Challenges and Opportunities Ahead for Scottish Red Meat Industry

The challenges the Scottish red meat industry is currently facing to achieve profitability were highlighted today (April 25th 2016) by Quality Meat Scotland chairman, Jim McLaren.

Speaking as QMS unveiled its activities planned for the year ahead, Mr McLaren said he was acutely aware of the frustration being felt in the supply chain, in particular by livestock farmers whose cash-flow has been hit by a combination of reduced and late support payments along with some of the lowest farm gate prices we have experienced in several years.

“Without question this is a disheartening time for many hard-working Scottish livestock producers but I would urge farmers not to lose sight of the long-term opportunities which lie ahead for our industry. What we offer from Scotland could not be more different to what is produced by the majority of our overseas competitors,” said Mr McLaren.

There will, he said, be real opportunities in the years ahead to reap the rewards of the Scottish industry’s unique selling points in a global market where there is growing demand for quality, sustainably-produced red meat.

“We have beef and lamb which benefits from our whole-of-life quality assurance schemes and full traceability. It is free of growth hormones and is produced using systems where any use of antibiotics is carefully controlled.

“Our production methods are grass and forage-based and do not divert water from human consumption. These qualities would place our products in the very top price bracket in markets such as North America, yet they seem to be taken for granted by UK retailers.

“It is essential that a larger share of the retail value finds its way back to the primary producer, or the long term availability of our world-beating products could be under threat.”

Mr McLaren also urged livestock farmers to ensure they are not so focused on the pence per kilo they receive for their animals that they lose sight of other opportunities to improve their profitability.

“While there is no doubt that the pence per kilo received is the source of the greatest frustration to farmers, the reality is it is one of the areas over which producers have least control, assuming they are producing animals to the specification the market needs.

“This is also true of a range of other factors linked to supply and demand such as cheaper imports, exchange rates, wider market access, input costs and the weather,” said Mr McLaren.

However, he said farmers could look at opportunities to improve profitability by concentrating on the areas over which they do have control such as making sure their end product is what their customers are looking for in terms of carcass weight and grade.

“We can also strive to improve our herd health status still further and make the most efficient use possible of grass, our industry’s greatest natural resource.”

Looking at the beef sector, he said the implementation of the wide-ranging Beef 2020 proposals would also offer farmers’ opportunities to improve their margins.

“The development of an integrated and accessible database was a central recommendation and is seen as key to the delivery of improved productivity, allowing producers to track the performance of their animals through the whole of their life and beyond,” said Mr McLaren.

“This information will help farmers to make changes to their businesses based on sound knowledge about the effect these changes are likely to have on profitability. The Scottish Government’s new Beef Efficiency Scheme (or BES) is the central mechanism for populating this database and I would encourage all producers of suckled calves to join this scheme.”

’Uel Morton, QMS Chief Executive, said the organisation’s priority, in terms of budget spend, remained marketing the Scotch Beef PGI, Scotch Lamb PGI and Specially Selected Pork brands.

QMS’s budgeted external spend for the 2016/17 year is £5.26m, slightly up its external spend of £5.1m for 15/16. 

“It is important to note that over 70% of this external spend is allocated to marketing and other consumer-facing activities with less than 20% of our spend focussed on our industry development activities,” observed Mr Morton.

Levy income for the financial year ending March 31st 2015 was £3.97 million, down by £123,000 on the previous year. 

“The loss of levy to other parts of Great Britain continues and the actual amount of levy received for the year fell short of our initial budget estimate, by £52k. Our forecast for levy income for the year ahead is £4.19m which is an increase of £215k on the year just past.”

On the issue of levy repatriation - the recovery of levy which is “lost” from Scotland due to livestock being slaughtered south of the border - he said there had been some welcome progress at the end of last year in discussions with the other GB red meat levy organisations.

“Significantly, there is agreement amongst the GB red meat levy organisations that the present system of levy distribution is unfair and an alternative method should be adopted.

“However, we have to recognise the legal framework we are in and the solution requires an amendment to legislation in England, Wales and Scotland. This proposal is currently with ministers in Westminster, Cardiff and Holyrood and we look forward to progress in the coming months,” he said.

The QMS team, he said, has worked hard to bring in grants, against a backdrop of tight public sector budgets.

“Grant income for the year past was £785,000 which is a great boost to our activities on behalf of the industry.  For the year ahead we have already secured £721,000 in grant income for the industry and we are hope to be able to confirm some further grant funding in the coming months,” said Mr Morton.