Memorandum submitted by the Country Land and Business Association (SFS 01)

 

 

1. The CLA feel strongly that the food and environmental challenges faced globally, by the EU and of course by the UK too, have been underestimated by Defra. Consequently we majored on these twin challenges and the sort of Food and Environmental Security Policy needed to respond to the challenges in our Centenary Conference in May 2007. The paper summarising these ideas, the 21^st Century Land Use Challenge, was published through our European association, the ELO, in June 2008 and was sent to the Committee before the Christmas break.

2. We are therefore delighted the EFRA Committee has decided to investigate these issues. We acknowledge that Defra have come a very long way in acknowledging the importance of food security issues in the last two years, but we feel there is still a gross under estimation in Government about the scope and role of policy, particularly the evolving CAP, to address this area.

3. Before we answer the specific questions raised in the announcement of this inquiry, it is important to put UK food and environmental security into their appropriate EU context. Curiously, the Defra papers on food security make practically no reference to this. We also offer our analysis of the events of the last 18 months which precipitated the renewed interest in Food Security and on which our own diagnosis of future policy needs is founded.

 

The EU context of UK food and environmental security

4. We start from the observation that all the major policy levers affecting food security in this country are decided at EU level. We refer to the Common Agricultural Policy, the EU Common External Tariff (i.e. trade policy) and the fact that nearly all environmental policy affecting land use is based on EU directives. In addition the, admirably named, budget heading 2 of the EU Budget, entitled the 'Protection and Management of Natural Resources', provides the principal public financial support for the policies which shape our food and environmental security.

5. We would raise two issues which we have not seen aired in Defra discussions of food security which we think the Committee might consider.

6. The first concerns the uninhibited conduct of intra-EU trade in times of severe supply-stress. We ask, will the single market operate smoothly in such circumstances? Our presumption is that in the (somewhat unlikely) event of severe shortages of basic food stuffs in the EU there would be no legal way in which Member States could unilaterally decide to obstruct intra-EU trade to benefit their own citizens. This observation prompts two questions. What sanctions could the Commission or another Member State apply to illegal trade interference by a Member States in such circumstances? Would they be able to operate fast enough to make any difference? Because the UK is an island, with relatively few points of entry for bulk food supplies, there is perhaps plenty of scope for direct action which obstructs roads or ports, thus threatening UK supplies at times of stress. What remedies are available in such circumstances? What is the correct policy stance for the UK to take to guard against such eventualities? Our instincts are that these matters should be considered. It might be instructive to take liquid milk as a case study. It might also be useful for the Committee to take evidence from other EU Member States and from the EU Commission on this matter. If there is complete faith in the Single European Market then food security has to be considered primarily as an EU issue. If, as appears from Government documents, there is not such faith, then contingency plans for dealing with breakdown of the single market must be openly discussed.

7. The second EU matter concerns the role and scope of the EU budget. Our contention, spelled out in our document The 21^st Century Land Use Challenge, is that the world faces an unprecedented double challenge of meeting a huge growth in food demand whilst respecting far higher environmental standards than in the 20^th Century. We argue that the challenges are interrelated and both intensified by climate change. Further that the EU as a major economic and political bloc in the world has responsibilities and self interest in demonstrating how to rise to these challenges. The facts of EU competence for the relevant policies to deal with these challenges and that climate and biodiversity are trans-boundary matters justifies that these issues must be grasped though a common EU approach and our suggestion is that the CAP evolves to become Europe's Food and Environmental Security Policy.

8. Such a policy, can steer Europe's land management sector to achieve efficient, competitive, profitable primary food production whilst at the same time showing how intensive, precision, land management can deliver food security and higher standards of biodiversity delivery and reduced pollution too. Some of the principal elements of food security policy are to encourage innovation and modernisation, much research, development and extension, and to assist risk management. The measures for environmental security are to encourage, where possible, the creation of markets for environmental services from land managers and, because this will not do the whole job, to provide the schemes for public payment of private environmental service delivery.

9. The last step in our argument concerns the EU's Budget and Policy review which was demanded by the European Council (December 2005). If this is to be a meaningful exercise to set the tone of EU food and environmental security policy for several decades, it must thoroughly analyse the nature and scale of the policy required to deliver Food and Environmental security for this period. Our fear is that short run political decisions about the deployment of the EU budget are being taken without reference to an analysis of the scale of the task demanded of EU policy, and thus the budget appropriate to dealing with this task.

 

The lessons from the 2007/08 commodity price spike

10. The events in commodity markets from late summer 2007 until July 2008 were remarkable for their speed and ferocity. Also remarkable was the speed with which most observers seemed to adjust upwards their expectations of future prices. There seems a broad consensus amongst private trading organisations and public authorities (HMT, EU Commission, OECD, FAO, World Bank) that commodity prices will remain during the next few years 40%-60% above their average levels of the last decade. In the meantime we can only observe that traded commodity prices are in fact back to where they were before the meteoric rise in 2007. Yet farm costs (e.g. fertilisers) and energy have not fallen back to the same extent, and neither also have retail food prices.

11. The CLA interpretation of these events is we have experienced a price spike comparable in scale and duration to that in the mid-1970s, and it is not yet clear that we are seeing a reversal of the long run, static or declining real prices of agricultural commodities experienced throughout the 20^th Century.

12. The two main reasons we argue that the 21^st Century will not be like the 20^th Century are first the added dimension of the desire to extract renewable energy from land, and second the stronger environmental ambitions to reduce biodiversity loss and pollution. Both of these new features are driven by concerns about climate change.

13. It is clear to us that further intensification of agricultural production will be needed in many parts of the world because there is insufficient additional land which can be brought into cultivation and there is a steady loss of existing agricultural land to development and to sea level rise. This demands significant effort to discover and apply a whole new greener revolution which can maintain high levels of agricultural productivity but where the added soil nutrients and water and plant protection products are applied with such precision that the unwanted side effects on the environment (biodiversity damage, soil erosion, water pollution, GHG (greenhouse gas) emission) are all reduced. All scientific knowledge, including chemistry, biotechnology and ITC will be required to rise to this challenge. In addition, policy measures will be required to assist farmers to deal with the unprecedented volatility in market prices, input costs, exchange rates as well as the more extreme weather events and influx of new pests and diseases of plants and animals. A third major element of policy to provide food and environmental security will be the schemes to pay farmers and other land managers to supply the ecosystem services for which markets cannot be arranged. The latter two policy functions are interlinked; farming and environmental management both require a degree of stability they are long term processes, so the public payment for environmental services could well provide an important, solid, dependable, income base for rural businesses from which they can weather the erratic development of food markets.

14. Turning to the questions posed, our answers are as follows.

 

How robust is the current UK food system? What are its strengths and weaknesses?

15. In international terms it is very robust. We are blessed with good soils, a temperate climate, good farm structures based on secure land ownership rights with flexible and well-based land markets and tenurial systems; a long history of innovation; highly developed and sophisticated, but also highly concentrated, input supply, food processing and food retailing systems; until the last decade or so, we have had a strong record of research and development and extension; and we have stable system of governance. Other strengths? The UK food system provides incredible safety, reliability and consistency of food supply to consumers to the extent that this is just taken for granted. It provides an incredible variety of foods, and the food service sector is highly dynamic providing a staggering choice of products and service. In addition the UK farming system provides the beauty of the English countryside which supports a large and renowned rural leisure and tourism sector including country sports which attract international participation.

16. All this said, some weaknesses at the primary food production level have emerged. Productivity growth has slowed. This is partly policy induced, and it is partly because of the changes to the research and development and extension systems. There are also concerns about the availability of seasonal labour. UK farmers also appear to be less willing to work together in strong producer controlled businesses than farmers in some other countries. We are also concerned about the availability and price of phosphate, and the investment which will be required in future to maintain land drainage system.

17. The other weakness of the sector - in common with the rest of EU agriculture - is the structural dependence on public subsidy. Direct payments under the CAP account for a significant share of net farming income. Without this assistance a very large proportion of EU farming businesses will not survive. Whilst in most of the rest of the EU this situation, including the subsidies, is accepted, in the UK and a small number of other NW European Member States, the overwhelming view outside the farm sector is that these subsidies are an unwarranted market distortion and should be eliminated. This is the declared view of the UK Government yet no analysis is provided to show the structural impacts, the effects on employment and output from agriculture, from the pursuit of this policy across the EU. We have seen no reference in Defra papers on Food Security to the implication of their own CAP Vision on the security of UK and EU food supplies. It is irresponsible of Government to advocate a policy without such evidence.

 

What are the supply side challenges?

18. We summarise the global farm-level challenge as that of repeating in the next half Century what was achieved in the second half of the 20^th Century, namely more than doubling the production of food, yet this Century we must do this whilst reducing the environmental impacts.

19. The principal soil challenges we face are: returning more organic material back to the soil, restoring the levels of trace elements, reducing soil erosion and protecting soil structure. In addition we must do more to protect the mostly low-lying best arable lands from coastal erosion, riverine flooding and from development. More attention is needed to investigate low till or no-till farming techniques. RASE (Royal Agricultural Society of England) recently pointed out the worrying dearth of R&D (Research and Development) capacity on soils.

20. Water availability. Even with the climate change anticipated, the UK, as a whole, is not expected to be short of rain. The problems will be its distribution in time and space. Farmers certainly could, and should, find it easier than at present to construct reservoirs to catch water. They will also have to be more precise in their use of irrigation water. Compared to other EU countries and in other parts of the world the UK is expected to be less badly affected by climate change.

21. CLA is concerned that there has been an erosion of the science base for agriculture, as documented recently by Prof Leaver for the Commercial Farmers Group. This is especially so for the applied R&D and this is precisely the area where new production techniques are required to discover more sustainable farming systems with less water and atmospheric, i.e. GHG, pollution, less soil erosion and better utilisation of applied irrigation water and fertilisers, and plant protection.

22. Not only has the record on R&D deteriorated, but there is every sign that EU policy decisions will make this situation worse. We refer specifically to the current changes in the Pesticides Directive which will significantly curtail the availability of Plant Protection products which will reduce yields on average, removing very important risk management tools from farmers risking catastrophic crop failures when pests or diseases strike. This can certainly be seen as a step diminishing food security.

23. In addition EU stance to the use of biotechnology in farming is progressively putting UK and EU farmers at a competitive disadvantage as well as removing from them productivity boosting and risk management tools, and reducing the opportunities of deceasing their dependence on some plant protection products. There is a very clear signal sent to the agro-chemical and biotechnology companies from these EU policy stances, it is that there is no point in investing in new technology for Europe, it will be rejected. We consider this is another important dimension of EU policy on food security which is not well positioned.

24. Training in the farming and land management parts of the food chain has adjusted and consolidated significantly in recent years. There is a good mix of practical skills development via Lantra and Farm Colleges; vocational training courses, degree and post graduate training. The provision at University level has declined and restructured. Ad hoc professional development takes place in a fantastic variety of formal and informal courses, events, shows and conferences.

25. On Border measures, our principal concern is the insufficient resource applied to the prevention of import of disease which can threaten food security.

26. The way land is farmed and managed. The UK has admirably flexible arrangements which allow farmers to create businesses which can take advantage of the economies of scale in input purchase, machinery operation and land management. These include Farm Business Tenancies, farm contracting, share farming, cropping under licence, farming companies, partnerships and cooperatives. With some struggle, it has been possible to preserve most of this flexibility despite the Single Payment System which did not recognise this multiplicity of farming structures.

 

Demand side developments

27. Others will provide detailed analyses of consumer demand developments. One of our major concerns is that there will be no change in the major structural feature in food markets that nearly all the market power rests with the highly concentrated food processors and retailers. Successive reports from the competition authorities have shown that this market power is sometimes abused, but the remedies offered are extremely weak. CLA have long argued that a proactive ombudsman could provide some deterrent effect on the misuse of market power, but it will not fundamentally change the relationship between fragmented suppliers and concentrated buyers.

28. Of course the other side of the coin of highly concentrated downstream food industry is that it offers the firms great scope for efficient market servicing and the opportunity to deploy sophisticated storage, distribution and logistics. This in turn means that the major responsibility for ensuring the resilience of the food chain to shocks or disruption arising from any causes, natural, industrial action or terrorism, lies with these companies.

How well joined up is Government policy?

29. The CLA offers three examples relevant to Food and Environmental Security where policy is not well joined up across Government departments.

30. The first is that Defra is completely hamstrung by the Treasury stance on the EU budget - in particular that a major part of the budget for the CAP should be eliminated. This is essentially a political requirement that as the British Budget rebate is eroded the total EU budget has to shrink to contain the growth in UK contributions. The CLA argues that of course the nature of the CAP has to continue to adapt and change, we have outlined the directions above. The CAP has already undergone a massive change since the early 1990s, the days of unsalealable surpluses have long since gone, a significant part of the budget is now paying farmers for delivering non-market environmental and cultural landscape services. We contend that spending less than 1% of total EU public expenditures, or less than 0.5% of EU GDP on a policy whose fundamental purpose, we argue, is for achieving food and environmental security is not self-evidently barmy.

31. The second concerns the nature and survival of farm businesses through economic diversification. It is already the case that a very large number of farms have diversified their income base beyond farming. Defra data from the Farm Business Survey suggest that of the 60,000 largest farms in England which occupy a farmer for at least half his time, and account for 96% of total output, 50% have diversified activities which generated an average of 19% of total income. This is a very important part of farmer risk management. However the overwhelming experience of CLA membership is that this rural business development and diversification is not understood by the planning system but is often obstructed by it. Affordable rural housing is a related aspect of rural development where all is not as it should be and where Government policy does not recognise the links to Food and Environmental Security provided by viable rural businesses who cannot find employees who can afford to live in rural settlements.

32. The problem is that Defra's rural affairs policy and the rural aspects of the Department of Communities and Local Government (CLG) are simply not joined-up. This was illustrated in the simultaneous publication in 2004 of Defra's 2004 Rural Strategy and CLG's Planning Policy Statement 7 on Sustainable Development in Rural Areas which had little reference to each other. Our observations on this gap in communications were taken up in the Barker Review of the Land Use Planning System which flagged how the planning system was having a detrimental effect on economic development including in rural areas. Also Matthew Taylor's report, A Living, Working Countryside, pointed to important linkages between rural businesses, the need for housing in rural settlements and hence sustainable rural communities, which were not met by the current system.

33. The third example concerns renewable energy. The prime reason for development of renewable energy is to substitute non-fossil fuels for coal, oil and gas to reduce GHG emissions. This is fundamentally to increase environmental security - both in the sense of reducing climate change and increasing energy security. The UK has the fifth lowest share of energy coming from renewable sources in the EU. Unlike in other EU member states, where Government policy has engaged the land management sector in delivery of renewables from the outset, UK Government has come late to the challenge. Waste policy and anaerobic digestion remain in Defra, while Energy policy is made at DECC. The latter is staffed mostly by the former DTI team who have consistently made energy policy to suit large scale energy companies, rather than engaging the rural SME sector. Only now with a new Secretary of State at DECC do we see the signs of an emerging joined up energy policy that can help deliver on food and environmental security.

Criteria for monitoring Food and Environmental security

34. Defra have already launched serious work on the appropriate indicators for Food Security and we have commented in detail to them on their proposed measures. Our main concerns on their approach are the complete lack of reference to EU food and environmental security, and to the economic sustainability of UK farming businesses. The fact is that UK farming as currently structured is highly dependent on public payments.

 

January 2009