Jim Paice’s speech at the Agriculture Investment Summit
Can the agriculture sector in the UK and Western Europe remain viable in a changing global environment?
The short answer to the question is a resounding “yes”. Our agriculture sector has a bright future - as long as it can adapt and innovate to meet the challenges of a fast-changing world. The challenges are big - but the sector is backed by a government that is determined to help it meet them.
I personally could not be more motivated to help build an exciting future for the industry. Not because of my own long connection with farming; but because all of our futures depend on it.
As the Foresight report makes clear, there is an emerging, global challenge to provide sufficient food to feed the world. The dramatic increase in global food production over the past 40 years is marred by two big failures:
- that nearly a billion of the world’s people are still hungry;
- that food production methods are polluting the environment and using up our natural resources.
The world’s farmers needs to address both these failures; while meeting a sharply increasing demand for food, and competing for diminishing amounts of water, energy and land.
The pressure is already showing. Food prices are rarely out of the headlines. So we need a revolution along the whole food chain. As a world we need to grow more food, more sustainably; and create a truly resilient international food and agriculture system.
The UK must help build this new system, and ensure its own agriculture sector thrives within it.
How? We must keep showing global leadership, through the EU, G20 talks and international trade discussions.
And we must help EU and UK farmers access and make the most of the opportunities global markets present.
We must also ensure farmers have both the incentives and the support they need to perform their role as custodians of the natural environment; and to both adapt to and mitigate climate change.
Global leadership
Globally: We need to increase world productivity - otherwise every year will be a crisis year.
We also need trade liberalisation and free global markets to ensure food security for all.
We need to get the message across that nation state self-sufficiency will not work. Only through open international trade can we achieve food security for everyone.
And we need greater transparency on food production, on consumption, and on stocks.
Tomorrow (22 June) Caroline Spelman will be in Paris at the first ever meeting of G20 agriculture ministers, to discuss practical solutions to tackle food price volatility. She will be pushing for agreement on improving market information and access, reducing trade-distorting subsidies, and reducing the need for export bans.
We must also be leaders in Europe. For the EU to have a strong voice on the global stage, we need a strong CAP.
We must push for ambitious reform of the CAP that will enable the sector to respond to and earn improved returns from the global market. Rather than providing market-distorting subsidies, the CAP should be helping to build capacity, competitiveness and resilience.
We need to be constructive as well as ambitious. Only by working with our European colleagues will we be able to drive through the changes needed. And we need to be realistic. So, not a tactical scrapping of subsidies tomorrow, but genuine and farsighted reform.
With legislative proposals expected from the European Commission this autumn we have a window of opportunity to put the EU agriculture sector on the right path. A path to where the UK’s farmers can stand on their own two feet, rewarded by market.
UK farmers
How are they doing at the moment? Rising fuel and fertiliser prices are being felt across the industry. But the higher cereal prices are good news for arable producers (although there’s much uncertainty about what the weather’s going to do).
The cereal prices mean higher feed costs for livestock keepers, but generally beef and sheep prices have held up well. And provisional estimates of Total Income from Farming for 2010 show it remaining well above levels earlier in the decade.
Debt in the industry is at historically high levels, but its net worth is holding up through high asset values, particularly land.
Productivity has continued its upward trend, with over £2 billion worth of investment in each of the last four years. But UK productivity isn’t increasing as fast as in the US and in other leading EU Member States.
Supporting productivity and competitiveness in UK farming sector
So the sector needs to get more enterprising and more flexible; to be able to respond quickly to the demands of increasingly discerning consumers - and to a changing climate.
And it needs to reduce production costs, not only saving money, but also reducing environmental impacts. That way it will become more competitive, resilient and capture a greater share of the market.
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We are in a good place, literally, in that we are in Northern Europe, where it’s likely ecosystems will continue to support food production. Also because of our scientific and technical knowledge. And because of the resilience and determination of our farmers.
What, specifically, do farmers need to improve on, and how can government help?
We’re helping farmers invest in physical capital for their farms by providing grants for equipment and infrastructure.
But there’s a lot of scope for improving performance through better business management. Production costs vary widely across the sector, and only a quarter of farms are regularly benchmarking their performance. So it’s as much about investment in management skills as in new equipment or expansion.
Upskilling generally is crucial. Defra is providing funds for training in practical, technical, business and management skills. We’re supporting the industry-led AgriSkills strategy, and working with the AgriSkills Forum to get more apprenticeships happening.
We also need to keep pushing forward with the science - with precision agriculture techniques, for example, and with ways of minimising water and energy use.
There’s already some really great work happening. At Thanet Earth in Kent tomatoes, peppers and cucumbers are grown in three vast greenhouses - which double as power stations, generating electricity for the National Grid.
Then there’s breeding and genetics. Export of breeding animals and genetic material already contributes to our rural economy, as well as to food security overseas. Our pigs are wanted for breeding because of the low feed required to produce quality stock. And we export cattle semen for guaranteed high productivity. We have the technology and the know-how in this area to go much, much further.
The Government as a whole invests about £400m per year on agriculture and food research. Defra is also supporting the Sustainable Agriculture and Food Innovation Platform with up to £90 million of match-funding for R&D over 5 years to stimulate the development of sustainable intensification technologies. And we’re also driving research through our Sustainable Farming Systems and Biodiversity programme.
We’re also helping farmers become more competitive by cutting back on the regulation that’s been hampering them. We chose a voluntary path for the Campaign for the Farmed Environment, and the Task Force on Farming Regulation has identified more ways of reducing red tape, giving farmers and food processors more freedom and more responsibility.
And we’re encouraging more UK applications for EU Protected Food Names, which will boost returns for producers in a particular region or using a traditional method.
We really want to help farmers compete internationally, taking advantage of the growing incomes and a growing population.
The dairy sector is the most pertinent example. Climate-wise it has a strong advantage over most of Europe, although a global market means it also needs to compete with the likes of New Zealand.
The end of EU milk quotas in 2015 gives European dairy farmers the chance to get more efficient. It also means UK farmers will need to compete with expansion in other EU member states, especially Ireland. But our dairy industry has a future as a strong, sustainable, resilient industry.
The last farmer intentions survey showed a rise in confidence: with planned increases in production greater than planned decreases.
We are seeing a willingness to invest at the processing end too: Arla is proposing a £150 million zero carbon dairy, and we’re seeing innovative products such as lower fat milk, and branding that makes healthy products appealing to children.
The latest cheese and butter export statistics are encouraging. The government has helped with export successes such as the recent certification of dairy exports to India. But we still maintain a £1.27 billion trade deficit. There are good opportunities, such as increasing export to China, but we need more investment and more innovation to compete. I will be challenging the dairy industry on its export opportunities when I chair the Dairy Supply Forum in two weeks’ time.
Climate change and environment
Agriculture is one of the first sectors to feel the impacts of climate change. It presents opportunities, such as growing new varieties of crops or livestock breeds - and industry must plan ahead to grasp them. But the sector will also need to manage the threats - extreme weather events, less water, bigger risk of pests and diseases - if it is to maintain its competiveness and resilience.
The sector also needs to mitigate current and future climate change by reducing its emissions. Globally, agriculture is estimated to produce 10 to 14% of greenhouse gas emissions.
It’s a big technical challenge. But in England, the farming industry has taken a good first step with its Greenhouse Gas Action Plan. The Plan shows that it’s possible to drive down emissions through simple measures that make good business sense - and that meet other environmental objectives.
To support industry efforts, we are conducting the first Climate Change Risk Assessment, an analysis of the key climate risks to the UK - and this will inform the first National Adaptation Programme
Our Natural Environment White Paper, published earlier this month, makes clear that a sustainable agricultural industry is necessary for a truly green economy. But there are tensions in growing more food at less cost to the environment, which we don’t want to shy away from. The White Paper announced the start of a focussed discussion on this subject, between government, industry and environmental partners. The discussion will be open to all interested parties, and will be informed by the Foresight report. Its conclusions will be published within a year from now.
I started with my short answer: yes, our agriculture sector can remain viable. I’d like to end by raising the bar. It’s not just viability UK and EU farmers should be aiming for, but to take a leading place in the world markets and form the bedrock of the UK’s new green economy.