer resistance to the
products on the shelf. Additionally poultry is not being very
well marketed yet. I fear for the organic veg market—marketing
has been badly handled in the past couple of years, and volumes
have risen considerably. I am not an expert in this area but I
suspect that growers will soon become scared off this market if
the margins in it fall any further. Additionally there is plenty
of organic material from abroad, which is taking up most shelf
space. The cereal sector has a long way to go—grains for
food and feed come nowhere near meeting demand, and consequently
most grain is imported. There is a worrying lack of evidence of
much UK arable area conversion in the short/medium term. The milk
market can grow also over the next few years if the product is
sold well. Every sector is threatened by imports, but more on
that later.
Market trends are simple—demand appears
to be growing all the time across all sectors. I read in places
that "experts blame this" on things like BSE etc. I
prefer to think that for most people with most organic products,
there is a sense that they are eating something better, in terms
of flavour, or integrity, or cooking qualities. Or they buy into
the other areas that organic can quite rightly tick a box against—environment,
job creation, animal welfare. There is a danger here—there
is pressure from multiple retailers in particular, communicated
back through processors and wholesalers to growers and farmers,
to get product at almost any cost—ie so long as it has an
organic standard attached to it, they turn a blind eye to the
standards being used in the productions of the raw material. My
worry is that:
1. the organic ethic is not being fulfilled
in such circumstances, if this is happening;
2. if consumers are made aware of this, if
it is happening, their faith in the organic market will be shaken,
and might not return;
3. organic to me, if properly policed, and
driven by people who do not seek to cut corners, and who are not
forced to cut corners, represents the ultimate food assurance
system in the UK. This is a wonderful position to have engineered,
and is one that could be blown open by any scandal that might
emerge. There is a need for all the certifying bodies to come
into line at the highest standards, not the lowest, and for the
auditors to work ruthlessly to weed out those who do not adhere
to the highest standards;
4. there is a terrible waste of time and
other resources in the squabbling and in-fighting, essentially
over standards, between the UK's three main certifying bodies
(Soil Association, OF&G, OFF). The creation of a competitive
market in this area is ludicrous. The UK should be proud to adhere
to one standard, that exceeds most of what the EU is demanding,
and that should be final. Organic can mean as many things as there
are standards. No wonder people can be confused, and will become
more so as they learn what's really going on;
5. price pressure from multiples is complete
madness (if quite understandable). It will kill the goose that
lays the golden egg. It demonstrably costs more to produce organic
food than non-organic. More land per unit output, more labour,
higher feed costs, to name but three factors. If there is no margin,
or very low margins, for farmers/growers they will either stop
doing it or cut corners. Then the organic assurance is gone, and
the chances of a profitable UK farming sector disappear as well.
The products that this business sells, as Eastbrook branded goods,
are not cheap. But never do consumers tell me we're too expensive,
because at this stage they understand they're buying into a more
expensive production method—and some of them are quite content
to see farmers making a reasonable profit for their efforts. Prices
of organic food will fall in time—we have virtually no effective
economies of scale to play with in a business of this size, in
terms of transport, feed, packaging. When we're ten times bigger,
our variable and fixed costs will fall. If I had to sell to Iceland,
or to Morrisons, or Tesco, at prices close to conventional prices,
as they are often insisting for products under their own brand,
I'd have to stop this afternoon. And I would! Consumers will not
benefit in any way in the long term from ridiculous price promises
made at this stage;
6. Imports are a threat—and they are
here. My own hunch is that consumers don't care where a product
comes from as long as it's good, ie that it's delivered some sort
of value that they appreciate. The only exception to this might
be livestock products—milk, dairy, meat. I detect a desire
still for UK product, and I feel that more UK product coming available
will eventually replace imported product, even if its more expensive—but
it has to be good quality;
7. exports—we have exported pork to
Denmark in the past, and are currently exploiting options in Italy.
It's a very specialist market, and we are some way short of satisfying
UK demand in all three species we work in, so major export volumes
are some way off. I would expect to be exporting in reasonable
volumes by end 2004, although consumers in mainland Europe are
notably much more interested in where their food comes from, and
seem to prefer their own products unless we can offer them something
exceptional.
May 2000
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