Amaeth Cymru The future of agriculture in : the way forward

Amaeth Cymru The future of agriculture in Wales: the way forward

Contents 1. Introduction to Amaeth Cymru 3 2. Our ambition 4 3. The outcomes 5 4. Links to other groups and sectors 5 5. Where are we now? 6 Global trends 6 The Welsh agriculture industry 6 Key imports and exports 7 Wider benefits of agriculture 7 Current support payments 8 Environment (Wales) Act 8 6. The impact of exiting the EU 9 Opportunities and threats presented by EU exit 9 7. The way forward 10 Overarching requirements 10 Measures to deliver more prosperity 10 Measures to deliver more resilience 11 8. Conclusion 12 Annex 1: Evidence paper – the Welsh agriculture sector 14 Annex 2: Amaeth Cymru – Market Access Position Paper 18 Annex 3: SWOT Analysis 21 Annex 4: List of sources 24

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1. Introduction to Amaeth Cymru ¬ Amaeth Cymru – Agriculture Wales was This document sets out our Vision for Welsh established on 25 September 2015 following Agriculture, the associated outcomes, an a consultation on a overview of where the industry is currently Strategic Framework for Welsh Agriculture.i and the strategic priorities that we will need This consultation was based around a to address to achieve that Vision. ‘principles paper’ developed by leading industry stakeholders and took into account This document is set within the context of the work of various independent reviewers. Taking Wales Forward – the government’s programme to drive improvement in Amaeth Cymru is an industry-led group, the Welsh economy and public services, with Welsh Government as an equal partner. delivering a Wales which is prosperous The group appointed Kevin Roberts as their and secure, healthy and active, ambitious independent chair in January 2016. The and learning, united and connected. The membership of the group covers a spectrum agricultural industry can play a key role in of interests, including farming unions, levy helping to deliver this agenda. This aligns with bodies, government, academics and industry Prosperity for all: the national strategy.ii experts. Full membership can be found below. This document focuses on the timescale Through joint working, Amaeth Cymru seeks until 2030, and will be reviewed periodically to provide strong, collective leadership to by Amaeth Cymru to ensure it remains move the industry forward and realise our consistent with emerging events. shared vision for Welsh Agriculture. All partners have an important role to play and take collective responsibility for delivering the Vision.

Membership Name Organisation Kevin Roberts Chair of Amaeth Cymru John Mercer NFU Cymru Dylan Morgan NFU Cymru Alan Davies FUW Nick Fenwick FUW Rebecca Williams Country Land and Business Association Cymru George Dunn Tenant Farmers Association Gary Haggaty Welsh Government Gwyn Howells Hybu Cig Cymru Tom Hind Agriculture and Horticulture Development Board John Griffiths Coleg Sir Gâr Peter Davies Environment & Sustainable Development representative Prysor Williams Bangor University Wynne Jones Chair of Farming Connect Strategic Advisory Board Euryn Jones Regional Agriculture Director - Wales and South West HSBC, Member of Farming Connect Strategic Advisory Board Peredur Hughes Chair of Animal Health & Welfare Framework Group Andy Richardson Chair of Food and Drink Wales Industry Board Nia Lloyd Wales YFC Helen Minnice-Smith Welsh Government

2 Amaeth Cymru Amaeth Cymru 3 2. Our ambition • To be resilient, businesses must be robust ¬ and therefore able to withstand setbacks Amaeth Cymru has developed the following – economic or from natural causes – with Vision for agriculture in Wales: public support correcting market failures and providing a framework for continuing ‘A prosperous, resilient agriculture delivery of public goods and services. industry promoting Wales’ present and Supply chains must be improved to make future well-being.’ them more efficient and able to operate in a fair way providing sustainable returns Amaeth Cymru recognises that the to farmers, processors and retailers, so industry is operating within a period of that farmers can become more market unprecedented uncertainty that will mean focused and secure a greater degree of significant changes to the way that both reward from the market place for the government and industry will operate in the outputs they produce. future. Leaving the European Union presents • Production must be profitable and a unique opportunity for us to set a clear sustainable in the widest sense – vision for the future of Welsh agriculture. economically, environmentally, socially Amaeth Cymru has an important role to and culturally – with these outcomes being play in helping to manage this change and is mutually compatible. committed to achieving a sustainable future Businesses that do all of these things well for Welsh agriculture taking into account the post EU exit, supported by appropriate needs of all people in Wales now and in the government policy will thrive and, future. importantly, will contribute to Wales’ present The key components of Amaeth Cymru’s and future well-being, and delivering against vision are prosperity and resilience: the seven well-being goals set out in the Well-being of Future Generations (Wales) Act. • To be prosperous, farms and related businesses must be profitable, creating skilled employment and bringing widespread economic benefit.

4 Amaeth Cymru Amaeth Cymru 5 3. The outcomes All future interventions and actions ¬ developed for the agriculture industry Amaeth Cymru has also agreed a number in Wales should be tested against their of shared outcomes that will need to be contribution to the outcomes and shared achieved if the Vision is to be realised. We Vision. If an action isn’t going to help want the agriculture industry to develop deliver against these then it should not further so that it can reach its full potential to: be considered a priority. Future policies and actions should also be enshrined in • Improve its sustainability – economically, the Well-being of Future Generations and socially, culturally and environmentally. Environment Acts. • Produce a diverse range of ‘products’ with increased value that meet current market Although we have a long term Vision, demand and anticipate market trends and the group will also be looking at what embrace opportunities. can happen in the short term to tackle the immediate risks, challenges and • Be a more efficient, competitive and lower opportunities facing the agricultural industry cost producer of food products, capable in Wales as a result of exiting the EU. of defending market share at home and seizing new markets overseas. This will In order to realise this Vision, all the require: a better deployment of research, organisations with an interest must work in development and knowledge transfer; a collaboration, sharing ideas and knowledge. higher animal health status and a better It is only by working collaboratively and understanding of the comparative costs in tackling the hard choices that face the our businesses and how to reduce them. industry head on that Welsh agriculture • Reduce our carbon footprint and will deliver the step change required for the contribute to our climate change targets. industry to thrive following our exit from the EU. • Drive first class management of the environment (soil, water and natural organisms) that sustains and enhances 4. Links to other groups both production and the natural environment for the long term. and sectors ¬ • Maintain overall sustainable production Amaeth Cymru can not deliver the shared in Wales, ensuring production is not vision and outcomes alone. The group must displaced to other countries that have work closely with other key groups and lower environmental and/or animal health individuals. and welfare standards. Amaeth Cymru is currently working closely • Be an industry that continues to generate with: wealth for the people of Wales. • Animal Health and Welfare • Be an industry that contributes to and Framework Group drives other sectors. • Food and Drink Wales Industry Board • Recognise that investment in the sector • Agriculture Industry Climate from taxpayers is directly related to the Change Forum public’s willingness to pay for the services provided. The situation after exiting the • Farming Connect – Strategic Advisory EU will make this an even more significant Board relationship and it is essential that the • Cabinet Secretary’s Round Table on Brexit wider community understands and is and associated sub groups engaged with building an agriculture sector that is fit for the future, providing • First Minister’s European Advisory Group multiple public benefits.

4 Amaeth Cymru Amaeth Cymru 5 Amaeth Cymru will also work with other Climate change does have some positive key stakeholders including planning policy outcomes for pasture based farming makers, Public Service Boards, Animal systems in Wales. Agriculture also plays an and Plant Health Agency and Natural important role as a carbon sink through Resources Wales to realise its ambitions. the management of grassland, peat and farm woodlands as well as a significant contributor to the decarbonisation of the energy sector. Food security – global demographic change coupled with climate change is likely to put pressure on food security, with population growth likely to be concentrated in Africa and South Asia. To meet demand, agriculture in 2050 will need to produce almost 50%v more food, feed and biofuel than it did in 2012. This may lead to increased prices for some produce. In addition, the increased global terrorism threat and international tensions may create future threats to international trade, which will impact on global food security and the need to consider whether greater self-sufficiency is warranted. In the UK, consumer demands and tastes are 5. Where are we now? also changing. Households are becoming ¬ smaller and meals are increasingly being Global trends ¬ chosen based on convenience. People are also consuming less meat, with 40% of meat It is not only the present trends in Welsh eaters ‘flexitarians’ (Kantar Worldpanel). agriculture and the environment that People are also looking for more healthy are important, but we must also take into options in their overall diet. account key global trends.iii The global economy – economic growth, The Welsh agriculture industry ¬ particularly in low and middle-income countries, could accelerate dietary Welsh agriculture is vital for Wales and we transitions and drive up agricultural want it to thrive, recognise its strengths and demand. realise its potential. The reach and impact of agriculture goes beyond its economic value Climate change – On a global scale food and alone as it impacts on rural communities, agricultural sectors contribute an estimated environment, culture and the well-being 24%iv of greenhouse gas (GHG) emissions of Wales. Agriculture can contribute to (not allowing for carbon sequestration). The delivering against all seven goals in the Well- impact of Climate Change could be a limiting being of Future Generations Act. Annex 1 sets factor in some parts of the world for the out a paper detailing the key information availability of water and food production. relating to the current position of Welsh The Conference Of Parties (COP) Paris 21 agriculture, but a summary of key points is agreement recognised this and while targets set out below. were set to reduce emissions it was agreed that this should not be at the expense of food The farming sector is the cornerstone of production. the rural economy and the farm structure in Wales is primarily small and medium sized

6 Amaeth Cymru Amaeth Cymru 7 enterprises in family ownership. In Wales the Netherlands combined accounting for agriculture forms a larger proportion of over half of total exports. Equally a high national GVA than other countries in the proportion of UK beef imports would be UK and employs a higher percentage of the sourced from the EU-28 as well, in 2015 the population (3.6% compared with 1.4% across figure stood at 91% of total importsx. the UK)vi. Amaeth Cymru will therefore look to grow this GVA and create further In the dairy sector, the UK currently had jobs whilst sustainably managing natural a trade deficit of around £1.1bn, in 2015, a resources. reduction of around £120m from 2014. The trade balance has improved over the past Welsh agriculture provides the important few years, with a reduction in imports and first link in Wales’ largest manufacturing an increase in exports. Nearly all of the sector; a dynamic food and drink sector UK’s imports come from the EU and in 2015 that has an annual turnover of £6.1bn (2015 around 90% of the UK exports were to the Food and Farming Priority Sector Statistical EU. There is a heavy reliance on England for Release), and a supply chain that employs processing capabilityxi. 223,100vii. The arable, horticulture, pig and poultry sectors are currently relatively small in Key imports and exports ¬ Wales. Wales makes a significant contribution to the UK production of red meat and milk. Wider benefits of agriculture¬ It accounts for 29% of the sheep in the UK, 13% of the dairy cows and 11% of all cattle The agriculture sector brings wider benefits (compared to around 5% of the people in the to Wales than just a Gross Value added (GVA) UK)viii. contribution from agricultural production alone. For every pound invested in British Trade in these sectors is therefore farming the industry puts more than seven particularly important for the agriculture back into the UK economy.xii An increasing industry in Wales. The export market beyond number of farmers are diversifying their UK has become increasingly important to farm businesses and use of their land to the Welsh red meat industry, as this helps create additional benefits, for example, to balance supply and demand and ensures energy (solar, wind, combined heat & power carcase balance. (CHP)) is increasingly common place. There is also a clear contribution from agriculture Wales produces considerably more lamb to the provision of services such as clean than is consumed in the country annually water and air that provide essential benefits – with 5% consumed in Wales, 55-60% in to the public. More broadly there are also the rest of UK and 35-40% exported. This wider social and cultural benefits (e.g. highlights the importance of identifying and language, custodians of the landscape, role maintaining new and existing UK and export at the heart of rural communities). markets. The value of exports from Wales has grown considerably from £57 million Agriculture plays a vital role in sustaining in 2004 to £106 million in 2015; 95% of the rural communities. In rural areas sheep meat exports in 2015 were shipped to agricultural businesses deliver other markets within other member states of the services and there are other businesses EU-28ix. that depend on agriculture to make their living, thus extending the economic value of The main destination for beef exports are agriculture for the area. Farm businesses other European countries. In 2015 93% of are important employers in their own right, total UK beef and veal exports (excluding and procure a wide range of services from a offal), with an annual value of £51 million, broad variety of secondary businesses. was shipped to other member states within the EU-28, with the Republic of Ireland and

6 Amaeth Cymru Amaeth Cymru 7 Recent research indicates that family farms historically received little in support in Wales procure over 80% of goods and payments. In general, dairy farms tend to be services from within a 25 mile radius of the less dependent on support payments, while holdingxiii, making a wider contribution to beef and sheep farms, particularly in the local economies and communities. uplands, are more so. Agricultural production accounts for more than 80%xiv of the land in Wales and, therefore contributes to the wider management of Wales’ natural resources and climate change action as envisaged by the Environment Act. The potential environmental benefits that can be provided by farmers should be recognised and valued as ‘public goods’. For example, agriculture is the most significant single contributor to an estimated £1.9 billion in “wildlife-based activity” in Walesxv. Unlike some other parts of the UK, cultural connections with farming across Wales remain comparatively strong, and agriculture continues to play a role in attracting and ensuring maximum benefit from tourism and sustaining the . Environment (Wales) Act ¬ Throughout Wales, those who speak Welsh Although good land management can within the agriculture community make an enhance and maintain the quality of our essential contribution to the preservation natural resources, if landowners do not of the language in terms of numbers, and appropriately manage their land they in particular in terms of the proportion can also have a significant impact on the within the category who speak Welsh environment. xvi (29.5%) , which is higher than in any other The Environment (Wales) Act 2016 sets out employment category. the legislative framework for the sustainable management of Wales’ natural resources. Current support payments ¬ In September 2016 Natural Resources Welsh farming currently benefits from Wales published the State of our Natural xix some €300,000,000xvii of EU support per Resources Report (SoNaRR) in accordance annum and overall Welsh farming is highly with the requirements of the Environment dependent on these subsidies, as are other Act. This report provides some headline European farmers. Across all farm types, messages about our natural resources support payments accounted for an average and the extent to which they are being of 81% of Farm Business Income in 2014/15 sustainably managed. This should form part and average Farm Business Income across of the evidence base used to inform future all farm types in Wales is £24,500xviii. agricultural policy. (Note that Farm Business Income is a Based on the evidence in SoNaRR, Welsh measure of the net profit on farm) Ministers have set out their priorities The degree to which farms depend on for policy to address the sustainable support payments changes considerably management of natural resources through across the types of farm. Some, such the Natural Resources Policy (NRP). as poultry, horticulture and pigs, have

8 Amaeth Cymru Amaeth Cymru 9 The Natural Resources Policy sets out the national priorities to address the challenges Threats our natural resources face and realise the • Potential for the introduction of tariffs significant opportunities that they provide and non-tariff barriers to our export for our well-being and prosperity. markets. This is a major threat for the sheep sector, in particular, which is There are three priorities for action: heavily reliant on exports to balance • The delivery of nature-based solutions carcass value. • Increasing renewable energy and • If trade tariffs are arbitrarily reduced resource efficiency, and as part of a cheap food policy, market returns will be undermined • Taking a place-based approach. by competition from low cost, lower Delivering against these priorities requires quality imports produced to lower action across the Welsh Government and environmental, animal health and from stakeholders across sectors. human rights standards. Natural Resources Wales will also develop • A weak currency adds cost to key Area Statements to support delivering the farm inputs. Natural Resources Policy. This will provide • Our animal disease status is very farmers with the opportunity for asset positive, and bovine TB (bTB) has the realisation and to look at diversification. potential to impact negatively on our ability to trade. • General uncertainty on how EU exit 6. The impact of exiting will shape the future regulation and the EU ¬ support regime. There is currently a degree of turbulence due to uncertainties resulting from the UK’s decision to leave the EU. Although there The decision to leave the EU has not changed are significant risks for the agricultural the Vision of Amaeth Cymru, but has made industry in Wales at this time that will need the collaborative role of this group even careful management, there could also be more important and its work more urgent. opportunities that must be capitalised on. A key prerequisite to achieving the Vision in the context of EU exit will be to ensure Opportunities and threats good access to UK, EU and global markets. presented by EU Exit Amaeth Cymru has covered these issues in ¬ its market access paper (see Annex 2).

Opportunities There is a clear need for a period of • There is an opportunity to develop transition after exiting the EU to allow the an agricultural policy for Wales. establishment of a viable trade regime and There is significant potential for support mechanism. This approach would import substitution in all of Wales’ key substantially mitigate the risks associated agricultural sectorsxx with a hard EU exit. • New trading opportunities, so long as Amaeth Cymru also recognises it is essential the markets remain open. that equivalent or greater resources to those Wales would have received from the • More competitive currency provides Common Agriculture Policy are provided good market conditions for exports from the UK Government to support and displacements of imports – if this is Welsh farming. sustained in the long run.

8 Amaeth Cymru Amaeth Cymru 9 7. The way forward 6. An improved understanding of the ¬ barriers that may exist and need to Amaeth Cymru held a two day workshop be removed before the plan can be with partnership members and invited implemented fully; barriers may include stakeholders to develop a plan to deliver knowledge, ability to cope with the the Vision. The plan has been categorised necessary change, planning, taxation, through overarching requirements access to effective broadband and the and measures to deliver prosperity and free flowing entry and exit from the resilience. A Strengths, Weaknesses, industry. Develop an understanding of Opportunities and Threats (SWOT) analysis whether the industry possesses the for the agriculture industry can be found at appropriate risk management tools to Annex 3. cope with the inevitable volatility driven by market change, disease risk and climate change/climate events. Overarching requirements ¬ The elements identified below describe how Measures to deliver gaps in knowledge or understanding are required to be filled before a delivery plan more prosperity ¬ can be fully implemented. The overall intention in this section is to 1. There is a requirement for more data encourage activities that make markets and evidence to underpin future plans; work better and ensure that the additional we broadly know what needs to be done value stays at the farm gate, improving but the degree of impact would be better profitability and prosperity. understood with more data. 1. Develop ‘Brand Wales’ to promote Wales’ 2. There is a need to understand better quality products at home and abroad with the issues identified in SoNaRR and a focus on increasing the proportion of whether some of the existing remedial Welsh branded produce sold in Retail and measures will bear fruit in the long term Food Service markets. Communicating a and whether a different approach is now combination of high quality, high welfare needed. and environmental standards, together with aspects of the imagery of Wales’ 3. To set a strategic direction and deliver unique culture and landscape. The brand a coherent structure to address will be underpinned by progressive climate change mitigation (reduction standards, regularly and independently of greenhouse gas (GHG) emissions) inspected, that will guarantee and actions to support agricultural consistently high quality products. businesses to plan and respond to changes in weather patterns. 2. Encourage market driven innovative product development that meets the 4. Consideration of whether better evidence needs of consumers on an ongoing basis. and communication of sector and market The consumer ask is constantly changing signals is needed to help shape improved and today’s consumers are looking for knowledge exchange networks and their more versatile and convenient meal tools so they meet the needs of all players solutions capable of being prepared more fully. Could our effective farm quickly and more representative of assurance platform be better exploited to modern life where people either eat alone deliver better knowledge exchange? or in twos; large meal occasions are almost a thing of the past. 5. Better collaboration will be required between all players responsible for the delivery of this plan.

10 Amaeth Cymru Amaeth Cymru 11 3. There needs to be a better flow of 9. Stimulate greater understanding of how information up and down supply chains; markets work and the impact they have they work better when they are more on farm performance; there needs to joined up and all players understand the be better sharing of best practice and a market signals and respond accordingly; greater understanding of the elements farmers participating in the Fairtrade that drive farm profitability, a greater scheme is just such an example. understanding of the costs of inputs and a better uptake of benchmarking. 4. Drive export markets, particularly in A precision agriculture approach (similar the red meat sector. There is a direct to arable farming) will reduce waste and correlation between export performance increase profitability. and farm gate price. Better export performance will ensure a higher 10. The sector will perform better overall proportion of the value in the supply chain if skills are optimised and deployed is retained at the farm gate. The weaker efficiently; we need to facilitate currency currently ensures export sales continuous professional development and are more competitive but, in order to the free flow of new more appropriately sustain exports in the longer term, a skilled entrants and the exit of individuals strategy of differentiation is required no longer able to compete. focusing on the unique qualities of Welsh produce. Enhanced exports provide opportunities for all cuts and products and particularly products not ordinarily purchased by British consumers. 5. Seize import substitution opportunities presented by the weaker currency making competitors’ products more expensive. This is particularly viable in the dairy sector, but also beef sector. 6. More prosperity may be driven for some players by considering other opportunities such as eggs and poultry enterprises; these food stuffs currently offer more short term profitability but these enterprises have to be fully costed and include the proper disposal and management of all waste products. There Measures to deliver is also an opportunity to consider more more resilience ¬ innovative projects such as vertical farming. 1. Businesses are only truly resilient if they can defend, sustain and enhance 7. New opportunities should be constantly their market positions. In the previous reviewed through an effective horizon section we addressed how this could scanning process. be achieved through differentiation 8. Stimulate diversification into new forms but businesses must also be as cost of resource use; encourage better uptake effective and competitive as possible. of all forms of renewable energy, forestry Businesses that strive to improve their where appropriate and small scale performance continuously, reduce their tourism based on landscape and local food. costs and deploy the latest innovative technology will be more resilient in the long run. More efficient businesses can reduce their carbon intensity in line

10 Amaeth Cymru Amaeth Cymru 11 with the Wales Decarbonisation Plan 6. Although food production and forestry and its associated targets. Businesses will remain the most viable ecosystem that optimise outputs from inputs (i.e. service for some time to come, the most driving productivity) by managing recent emerging opportunity has been resources and improving soil health, renewable energy. This technology will grassland management and genetic provide a useful additional income stream performance better are more efficient for those players able to participate. and more profitable in the long run. This opportunity should therefore be Productivity, however, should be driven encouraged, but managed carefully to sustainably and should be calibrated avoid the unintended consequences such against the capability of the land. as increased land rents associated with Good environmental practice, such as large scale anaerobic digestion. preservation of pollinators bio diversity and protection of soils, adds to the long- 7. There should continue to be support for term resilience of the farm resources and farm business investment in new and long-term potential for future profitability. improved fixed equipment, cost reduction Indeed, poor environmental practice and initiatives, on-farm processing capacity, poor management of resources should diversification, marketing, cooperative not be tolerated and the worst cases and collaborative initiatives, the should be penalised. establishment of producer organisations, measures associated with climate 2. The plan should encourage a high change adaptation and environmental animal health status as this will improve improvement. efficiency and resilience in the long run. High animal health status is vital to facilitating export performance also. 8. Conclusion ¬ 3. The sector will perform better and The agriculture sector in Wales is a be more resilient if supply chains add significantly larger proportion of the more value nearer the point of primary economy than in the UK as a whole. It production; measures to encourage provides vital economic activity in the more investment in Wales’s secondary smallest rural communities; often it is the production capability will protect primary only economic activity in the most remote production and jobs in the long run. areas. The sector safeguards Wales’ 4. Good environmental performance should extensive natural resources and provides be driven by more sympathetic regulation access to public amenity. that is more outcome focused. This document sets out the measures 5. Payment for Ecosystem Services (PES) necessary to protect and enhance offers long-term opportunities for the agriculture’s vital role in Welsh life. sector; this is an emerging activity that It also commits to restoring Wales’ natural may develop market outcomes for goods resources whilst growing output in a (biodiversity, resource protection, flood sustainable way. The food and drink industry management etc.) that are often funded in Wales has tremendous potential for from the public purse. There are already growth, providing greater economic activity beacons of good practice often funded and more jobs in the future. The document by philanthropy that can signal the way contains a bold ambition to drive the sector forward and similar schemes should be forward through the creation of a brand for considered for seed funding through Wales that champions and promotes high the public purse. Further opportunities quality, sustainable food products at home should be sought through horizon and in overseas markets. scanning.

12 Amaeth Cymru The document assumes that EU Exit will The next step in the process will be to provide opportunities for growth in export convert this document into a deliverable markets and allow the development of a plan. It will also provide valuable evidence support and regulatory regime that helps for policy makers considering a post EU build a sector that is more prosperous and Exit regime. Amaeth Cymru will also have resilient in the future. Should EU Exit result to consider what part it wishes to play in in loss of trade and reduced support for the building that plan for delivery. sector in the short term then our ambition will be seriously curtailed. Indeed, the Vision may never be realised if a hard exit results in loss of critical mass and environmental degradation in the short term.

Amaeth Cymru 13 Annex 1: Evidence paper – the Welsh agriculture sector ¬

Annex 1 and 2 were used to inform discussion at Amaeth Cymru in developing The future of agriculture in Wales: the way forward.

Welsh agriculture is vital for Wales and we have remained relatively stable (changes want it to thrive, recognise its strengths and are likely in 2015/16 however, as a realise its potential. The reach and impact of consequence of The Common Agricultural agriculture goes beyond its economic value Policy (CAP) reform, resulting in both into rural communities, environment, culture winners and losers). and the well-being of Wales. The following • Across all farm types, support payments bullet points describe the current situation accounted for an average of 81% of Farm for the agriculture sector in Wales. Business Income in 2014/15 and average Farm Business Income across all farm Economic value and jobs types in Wales is £24,500. Forecasts for 2015/16 suggest a further drop in income, • The value of agriculture to the economy which would lead to support payments is wider than the value of agricultural accounting for an even higher percentage produce alone. of Farm Business Income. (Note that Farm • The agriculture sector provides a crucial Business Income is a measure of the net link in the supply chain for the food and profit on farm) drink industry in Wales. The Food and • The degree to which farms depend on Farming ‘Priority Sector’ in Wales has a support payments changes considerably Gross Value Added (GVA) of £1.55 billion across the types of farm. Some, such (2013) and employs 84,200 people (if all as poultry, horticulture and pigs, have farmers and agricultural workers are historically received little in support included (2014). payments. In general, dairy farms tend to • Agriculture’s share of total regional be less dependent on support payments, employment in 2015 was higher in Wales while beef and sheep farms are more so at 3.6% compared to the 1.4% across the – particularly those beef and sheep farms UK. At a more local scale agriculture can in the uplands. The uplands, if sustainably be a significant share of the total workers managed, can provide an important in parts of rural Wales. contribution to the . • While quantification is difficult, in rural • There is, however, a considerable variation areas agricultural businesses deliver other within the farm types. These may reflect services and there are other businesses previous support payments claims, that depend on agriculture to make entitlements etc., but can also reflect their living, thus extending the economic the efficiency and business acumen of value of agriculture for the area. Recent the farm. research indicates that family farms in • In 2014-15 just under half of all farms Wales procure over 80% of goods and either made a loss or would have done so services from within a 25 mile radius of the without support payments. holding, making a wider contribution to local economies and communities. • Farmers in the UK have received support payments since the Second World War, which has helped to insulate them from Support Payments market forces. If no replacement support funding is available it will inevitably put our • Welsh farming benefits from some producers at a competitive disadvantage €300,000,000 of EC support per annum. compared with our neighbouring Support payments to farmers over the countries that will remain in the EU. period 2012/13 – 2014/15 (three years)

14 Amaeth Cymru Furthermore, generally most economies • The main destination for beef exports throughout the world provide support are other European countries. In 2015 payments to agriculture. 93% of total UK beef and veal exports (excluding offal), with an annual value of Trade £51 million, was shipped to other member states within the EU-28, with Ireland and • Wales makes a significant contribution to the Netherlands combined accounting the UK production of red meat and milk. for over half of total exports. Conversely a Wales accounts for 29% of the sheep in high proportion of UK beef imports would the UK, 13% of the dairy cows and 11% of be sourced from the EU-28 as well, in 2015 all cattle (compared to around 5% of the the figure stood at 91% of total imports. people in the UK). • In the dairy sector, the UK currently has • Trade in these sectors is therefore a trade deficit of around £1.1bn, in 2015, particularly important for the agriculture a reduction of around £120m from 2014. industry in Wales, and work is underway to The trade balance has improved over the build a complete evidence base for Wales past few years, with a reduction in imports only trade. and an increase in exports. Nearly all of the UK’s imports come from the EU and in • The export market has become 2015 around 90% of the UK exports were increasingly important to the Welsh red to the EU. meat industry, as this helps to balance supply and demand and ensures carcase • Welsh milk production accounts (on balance. average) for around 12% of UK milk production. Over the past few years, milk • Being a member of the EU-28 has allowed production in Wales has increased 20% the UK to have free market access to between 2012/13 and 2015/16. The amount established red meat markets across the of milk processed has consistently been continent, particularly important for sheep lower than milk produced and in 2015/16 meat exports although there has been a this was 48% lower. Excess production growing EU market for beef exports after has to be transported out of the country, the UK re-gained access following the BSE and there is a heavy reliance on England sanctions. Restricted access to the EU for processing capability. With milk export market access would, therefore, production expected to increase over the have an adverse effect on farming. coming years, production of commodity • With Wales having 28% of the UK breeding products is likely to grow. flock and less than 5% of the UK’s • Agriculture in Wales is very much part population. Wales produces considerably of the wider sector in the UK as a whole. more lamb than is consumed in the , products and goods move country annually. freely between Wales and the rest of the • For sheep meat, the value of exports from UK. This poses questions about how to be Wales has grown considerably from £57 distinctively Welsh while maintaining the million in 2004 to £106 million in 2015. 95% essential links with the rest of the UK. of the sheep meat exports in 2015 were • Export trade for Wales is underpinned by shipped to markets within other member a reputation for high quality products built states of the EU-28. on good animal health and welfare, human • Consumers in the UK prefer certain cuts health and environmental standards. In of lamb, such as legs, and UK domestic order to maintain this status Wales needs production is supplemented by sheep to continue to fund programmes that meat imports dominated by New Zealand tackle Bovine TB rigorously. (74% of all UK sheep meat imports in 2015) and Australia (15% in 2015). Other cuts, that are less popular for the domestic market, are exported abroad.

Amaeth Cymru 15 Wider Benefits to Wales • Agricultural land can act as a major store of water, providing an important role Delivered by the Agriculture in downstream flood mitigation. This is Sector particularly the case in Wales, where such a high proportion of land is managed • The agriculture sector brings wider under permanent pasture, which has benefits to Wales than described by increased water infiltration rates and just its GVA contribution. For example, storage potential. diversification of farm businesses into tourism (B&B’s, Campsites, leisure • The management, use and appreciation destinations) and increasingly energy of the natural environment has been (solar, wind, CHP) is common place and recognised as making a relatively greater the contribution of agriculture cannot contribution to the therefore be measured by the contribution than to other UK countries. It directly of agricultural produce alone. For example, supported an estimated 117,000 full-time agriculture will contribute to the value equivalent (FTE) jobs. of wildlife and outdoor activity tourism • The management and use of the in Wales, which is estimated to be in the environment, and the multiplied economic region of £6.2 billion with an estimated effects of this, generates spending of 206,000 jobs across Wales. A number of around £9 billion each year to Wales – studies have shown that tourists view the almost £1 in every £10 of Welsh GDP is ‘farmed landscape’ favourably. dependent on the environment. • There is also a clear contribution from • Office of National Statistics (ONS) in agriculture to the provision of services like its work looking at the value of natural clean water and air that Wales benefits capital have estimated that the monetary from. Although these do not generate valuation of UK agricultural land is income, it is nevertheless possible to estimated to be £45.1 billion based on quantify the value of the benefit (e.g. a 2011 prices. drinking water treatment plant costing approximately £10 million; poor air quality • In terms of carbon, the monetary valuation was estimated to cost approximately 5% of net greenhouse gas sequestration of the UK’s Gross Domestic Product (GDP) services provided by UK natural capital in 2010). More broadly there are also the in 2007 and 2011 is estimated to be £7.4 wider social and cultural benefits (e.g. billion and £8 billion. Carbon sequestration language, landscape, role at the heart of from living biomass (mostly trees) was rural communities). estimated at 1.2 MtCO2, which equals a value of £75.6 million for the annual value of carbon sequestration in Wales Environment and Service Delivery in 2016. There is also significant scope • Agriculture accounts for more than 80% for greater sequestration of carbon of the land in Wales. This means that through afforestation of less favourable there is great potential for environmental marginal land. impacts – either positive or negative - and carbon reduction. The corresponding figure for the UK is 70% and therefore Wales has the potential to contribute more proportionally to environment and climate change action. For example, given the high amount of land accounted for by agriculture, then it follows that solving the issue around producing enough of our energy renewably needs to consider the its contribution.

16 Amaeth Cymru Culture and the Welsh Language • Throughout Wales, those who speak Welsh within the agriculture category • Unlike some other parts of the UK, make an essential contribution to the cultural connections with farming across preservation of the language in terms of Wales remain comparatively strong, and numbers, and in particular in terms of the agriculture continues to play a role in proportion within the category who speak attracting and ensuring maximum benefit Welsh (29.5%), which is higher than in any from tourism and sustaining the Welsh other employment category. language.

Amaeth Cymru 17 Annex 2: Amaeth Cymru – Market Access Position Paper ¬ Purpose of this paper An increasing number of farmers are helping to deliver on the green growth The purpose of this paper is to provide a agenda through the diversification of farm briefing on the potential market access businesses, for example, energy (solar, wind, consequences of an EU Exit for the CHP) is increasingly common place. There is agriculture sector in the context of delivering also a clear contribution from agriculture to Amaeth Cymru’s Vision of a “A prosperous, the provision of services such as clean water resilient agriculture industry promoting and air that provide essential benefits to the Wales’ present and future well-being”.1 public. More broadly there are also wider This is the first in a series of papers social and cultural benefits (e.g. language, produced by Amaeth Cymru. This paper custodians of the landscape, role at the heart focuses solely on market access, but future of rural communities). papers will focus on other key issues. Agriculture plays a vital role in sustaining rural communities. In rural areas Why is agriculture important? agricultural businesses deliver other services and there are other businesses Taking Wales Forward sets out the that depend on agriculture to make their government’s programme to drive living, thus extending the economic value improvement in the Welsh economy and of agriculture for the area. As well as being public services, delivering a Wales which the starting point for a multi-billion pound is prosperous and secure, healthy and food and drink sector, farm businesses are active, ambitious and learning, united and also important employers in their own right, connected. The agricultural industry can play and procure a wide range of services from a key role in helping to deliver this agenda, a broad variety of secondary businesses. as the farming sector is the cornerstone of Recent research indicates that family farms the rural economy and in Wales, agriculture in Wales procure over 80% of goods and forms a larger proportion of national GVA services from within a 25 mile radius of the than other countries in the UK. holding, making a wider contribution to local economies and communities. Welsh agriculture provides the important first link in Wales’ largest manufacturing Agricultural production accounts for more sector; a dynamic food and drink sector that than 80% of the land in Wales and therefore has an annual turnover of £6.1 billion (2015 has the potential to contribute positively to Food and Farming Priority Sector Statistical the management of Wales’ natural resources Release), and a supply chain that employs and climate change action as envisaged 223,100. This in turn forms part of a wider by the Environment Act. The potential UK industry that is worth £108 billion; food environmental benefits that can be provided and drink is also the fourth largest exporting by farmers should be recognised and valued sector. Exports for agricultural commodities as ‘public goods’. For example, agriculture alone are valued at £6.25 billion each year. is the most significant single contributor to an estimated £1.9 billion in “wildlife-based Growing the food and drink industry will activity” in Wales. form a valuable element of developing and driving forward the Welsh economy. However, the agriculture sector brings wider benefits to Wales than just a GVA contribution from agricultural production alone and can contribute to delivering against all seven goals in the Well-being of Future Generations Act.

18 Amaeth Cymru Amaeth Cymru 19 Market prospects for agriculture export markets is one of the few ways of intervening positively on market prices. A in the medium to long term successful food and drink sector is also one While we believe the long term prospects that drives continuous improvement and for agriculture are positive, the short term innovation in its supply chains, stimulating will be extremely challenging, particularly the development of new products that keep if there is no tariff free market access for pace with changing consumer demand; export trade. In 2015 Wales’ direct food and consumers want more convenience, quicker drink exports were worth over £264m of preparation times and products that suit which over 90% was exported to the EU. smaller meal occasions. The sheepmeat sector is particularly reliant Implementation of these broad on European markets with over 90% of our recommendations would: lamb exported to the EU. Although Welsh farmers are adaptive, on average, they • Help to rebalance the economy in Wales currently rely on EU support for 80% of their by providing more jobs and growth in the net income. Achieving real resilience will private sector; take considerable time. • Deliver on the Taking Wales Towards Sustainable Growth: An action Forward agenda; plan for the food and drink industry 2014 • Improve returns to food producers; – 2020 sets targets for 30% growth to a £7bn turnover and 7000 new jobs by 2020. • Increase resilience in the agriculture In light of EU exit this action plan should be sector; refreshed to cover the period to 2030. • Help create sustainable and thriving rural communities. The opportunities for a food and drink manufacturing sector producing high quality However, all this potential could be lost if the products from efficient sustainable systems UK suffers a hard exit from the EU. Loss of supplying high value markets at home and export markets could generate enormous abroad are currently not fully realised. short term consequences, in particular, for Wales has unique qualities built around its the livestock sector. The agriculture sector language, culture and production systems, currently depends heavily on EU support developed from an unrivalled extensive for 80% of its income and is therefore very landscape. These qualities represent vulnerable to market shocks. Measures excellent branding opportunities to promote should be introduced that avoid these Welsh products in the UK and overseas. threats and allow the sector to capitalise on opportunities presented by life outside the To translate this potential into jobs and EU regime. growth the Welsh agriculture industry should work with government to capture more added value processing in Wales and further develop an ambitious export programme to exploit markets in the EU and beyond. Wales should seek to rival the successes of the Republic of Ireland and New Zealand in developing an export culture. Success should improve prices and stabilise returns from the market for many food producers. A successful export strategy should also have a positive impact on home market prices assuming demand holds steady and there is little or no product substitution. Stimulating our

18 Amaeth Cymru Amaeth Cymru 19 Opportunities and threats the same time as cheap imports flooded in. Sustainable management of natural presented by EU Exit resources would be more difficult to deliver. The UK’s decision to leave the EU presents Experience tells us that shocks to the both market opportunities and threats to farming sector have serious consequential delivering our vision for agriculture in Wales. impacts to wider communities and allied industries; the Foot and Mouth Disease epidemic is a case in point. Opportunities • There is an opportunity to develop a bespoke agricultural policy fit for the Measures to mitigate risk industry and Wales. Securing a transitional arrangement • There is significant potential for allowing the UK to continue trading with import substitution in all of Wales’ key EU Member States and third countries with agricultural sectors. EU trade agreements would substantially mitigate the risks associated with a hard • New trading opportunities, so long as EU exit. Loss of markets is, by far, the most the markets remain open. serious immediate consequence. • More competitive currency provides good market conditions for exports – It will be important that there is clarity if this is sustained in the long run. on how the UK market operates and is regulated so that its four countries can continue to trade freely. It will, therefore, Threats be necessary to consider the proposal to • Potential for the introduction of tariffs develop UK frameworks to replace key and non-tariff barriers to our export frameworks currently set by the EU. These markets. This is a major threat for frameworks should be collectively developed the sheep sector, in particular, which and agreed, rather than imposed, and both is particularly reliant on exports to respect devolution and acknowledge that balance carcass value. the devolved administrations will have a more active interest in non-devolved areas, • If trade tariffs are arbitrarily reduced such as trade. The input of the devolved as part of a cheap food policy, administrations will be key to ensuring market returns will be undermined that such frameworks represent the UK by competition from low cost, lower as a whole and do not lead to unintended quality imports produced to lower consequences. environmental, animal health and human rights standards. Conclusion • A weak currency adds cost to key farm inputs. The prospects for the food and drink sector in Wales are bright and with the right policy • Our animal disease status is very framework these prospects can be brought positive, and bovine TB (bTB) has the to fruition. Growth and jobs in the sector potential to impact negatively on our could be increased substantially helping to ability to trade. rebalance the economy and deliver on the As identified earlier in the paper, the Taking Wales Forward agenda. However, threats generated by a very hard EU exit a hard EU exit could put this outcome would more than offset most potential in jeopardy, create substantial financial opportunities. The prospects of developing a hardship in the farming sector and upstream more resilient and prosperous food industry and downstream businesses (agriculture would be detrimentally impacted. Returns suppliers and food processors), and from agriculture would be significantly impact detrimentally on the essential job of reduced if export markets were closed at restoring and sustainably managing Wales’ natural resources.

20 Amaeth Cymru Amaeth Cymru 21 Annex 3: SWOT Analysis ¬

Amaeth Cymru undertook a SWOT analysis to inform the development of this document • Strong agricultural education and and this is detailed below: knowledge exchange network • Growing tourism destination based Strengths around Wales’ iconic landscape, • Welsh agriculture’s gross output is maintained by farmers £1.5 billion with around 58,000 people • Strong heritage, culture and linguistic employed full or part-time on farm identity holdings in Wales • An enabling legislative framework – • Farming underpins the food and drink Well-being of Future Generations Act supply chain worth over £6billion, and Environment Act employing over 220,000 – Wales’ biggest employer • Welsh farmers are food producers Weaknesses producing safe, nutritious, traceable, • Red meat sector too heavily reliant on high quality produce to world leading multiple retailers environmental and animal welfare standards, recognised and trusted by • Poor current market returns with consumers returns below cost of production across many sectors • Depth and wealth of Welsh produce – including Welsh lamb, beef, pork, dairy, • Reliance on EU support which ensures poultry, horticulture and cereals affordable food produced to high standards for the consumer • PGI status for Welsh Lamb and Beef and Early Potatoes • High transport costs caused by poor road network and consequential lack of • 80% land area of Wales actively processing capacity across whole food managed by farmers, including industry but in particular for dairy extensive areas of grazing providing diverse semi-natural habitats • Lack of relevant applied research • Significant natural resources and • Outflow of young people advantageous climatic conditions • Barriers to growth such as planning, for grass-based production systems tax and legal requirements producing high quality protein • Costs and complexity associated with products the regulatory environment • A culture of actively participating in • Limited opportunities to diversify agri-environment schemes cropping from lamb and beef • Strong natural asset base for production in many areas of Wales delivery of wider environmental and – particularly the uplands which public goods and services including comprise significant land area renewable energy, water, carbon • Poor access to national grid limiting storage opportunities for renewable energy • Increasing capacity for integrated supply natural resource management • Not all agricultural businesses are • Strong, innovative, highly trained yet able to benefit from current and adaptable workforce including young planned improvements in broadband people and new entrants seeking and mobile connectivity. opportunities in farming

20 Amaeth Cymru Amaeth Cymru 21 • A lack of understanding as to how • To invest in the infrastructure of Welsh exploitation of improving broadband farming to enhance economic and and mobile connectivity can support environmental performance business growth and diversification. • To better understand and seek to • Some agricultural practices reduce greenhouse gas emissions contributing to deterioration in per unit of production by improving environmental quality and a failure to agricultural efficiency recognise the positive contribution that • Develop and grow diversified, high farming makes to the environment in value export markets reducing Wales dependence on EU market • Aging population of farmers and lack of • Develop and grow home markets new entrants including public procurement opportunities • Recognise the contribution of safe, Opportunities healthy, nutritious food to well-being • Opportunity to establish Wales as a and actively promote this through food producing nation and grow the the education system and health Welsh food and drink sector providing service. Wales’ natural advantage as jobs, growth and employment in Wales a food producing nation in context based around marketing and branding of the challenges to our global food opportunities for high quality products production system including climate from Wales building on unique values change, growing world population, of natural environment, identity and scarcity of resources to grow food such culture and world leading production as land and water and the so-called standards (environmental and animal nutrition transition and demand for health and welfare) increased protein in the diet • EU Exit presents opportunity to design • Diversification through support and regulatory regime that renewable energy facilitates this to happen and better • Exploitation of improving broadband meets the needs of Wales; more and mobile connectivity to support outcome based and driving better business growth and diversification competitiveness and sustainability • Address barriers to increasing agri raw • Weaker currency makes exports more material processed in Wales, including competitive if markets remain open working with partners to ensure that • Opportunities to diversify agricultural the transport network provides the sectors and range of food produced in efficient movement and growth of Wales materials • To produce more, impact less and • Exploit demand for farm based tourism to further integrate farming and • To market and promote and develop environmental objectives by fairly grading systems to reward meat yield rewarding farmers for the full range of and eating quality environmental and public goods and services they provide • Reduce waste throughout the supply chain • Capitalise on emerging water and carbon trading markets and emerging payments for ecosystems generally; encouraging better utilisation of uplands for water and carbon management 22 Amaeth Cymru Amaeth Cymru 23 Threats • Failure to monitor and evaluate • Increased reliance on imported foods environmental action such as carbon produced to lower environmental and sequestration, reduced emissions animal health and welfare standards intensity of production which will than Wales undermine the green credentials of brand Wales • Funding previously financed by EU for support and agri-research used for • Uncertainty over future support for other purposes – Health or Education farming as a result of EU exit • Weakening sterling increases • EU and other export markets are input costs closed after EU Exit • New trade deals designed to enhance • Fragile farm incomes threatens opportunities for financial services resilience of farming, potential business may expose farming to lower cost failures, degradation in environmental competitors goods and creates pressure on rural communities • Potential loss of Protected Geographical Indication (PGI) status • Lack of transition period in terms of after EU Exit future support and terms of trade • The UK could become more isolationist • Climate change and predicted extreme in trade terms weather events Potential for a new or emerging exotic animal disease • Potentially fewer skilled and unskilled outbreak foreign workers after EU Exit • Our animal disease status is very • Potential for different regulatory positive, and bovine TB (bTB) has the regimes in Wales and UK causing potential to impact negatively on our complexity, confusion and market ability to trade distortions • Continued downward price pressure in • Potential for different agricultural the supply chain policy and budgetary regimes in other parts of the UK and within the EU that • Human dietary and health concerns could create market distortions. restricting consumption of meat and dairy products • Failure to address some of the barriers in the current planning and regulatory • Poor agriculture practice causing frameworks that prevent agricultural diffuse pollution and non-farm diversification • Growth of fuel crops distorting market • Failure to exploit current and future for agriculture production Potential improvements in broadband and loss of environmental protection mobile connectivity. previously driven by EU directives • Failure to implement planned • The further loss of plant protection improvements in broadband products placing further pressure on connectivity the viability of arable and horticulture production. • Failure to recognise the strategic importance of the farming sector and the inter-dependencies of other sectors such as tourism, food and drink • Significant land-use change which will have a detrimental impact on the environmental, economic, social and cultural well-being of Wales

22 Amaeth Cymru Amaeth Cymru 23 Annex 4: List of sources ¬

i Consultation document – A strategic Framework for Welsh Agriculture ¬ ii Prosperity for all: the national strategy ¬ iii The future of food and agriculture Report – Food and Agriculture Organization of the United Nations ¬ iv Global Greenhouse Gas Emissions Data ¬ v Food and Agriculture Organization of the United Nations ¬ vi Agriculture in the UK 2016 – https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/629226/AUK-2016-17jul17.pdf ¬ vii Update on the Welsh food and drink sector’s economic performance to 2016 ¬ viii Farming facts and figures –http://gov.wales/statistics-and-research/farming-facts- figures/?lang=en ¬ ix Source: Hybu Cig Cymru ¬ x Source: Hybu Cig Cymru ¬ xi Agriculture and Horticulture Development Board (AHDB) ¬ xii Farming – Bringing Wales Together – NFU Cymru ¬ https://www.nfu-cymru.org.uk/nfu-cymru/documents/farming-bringing-wales-together/

xiii Wales Rural Observatory (2013) ¬ xiv Farming – Bringing Wales Together – NFU Cymru ¬ https://www.nfu-cymru.org.uk/nfu-cymru/documents/farming-bringing-wales-together/

xv Wildlife Economy Wales’: An Economic Evaluation Scoping Study ¬ xvi The Office for National Statistics¬ xvii Farm Business Survey ¬ xviii Farm Business Survey ¬ xix Reference to the State of Natural Resources Report (SoNaRR) ¬ xx Food and Agricultural Policy Research Institute (FAPRI) UK modelling work ¬

24 Amaeth Cymru Amaeth Cymru PB