Supplementary memorandum submitted by Martin Humphrey, UKASTA (A29(a))
I was one of four members of the UKASTA team who attended your Committee meeting on 1 May 2002. As the last one "up" we found ourselves with little time to be able to make the points which we believed would be of interest to your Committee.
A key point which UKASTA will be making in due course, which is entirely complementary with the point made by FDF, and indeed the Curry Report, is the importance of Assurance Schemes. UKASTA has been at the forefront of implementing systems which have since become the industry norm, and are which are internationally recognised and verified. I will let UKASTA make the full merits of their contribution, which had there been time, I would have supported.
I would however have welcomed the opportunity to comment on some of the FDF issues, and indeed provide an alternative perspective from that which Jim Reed from UKASTA presented, and I believe that these points go to the heart of what your Committee is trying to determine—the future of UK agriculture.
My perspective is that of a poultry farmer, whose prime product is eggs, a sector in which our company has been operating in for 70 years. We have been involved in the poultry meat sector—but had to withdraw from that following the rise of imports which have had such a damaging impact upon the sector (a point well made by Gillian Shephard). Our business has also been involved in selling eggs to the retail sector, but we have removed ourselves from the sharp end of that activity, and are concentrating on egg production.
The FDF people were confident of their continued support of UK agriculture, but I could not determine why they would continue to be committed. Fresh milk, and to a much lesser extent, eggs are some of the few relatively protected commodities, in that the consumer is focussed on "freshness", a concept which does not sit happily with imports, however, this important issue, does not affect virtually all other primary UK agricultural production.
One of your committee asked what the consumer wanted (with reference to the Landscape): the real answer was "cheap food". Our culture is committed to this concept, and so is government, and the EC—the thought of a loaf of bread being £4 is politically unpalatable! Somehow our society with its "do not have the time" mentality has moved towards more processed foods, and as part of that process has abdicated the responsibility of searching for good food, to the supermarket. This can be witnessed by the demise of the corner and independent shops.
The drivers for the supermarkets is to be seen to be the seller at least prices whilst obviously maximising their profit—witness Tesco's>£1 billion profit this year. The supermarket's strategy with their suppliers is "divide and rule". Not only do our supermarkets make the biggest margins in Europe but they also have the most amount of "own label" foods, and least amount of "branded" food. Amongst other issues, own label allows them to change their suppliers about, but fundamentally it reduces the item being sold, to that of a "commodity".
As I was told a couple of years ago, in a commodity market there is only one strategy—least cost. And the UK farmer can not provide the UK consumer with least cost. Why not?
1. The value of land.
2. The cost of labour.
3. The high standards of production/welfare which we insist upon in our quest to regain the confidence of the consumer.
Your committee's visit to New Zealand has obviously left a strong impact upon you. Indeed NZ did undergo a fundamental change in their approach to agriculture, but this did coincide with a fundamental change to their total approach to their entire economy, and as such is now the stuff of text books in schools and universities around the world. Their land values do not compare with ours—simple economics, the land mass is the same, yet they spread out just three million people, in an area where we squeeze nearly 60 million. More people bidding for the same space bids up the land values. The NZ general cost of living is lower, therefore their labour costs are lower.
It is no surprise that some of the companies representing FDF have moved production away from the UK, so have a number of poultry producers, who have long been seen as the trailblazers in terms of cost reduction through their vertically integrated approach to growing, processing and presenting poultry products to the UK consumer. It is no surprise that Cargill, Crampian and others have been investing abroad—land, labour and other inputs are cheaper, whilst the legislation standards are lower. I would not necessarily say that their standards are lower, but they can, for instance, have higher stocking densities, and use drugs banned in the UK and EU.
So where is this ramble leading? The UK will never again be the supplier of commodity items, such as wheat—because we are not the least-cost producers. There will always be niche opportunities, but agriculture cannot supply just the niches! For my prediction to be disproved a revolution (bloodless please) needs to take place, where:
(a) Land values are slashed (to 10 per cent current levels to match those of Brazil and other agriculturally developing).
(b) The cost of living in other countries is raised, ie, their workers want their own house, fridge, freezer, TV and DVD system—so that their costs rise to those of ours, in our mature economy.
That opinion is at odds with that presented to you by the FDF, and indeed may be considered heresay, but I would suggest to you, that it represents a realistic outcome for UK agriculture on the course on which it is currently headed.
I am 39 years old, and despite being a director of a small agricultural business with a relatively strong balance sheet (albeit denuded somewhat by the ravages of being paid continually beneath the cost of production), I firmly believe that I will not end my working life in agriculture. The reason—even in eggs the retail buyers will have abandoned their "support British" approach, as they have been over the years, in the quest for the cheapest source.
Despite that prediction, I believe that there is a future for our business carving out a niche and re-assigning some of our buildings for alternative use, but not everyone can do that, and not everyone will be allowed to.
May 2002
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