Select Committee on Welsh Affairs Minutes of Evidence



Memorandum submitted by the National Farmers Union (NFU) Cymru Wales

 

1.  INTRODUCTION

  NFU Cymru welcomes the Committee's decision to follow up its Second Report from session 97/98 "The Present Crisis in the Welsh Livestock Industry" with their current Inquiry into "Farming & Food Prices".

  The focus of this Inquiry is clearly on what measures farmers and the farming industry have and continue to take to get involved in the food chain in the light of the Committee's vision for "the way ahead". NFU Cymru and the industry's endeavours in this regard need to be set against a backdrop of an average net farm income in Wales of just £4,100 to the year ended February 2001. Since then there has been a further collapse with the devastating consequences of foot and mouth disease, the containment and eradication of which has dominated the whole industry's agenda, with `survival' being the priority for many Welsh farmers.

2.  NFU CYMRU AND MEMBERS' INVOLVEMENT IN THE FOOD CHAIN

Farmers' choices

  NFU Cymru believes that farmers in Wales are faced with a number of choices [not mutually exclusive]:

    —  Expand and continue to provide basic commodities

    —  Collaborate and co-operate to acquire strength and negotiating `muscle' in the market place

    —  Develop added-value products

    —  Tap into niche markets, such as Welsh branding, organic production etc

    —  Exploit the food marketing potential of involvement in agri-environment schemes such as Tir Gofal

The key drivers

  NFU Cymru has identified a number of factors which are crucial to involvement in the food chain:

    —  Recognition of an increasingly global economy with its implication for competition

    —  The imbalance in terms of size of farming businesses and others in the food chain

    —  Increased awareness of food safety issues and the demand for ever-lower levels of risk

    —  Rising expectation from consumers on animal welfare and environmental standards

    —  A better understanding of how the food chain works

What the industry needs to do

  NFU Cymru is of the view that the industry needs to:

    —  Reduce dependence on commodity markets and where possible compete on quality and not quantity

    —  Increase collaboration/co-operation to provide a quality specification and to negotiate better prices

    —  Shorten the supply chain and develop marketing groups

    —  Improve business efficiency and reduce unnecessary cost

What NFU Cymru has/is doing

    —  NFU Cymru input into National Assembly for Wales `Farming Futures' strategy launched November 2001

    —  Involvement of NFU Cymru Officers/Officials in WDA's Agri-Food Partnerships and task groups set up in 1999/98 respectively

    —  NFU Cymru instrumental in getting WDA to produce dairy prospectus for would be investors in Welsh milk sector

    —  Set up an all Wales Conference in October 2001—main themes being co-operation, the adding of value to primary produce and marketing

    —  NFU Cymru is supporting its members through provision and update on NFUnet/request of detailed briefing/information sheets eg:

    "Introduction to Farmers' Markets"

    "A beginners guide to becoming a milk producer/processor"

    "Trading and selling" advice

    "Food Safety" advice

    —  NFU Cymru is establishing a food and marketing working group [establishment delayed by Foot & Mouth Disease]

    —  Development of British Farm Standard—the little red tractor by the NFU. NFU Cymru has pressed WDA consistently to develop a Welsh brand to facilitate the differentiation of Welsh branded food

    —  NFU Cymru members actively involved in "Farmers' Markets". NFU instrumental in establishing and now partner in National Association of Farmers' Markets

    —  NFU business development service has been set up in association with Hertington Group aimed at providing our members with practical advice and information to help them develop commercial ideas, currently being trialled

    —  NFU/IGD holding Food Chain Training Workshops—number scheduled early this year had to be postponed due to FMD—designed to help and inform producers about supply chain from farmgate to end consumer

    —  NFU Cymru Food & Farming Roadshow to educate consumers about food source

3.  PROBLEMS ENCOUNTERED BY MEMBERS IN BECOMING PART OF THE RETAIL FOOD CHAIN

    —  Successive years of low income plus diminishing value of livestock have left capital resource and collateral drained. Processing and marketing grants available in Wales from WDA under Farming Connect [40 per cent in Objective 1 areas, 30 per cent outside] funding to draw down grant unavailable. Lack of profitability making it impossible to invest in change

    —  Lack of processing facilities in Welsh meat and livestock sector

    —  Peripharality/distance from the market place/tendency to be small suppliers makes it difficult to develop outlets other than niche markets

    —  Lack of transparency in the market place in terms of specification and price

    —  Those most in need often unable to identify and realise opportunity in retail sector

4.  WAYS IN WHICH GOVERNMENT COULD HELP

    —  Assist farming in making changes, not obstruct them

    —  Provide a solution to currency fluctuations which are presently attracting imports, make exports uncompetitive and reduces support in national currency terms

    —  Streamline bureaucracy/red-tape with regulation being proportionate to risk—disproportionately high costs for small abattoirs/processors

    —  Making sure that illegal imports are stamped out

    —  Making sure that consumers' understand that domestic product is produced to high safety, quality standards which embrace high welfare and environmental considerations

    —  Public sector purchasing eg MoD and overcome best value policies, source local food that safeguards local jobs

    —  Grant funded research and development for new products to meet and stimulate new consumer demands for value added/processed foods

    —  More funding for Tir Gofal Scheme which is heavily over-subscribed. Would provide increased pitch for marketing "green" food

    —  To consult and have a dialogue with the farming industry over the Code of Practice on Supermarkets' relationships with their suppliers cf Section 6

EFFECT OF FMD/BSE

    —  France remains in breach of community law for not accepting beef directly exported under the Date Based Export Scheme [Advocate General's opinion vindicates UK position]

    —  Now French farming organisations supported by French Government have joined forces with other meat groups to ban foreign beef in response to low consumption and prices. Strikes at the core of the principle of a single market. UK Government and the EC must put pressure to bear on French Government so that free trade may resume

    —  Until recently due to FMD export restrictions have applied to meat from GB. In counties which have from the outset been disease free, exports may resume, but conditions stringent

    —  NFU Cymru was deeply concerned during the summer that the closure of the export market due to FMD for light weight lambs [8-15 kg] would mean there was no viable outlet. Welsh Lamb & Beef Promotions [sponsored by producer levy income] was able to create a domestic demand for "light lamb" which to some extent displaced larger lambs, but nonetheless helped reduce reliance on a light lamb welfare disposal scheme

    —  Co-op/Asda/Walmart and Tesco extended its product specification to embrace light lambs, Safeway relaunched Welsh Mountain lamb and introduced multipack Welsh Hill lamb. Waitrose has supported Welsh lamb throughout the crisis and has recently introduced branded "Welsh Organic Lamb"

    —  The re-introduction of the export market for both Welsh lamb and beef is crucial and WDA is currently supporting the preparation of a video/CD rom to attempt to re-capture export clients. Funding for these relaunches will be crucial if Wales is to recover these vital markets

6.  COMPETITION COMMISSION/SUPERMARKET CODE OF PRACTICE

    —  NFU Cymru welcomed the Competition Commission report, published in October 2000 by the Government which recommended a legally binding code of practice to govern the relationships between retailers and suppliers [NFU Cymru had complained that farmers felt under threat from the excessive or unreasonable demands of supermarket contracts]

    —  NFU Cymru also welcomed the Competition Commission's highlighting of the problems caused by persistent selling below cost and their recommendation that there should be an independent dispute resolution and written contracts with reasonable notice for changes

    —  NFU Cymru recognises that the food industry has to work together, but not at each others expense

    —  In response to National Assembly for Wales in March 2001 NFU Cymru emphasised that Code should be template for all trading relationships between buyers and sellers

    —  In July NFU complained to the Secretary of State for Trade and Industry at the lack of progress and dialogue on the Code of Practice. Also raised with Trade & Industry review team which met in August in Cardiff to consider her Department's operations

    —  The Code of Practice was finally published on 31 October 2001 by Patricia Hewitt, Secretary of State for the Department of Trade & Industry, seven months after the consultation deadline.

    None of the NFU recommendations were taken into account by the Director General of the Office of Fair Trading—the Co-ordinator for industry responses to the Code.

    Particular concerns include provisions covering promotional timescales, changes to prices and payments and consumer complaints management. Fundamentally, the Code only applies to the top four retailers with market share of 8 per cent and above. This leaves many thousands of producers who do not supply these supermarkets without even the very limited protection the Code offers.

    —  The NFU are in discussions with each of the supermarkets to determine how they will interpret the numerous provisions in the Code and translate these into practical business relationships with primary producers. The NFU are also seeking reassurances that the supermarkets will be implementing a comprehensive training programme for all buyers, including new and junior roles on implementation of the Code.

    —  A review should be undertaken by all parties on at least an annual basis to determine the efficacy of the Code.

7.  CONCLUSION

  NFU Cymru has tried to positively and proactively progress and embrace some of the findings and recommendations of the Welsh Affairs Select Committee as detailed in its second report on "the present crisis in the Welsh livestock industry" and believes notwithstanding the economic circumstances still prevailing in the industry that some progress has been made. NFU Cymru is not complacent and recognises that much remains to be accomplished, but this requires a partnership between the farming community, the food chain, consumers, Government [at Westminster and the National Assembly for Wales] and the EC.

Mary James

Deputy Director

Head of Policy

 


 
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