APPENDICES
Contents
Appendix A: Past Trends and Current Status of Agriculture in UK, England and Wales ………………………………………………………………………...... A1 Topic Paper 1: A Broad Sector Review of Agriculture in England and Wales...... A2 Topic Paper 2: Policy Review...... A16 Topic Paper 3: Crop Systems...... A33 Topic Paper 4: The Livestock Sector in England and Wales...... A48 Topic Paper 5: Farming Systems Development...... A76 Topic Paper 6: Economic Analysis………………………………………………………..A95 Topic Paper 7: Social Issues…………………………………………………………...... A107 Topic Paper 8: Environmental Issues…………………………………………...... A118
Appendix B: Demand Estimates for Agricultural Commodities, including bio-fuels. Appraisal of Alternative Farming Systems………………..…………………………………………………………………..B1 Topic Paper 9: Projected Agricultural Prices in the 21st Century…………….…………...B2 Topic Paper 10: Farming Systems Data...... B7 Topic Paper 11: A Broad Sector Review of Agriculture in England and Wales………….B26
Appendix C: Agricultural Futures and Implications for Environment Report of a Workshop 25th September 2003……..……………………………………………………………...…C1
Ai Agricultural Futures and Implications for Environment: Defra IS0209
Appendix A:
Past Trends and Current Status of Agriculture in UK, England and Wales
The Topic Papers presented in Appendix A relate to past and current trends in agriculture and provide the context for the main body of the report. Each Paper represents an individual study that should be treated as a stand report; it was not intended that all the reports collated in this appendix should be read as a continuous report.
In terms of content, Topic Paper 1 provides a broad overview of the agricultural sector in England and Wales and more specifically regional differences in agricultural land-use. Topic Paper 2 gives a broad review of agricultural policy as it relates to England and Wales. Topic papers 3 and 4 provide a review of the crop and livestock production sector respectively, whilst Topic Paper 5 provides an overview of the recent development of alternative farming systems that have arisen through continued pressures to: reduce costs; diversify; and reduce potential health and environmental risks associated with intensive farming.
Following these topics, which generally relate to patterns of land-use and intensity of land- use: three further Topic Papers are used to highlight the socio-economic importance of agriculture. Topic Paper 6 provides an overview of the economic significance of the agricultural industry, while Topic Paper 7 and 8 discuss the social and environmental issues within the agricultural industry respectively.
A1 Agricultural Futures and Implications for Environment: Defra IS0209
TOPIC PAPER 1:
A BROAD SECTOR REVIEW OF AGRICULTURE IN ENGLAND AND WALES
1 Introduction
This paper provides a broad overview of agriculture within the UK, and more specifically regional variances across England and Wales. The paper comprises three main sections. First, a review of the current situation and past trends is given, specifically examining farming systems, with additional detail on the crop and livestock sectors. The latter two topics are covered in more detail in later Paper 3 and 4 respectively. Second, there is a section focusing on likely future developments within agriculture and its farming systems. Influencing factors, their consequences, and the likely outcomes are also identified. Finally, the paper concludes with a section identifying the possible linkages of the different farming systems with the four Future Scenarios.
2 Current position and past trends identified
2.1 Agriculture in the UK
In European terms, the UK is a relatively highly urbanised country, with its more accessible rural areas notably experiencing population and employment growth (Ward 2000). Despite this, agriculture is by far the largest UK land use, covering 18.6 million hectares, representing 77% of the total UK land area (Defra, 2005a). This is significantly greater than most other European Union (15) Member States. Forests and woodland account for a further 10%. In England, agricultural land use is 71% and in Wales it is 77% of the total areas respectively (Defra, 2003). Of the UK agricultural land about a quarter, 4.9 m ha, is used for arable production and three quarters for grazing livestock (See Table 1).
Since 1945 successive government policies have given the agricultural industry the very clear objective of maximising food production. This has been encouraged through legislation on agricultural land tenure, research and development programmes, price support, grants and subsidies, and exemptions from the usual Town and Country Planning controls for many aspects of agriculture (National Trust, 2000a). This has helped to create an agricultural industry that is relatively well developed and productive, with a small agricultural workforce and a farm structure dominated by larger farms. Average farm size (in terms of land area) (see Table 2) is four times the EU average, with the largest farms concentrated in southern and eastern England (Ward, 2000). Two thirds of holdings are over 100 hectares (Defra, 2002a) Nevertheless, during the last 30 years there have been no major changes in the relative shares of arable land, grassland and rough grazing areas in agricultural use (Defra, 2003). Furthermore, it appears that the rate of change in productivity of UK farms has levelled off in the last decade compared to the increases in the rest of Europe, albeit in some cases about a lower overall average productivity level.
Currently, a continuing decline in produce prices, political concern over the cost of agricultural support, and public concerns over the environment, food safety and animal welfare are contributing to a period of change for the agricultural industry (National Trust, 2000b). These issues are considered in other topic papers.
A2 Agricultural Futures and Implications for Environment: Defra IS0209
Table 1 Land use (‘000 hectares) and livestock numbers (thousands)
average of 1990 2000 2004 % 1979-1981 change 79-81 to 90
Land use
Total crops 4,960 5,013 4,665 4,593 -7%
Bare fallow 69 64 37 29 -58%
All grasses under 5 years 1,933 1,580 1,226 1,246 -36%
All grasses over 5 years 5,145 5,263 5,363 5,620 9%
Sole right rough grazing 5,093 4,706 4,445 4,326 -15%
Set aside - - 567 560
Other including woodland 486 680 780 825 70%
Total area on agricultural holdings 17,686 17,307 17,083 17,200 -3%
Common rough grazing 1,213 1,236 1,226 1,237 2%
Total agricultural land 18,899 18,542 18,308 18,437 -2%
Crops
Wheat 1,435 2,014 2,086 1,990 39%
Barley 2,335 1,518 1,128 1,010 -57%
Oats 142 107 109 108 -24%
Other cereal crops 20 21 26 24 20%
Oilseed rape 97 332 498 413%
Sugar beet not for stockfeeding 212 173 154 -27% Hops 6 2 2 -67%
Peas for harvesting dry and field beans 78 208 242 210% Linseed - 71 30 - Other crops 198 192 203 3%
Potatoes 200 177 166 149 -26%
Horticulture 270 208 172 175 -35%
Livestock
Total cattle and calves 13,384 12,059 11,135 10,603 -21% Total sheep and lambs 31,163 43,799 42,264 35,890 15% Total pigs 7,836 7,449 6,482 5,161 -34%
Total fowl 125,712 124,615 154,504 165,324 32% (2003 datum) Source: Defra, 2005a; MAFF, 1992, 1990
A3 Agricultural Futures and Implications for Environment: Defra IS0209
Table 2 UK Agricultural holdings: number and area
1985 1990 1995 2004
Number of holdings 247,400 237,400 239,400 304,800 Total area of holdings (hectares) 17,342 17,087 16,999 17,228 Average size of all holdings (hectares) 70.1 72.0 72.4 56.5 Av. Size of full time holdings (hectares) - - 113.2 1 Source: Defra, 2005a; MAFF, 1991.
In terms of the value of output in 2004, UK total agricultural output was £16,907 million, with arable and grazing livestock contributing equal amounts, despite the difference in land area used. The gross value added of UK agriculture at current prices is £7,905 million, equivalent to 0.8% of the UK total (See Table 3; further details are given in Topic Paper 6).
Table 3 The value of the output of UK agriculture (£ million)
1977-79 1990 2000 2001 2004 Cereals, other crops, potatoes 1,602 3,403 3,750 3,636 4,281 Horticultural crops 803 1,887 1,785 1,928 1,732 Livestock 2,742 5,007 5,206 4,654 6,027 Livestock products 2,088 3,368 2,810 3,260 3,208 Capital formation in livestock 35 180 374 569 685 Other agricultural activities n/a n/a 657 628 702 Inseparable non-agricultural n/a n/a 439 457 609 activities Gross output 7,445 13,923 15,022 15,126 16,907 Intermediate consumption 7,036 8,487 8,707 9,002 Gross value added 3,438 6,887 6,535 6,418 7,905 Consumption of fixed capital 833 1,776 2,492 2,499 2,549 Net value added 2,605 5111 4,043 3,919 5,356 Other subsidies (less taxes) n/a n/a 232 514 580 Net value added at factor cost n/a 5,101 4,275 4,433 5,843 Compensation of employees * 1,113 1,618 1,987 1,914 2,004 Interest 216 130 633 579 526 Rent 55 n/a 232 230 395 Total income from farming * 1,221 2,306 1,513 1,710 3,014
Productivity index 2000 = 100 Final output per unit of all inputs n/a 91.6 100 95 105 Source: Defra, 2005a, 2002a; MAFF, 1992, 1989. • 1977/79: compensation of employers includes family labour, Net Farm Income. • 2004 figures are given as provisional in Defra 2004.
2.2 Farming systems in England and Wales
Farming Systems in England and Wales are classified on the mix of land use and farm enterprises, with the main distinctions drawn between grassland for livestock and arable farming. There is a general distinction between upland/hill and lowland farms, where the former are almost universally grassland, with some fodder crops.
Lowland farms are classified into the main categories of dairy, livestock rearing and fattening (both of which imply mainly grassland farms) and arable. Arable farms are further classified
A4 Agricultural Futures and Implications for Environment: Defra IS0209 into mainly cereals, mixed arable farms with cereals, root and vegetable crops, and specialist horticultural and fruit farms. Farms are also classified into dominant mixes of dairy, livestock and arable, such as dairy and cereals, or livestock and cereals. In addition, there is a separate category of intensive livestock production for specialist pig and poultry farms.
In relation to agricultural land use, England accounts for 54% of the total area on agricultural holdings in the UK and Wales 8%. In Wales the greater majority, at 92%, is under grass and rough grazing. In England a greater percentage of agricultural land is given over to crops, accounting for around 41% of the land on agricultural holdings (Defra, 2005a). This is reflected, to some extent, in the relative number of holdings of different types within England and Wales.
Of the 303,100 holdings in the UK in 2004, 61% were in England and 12% in Wales. Holdings in England are the largest in terms of economic activity. In terms of type of holding, 45% in Wales are cattle and sheep farms, a further 8% are dairy farms. In England no farm type dominates, with lowland cattle and sheep, cereals and dairy farms all accounting for more than 10% of the holdings. See Table 4.
Table 4 Numbers of holdings by type: size (000) and country in England
Number of holdings Change over period
Farm Type 1990 1995 2000 2004 (ha or head) (%)
Cereals 20.1 19.9 20.9 22.9 2.8 14% General Cropping 14.3 12.9 9.8 9.4 -4.9 -34%
Horticulture 10.5 8.5 9.6 9.5 -1.0 -10% Pigs & Poultry 5.6 4.6 6.1 7.9 2.3 41% Dairy 22.7 19.6 15.2 12 -10.7 -47%
Cattle and Sheep (LFA) 11.2 10.5 10.0 11.5 0.3 3%
Cattle and Sheep (lowland) 30.2 31.0 32.8 35.1 4.9 16% Mixed 11.8 11.4 10.9 10.7 -1.1 -9% Other 23.8 27.3 52.1 73.9 50.1 211%
A5 Agricultural Futures and Implications for Environment: Defra IS0209
Table 5 Numbers of holdings by type in Wales in 2004
(Number of holdings 000)
2002 2004 Dairy 3.1 2.9 Cattle and Sheep: LFA 12.8 12.4 Cattle and Sheep: Lowland 3.6 3.4 Cereals 0.3 0.3 General Cropping 0.1 0.1 Pigs and Poultry 0.5 0.7 Horticulture 0.5 0.5 Mixed 0.6 0.7 Other 14.6 14.9 Total 36.5 35.9 Source: Defra, 2005a
Key factors influencing the arable sector in the last decade have been the weakening world commodity prices and increase in international competition (NFU, 2002).
In horticulture, the major problem facing the sector is a combination of global over-supply and the relative strength of sterling, resulting in fierce price competition from imported produce. Increased labour costs are undermining the profitability of domestic producers (NFU, 2002).
The beef and sheep systems face particular problems as a result of foot and mouth, with a proportion of the herd and flock culled, opening up the market for imports (NFU, 2002). Overall there were 2,030 cases of Foot and Mouth Disease (FMD), 6.1 million animals slaughtered (4.1 million for disease control, 2.0 million for welfare reasons), of which 4.1 million were sheep (Defra, 2002a).
2.2.1 Livestock production
The production of milk and beef from the national dairy herd is one of the most important agricultural activities in the UK. Dairying, with 2.1 million dairy cows, is generally concentrated in the grass growing areas in the west, although there are some large units in the south and east. 20% of the dairy herds contain over 100 cows, and comprises 46% of the national herd. The average yield is 6,300 kg per cow. Milk production is limited by quotas and, as milk yield per cow increases, farmers have typically purchased or leased extra quota to maintain or increase production and income. There is a continuing trend towards larger herds and fewer producers. (Defra, 2003a)
Beef production, with 1.7 million beef cows, is a by-product of the dairy industry, calves either being reared on dairy farms or sold to be grown elsewhere. Suckler herds expanded after dairy herds reduced in number during the late 1980s in response to milk quota restrictions. However, numbers have now stabilised due to the imposition of further quotas on the number of suckler cows eligible for subsidy. Suckler cows are found in both the lowlands and the uplands. Traditional systems producing finished cattle at 24 months of age continue on the poorer quality land but there has been a gradual change to shorter finishing systems elsewhere (Defra, 2003a).
A6 Agricultural Futures and Implications for Environment: Defra IS0209
In 2001, the number of cattle fell by 4.5%, dairy cattle by 3.6%, beef cattle by 7.3%. This is largely due to the effect of FMD, offset by numbers that had to be retained on farms because of constraints on livestock movements (Defra, 2002a).
There are approximately 18 million breeding ewes in the UK with sheep on about 84,000 farms. Total sheep numbers fell 13% in 2001 and the breeding flock by 12%, primarily a result of FMD and also the continuing decline since 1999 (Defra, 2002a). The diverse geography of the UK has resulted in a number of different sheep systems. Thus sheep production varies from extensive systems in the mountains to intensive lowland flocks, lambing indoors. Meat is the primary product, with wool representing only about 3% of output and falling. Nevertheless, wool remains an important by-product with over 60% of the wool exported. It is particularly suitable for making carpets (Defra, 2003a).
Increased international competition in the intensive pig and poultry sectors, has placed downward pressure on prices, in the face of rising costs of production associated with increased commitment to animal welfare and food safety (NFU, 2002). Pig and poultry production has become increasingly specialist. Smaller producers have gone out of business in the face of falling or variable market prices whilst remaining units have tended to get larger. Welfare considerations have had a significant effect on production. In the pig sector, total pig numbers fell by 9.8% in 2001, although the breeding herd fell by only 2%. There has been a concentration of the herd between 1997 and 2000, and the pig sector has also been hit by FMD and Classical Swine Fever (Defra, 2002a). There has also been a distinct trend towards outdoor pig production. In poultry, there has been a rapid rise in the number of table birds with a corresponding decline in the laying flock, and the popularity of free-range systems continues to increase (Defra, 2003a).
In relation to upland livestock systems, of the 78,200 holdings in the UK classified as being wholly or mainly in Less Favoured Areas (LFAs). LFAs in the UK can be characterised by land where productive capacity is constrained by natural conditions, such as soil, elevations and climate. Generally, these conditions are associated with upland farms and make them unsuitable for agricultural activities other than extensive forms of livestock production (Caskie et al., 2001). Wales has 77% of its area within an LFA compared to 14% in England. Holdings in LFAs tend to be larger in area, but smaller in terms of gross turnover and net income compared to non-LFA holdings (Defra, 2002b). In addition, hill farmers are largely dependent on livestock farming for their incomes. Thus, farm profit, where it exists, is largely reliant upon subsidy and agri-environment receipts. Overgrazing in the uplands is a particular issue. There is concern that stocking levels have been maintained at unsustainable levels due to the mechanism of current subsidy systems and the extent of common land that is not able to carry the stock for which grazing rights exist. The problem has been exacerbated by the retention of livestock which normally would have been sold but have limited value (National Trust, 2000a).
A7 Agricultural Futures and Implications for Environment: Defra IS0209
Table 6 Livestock: key facts and dominant issues
Numbers Locational Trend Issues (million) Focus Dairy 2.1 West (also Increasing herd size, Milk quotas, milk south & east) declining number of prices holdings Beef 1.7 Lowlands & Increased late 1980s then Subsidy quotas, BSE, uplands stabilised until BSE, FMD FMD Sheep 18.0 Lowlands & Increase in numbers from Commodity price, uplands 1940 until 1999, since then a FMD decline in numbers Pigs 5 Eastern Smaller producers leaving, Welfare, fluctuating midland and remaining becoming larger price, disease north east England Poultry 168.1 Eastern and Smaller producers leaving, Welfare, cheap north eastern remaining becoming larger imports england Source: Defra, 2005a, 2003a, 2002b
Table 7 Livestock numbers: UK (000 head)
1979- 1990 2000 as of % 1981 June change 2004 79-81 to 2004 Dairy 3,237 2,854 2,336 2,131 -34% Beef 1,481 1,601 1,842 1,735 17% Dairy heifers in- calf 689 530 532 461 -33% Dairy heifers in- calf 164 232 186 228 39% Other beef 7,812 6,950 6,238 5,994 -23% Sheep 31,163 44,217 42,264 35,890 15% Pigs 7,836 7,606 6,482 5,161 -34% Poultry 125,712 124,763 154,504 165,324 (2003 datum) 32% Source: Defra 2005a; 2002b
2.2.2 Crop systems
The production of wheat and barley and, to a lesser extent, oilseeds and combinable legumes, occupies large areas of the south and east of England. Cereal production expanded after the UK joined the European Union in 1973. Wheat is the most important arable crop making up 36% of the area dedicated to crop production and 47% of the combinable crop area. Throughout the 1990s some 2 million ha annually were sown with wheat but low producer returns reduced this to 1.64 million ha in 2001.
A8 Agricultural Futures and Implications for Environment: Defra IS0209
Barley is the UK’s second largest crop. It is generally less profitable than wheat, but is more suited to poorer soils. It also has a shorter growing season and is less prone to drought. In 2001 1.2 million ha was sown to barley. Cereal production in the UK, until recently, rose with the introduction of new technology and as market competition continued to force down unit costs of production (Defra, 2003a, 2002b). In 2001, the area of crops fell by 4.5%, with cereals falling by 10%. The majority of this was due to a reduction in wheat area of 22%, but there was an increase in barley area of 10%. The primary reason for the switch to barley was due to poor weather conditions which prevented the timely sowing of wheat.
In terms of other crops, oilseeds (rape and some linseed) are the other major crops to be grown, covering an area of 528,000 hectares in the UK in 2004. These are then followed by legumes (peas and beans) at 242,000 hectares in 2004. Other major crops include sugar beet and potatoes. The production of sugar beet is mainly limited to the east of England, close to the sugar beet factories. In 2004, there was 154,000 hectares grown. Potato production is more geographically wide spread with 149,000 hectares in 2004. Potato production has moved from heavy to lighter soils in order to facilitate mechanisation. But this has created a dependency on irrigation in order to assure crop quality (Defra 2003a, 2002b).
The majority of the remaining area is under horticulture. In 2004, the total area devoted to horticulture in the UK was 175,000 ha, producing an output of £1,731 million. Over half the area dedicated to horticulture is used for the production of field vegetable crops. The most commonly grown crops are Brussels sprouts, cabbage, cauliflower, broccoli, carrots, parsnips, onions, lettuce, peas and beans. The production of field vegetables was traditionally located in areas convenient for transport to markets. Improved road networks have opened up other areas. A further significant change in the industry in recent years has been the expansion of the multiple (supermarket) chains who now handle some 75% of fresh produce retail sales. This has reduced the volume of produce going to wholesale markets. Supermarkets have become a dominant influence in the market for fresh vegetables, promoting quality assurance and compliance with good environmental practice amongst producers. Simultaneously, this has encouraged the adoption of new technology, such as integrated crop management, and investments in advanced crop storage, packing and distribution technology. This has resulted in the consolidation of production units and supply chains in pursuit of economies of scale. Producers, however, argue that they have not been sufficiently compensated for the improvements that they have made (Defra, 2005a, 2003a, 2002b).
There are about 2,000 ha of protected cropping area in glasshouses and plastic covered structures in the UK, of which about three quarters are provided with artificial heat. More than half this area is dedicated to the production of salad crops and other vegetables. The most important crops are tomatoes, cucumbers and lettuce. Some producers have diversified into pot and bedding plant production with increasing demand from the domestic garden sector (Defra, 2005a, 2003a, 2002b).
The UK hardy and ornamental nursery stock industry provides a comprehensive range of ornamental trees and flowering shrubs, hardy perennials, alpines and a full range of aquatic plants for commercial and domestic planting. Increased demand for plants has resulted in a consequent increase in the number of nurseries providing for this need. Most produce is sold on the wholesale market (Defra, 2003a, 2002b).
Top fruit (apples, pears, cherries) is produced from 24,000 ha of orchards in the UK. Production, historically, has been confined to certain areas for reasons of soil type and climate, mainly in the southern parts of England (Defra, 2005a, 2002b). These areas have significantly declined in the face of international competition
Soft fruit (strawberries, raspberries, etc.) production accounts for about 9,000 ha. The industry has evolved over recent years with a reduction in the area dedicated to fruit for
A9 Agricultural Futures and Implications for Environment: Defra IS0209 processing being matched by an increase in production on land near populated areas for ‘Pick-your-Own’ and farm shops (Defra, 2003a, 2002b).
Table 8 UK Crops in 2004: key facts and dominant issues
Area Location Trend Issues (hectares) Cereals 3,133,000 South & Wheat area expanded after Weak commodity east 1973, continuing to rise price Oilseeds 498,000 South & rapid increase in response to subsidy dependent east markets and subsidies Proteins 242,000 South & increased area mainly for subsidy dependent east animal feed Sugar beet 154,000 East declining areas, increased Proximity to yields factories Potatoes 149,000 More Declining area, increased Competition from widespread specialisation, irrigation imports, water Horticulture 175,000 Concentration on declining Dominance of total area supermarkets, global over-supply, competition Source: Defra, 2005a, 2003, 2002b
Table 9 Crop area (hectares): England and Wales
England Wales Cereals 2,492,000 42,000 Oilseeds 396,000 1,000 Legumes 270,000 2,000 Sugar beet 177,000 - Potatoes 126,000 3,000 Horticulture 155,000 1,000 Source: Defra 2002b
Table 10 shows the extent of irrigation in the UK from the national irrigation survey in 2001. Potatoes and vegetables are the dominant irrigated crops. Much irrigation is now driven by the need for quality assurance rather than yield enhancement alone. Approaching 50% of irrigation occurs in the Anglia region, with important clusters in the East and West Midlands of England, and in Kent. In some areas limits on abstraction licences have encouraged investments in farm reservoirs.
A10 Agricultural Futures and Implications for Environment: Defra IS0209
Table 10 Allocation of water volume and irrigated land to crops in 2001 in the UK. (National Irrigation Survey 2001)
Crop Volume Area m3 % ha % Early Potatoes 5,872,522 4.46% 7,628 5.16% Maincrop Potatoes 70,057,912 53.17% 70,006 47.33% Sugar beet 4,633,365 3.52% 9,755 6.60% Orchard fruit 896,670 0.68% 1,578 1.07% Small fruit 3,312,614 2.51% 3,774 2.55% Vegetables 34,114,637 25.89% 39,164 26.48% Grass 2,470,802 1.88% 4,104 2.77% Cereals 1,471,007 1.12% 4,615 3.12% Other crops 8,841,536 6.71% 7,272 4.92% Total of Outdoor crops 131,755,033 100.00% 147,895 100.00%
2.3 Regional differences
In relation to the above, it should be noted that there are substantial differences in the economic, socio-cultural and environmental values of agriculture between England and Wales and between the different regions of England. Some regions are more economically dependent on agriculture and the rural economy than others. Some regions face pressures, particularly on the environment, for example as a result of counter-urban population movements. There may also be regional differences in the value of environmental services such as wildlife and landscapes, particularly as they support recreation and tourism. For the most part, these environmental values are highest in the least intensively farmed areas characterised by wetlands, estuarine and coastal zones, and upland areas. But of course small increments in environmental quality in intensively farmed areas can result in very significant increments in environmental gain.
3 Future developments
The future prospects for farming will reflect the inter-action of the key drivers (both long term and short term) which have shaped the present position. Further, agriculture is an industry where specific events in individual years, such as poor weather or a disease outbreak, can disturb the underlying trends.
FPDSavills (2001) suggest that change within the farming sector is driven by many factors, including:
• level of farm incomes relative to incomes outside the industry; • diversity of management performance amongst farmers; • the age of farmers and existence of family successors; • the cost of servicing farm business debt; • technology, knowledge and skills which have driven a replacement of labour by machinery and accentuated the benefits of management ability; • economies of scale; • changing food and input markets; • changing subsidies and specific policy mechanisms and regulations, such as the agri- environment schemes; • a growing interest in the countryside as a place to visit and in which to live and work; and • disruption by unexpected events, such as FMD.
A11 Agricultural Futures and Implications for Environment: Defra IS0209
More broadly, the key drivers can be summarised as shown in Box 1. These are all issues considered in other topic papers.
Box 1: Key drivers of agricultural change • Policy and regulatory developments • The economic environment, e.g. world commodity prices, exchange rate fluctuations, WTO rulings and the move towards trade liberalisation • Technological developments, productivity improvements • Market concerns, i.e. food safety/quality, animal welfare • Concerns associated with the environment • Pressures and prospects for rural diversification • Unexpected events
The current emphasis within agriculture in the UK and Europe is focused on the decoupling of subsidies to farmers away from direct production support and, to a degree, to move some of this support towards environmental payments. This has happened in the arable sector with the use of fixed, regionally defined, area payments rather than direct community price support per tonne. In the livestock sector (beef, sheep and dairy) this would mean a policy based on area payments, designed to discourage overgrazing with a ceiling on stocking rates, and allowing for differences for improved and unimproved grassland, with additional support for traditional beef herds. There is move towards this with the new arrangements area rather than headage based hill land compensatory payments.
Conservation organisations are pushing towards an agricultural policy whereby all subsidies are conditional upon the maintenance of basic environmental standards on each farm, including abiding by strict codes of practice (The National Trust 1999a, 1999b).
Subsequent to the preparation of this review, the Single Payment Scheme was introduced in April 2005 to provide income support to farmers as a single annual payment based on historic entitlement to subsidies. This breaks the direct link between crop and livestock production and income support, although farmers are required to continue in farming. They are also required to keep land in ‘good agricultural and environmental condition’. It remains to be seen how the scheme affects production. Early signs suggest livestock numbers are likely to fall.
In terms of the key economic drivers, policy and regulatory developments implicit within CAP reforms is likely to increase financial pressure on farmers, although there may be a modest recovery in world commodity prices. Nevertheless, it is likely that agricultural incomes per farm will continue to decline in real terms, reflecting the long term trend of decline in agriculture’s share of the economy, and decline in competitiveness (see Topic Paper 6). Increased farm size in pursuit of economies of scale and actions which enable producers to capture a greater proportion of the final consumer price for flood or agricultural based produce are likely to be important elements of strategies to cope with the pressures on the sector. In addition, Exchange rate movements, with or without of Euro zone membership, is an important factor influencing UK farming prosperity.
WTO rulings and trade liberalisation are another important factor (CPRE, 2002; Winter, 2002; National Trust, 1999b). Globalisation and the liberalisation of agricultural commodity trade under the terms of the GATT agreement and the requirements of WTO mean that farmers will require greater productive efficiency to remain competitive. This may mean an increase in specialisation with respect production of bulk commodities. In the face of low price imports, farmers may find benefit in moving away from bulk commodities to differentiated products which are distinguished according to quality aspects, such as place of
A12 Agricultural Futures and Implications for Environment: Defra IS0209 origin, production method, particular customer requirements, or specific attributes relating to food safety, animal welfare or environmental impact.
Alongside trade liberalisation, there is the issue of so called Green Box payments which are allowed because they serve particular social or environmental objectives without providing incentives to increase production. Recently, the WTO has placed pressure on the CAP not only to shift payments away from direct production support, but also to test whether green box payments are generally neutral in their production effect. For example, although organic farming schemes and agri-environment schemes could be seen as Green Box payments but are likely to have an indirect effect on production, not least because they provide both capital and revenue funds to sustain farming activities that might not otherwise prevail. However, without such payments – as with reduced commodity prices –many livestock systems will be placed under considerable financial pressure and may not survive in their present form. To avoid this would require radical changes in consumer spending and the food market in general, with consumers willing to pay higher prices to secure these sources of food (Winter, 2002).
Following the impact of BSE and the more recent foot and mouth disease outbreak, much greater attention has been given to standards of bio-security and food safety, both on the farm and throughout the supply chain as a whole. Producers are required to meet very exacting specifications concerning quality, production standards and convenience as well as price, specifically, the production of healthy food, to high environmental and animal welfare standards.
This will require capital investment to enable farms to adapt to changing demands, such as for new / adaptations of buildings to meet animal welfare standards, as has been the case in the pig sector with respect to breeding sows. With pressure on farm incomes, this capital may not be available. In this respect, safeguards in future global trade agreements regarding social, environmental and animal welfare costs will be needed to prevent UK producers being undermined by cheaper import produced to lower standards. However, the shift in public attitudes, whereby consumers are demanding better information about the provenance of food and the methods of production employed, does provide opportunities to develop and exploit new markets.
To sustain farming livelihoods, farmers will need to be globally competitive in both the commodity market and through a range of other non-commodity means. Winter (2002) suggests that there will be regional specialisation reflecting differences in strategic assets, such as natural resources or farming skills, which provide regional distinctiveness and a basis for competitive advantage. Farmers will need to connect with local and regional markets, adding value from food processing, marketing, retailing, and be supported in this through relevant policy mechanisms (Cabinet office, 2002). Organisations such as the National Trust, (1999b) and CPRE (2002) see this as a move towards local area farming with a focus on local and regional produce, grown, processed, packaged, stored and retailed within a radius of a few miles by individual initiative of as part of a co-operative rural enterprise. They suggest the emergence of a group of ‘speciality value added producers’ who will respond directly to growing consumer demands creating markets where competitive advantage is based on ‘quality’ criteria. These markets will not be price driven. Although, this sector is likely to remain small in terms of the total food sector, it is suggested that there is a huge potential for growth.
Both Government and non-Government commentary on the state of agriculture comment on the rise in environmental concerns, requiring farmers to manage the land for a variety of public benefits as well as for the production of good quality, safe food: ‘a countryside to be enjoyed by all’. These issues are alluded to in the Rural White Paper, the Curry Report on the Future of Farming and Food, and Defra’s strategy for sustainable farming and food (DETR,
A13 Agricultural Futures and Implications for Environment: Defra IS0209
2000; Cabinet Office 2002, Defra, 2002c;) They are also a main theme in policy documents produced by Conservation organisations (CPRE, 2002; National Trust, 1999a, 2001).
Examples of the wide-ranging goods and services that farmers and land-managers could provide include: managing, enhancing and restoring the countryside; nature conservation; protection of assets – healthy soil, clean water and air, rich and diverse landscape; the enhancement of biodiversity and preservation of traditional landscapes; the provision of public access and recreation Farmers can explore alternative forms of land use ranging from the production of renewable energy sources including the production of alternative crops, through to forestry, soil carbon banks, and flood control/protection systems (CPRE, 2002; National Trust, 2001).
Mechanisms supporting this shift in emphasis away from food production to other economic activities focus primarily on a shift away from agricultural production subsidies into environmental and rural development payments. Some conservation organisations have argued for example that at least 50% of total CAP funding should be delivered through agri- environment schemes – consolidated into a single programme, the remainder coming through production related support (National Trust, 1999a, English Nature, 2001). Recent reforms suggest this will be implanted through ‘a broad and shallow’ type approach to a compliance driven support regime (Defra, 2005b).
Ultimately, taking into account the key drivers highlighted above, it is likely there will be significant structural adjustment – as land owners/occupiers adopt different survival strategies in response to the policy and market signals from CAP and international trading rules. Some may be driven or encouraged towards environmentally responsible practices.
There may also be full or partial withdrawal from farming, with an associated increase in off- farm employment and diversification – particularly within livestock areas with cattle, sheep and pigs facing either depressed or increasingly competitive commodity markets. It is suggested that the change will be particularly amongst cattle and sheep farmers, and most notable amongst tenant farmers in upland areas, leading to a lower intensity of farming, and even land abandonment (FPDSavills, 2001).
It is clear that farming futures very much depend on the nature of social preference and governance that characterise alternative future scenarios, and find expression in rural and agricultural policy.
A14 Agricultural Futures and Implications for Environment: Defra IS0209
Reference List
Caskie, P., Davis, J. and Wallace, M. (2001) Targeting disadvantage in agriculture, Journal of Rural Studies, 17, 471-479 CPRE (2002) Farming Policy Position Statement, November 2002. http://www.cpre.org.uk. Accessed 21/01/03. Cabinet Office (2002) Farming and Food a sustainable future: Report of the policy commission on farming and food. The Stationary Office, London. http://archive.cabinetoffice.gov.uk/farming/pdf/PC%20Report2.pdf Accessed 11/6/2005 Defra (2002a) Agriculture in the UK 2001. The Stationery Office, London. Defra (2002b) Farm Incomes in the United Kingdom 2000/2001. Defra. Defra (2002c) The strategy for sustainable farming and food. The Stationary Office London. http://www.Defra.gov.uk/farm/sustain/newstrategy/strategy.pdf Accessed 11/6/2005. Defra (2003a) Agriculture: in the UK 2002. The Stationery Office, London. Defra (2003b) Land by agricultural and other uses: 2003, http://www.Defra.gov.uk/environment/statistics/land/alltables.htm Accessed 09/06/05 Defra (2005a) Agriculture: in the UK 2004. The Stationery Office, London. Defra (2005b) Entry level stewardship handbook. Defra. London. DETR (1998) Digest of Environmental Statistics, No 20. The Stationary Office, London. English Nature (2001) Sector Analysis: Agriculture, http://www.english-nature.org.uk Accessed 20/01/03. DETR (2000) Our countryside: the future: a fair deal for rural England. The Stationary Office. London. http://www.Defra.gov.uk/rural/pdfs/ruralwp/rural.pdf Accessed 11/6/05 FPD Savills (2001) Structural Change in Agriculture and the Implications for the Countryside. Prepared for the Land Use Policy Group of the GB Statutory Conservation, Countryside and Environment Agencies. September 2001. MAFF (1989) Agriculture in the UK 1988. HMSO, London. MAFF (1991) Agriculture in the UK 1990. HMSO, London. MAFF (1992) Agriculture in the UK 1991. HMSO, London. National Trust (1999a) Agenda 2000 – CAP Reform. Towards A New Direction for Agriculture. The National Trust Response to the MAFF Consultation. February 1999. National Trust (1999b) A New Direction for Agriculture. The National Trust Response to the MAFF Consultation. September 1999. National Trust (2000a) Agriculture – 2000 and Beyond. An Agricultural Policy for the National Trust. The National Trust. National Trust (2000b) The National Trust and Agriculture – an Overview. The National Trust. National Trust (2001) Farming Forward. The National Trust. NFU (2002) UK Agricultural Review –Farming in Crisis. June 2002. NFU information web pages. http://www.nfu.co.uk/info. Accessed 24/01/03. Ward, N. (2000) Actors, Institutions and Attitudes to Rural Development: the UK National Report. The Nature of Rural Development: Towards a Sustainable Integrated Rural Policy in Europe. Department of Geography, University of Newcastle upon Tyne. Winter, M. (2002) Rural Policy: New Directions and New Challenges. Research to identify the policy context on rural issues in the South West. Final Report to South West of England Regional Development Agency and the Regional Assembly. Centre for Rural Research, University of Exeter.
A15 Agricultural Futures and Implications for Environment: Defra ISO 209
TOPIC PAPER 2:
POLICY REVIEW
1 Introduction
This paper contains a broad review of agricultural policy as it relates to agriculture in England and Wales. It reviews the current arrangements under the Common Agricultural Policy, and reports on the current reform process. The paper also extrapolates the current policy framework into the medium term, namely around 2012, drawing on predictions made by various international organisations. The paper explores possible policy futures under each of the foresight type scenarios.
1.1 The CAP, rural development and agri-environment policy and issues
As a result of the Agenda 2000 process (European Commission, 1997a) rural development has evolved into the ‘second pillar’ of the CAP1, becoming embedded in legislation in the form of Regulation 1257/99 – the Rural Development Regulation (RDR) (European Commission, 1999). “Agri-environment” developments, or the development of environmentally benign forms of agricultural activity, have long been developing unilaterally alongside the conventional, production-oriented agricultural methods sponsored by the CAP since its inception. Indeed, insofar as sustainable farming systems represent traditional, non- intensive forms of agriculture, the environmentally benign approach to farming which agri- environment policy aims to promote is in principle nothing new. However, the agri- environment momentum has now also achieved a statutory foundation under the rural development umbrella, as the RDR requires member states to implement formal agri- environment support schemes.
The rural development pillar is one of the principal vehicles for introducing sustainable development into agricultural and rural policy, beyond the primarily environmental scope of agri-environment policy. It is broadly under the RDR that wider social and economic initiatives are being introduced, to broaden the economic base of farming and other rural enterprises, to counteract social exclusion and disadvantage and to enhance the social and cultural cohesion of rural areas. The RDR works alongside other policy instruments in this respect, including the LEADER + programme and other funding from the structural funds2.
1.1.1 Current situation
CAP
At present, agricultural policy in the EU is at a crossroads. The CAP reform process, begun in earnest in the early 1990s, has more recently progressed under the 'Agenda 2000' process. These reforms are strongly influenced by factors external and internal to the EU.
1 The first ‘pillar’ of the CAP is the ‘traditional’ provision of market support provided through the Common Market Organisations 2 The structural funds include: the European Social Fund (ESF); the European Agricultural Guidance and Guarantee Fund (EAGGF), Guidance Section; The European Regional Development Fund (ERDF); the Financial Instrument for Fisheries Guidance (FIFG), created in 1993. The Cohesion Fund, targeted at member states with a GDP below 90% of the EU average, is not available to the UK.
A16 Agricultural Futures and Implications for Environment: Defra ISO 209
External drivers include an expanding world demand for food, increased liberalisation of world trade, and eastward enlargement of the EU to include countries with relatively large farming sectors.
Internal drivers include problems of over-production in some commodity markets, a commitment to environmental protection, increased concern regarding food safety and animal health, and reduced administrative complexity. There is also a move towards decentralisation which allows member states to target specific regional priorities, subject to avoiding market distortion. Furthermore, despite representing only about 0.7% of EU GDP3, the cost of the CAP accounts for approximately half the EU budget, and taxpayer pressure on national governments to reduce this burden is growing.
Thus the reform of CAP seeks to deliver a market oriented, internationally competitive agricultural sector which supplies quality food for consumers, provides sustainable livelihoods for producers, supports the development of vibrant rural economies and simultaneously protects and enhances the rural environment. Quite a challenge given the diversity of circumstances and practices in agriculture across the EU and, in some cases, high levels of dependency on existing levels of price and income support.
The regulations under Agenda 2000 introduced a number of initiatives:
• phased reductions in support prices to realign internal EU prices with world market prices: e.g. 15% for cereals, 20% for beef, 15% for milk; • increased direct aid mainly in the form of area payments to support rural incomes (and to compensate for reductions in price support); • commitment to multilateral free trade negotiations under the WTO assisted by market orientation; • quality assurance with respect to food safety, animal health and welfare, and environmental protection; • environmental enhancement and protection undertaken by member states under locally defined agri-environmental schemes. Member states may also require that support payments are conditional on 'compliance' with environmental conditions. • A new rural development framework based on a 'menu' of locally defined, targeted actions to promote a 'competitive, multifunctional agricultural sector' as part of an 'integrated strategy for rural development'. Agri-environmental schemes are a central component of the framework. • Decentralised decision making whereby part of the direct payments in some farming sub- sectors are defined by member states in accordance with national or regional priority. • Simplification of support mechanisms and regulations. The CAP reforms make specific references to arable crops, the beef, dairy and small livestock sectors, and wine, with special measures for sugar, olive oil and tobacco.
Mid term review
In July 2002 the Commission published a mid-term review (MTR) paper as a consultation document (European Commission, 2002) . This re-iterated the objectives of agricultural policy as delivering:
• “a competitive agricultural sector;
3 Approximately EURO 6,250 bn p.a.: Economagic.com http://www.economagic.com/em-cgi/data.exe/ecb/t5-01-01+1
A17 Agricultural Futures and Implications for Environment: Defra ISO 209
• production methods that support environmentally friendly, quality products that the public wants; • a fair standard of living and income stability for the agricultural community; • diversity in forms of agriculture, maintaining visual amenities and supporting rural communities; • simplicity in agricultural policy and the sharing of responsibilities between the Commission and member-states; • justification of support through the provision of services that the public expects farmers to provide.”
The review aimed, however, to improve on the Agenda 2000 reform process, and the Commission summarised its proposals to achieve these objectives as follows:
1. “Focus the support to reward farmers for their environmental, food safety and quality or animal welfare services. 2. Provide more money to help farmers to produce in a market and consumer oriented way 3. Continue to provide support and stability in agricultural incomes. 4. Help farmers to get on with their work by cutting red tape and simplifying paperwork 5. Ensure that farmers can benefit from growing markets. 6. Concentrate on the products and services the consumer wants, without artificial incentives to produce what consumers do not need. 7. Integrate food quality, food safety and animal welfare fully into the CAP. 8. Reinforce compliance in the farmed environment, with fewer environmentally damaging incentives, and more environmentally friendly services. 9. Offer more support for traditional and high-nature value farming systems. 10. Take the lead in international farm trade talks with a modern farm policy which is positive for international trade and for developing countries.”
Thus the three key elements of the review were:
• market reform proposals, including cereals and dairy; • decoupling of subsidies from production and the creation of a “single income payment”; • a shift in support from production-linked subsidies (known as Pillar 1 of the CAP) to wider agri-environment and rural development measures (Pillar 2) funded by compulsory “dynamic” modulation4.
The review was adopted, with some amendments, as a legal Commission proposal in January 2003. Whilst the extent to which member states agree with the Commission's position on reform is very diverse, the Agriculture Council of June 2003 was able to agree a compromise position on which to take this reform forward.
Defra, which frequently reflects the UK’s sceptical interpretation of the EU’s attempts at CAP reform, was able to say that this agreement “represents a real shift in agricultural policy”
4 “Modulation consists of skimming off a percentage of subsidies allocated to production and redirecting these fund to non-production measures such as structural improvement and preserving environmental and rural heritage. At present, the EU operates modulation on a voluntary basis, with the Member States deciding if they want to transfer funding from production linked aid to structural and environmental measures. The Commission proposes in the reform [MTR] to make it mandatory for the member states to make this transfer.” Conseil Européen des Jeunes Agriculteurs: Modulation position paper, September 2002. http://www.ceja.org/Downloads/Opinions/modulation(en).doc accessed 14/2/2003
A18 Agricultural Futures and Implications for Environment: Defra ISO 209
(Defra, 2003). It incorporates two fundamental aspects of farm policy reform, which have hitherto remained on the policy drawing board despite much talk of their importance:
• cross-compliance; and • decoupling
A third key feature of reform, modulation, whereby a proportion of direct support for farmers (especially larger farmers) is clawed back and redirected to rural development expenditure, is accelerated as well.
Cross-compliance
From 2005 payments to farmers under the reformed system will be contingent upon adherence to the principles of good agricultural practice. This will require farmers to meet animal welfare, food safety and environmental standards. A sample of each member states farms will be sampled and audited annually as a mechanism for enforcing this requirement. This principle should have the effect of embedding best practice into the production process.
Decoupling
The objective of separating farm support payments from production levels will be largely achieved as a result of this agreement. Instead of a complex set of different payments, each linked to production levels of a different crop or livestock species, farmers will receive a single support payment based on a reference point, which represents the historic level of support on which those farmers have depended up to now. The rationale is that the public purse will be supporting farmers to perform socio-economic and environmental functions which are required, such as providing rural employment and keeping Europe’s agricultural areas and landscapes in good heart. It will not be supporting them to perform unnecessary functions, such as the over-production of foodstuffs. This fundamental aspect of the farm economy should become more responsive to market signals.
Modulation
Small farmers will be exempt from the impact of modulation. The funds generated by reducing farm payments to larger farmers by 5% will be redirected to rural development measures. Farmers will, of course, be eligible to apply for some of these redirected funds by engaging in additional rural development activities, such as agri-environment improvement measures, or eligible diversification activities.
The implications of these reforms for the policy development process into the future are discussed below at section 1.1.3, in the context of scenarios for different policy futures.
Farm incomes and the agricultural economy (see Farm Incomes position paper)
Throughout Europe, and markedly in the UK, the agricultural economy has been in recession since the mid 1990s (measured in terms of gross output5), and its relative contribution to GDP has been declining for decades (Marsh, 2001).
The impacts of these trends in the UK have included:
5 The Gross Output trend was to rise from the early 1980s until 1995, in current money terms (Marsh, 2001), (Performance and Innovation Unit, )
A19 Agricultural Futures and Implications for Environment: Defra ISO 209
• steep and persistent declines in agricultural employment (particularly in full-time labour), a more gradual decline in numbers of business principals engaged in farming, and a steep increase in numbers of part-time farmers; • a decline in the net worth of UK farm businesses;
Agriculture accounts for £8.7bn or 16% of Gross Value Added in the £56bn UK food chain (Food Chain Group, 1999). Although of minor significance nationally in respect of its contribution to GDP and employment (in terms of its share of GVA across the entire economy agriculture accounts for a mere 0.7% (Countryside Agency, 2002)), in rural areas it can play a vital role. In East Anglia, for example, agriculture contributes up to 5% of GDP, (Performance and Innovation Unit), with an equivalent contribution to rural employment. Adding activities which supply agricultural inputs and process its outputs can increase GDP contribution to as much as 17% in parts of East Anglia.
Rural development and agri-environment
Rural development has emerged as a formal component of European Union Policy, and its place in policy structure was indicated less formally when it was identified by the Commission as the second ‘pillar’ of the Common Agricultural Policy. The portent of this development was evident when the successor to Ray MacSharry, commissioner for Agriculture at the time of the 1992 reforms, took up the post as Commissioner for Agriculture and Rural Affairs (now Agriculture, Rural Development and Fisheries).
In fact, whilst agriculture still accounts for the lion’s share of rural public expenditure at EU level, funding for rural development has become increasingly the focus of policy evolution.
In the UK, rural development policy can be defined in terms of government’s ‘vision’ for rural areas:
“Our vision is of rural areas evolving in ways which enhance landscape and biodiversity. It is of a forward looking and competitive farming industry, delivering good stewardship of the environment as well as producing our food. It is of a rural economy based on information technology as well as on traditional skills. In short, not a theme park, but a living, working countryside for real people. We want a countryside which can shape its own future, with its voice heard by Government at all levels.” (Defra, 2000)
It is not difficult to interpret from this vision statement that in terms of UK government policy, agriculture is increasingly perceived as a pillar of rural development, rather than the other way around. Agri-environment can be included in an analysis of rural development which starts from this perception, as it represents part of the strategy for cohesion between agricultural and other rural objectives.
Rural development as a process is supported by state and European funding, allocated as a result of the Berlin European Council meeting in March 1999, which apportioned funds through the mechanisms of the structural funds and the CAP and, modestly, the LEADER + programme.
The state of rural development, including progress towards agri-environment objectives, can be expressed in quantitative and qualitative terms. In the language of sustainability rural development must deliver progress in economic, social and environmental terms. Indicators for economic progress which centre on agricultural statistics include Total Income From Farming (TIFF) and the trends outlined briefly above. As indicated above, however, agriculture accounts for less than 1% of GVA. For the rural economy as a whole, the Countryside Agency uses rates of business start-up and closure (turnover) as the key indicator of rural business health. In this respect rural business growth is slightly ahead of its urban
A20 Agricultural Futures and Implications for Environment: Defra ISO 209 equivalent (Countryside Agency, 2002). The same report shows that percentage rate of employment, too, is slightly higher in rural than in urban areas, but the overall figures mask large variances between areas, and that there are substantial pockets of rural deprivation.
Agri-environment
A fundamental indicator of agri-environment ‘progress’ is the extent to which environmentally beneficial farming systems are replacing the intensive, CAP-sponsored farming systems developed since its inception in the early 1960s. Agri-environment systems in England are promoted explicitly under rural development policy by means of three agri- environment schemes:
• The Countryside Stewardship scheme (CSS); • The Environmentally Sensitive Areas (ESA) scheme; • The Organic Farming scheme
Other schemes, such as the Energy Crops scheme, whilst primarily serving economic and diversification objectives for farmers, also pursue agri-environmental objectives, having environmentally desirable consequences such as the displacement of fossil fuel energy sources by renewables.
Agri-environment review:
Defra initiated a review of the agri-environment schemes in January 20026, with a view to rolling out revised schemes in 2005. The first initiative in this direction, based on the recommendations of the Curry report7, is the plan to pilot a universal ‘broad and shallow’ scheme in 2003.
Regarding the EU as a whole, the commission’s position on the review of agri-environment schemes is optimistic, noting that the land area under such management, at 20% of agricultural area has already exceeded the 5th Environmental Action Programme target of 15% by the year 20008.
As at October 2001 there were 577,131 ha under agreement in ESAs in England, representing 60% of the eligible area, and 6.3% of total farmland. There are now almost 12,000 CSS agreements covering 263,000 ha of land, representing 2.9% of farmland in England (Centre for Rural Economics Research Department of Land Economy University of Cambridge and CJC Consulting, 2002), (MAFF 2000).
1.1.2 Where we have come from
Following the 1947 Agricultural Act and prior to joining the EU, the UK operated a national policy framework for agriculture which contained a comprehensive and diverse range of farm income and general farm sector support measures. These included:
• import controls to maintain high internal prices as in the case of sugar beet; • producer controlled marketing boards, as for milk and potatoes which controlled production and market supply to maintain commodity prices;
6 http://www.defra.gov.uk/erdp/schemes/landbased/review/aedraftnew.htm 7 (Policy Commission on the Future of Farming and Food, 2002) 8 http://europa.eu.int/comm/agriculture/envir/programs/evalrep/concl_en.htm
A21 Agricultural Futures and Implications for Environment: Defra ISO 209
• a plethora investment grants and allowances to encourage modern farming methods; • direct investments in flood defence and regional drainage schemes; • large public expenditures in agricultural research and technology development and extension, and • a price support regime which used the principle of deficiency payments.
The latter involved end of year ‘price reviews’ to set payments to farmers over and above prevailing market prices in order to secure reasonable returns to farmers and workers in the industry. This comprehensive regime was largely financed by the tax payer, and was perceived to be ‘progressive’ in terms of its impact on income distribution. Relatively low food consumer prices were seen as part of Britain’s post war low wage economy.
The CAP was created in the early 1960s by the original six members of the then European Economic Community (EEC), and was based on the principles and objectives set out in the 1957 Treaty of Rome, which established the EEC (European Union, 1997). Its objectives and methods were predominantly oriented towards supporting the agricultural sector by mechanisms which rewarded increased productivity, and by so doing to increase the self- sufficiency of the EEC, enhance its food security, and support the producers of that food.
20 years of this policy led to considerable productivity gains, with the result that the cost to taxpayers grew substantially, over-production of key commodities led to the need for subsidised exports which distorted world markets, and the increasingly intensive nature of production caused an alarming level of environmental degradation and destruction in many rural areas (see, for example (Winter and Smith, 2001) and (European Commission, 1997b)). Calls for a reversal of the policy which caused such contentious impacts were met with a vigorous defence of the policy by those who benefited most from it. The first clear indications that reform was inevitable came with the Commission’s ‘MacSharry’ proposals (European Commission, 1992). The reductions in price support which stemmed from this initial process were modest. They were followed in 1997 by more radical proposals in the form of the Agenda 2000 programme (European Commission, 1997a). The reforms put forward under Agenda 2000 were agreed, in modified and diluted form, by the European Council in Berlin in March 1999.
1.1.3 Where we are going
The Commission’s mid-term review proposals in July 2002 re-emerged in January 2003 as a formal proposal for new and amended legislation (European Commission, 2003). This proposal has led to the agreement for CAP reform outlined above.
Less radical and proposing a delayed programme, in comparison with the MTR, the proposals drew criticism from France for going too far, and from Germany and others for not going far enough.9 The UK government indicated, in the words of Margaret Beckett, that the proposals are “heading in the right direction”10, and the government seems satisfied with the eventual outcome.
9 EU Business reports, accessed 24/1/03: German criticism: http://www.eubusiness.com/cgi- bin/item.cgi?id=100975&d=101&h=0&f=0&dateformat=%o%20%B%20%Y Other concerns: http://www.eubusiness.com/cgi- bin/item.cgi?id=101448&d=101&h=0&f=0&dateformat=%o%20%B%20%Y 10 Defra news release no. 27/03, 22/1/03, accessed 27/1/03 http://www.defra.gov.uk/news/2003/030122a.htm
A22 Agricultural Futures and Implications for Environment: Defra ISO 209
The core trend of the reform follows the line set out in the MTR: decoupling of direct aid received by farmers from their productivity. In other words, moving further towards the situation where the financial support that a farmer receives is not dependent on the level of production, but on some standard notion of what an appropriate level of support should be, if wider rural socio-economic and environmental objectives are to be achieved.
Some proportion of farm support payments will be dependent on ‘public goods’ produced by the farmer, such as enhanced landscape or conservation features. This element of support will be financed by modulating funds away from pillar one of the CAP, and its traditional production-dependent financing basis, towards pillar two, supporting rural development through environmental schemes and non-agricultural aspects of the rural economy. Most of the support channelled directly to farmers under pillar one (which will still be the lion’s share) will be conditional upon maintaining baseline standards of environmental, welfare and food safety performance.
These changes will take a number of years to be implemented, and do not involve absolute decoupling. It is important to note that there will be a level of national discretion on the part of the member states to maintain partial links to the production of certain products, where they consider that there is a risk of land abandonment.
This policy trend can be considered in the light of recent reviews of global futures under the Foresight Programme (Berkhout et al., 1998; DTI, 2002), as discussed and expanded elsewhere. The four possible futures described in that analysis, and expressed in terms of social values and governance, are World Markets, Global Sustainability, Provincial Enterprise and Local Stewardship. These are illustrated in Figure 1.
Figure 1 Possible Futures, based on Foresight (DTI, 2002)
Globalisation
World markets Global sustainability
Conventional development Consumerism Community
Provincial enterprise Local stewardship
Regionalisation
The term CAP may be seen as restricting exploration of models that go beyond the CAP concept. It may be useful, therefore, to treat the use of the term simply as a generic reference to whatever policy framework applies within the EU at any given time, whether over the medium or long term.
In terms of policy development as described above, and taking the origins of the CAP as the starting point, the reform track could be plotted onto the Futures model as in Figure 2:
A23 Agricultural Futures and Implications for Environment: Defra ISO 209
Figure 2 Extrapolating the Agricultural policy track
Globalisation World markets
Global sustainability
Conventional development Consumerism Community
Provincial enterprise Local stewardship
Regionalisation Policy to date
Apparent policy trend
Policy has thus been moving towards a recognition of community objectives (sustainability and environmental goods production), but in the context of global rules. If it continues on this path it will end up as the Global Sustainability scenario. However, a reaction away from globalisation, perhaps as part of the pressure to emphasise a community orientation, might see policy swing back towards the Local Stewardship scenario. Indeed, elements of the reform such as the right of member states to retain a production linked component to avoid land abandonment suggests that the Local Stewardship model (where 'local' means the level of the member state) retains a substantial pull. In either case, this represents a continuation of the current move towards the 'CAP MF' scenario described by Marsh (see below), where a multifunctional agricultural industry supports an economically diverse and socially inclusive rural sector.
This analysis is supported by other models, such as that set out in another Foresight report by Marsh (2001). This analysis proposes four farm policy futures developing from the current basis of the CAP:
“(i) a fully liberalised CAP in which prices are determined within an open international market and public support provided in a wholly decoupled manner. This being restricted to a small list of public goods and social needs. This is labelled the CAP Lib scenario.
(ii) A CAP based on maintaining the multi-functional nature of farming. Prices for commodities fall but public money is used to maintain the non-market benefits of farming. Policy mechanisms are designed to reward farmers for benefits society receives other than food. Many more farm businesses are protected than under scenario CAP Lib but the emphasis shifts from commodities to public goods. In Community jargon this represents a move from the first to the second pillar. Here this is referred to as the CAP MF scenario.
(iii) The third scenario envisages a CAP that sets rules defining the purposes for which member governments may assist farming. It leaves the ways in which they are implemented to national authorities, subject to their monitoring by the Commission. This is called here the CAP Repat scenario.
A24 Agricultural Futures and Implications for Environment: Defra ISO 209
(iv) The final scenario consists of a CAP that remains primarily a commodity policy. Environmental and public good concerns may be represented by cross compliance conditions and discrimination in favour of small farms but the share of direct expenditure on environmental policies in total CAP expenditure does not increase. This is called the CAP Stat Quo scenario.” (Marsh, 2001)
Marsh then suggests how the three principal types of UK farm business, classified on the basis of their goals and drivers into (a) commercial farms, (b) public goods producers, and (c) those with external incomes, might fare under each scenario, in terms of revenue changes and risk exposure. These potential outcomes, and the opportunities and threats they represent, are summarised in a series of tables.
Marsh’s scenarios could be roughly equated with the Foresight Futures, as follows:
• ‘Cap Lib’ equates broadly to the World Markets scenario; • ‘CAP MF’, which does not particularly discriminate between local versus global levels of governance, equates broadly to the Global Sustainability/Local Stewardship scenarios, in terms of the emphasis on environmental and social production; • ‘CAP Repat’ equates broadly to the Provincial Enterprise scenario; • ‘CAP Stat Quo’ may also fit within the Provincial Enterprise scenario, but higher up the Globalisation axis in recognition of the extent to which global rules have already shaped existing policy. It equates to a policy future of 'Business as usual"
These scenarios may therefore be mapped onto the model as in Figure 3:
Figure 3 Agricultural policy scenarios and Possible Futures
Globalisation
1
Global sustainability World markets Conventional development Consumerism 2 Community 4
Provincial enterprise Local stewardship 3
Regionalisation
1. CAP Lib 2. CAP MF 3. CAP Repat 4. CAP Stat Quo Policy to date
Apparent policy trend
A25 Agricultural Futures and Implications for Environment: Defra ISO 209
1.2 International policy context and the WTO
Agricultural policy is a global issue. Its concern with traded commodities means that it has an impact on the terms of trade of countries beyond the borders of those states which happen to implement any particular policy. Furthermore, as the primary source of the world’s food supply agriculture has a key strategic role in addressing issues of food security and scarcity throughout the world. These drivers of the international food and farming debate are largely in conflict, however. Globalisation puts pressure on nations to open borders and subject their domestic farm systems to international competition, and to focus production on cash-earning export crops in many cases. However, the imperatives of food security require those same nations to support a diverse domestic farm system which focuses on feeding local populations. This objective may require intervention or protection in some respect – policies at odds with the global push for free trade.
The CAP has produced commodity surpluses, and has subsidised their export to the detriment of world and overseas markets. Its own systems of import restraint and protection have disadvantaged other exporters seeking to compete on fair terms in EU markets. The distortion of markets and domestic farm industries around the word that has arisen as a result of EU farm policy has created a momentum in trade negotiations to which the EU must react. To the extent to which its interests are overwhelmingly served by reaching agreement with trading partners around the world, the EU is under enormous pressure to reform its farming policies.
1.2.1 Current situation
The first multilateral round of negotiations under the World Trade Organisation (WTO) began in Geneva in 2000, but took off in earnest in Doha in November 2001. Out of this meeting came amendments to the Agreement on Agriculture (AoA) which was one of the outcomes of the 1994 Uruguay GATT round negotiations. The Uruguay agreement was also responsible for establishing the WTO, which came into being in 1995 and the AoA established that negotiations on agriculture would resume under the WTO. The text of the agreement reached at Doha determined that “building on the work carried out to date and without prejudging the outcome of the negotiations, we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support”11
The timetable for completing the new round of trade negotiations is 1st January 2005, but as the Uruguay round was finally agreed 3 years late few will be surprised if similar delays arise again.
WTO members were under an obligation to agree the ‘modalities’, or the quantified targets for the revised agriculture agreement, by the end of March 2003. The chairman’s review of December 200212 indicated that there were still a number of obstacles to overcome if this objective were to be met, and indeed, the negotiators failed to reach agreement by the deadline13. Whatever the exact outcome of the ultimate negotiations, however, their significance is that (unless they are a complete failure) they will extend the reform process of the CAP14.
11WTO: http://www.wto.org/english/tratop_e/agric_e/negoti_e.htm#meetings accessed 14/2/2003 12 http://www.wto.org/english/tratop_e/agric_e/negoti_modoverview_e.htm 13 http://www.wto.org/english/news_e/pres03_e/pr336_e.htm 14 Further information on the WTO process is available at: http://www.wto.org/english/tratop_e/agric_e/negs_bkgrnd01_nutshell_e.htm#modalities http://www.wto.org/english/tratop_e/agric_e/negs_bkgrnd30_modwp_e.htm
A26 Agricultural Futures and Implications for Environment: Defra ISO 209
1.3 Other EU policy features and legislation
1.3.1 Current situation
Agriculture is constrained by a range of policy and legislative factors beyond specific farm and rural policy. Inasmuch as the development of the CAP is geared towards compliance with increasing environmental standards and performance (such as the requirement for farmers to observe good farming practice, or adoption of an agri-environment scheme under the RDR), many of these factors are compatible with the same policy direction. They largely derive from a series of European directives aimed at enhancing the sustainable development of the EU.
• The Habitats Directive15 aims to provide strong protection of designated sites – it establishes Special Areas of Conservation (SACs). Its principal impacts on agriculture and farming practice are to restrict actually or potentially damaging operations in or near an SAC. • The Birds Directive16 aims to provide strong protection of designated sites known as Special Protection Areas (SPAs). Its major impact on farming is to restrict actually or potentially damaging operations in or near an SPA. • The Water Framework Directive17 introduces a requirement to prevent deterioration of and to achieve good status for all waters, with a new focus on ecological status for surface waters. The directive will tackle diffuse pollution for the first time. It is accepted that farming is a major source / cause of diffuse pollution. • IPPC regulations18 identify prescribed installations which cannot operate without an authorisation – which governs the materials and technology used, discharges to the environment, energy efficiency, best practice operation and maintenance and accident prevention. The regulations apply to intensive pig and poultry farming units above specified threshold sizes. • The Waste Framework Directive19 determines that a cradle to grave, duty of care, responsibility for waste lies with producers of waste. Farms both produce and use waste. Trends suggest that exemptions for some processes which are deemed beneficial to agriculture, may be withdrawn • The Nitrates Directive20 restricts use of N based fertilisers on agricultural land, via designation of Nitrate Vulnerable Zones (NVZs). The area designated as NVZs has increased from 22% to 55% of England & Wales – many more farmers will be affected in future. • The Groundwater Directive21 imposes a requirement for authorisation of use, storage and disposal of dangerous substances where actual or potential risk of escape could result in groundwater pollution. • The Landfill Directive22 creates an obligation to reduce biodegradable waste going into landfill; it places restrictions on hazardous wastes going to landfill and
15 Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora 16 Council Directive 79/409/EC of 2 April 1979 on the conservation of the wild birds 17 Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy 18 Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution prevention and control 19 Council Directive 75/442/EEC of 15 July 1975 on waste 20 Council Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against pollution caused by nitrates from agricultural sources. 21 Council Directive 80/68/EEC of 17 December 1979 on the protection of groundwater against pollution caused by certain dangerous substances 22 Council Directive 1999/31/EC of 26 April 1999 on the landfill of waste
A27 Agricultural Futures and Implications for Environment: Defra ISO 209
establishes a requirement of pre-treatment. The application to agricultural land may well be the most likely option for biodegradable waste that can no longer go to landfill. Opportunities arising may include cheap soil conditioning material and/or development of composting businesses • The Environmental Liability Directive is currently a proposal from the European Commission23 which will codify civil liability for environmental harm caused by prescribed activities (e.g. under IPPC), waste disposal (e.g. paying for clean-up). Strict liability will apply for harm to the public but not for harm to biodiversity. In this context intensive pig and poultry farming is a prescribed activity under IPPC. • The prospective Soils Directive will provide protection against soil degradation in all its forms. Liability could apply to farmers who adopt poor land use or farming practices which result in soil erosion and soil quality degradation.
1.4 National land use planning policy24
1.4.1 Current situation: Planning policies for the countryside
“The guiding principle in the countryside is that development should both benefit economic activity and maintain or enhance the environment…. Rural areas can accommodate many forms of development without detriment, if the location and design of development is handled with sensitivity. New development should be sensitively related to existing settlement patterns and to historic, wildlife and landscape resources. Building in the open countryside, away from existing settlements or from areas allocated for development in development plans, should be strictly controlled. In areas statutorily designated for their landscape, wildlife or historic qualities, policies give greater priority to restraint.” (ODPM, 2001).
This planning approach envisages the encouragement of farm diversification where it makes better economic use of resources such as existing farm buildings, without sacrificing agricultural land or landscape value. The approach pursues development in line with the provisions of the ERDP, whereby the multi-functionality of farming will be enhanced, reducing reliance on traditional farm output for economic productivity, and increasing contributions to the rural economy and society by means of diversified activities.
2 Future scenarios
The relationship between agricultural and rural policy and each of the four scenarios described above is examined in this section. In particular the broad nature of policy and what the key policy objectives and instruments might be in each case are suggested. The longer into the future, the more the deep seated will a particular scenario become, and the greater the distance from the current CAP based scenarios, Within the medium term 10 year timeframe, scenarios for the most part will be defined relative to the current or extrapolated CAP regime.
2.1 World Markets
The key features of this scenario are private consumption, free-trade on a global scale, and 'laissez-faire' approaches to market governance. In this scenario the two pillars or agricultural policy and rural development policy will probably split into separate entities – agricultural
23 COM(2002) 17 final, 2002/0021(COD). Proposal for a directive of the European Parliament and of the Council on environmental liability with regard to the prevention and remedying of environmental damage. Brussels, 23.1.2002 24 For summary information see: http://www.defra.gov.uk/environ/landuse/landuse.htm & Defra & ODPM, 2002, A farmer’s guide to the planning system
A28 Agricultural Futures and Implications for Environment: Defra ISO 209 production will be completely de-coupled from any kind of public intervention in respect of the production of environmental goods and services.
A 'soft' interpretation might envisage a free market in agricultural goods, with no subsidy and no protective instruments distorting trade between the world's centres of agricultural production and consumption. As a separate issue, the concept of market failure applied to environmental goods and services might allow an element of public intervention in the production of these. For example, providers of amenity services such as a local parks trust might 'sell' those amenities to the local community via the mechanism of funding from the local authority or central government agency.
In the main, however, a 'hard' interpretation would entail markets for environmental goods, developed through the market mechanisms of differentiating and promoting such goods, and pricing them accordingly: organic and fair-trade foods delivering environmental and social outputs; commercial leisure and amenity activities on farms, where the public pays to walk in the woods or feed the donkeys, thus 'purchasing' landscape and conservation outputs; and so forth.
This interpretation assumes that all goods and services of value can be traded – that in a trade- off between the environmental value of the Indonesian rain forest and the commercial value of garden furniture, for example, the real environmental value will be reflected in the price of 'forest-friendly' furniture. As scarcity drives the price of these goods up, so competition will drive resources into their production and away from environmentally destructive practices. However, the argument assumes a state of perfect competition which is not readily found in practice.
Thus the 'soft' interpretation might incorporate a laissez-faire agricultural policy and an interventionist rural policy, whilst the 'hard' interpretation would see governments withdraw from intervention in either area.
2.2 Global Sustainability
In this scenario the principle of free trade is constrained by concepts of responsibilities towards a sustainable future – in particular, that free markets do not optimise real returns to resources, where market failure fails to value environmental and social resources accurately.
Thus the 'soft' interpretation of the world market scenario would be extended here to the point where agricultural policy would encourage and uphold a global trading system, but within a set of interventionist rules that protected the value of rural resources, including such features as habitat and landscape, biodiversity, and social and economic inclusion.
This would embrace Marsh's CAP MF scenario, in that the multifunctionality of agriculture is not dependent on the global or local nature of policy, but focuses on whether or not it delivers public goods as well as private goods, by whatever means are effective and socially acceptable. It is towards this scenario that the current policy trend would appear to be moving (Figure 3).
2.3 Provincial Enterprise
Provincial enterprise describes the policy context prior to CAP in the case of the UK and in which the CAP has developed at member state and EU level, through the succeeding decades. Starting with a largely national scope for the definition of 'provincial', which then extended to the European scale as the EEC expanded, policy focused on production of basic agricultural private goods, where the emphasis was entirely on benefits accruing to the region. Thus trade barriers increased as mechanisms for protecting national and European priorities, and the
A29 Agricultural Futures and Implications for Environment: Defra ISO 209 market mechanism (albeit distorted through government intervention) was used to achieve policy objectives. Those objectives were community focused to the extent that protecting agricultural communities by preserving the economic and social status quo was central to the CAP. Despite extensive changes to the agricultural sector over 40 years, that aim has remained a brake on the rate of policy adaptation – in other words the status quo being preserved is not static at all, but policy reformers are only slowly proving able to overcome the conservative influences that have historically characterised the CAP.
Reverting to the Provincial Enterprise scenario would entail a reversal of policy rather than a simple shift in direction from the current observed trajectory and rejection of the principles underpinning free world trade. The economic impact arising from the use of protectionist instruments, as regional priorities prevail over global agreements, would be two-fold. First, the inefficiencies inherent in protectionist policies could constrain economic development in the region, by diverting resources away from their most efficient allocation, and second, countervailing restrictions imposed on the region's goods and services by other countries could reduce trade and economic activity still further.
The rationale for such a policy might be built on traditional arguments of protecting heritage and food security, and of winning electoral support from populations which attach importance to the concept of self-sufficiency.
The consequences of this regime for the UK very much depend on what the rest of the world is doing. Adopting a protectionist regime when all others are trading freely will exacerbate some of the inherent risk in this strategy associated with isolationism, but possibly also provide a buffer against some of the shocks of globalisation
A ‘soft’ half-way house to Provincial Enterprise might include the 'repatriation' of the CAP, whereby national governments within the EU are authorised to pursue national and regional priorities, but within limits which prevent the worst excesses of protectionism.
2.4 Local Stewardship
Local stewardship could also represent a form in which 'repatriation' of agricultural and rural policy actually comes about. The emphasis is on multi-functional agriculture (as in the global sustainability scenario), but with regional priorities. Protectionism does not take the form of supporting production, as with the traditional CAP under the original Provincial Enterprise situation, but in rewarding (or legally compelling) agriculture, so that its production is compatible with those priorities. The community emphasis means that they will include environmental protection, local employment and access to local services, for example. Agriculture will be expected to be one of many rural activities whose primary role is to support the priorities – including by means of the production of plentiful, wholesome food. Critics will draw comparison with traditional idylls of rural life, which masked unreliable and poor quality food supplies beneath an attractive pastoral vision, whilst supporters will claim that technology and higher standards of education will allow communities to expect and receive high standards of actual performance. This is likely to be at the cost of higher prices for food, however.
An alternative interpretation of a multifunctional CAP, however, allows Local Stewardship to be responsible for rural development as a policy area, whilst food supply is accounted for under a totally separate policy function. Domestically, farmers produce environmental and social goods and services (with some food and fibre by-products), whilst the supermarkets continue to feed the population with supplies from around the world, produced under social and environmental codes of practice (Global sustainability). This dichotomous interpretation of Marsh's CAP MF scenario is illustrated in Figure 2.
A30 Agricultural Futures and Implications for Environment: Defra ISO 209
Table 1 Summary of policy impacts under the Foresight Futures
Global Provincial Local World Markets Sustainability Enterprise Stewardship Unfettered. No Free trade, Broad based Reduced until intervention. market driven, relatively compatible with Competition but according to intensive community leads to rules governing farming to priorities. intensive, high production. provide self Opportunities technology Some extensive sufficiency. for production commercially farming Focus on local to various Agricultural driven supported for priorities 'quality' criteria production production by non-food supports specialists. reasons. Niche domestic food Marginal land opportunities production, to abandoned. the detriment of public benefit. Intensification of production. Some Global rules Emphasis on The prime focus intervention for seek to ensure 'the Industry' of policy. provision of ethical rural does little to Intervention essential development. help other parts locally to ensure services, Multi-functional of the rural social inclusion: Rural otherwise agriculture economy or priorities on development community produces public society. rural jobs and structures evolve goods services. according to neo- classical economic drivers Markets develop Carrots and Environment Environment for 'trading' sticks ensure suffers at the becomes a key environmental, protection of the expense of indicator for social goods and environment at agricultural quality of life Environment services. Non- home and output and social -al protection tradable public abroad responsibility goods under- valued and over- exploited. Food prices Food prices rise, Food prices rise, Food prices rise. drop, trade trade & GDP trade and GDP Shift in trade increases, growth grow slowly, restricted. patterns. in accordance niche Resources Measures of Economic with traditional opportunities retained in GDP reflect impact measures of for domestic farming sector. ‘development’ GDP industry and offer new forms of growth potential
A31 Agricultural Futures and Implications for Environment: Defra ISO 209
Reference List
Berkhout, F., Eames, M. and Skea, J. (1998) Environmental Futures Scoping Study. Final Report. Brighton: Science and Technology Policy Research Unit: University of Sussex. Centre for Rural Economics Research Department of Land Economy University of Cambridge and CJC Consulting (2002) Economic Evaluation of Agri-Environment Schemes. Countryside Agency (2002) The State of the Countryside, 2002. Countryside Agency. Defra (2000) Our Countryside: the future. A summary. Defra. London. Defra (2003) Summary of the CAP reform agreement of 26th June 2003, http://www.defra.gov.uk/farm/capreform/agreement-summary.pdf (accessed 9/7/03) DTI (2002) Foresight futures 2020: revised scenarios and guidance. DTI. European Commission (1992) The development and future of the common agricultural policy. European Commission. European Commission (1997a) Agenda 2000: for a stronger and wider Union [COM(97) 2000]. Brussels. European Commission. European Commission (1997b) Towards a Common Agricultural and Rural Policy for Europe. European Commission. European Commission (1999) Council regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF). Brussels. European Commission. European Commission (2002) Mid-term review of the Common Agricultural Policy. COM (2002) 394. Brussels: European Commission, (2003) EU fundamentally reforms its farm policy to accomplish sustainable farming in Europe, IP/03/898, Luxembourg, 26 June 2003 http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.getfile=gf&doc=IP/03/898|0| RAPID&lg=EN&type=PDF (accessed 27/6/03) European Commission (2003) Proposal for council regulations: establishing common rules for direct support schemes under the common agricultural policy and support schemes for producers of certain crops; amending Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and repealing Regulation (EC) No 2826/2000; on the common organisation of the markets in cereals, rice, dried fodder for the marketing years 2004/05 to 2007/08;amending Regulation (EC) No 1255/1999 on the common organisation of the market in milk and milk products; and establishing a levy in the milk and milk-products sector. [COM (2003) 23 final]. Brussels. European Union (1997) Consolidated Treaty establishing the European Community. European Union. Food Chain Group (1999) Working together for the food chain. Food Chain Group. MAFF (2000) England Rural Development Programme 2000-2006. London: MAFF. Marsh, J. (2001) Agriculture in the UK - its role and challenge. Food chain and crops for industry panel. ODPM (2001) The Countryside - Environmental Quality and Economic and Social Development (PPG7). ODPM. Performance and Innovation Unit Rural economies - taking stock. Cabinet Office. Policy Commission on the Future of Farming and Food (2002) Farming and food: a sustainable future. London. Winter, M. and Smith, G. Haines-Young, R. and McNally, S. (Eds.) (2001) Drivers of countryside change. Centre for Ecology and Hydrology, Natural Environment Research Council.
A32 Agricultural Futures and Implications for Environment: Defra ISO 209
TOPIC PAPER 3:
CROP SYSTEMS
1 Introduction
This paper provides a review of crop production sector in England and Wales. First, for the period 1950 to 2004, it reviews the changes in the total agricultural area, the balance between crop and grassland, the area of specific crops, and the changes in technology and output. Secondly the paper examines likely future developments. It concludes with a section identifying the possible scenarios of cropping enterprises within four future scenarios.
2 Current position and past trends identified
2.1 Agricultural area
The agricultural area in England has declined by about 10% from about 10.5 million ha in 1950 to approximately 9.2 million ha in 2004 (Figure 1). Similarly the agricultural area in Wales has declined by about 12% from about 1.8 million ha in 1950 to 1.6 million ha in 2002 (Figure 2). Across the two countries, this represents a loss of about 26,000 ha each year (i.e.: an area the size of Dorset every ten years) to other uses including urban growth and forestry.
12000 Other 10000 Farm woodland ha) 8000 Rough grazing
000 6000 Permanent grass Rotational grass
ea (' 4000 Total horticulture Ar 2000 Fallow/set-aside 0 Arable 1900 1950 1970 2004
Figure 1 The agricultural area in England (1900 to 2004) (Defra, 2002; Defra, 2005) (Board of Agriculture, 1902)
2000 Farm woodland
1500 Rough grazing
Permanent grass
000 ha) 1000 ('
a Rotational grass e 500 Ar Horticulture and fallow 0 Arable 1900 1950 1970 2002 Figure 2 The agricultural area in Wales (1950 to 2000) (National Assembly for Wales, 2002; Board of Agriculture, 1902)
A33 Agricultural Futures and Implications for Environment: Defra ISO 209
2.2 Area of crops and grassland
In 1900, the area of cropland in England and Wales was estimated to be 3.5 million ha (Figure 1 and 2), before declining during the depression to reach about 2.8 million ha in 1939 (Defra, 2003b). During the second world war, with the drive to increase levels of self-sufficiency, the area of arable cropped land increased to 4.7 million ha in 1944 (Defra, 2003b). This rise, and an increase in rotational grassland, was provided by the ploughing of about 2.4 million ha of permanent grassland (Defra, 2002b). By 1950 the area of arable cropped land in England and Wales had stabilised at about 4.2 million ha.
England and Wales have shown contrasting changes in the area of arable crops. In England, the area of land growing arable crops (including set-aside) increased from 3.6 million ha in 1950 to 4.3 million ha in 2000. By contrast the area of arable crops in Wales during the same period declined from 250,000 ha to 66,103 ha. These changes have resulted as farmers specialised in either grass production in the west or crop production in the drier eastern counties (Figure 3). Substantial areas of eastern England is now characterised by continuous cereal cultivation or cereal cultivation with break crops such as oilseed rape and field beans.
Figure 3 Cereal crops as a proportion of agricultural land (DETR, 1998)
Between 1950 and 2002, the area of grassland in Wales has stayed relatively constant at about 1.5 million ha (Figure 2). By contrast the area of grassland in England has declined during the same period from 6.4 million ha to 4.5 million ha (Figure 1; around 4.3 million ha in 2004). The increased specialisation of either grassland or arable production is also indicated by the fall in the area of rotational grassland by 50% in England and 20% in Wales (Figures 1 and 2)
2.3 Area of specific crops
The majority of the arable area in England and Wales is based in England. Therefore, sections 2.3.1 – 2.3.7 are focussed on cropping areas in England. During the past fifty years the key changes have been in the type of cereals, the introduction of oilseed rape, the decline of fodder root crops, the introduction of set-aside, and the reduction in the area of horticultural crops.
A34 Agricultural Futures and Implications for Environment: Defra ISO 209
2.3.1 Cereals: from oats to barley to wheat
The phasing out of horse power on farms, which was largely completed by the end of the 1950s has led to a reduction in the area for oats from 638,000 ha in 1950 to 212,000 ha in 1970. By contrast, the area under barley almost trebled from 643,000 ha in 1950 to 1,864,000 ha in 1970, before declining to 642,000 ha in 2004 (Figure 4). By contrast the area of wheat remained constant from 951,000 ha in 1950, to 961,000 ha in 1970, before rising sharply to 1,865,000 ha in 2004. Part of the reason for this change was that farmers were paid higher guarantee prices for wheat than barley under the Common Agricultural Policy (Ilbery, 1992).
Set-aside/fallow 5000 Horticulture 4000 Sugar beet
3000 Potatoes
2000 Field beans, peas and maize
Area ('000 ha) 1000 Forage root crops Oilseed and others 0 1950 1970 2004 Oats and other cereals
Barley
Figure 4 The area of arable crops in England (1950 to 2000) (Defra, 2004)
2.3.2 Oilseed rape: increase
The area of oilseed rape has increased from 4,000 ha in 1970 to 455,400 ha in 2004. This increase was a result of established favourable European Union support for oilseed production. Breeders have also bred ‘double-zero’ varieties which are low in both erucic acid and glucosinolates, which allowed an increase in the use of rape in food production.
2.3.3 Field beans, peas and maize: increase
Two other break crops which have shown an increased importance are field beans and peas increasing from 58,000 ha in 1950 to 230,000 ha in 2004. Both field beans and peas have received support from the European Union, and they act as nitrogen-fixing break crops within a cereal rotation. In addition the area planted to maize (principally grown as forage for cattle) has grown from less than 2,000 ha in 1970 to 108,000 ha in 2004. This can be attributed to the introduction of varieties suited to the UK and warmer temperatures.
2.3.4 Root crops and potatoes: reduction
In 1950, approximately 340,000 ha were planted to fodder crops for horses, cattle and sheep such as swedes, turnips and mangolds. However by 2004, the area had declined to less than 30,000 ha. During the same period there has also been a decline in the area of potato production from 330,000 ha in 1950 to 112,000 ha in 2004. Ilbery (1992) reported that much of this decline occurred in western England. Potato production in the UK was regulated by quotas managed by the Potato Marketing Board until it ceased to exist in 1997 (Lloyd et al., 1998).
A35 Agricultural Futures and Implications for Environment: Defra ISO 209
2.3.5 Sugar beet
In 1951, the Commonwealth Sugar Agreement placed a voluntary limit of 640,000 tonnes on the amount of sugar that the UK would produce, representing about 25% of consumption. On joining the EC, a new quota of 1.04 million tonnes was specified for 1973 which would receive full price guarantees, representing closer to 50% of UK consumption (Hollowell, 1985). The production quota is currently 1.1 million tonnes and it still represents about 50% of UK consumption of sugar (British Sugar, 2003). During the past 50 years the area planted to sugar beet has remained relatively constant.
2.3.6 Fallow land, set-aside and farm woodland
The area of fallow land in England decreased from about 102,000 ha in 1950 to 20,000 ha in 2004. The introduction of the Integrated Administration and Control System (IACS) following the MacSharry reforms of Common Agricultural Policy led to introduction of set- aside areas. The area of set-aside has varied from 10% (1993-1996), to 5% (1997-1998) and again 10% (1999-2002). One additional change during the past 50 years as been the increase in farm woodlands. For example between 1988 and 2000, about 30,000 ha of new farm woodland was approved in England under Farm Woodland Grant schemes (Coates, 1999).
2.3.7 Horticulture
The area of vegetable and fruit crops in England has declined (Figure 5) coinciding with advances in transportation and refrigeration of perishable goods. Also within England, horticultural production is increasingly centred on larger farms and favourable soils of the Fenland region rather than traditional centres such as Kent and the Vale of Evesham (Ilbery, 1992). The area dedicated to small fruit, nursery stock and flowers has remained relatively constant.
400 )
ha 300 Glass structures Small fruit/nursery/flowers
000 200 Orchards 100 Vegetables
Area (' 0 1950 1970 2004
Figure 5 The area of horticultural crops in England (1950 to 2000) (Defra, 2002; Defra 2004)
2.4 Changes in technology
The four key foundations of technological innovation in crop systems have been genetic improvement, crop nutrition, crop protection and mechanisation.
2.4.1 Genetic improvement
The high yielding winter wheat Capelle-Desprez appeared commercially in 1953 and accounted for 88% of the UK winter wheat crop in 1965 (Russell Eggitt, 1977). It was superseded in the 1970s by the introduction of new varieties such as Maris Huntsman in 1972, which showed yield increases of up to 20%. New high yielding varieties are typically shorter and reach flowering earlier in the season than older varieties (Austin et al., 1980). Austin et al.suggest that variety improvement was responsible for about 40% of increases in cereal yield between 1947 and 1977.
A36 Agricultural Futures and Implications for Environment: Defra ISO 209
2.4.2 Crop nutrition
The consumption of nitrogen fertilizer in the UK increased from about 200,000 tonnes per year in 1950 to 1,650,000 tonnes in 1987. Between 1973 and 1987 the average amount of fertilizer applied to winter wheat in England and Wales increased from 90 kg ha-1 to 190 kg N ha-1. Whilst this has increased potential yields it has meant that the crop is more susceptible to disease and lodging (Gooding and Davies, 1997). Similarly nitrogen application rates on grassland increased from about 5 kg ha-1 in the 1940s to 120-130 kg N ha-1 in 1995 (Frame et al., 1995). Since 1987, the annual use of nitrogen has declined by about 22% reaching 1,280,000 tonnes in 2000.
2000
1500 onnes) Nitrogen t k Potash 1000
ion ( Phosphate pt 500
Consum 0 50 55 60 65 70 75 80 85 90 95 '00
Figure 6 Consumption of nitrogen, potash and phosphate fertilizer in the UK (Environment Agency, 1999; Values from 1950 to 1970 from Ilbery, 1992)
2.4.3 Crop protection
Until the mid-1940s, control of weeds, diseases and pests primarily relied on cultivation, the use of crop mixtures, rotation and hand rouging. The mid-1940s saw the introduction of the first selective broadleaf-weed herbicides, such as MCPA and 2,4,5-T, based on plant hormones. Further herbicides, and also fungicides and pesticides were subsequently developed. In the late 1960s, the introduction of growth regulators, such as chlormequat, was a major development in terms of reducing crop lodging (Griffiths, 2000). In addition to reducing yield loss, pesticides allowed the creation of simpler rotations, and in some places continuous cereal production. They have also increased labour productivity, for example ‘gangs’ of workers were used to control weeds in sugar beet production, prior to the introduction of selective herbicides in the 1960s (Griffiths, 2000). Although the overall rate of application of crop protection chemicals has remained relatively stable (expressed in weight of active ingredients), the number of applications has increased to typically eight per crop (Figure 7).
2.4.4 Mechanisation
Improvements in the productivity of crop production have also been associated with large increases in labour, which were enabled by developments in mechanisation. This includes the use of tractors for cultivation, sprayers for weed, pest and disease control and the use of combine harvesters. The increasing use of large machinery had tended to led to an increase in field size and farm size, and the removal of trees within fields.
A37 Agricultural Futures and Implications for Environment: Defra ISO 209
25 50 ea ic r
a ) 20 40 illion m edients lphur ea ( ( u ) ) s ar s s onnes y ingr iplied by d e
g 15 30 a r e id r ta p tiv ac and t eate udin l 10 20 c hec
Thousand tonnes of s hous ide ac ide tr t eated mult
ic Million ha treated
5 10 ic ( t ed ex t tr us number Pes 0 0 Pes 88 90 92 94 96 98 Figure 7 Consumption of pesticides and the area of arable land treated with pesticides (Environment Agency, 1999)
2.5 Output
2.5.1 Crop yield
The mean yield of wheat increased almost three-fold from 2.9 t ha-1 in 1950 to 8.0 t ha-1 in 2000 (Figure 8), yield in 2004 was 7.8 tonnes ha-1. The major reasons for this increase were described in the preceding section. The yield of barley has not increased at the rate as wheat, but the yield in 2004 is still double that in 1950. Similar upward trends are also shown for world-wide mean wheat yields (Dyson, 1999). In 1980 the UK became a net exporter of cereals (Almond, 2000).
10
8
6 d (t/ha) Wheat el i Barley 4 ean y
M 2
0 50 55 60 65 70 75 80 85 90 95 '00
Figure 8 UK mean yield of wheat and barley from 1950 to 2000 (MAFF, 2000)
2.5.2 Crop prices
Prices for wheat and barley remained relatively stable during the late 1980s, but increased to a maximum in 1992, when pound sterling was rapidly devalued on leaving the European Exchange Rate Mechanism (Figures 9 and 10). However since 1996, prices (in terms of pounds sterling) have steadily declined following the increase in the value of the pound against the Euro. If cereal prices are deflated to take account of inflation, then there has been a steady decrease in cereal prices for past two decades (Figure 11).
A38 Agricultural Futures and Implications for Environment: Defra ISO 209
180 Bread wheat 160
) Feed barley -1 140 120 onne 100 e (£ t c
i 80 60
ean pr 40 M 20 0 Jan-85 Jan-90 Jan-95 Jan-00
Figure 9 UK mean value of wheat and barley from 1984 to 2002 (Defra, 2002)
0.90 ) £ (
o 0.80 r u E
1 0.70
lue of 0.60 a V 0.50 92 93 94 95 96 97 98 99 00 01 02
Figure 10 Relationship between the value of pound sterling and the value of 1 Euro (Bank of England, 2002)
300 2000) n
i 250 Bread wheat es c
i Feed barley 200 ) pr r -1 o e n d f
n 150 e t to a l £ ( 100 def e (
c 50 i
0 ean pr
M Jan-85 Jan-90 Jan-95 Jan-00
Figure 11 UK mean value of wheat and barley from 1984 to 2002 deflated to take account of inflation (Defra, 2002; HM Treasury, 2003)
A39 Agricultural Futures and Implications for Environment: Defra ISO 209
2.5.3 Crop revenue
If the revenue from UK crop production is deflated to take account of inflation, then there has been a steady decline during past thirty years (Figure 12). However the overall pattern masks changes in individual sectors. During the period 1985 to 2000, the real revenue from cereal production has declined by about 50%. As the area of cereals has remained relatively constant, the 25% increase in cereal yields (Figure 9) has been more than offset by a 65% reduction in real prices (Figure 11). The chart also shows that the revenue from potato production is volatile with high revenue in dry years (such as 1976 and 1996). However there remains a general long-term downward trend. The real return from sugar beet has also halved between 1975 and 2003. The return from oilseed rape has increased following the increase in area, although the revenue is still less than half of the peak in 1993.
Within the horticultural sector, the real revenue from vegetable and fruit production have halved, which is perhaps less than that expected in terms of the substantial reduction in area. One area which has shown significant real growth during the past fifteen years has been the flower production (Figure 14).
12 Other crops 10 Fruit r 2000)
o Flowers
f 8 e Oilseeds u ed at
l 6 Sugar beet f e Vegetables Reven d
n 4 Potatoes llio i Other cereal
b 2 £
( Wheat 0 75 80 85 90 95 '00
Figure 12 Revenue from UK agriculture from 1975 to 2002 (Defra, 2003), deflated to 2000 prices (HM Treasury, 2003) 6 ) 5 2000
r
Cereal fo 4 d Potatoes nue ate e 3 fl v Sugar beet e Re d 2 Oilseeds n o i ll i 1 b (£ 0 75 80 85 90 95 '00
Figure 13 Revenue from arable crops from 1973 to 2002 (Defra, 2003), deflated to 2000 prices (HM Treasury, 2003)
A40 Agricultural Futures and Implications for Environment: Defra ISO 209
2.5 r 2000)
o 2.0
Vegetables e u ed f 1.5 Flowers at l Fruit 1.0
Reven Other crops 0.5
billion def 0.0 £ ( 75 80 85 90 95 '00
Figure 14 Revenue from UK agriculture from 1975 to 2002 (Defra, 2003), deflated to 2000 prices (HM Treasury, 2003)
3 Future developments
The key drivers in terms of the future development of the UK crop sector are the international markets, trade liberalisation and the response of the European Union, the consolidation of agricultural suppliers and domestic retailers, climate change, technological change and opportunities for diversification.
3.1 International markets
Although demand for commodity cereal crops is likely to remain strong from East Asia, North, West and Sub-Saharan Africa and the Middle East, there is thought to be potential for substantial increased production in North America, the enlarged European Union, Ukraine and Russia (Dyson, 1999). Hence the long-term trend of a decline in the real price of cereals is likely to continue.
In terms of the competitiveness of UK farmers, the exchange rate of pound sterling to the Euro is of key significance, as the value of agricultural outputs are principally determined in Euros. In the short-term macroeconomic forecasters expect the euro to rise against the pound, which would tend to increase income from arable crops. The possible accession of the UK into the Eurozone, and the exchange rate at entry, are key developments.
3.2 Trade liberalisation and the response of the European Union
Government support to farmers in the developed world is large ranging from US$17,000- 22,000 for every full-time farmer in the European Union and the United States, to US$26,000-33,000 in Japan, Switzerland and Norway. Levels of support in New Zealand, Australia and Canada are smaller (US$1,000-8,000) (Economist, 1999).
The World Trade Organisation is a key driver for change in that much of the EU’s Common Agricultural Policy is considered to intervene too much in the market (Figure 15). In addition the expansion of the European Union, to include countries such as Poland (which have large potential for crop production) is acting as a catalyst for change.
Under the Agenda 2000 reforms, although the changes were relatively small they can still impact on arable cropping systems. For example the area payment received for oilseed has declined to the same level as cereals. This has led to a reduction in the area of oilseed rape and an increase in the area of wheat.
A41 Agricultural Futures and Implications for Environment: Defra ISO 209
If the number of farmers in the UK remains constant, then the levels of support per farmer in the UK is set to decline as the overall EU budget for agriculture is held constant and additional countries join the Union. In addition a greater proportion of the budget is likely to go on agri-environmental measures (such as organic farming)
AMBER BLUE GREEN Status Trade and production Production-linked Production neutral distorting Examples of EU Intervention, export Arable-area Rural development policy refunds, import duties, payments, livestock regulation including quotas headage payments agri-environment schemes WTO Objective To be outlawed Temporarily allowed Allowed
Current share of 20% 70% 10% CAP budget
Figure 15 WTO support boxes and EU policy (Lloyds TSB Bank, 2002c)
3.3 Market consolidation and farmer’s share of the market
In 1950, the world’s agribusiness was worth US$420 billion, and farmers added more than a third of the value. By 2028, the market could be worth US$10 billion, but it has been predicted that the farmer’s share will fall to 10% (The Economist, 2000). In the 1980s, consumers spent about 20% of the total household expenditure on food, and present they spend about 10% and by 2015, forecasters have indicated that the proportion could fall to 5- 6% (Lloyds TSB Agriculture, 2002d).
Upstream and downstream from the agricultural sector, suppliers and retailers are consolidating their sectors. The supply companies to agriculture continue to merge (for example: Novartis +AstraZeneca to form Syngenta, the merging of Cyanamid and BASF). Likewise food retailers continuing to consolidate their position (for example Wall-Mart’s takeover of ASDA). The large buying power of UK’s supermarkets makes the UK an attractive market for exporters to target. There is also consolidation in commodity trading, with for example Cargill controls 42% of the United States’ corn exports (The Economist, 2000).
3.4 Impact of climate change
Climate change has three potential effects on crop production in the UK: the direct effects of climate change in the UK, the effects of climate change in other crop producing regions, and the effects of changes in legislation and support policies in response to climate change.
Direct effects in the UK: for winter wheat, a predicted temperature increase of 2ºC and a precipitation decrease of 10% has been predicted and could lead to increases in cereal production in western England, whilst areas of East Anglia become less suitable because of drought. Brignall et al. (1994) suggested that sunflower and grain maize may become more common in areas currently dominated by cereals
Effects of climate change in other crop producing regions: Dyson (1999) notes that reduced stocks of cereals, and also perhaps greater risk of drought in major production regions such as North America (associated with Climate change), may mean that the production and hence of the price of cereals becomes more volatile. Therefore it is likely that although deregulation of the market will occur, national governments will seek to moderate world cereal stocks.
A42 Agricultural Futures and Implications for Environment: Defra ISO 209
Subsidies and legislation: the UK government has committed itself to reduce carbon dioxide levels by 20%, and greenhouse gases by 12.5% by 2010 compared to 1990 levels. Agriculture is the dominant source of nitrous oxide and methane, and land use can affect carbon dioxide levels. Methane production is primarily restricted to the livestock sector, but to reduce nitrous oxide, the government will be keen to maintain downward pressure on nitrogen application to cropland. In order to help lock up carbon dioxide, the government is likely to continue its support for farm woodland planting, and there may be opportunities for biomass production and tax breaks for the production of biodiesel (Renewable Energy from Agriculture, 2003).
3.5 Technological change
The key technological changes are the potential for genetically modified crops and further mechanisation. In the UK, crop nutrition and protection is already near optimal levels and opportunities to further increase production through these routes appears limited.
Genetic improvement: Genetic modification of plants has focussed on herbicide tolerance, disease resistance, pest resistance, the creation of oilseed crops with enhanced levels of laurate, oleate or erucic acid, easier production of hybrid varieties by the control of male sterility, and possibly enhanced environmental adaptation (Askew, 1997).
Mechanisation: the trend towards increasing labour productivity by increased mechanisation seems likely to continue. A potential area for reducing costs relates to reduction in cultivation costs, either moving to direct seeding (as is now practised with oilseed rape).
3.6 Diversification
Diversification is the major way in which farmers are seeking to increase or maintain income (Lloyds TSB Bank, 2002b). There are three broad categories of diversification (Lloyds TSB Bank, 2002b)
• On-farm agricultural diversification – alternative crops, contracting • On-farm non-agricultural diversification – tourism, retail, environmental services, rural workshops • Off-farm diversification – ranging from self-employed business ventures to full- or part- time employment.
Potential diversified crop enterprises include (Lloyds TSB Bank, 2002b): durum wheat, naked oats, grain maize, quintal, navy beans, soyabeans, winter lupins, sunflowers, borage, evening primrose, opium poppies, meadowfoam, high erucic acid oilseed rape, linseed, linola, short fibre flax, hemp, mushrooms, energy crops (SRC and miscanthus), Christmas trees, and timber, turf, and vineyards, and nettles for cotton-like fibre for textile industry (Farmers Weekly, 2002)
4 Future scenarios
The four scenarios are illustrated in Figure 16. They can be described by narratives or story- lines and selected indicators. The current dominant development paradigm is shown to be mainly a mix of World Markets and Provincial Enterprise.
A43 Agricultural Futures and Implications for Environment: Defra ISO 209
Globalisation
World markets Global sustainability
Conventional development Consumerism Community
Provincial enterprise Local stewardship
Regionalisation
Figure 16 Possible futures, based on Foresight (DTI, 2002)
4.1 World markets
World markets are characterised by an emphasis on private consumption and a highly developed and integrated world trading system.
Within the crop-production sector, the focus here is the production of ‘commodity’ crops for the international market by large-scale producers of commodity cereals and oilseeds in Eastern England. Such products can be handled readily in bulk. Such producers will need to ensure adequate crop quality at the lowest possible price. Key features of a producer supplying the commodity market (Lloyds TSB Bank, 2002a) are: ● they’re driven by the world market price, ● they have a high turnover and a high volume of output, ● they have very efficient production systems and low variable and low overhead costs. ● They operate on a large scale and dilute costs through economies of scale. Such producers may become susceptible to international competition if potentially advantageous changes in production practices and technology such as the use of genetic modification technology are accepted elsewhere, but not in the UK.
4.2 Provincial enterprise
Provincial enterprise is characterised by emphasis on private consumption but with decisions made at national and regional level to reflect local priorities and interests. Although market values dominate, this is within national/regional boundaries.
Within the crop production sector, the strongest sectors meeting provincial enterprise are vegetable and flower producers primarily producing for the domestic market, primarily through supermarkets.
New areas could include the production of crops to provide raw materials for industrial purposes (oil from linseed and OSR, biodiesel, bioethanol and energy crops, fibres and textiles, starches and sugars and pharmaceuticals). Biomass crops, in particular, can be too bulky to transport large distances. It is anticipated that these non-food crops must have potential without subsidy.
A44 Agricultural Futures and Implications for Environment: Defra ISO 209
4.3 Global sustainability
Global sustainability is characterised by more pronounced social and ecological values, which are evident in global institutions and trading systems. There is collective action to address social and environmental issues. Growth is slower but more equitably distributed compared with the World Markets scenario.
In the crop sector, the concept of global sustainability probably relates to crops which can provide internationally traded services. One potential area is the use of biomass crops for carbon sequestration. At a European-level, agri-environment schemes may be viewed as providing an international service.
4.4 Local stewardship
Local stewardship is characterised by strong local or regional governments which emphasise social values, encouraging self-reliance, self sufficiency and conservation of natural resources and the environment.
A possible focus here is organic farming, and also the development of niche markets. There is an identified need for producers to reconnect their industry to the consumers and allow them to make a better living at the same time.
A45 Agricultural Futures and Implications for Environment: Defra ISO 209
Reference List
Almond, A. (2000) Cereal exports – a success story for the UK and HGCA, Journal of the Royal Agricultural Society of England, 161, 41-48 Askew, M. (1997) The agricultural implications of genetically modified plants. The 1997 Bright Crop Protection Conference- Weeds 281-290. Austin, R.B., Bingham, J., Blackwell, R.D., Evans, L.T., Ford, M.A., Morgan, C.L. & Taylor, M. (1980) Genetic improvements in winter wheat yields since 1900 and associated physiological changes, Journal of Agricultural Science Cambridge, 94, 675-685 Bank of England (2000) Monetary and Financial Statistics Division. http://www.bankofengland.co.uk/mfsd/index.htm#INTEREST Board of Agriculture (1902) Agricultural returns for Great Britain. London: HMSO. British Sugar (2003) The EEU Sugar regime. Accessed 25 April 2003. http://www.britishsugar.co.uk/bsweb/bsgroup/facts/fsheet1.htm Brignall, A.P., Favis-Mortlock, D.T., Hossell, J.E. & Rounsevell, M.D.A. (1994). Climate change and crop potential in England and Wales, Journal of the Royal Agricultural Society of England, 155, 140-161 Coates, D. (1999) Sustainable rural development and the role of new farm woodlands in England. In: Farm Woodlands for the Future 1-10. (editors: P.J. Burgess, E.D.R. Brierley, J. Morris and J. Evans). Oxford: BIOS Scientific. Craig, G.M., Jollams, J.L. & Korbey, A. (1986) The case for agriculture: an independent assessment. Centre for Agricultural Strategy Report 10. University of Reading. Defra (2003a) Agricultural and Horticultural Census for England June 1950, June 1970 and June 2000. Economic and Statistical Analysis. York: Defra Defra (2003b) Agriculture through World War Two. http://www.Defra.gov.uk/esg/work_htm/publications/cs/farmstats_web/History/WWI I/WWII_stats.htm Accessed 24 April 2003. Defra (2004) Agricultural and horticultural census: 3 june 2004 England. http://statistics.Defra.gov.uk/esg/statnot/june_eng.pdf Accessed 20th May 2005. DETR (1998) Environmental Effects of Agriculture. Final Report. Department of the Environment, Transport and the Regions. Ed. W. Little. pp 70-82. DTI (2002) Foresight futures 2020: revised scenarios and guidance. DTI. Dyson, T. (1999) World food demand and supply prospects to 2025, Journal of the Royal Agricultural Society of England, 160, 227-243 Environment Agency (1999b) Usage of pesticides and fertilizers. http://www.environment- agency.gov.uk/s-enviro/stresses/4use-rel-dis/6pest-fert/4-6.html Accessed 26 October 1999. Farmers Weekly (2002) Super nettle breakthrough for farm profits. Farmers Weekly Cereal News 12 and 23 June 2002. Frame, J., Baker, R.D, & Henderson, A.R. (1995) Advances in grassland technology over the past fifty years. In: Grassland into the 21st Century: Challenges and Opportunities. 31-63 Proceedings of the 50th Anniversary Meeting of British Grassland Society. Griffiths, W. (2000) Some aspects of the crop protection industry in the UK: past, present and future, Journal of the Royal Agricultural Society of England, 161, 129-141 HM treasury (2003) Economic data and tools. GDP deflators at market prices. http://www.hmtreasury.gov.uk/economic_data_and_tools/gdp_deflators/data_gdp_fig .cfm Accessed 25 April 2003 Gooding, M.J. & Davies, W.P. (1997) Wheat Production and Utilization: Systems, Quality and Environment. CAB International. 355 pp. Hollowell, B. (1985) New sugar quotas – the last lap, British Sugar Beet Review, 53, 4 Ilbery, B. (1992) Agricultural Change in Great Britain. Contemporary Issues in Geography. Oxford University Press. 48 pp. Lloyd, T.A., Morgan, C.W. and Rayner, A.J. (1998) Policy intervention and supply response. University of Nottingham, School of Economics Discussion Paper 98/13. http://www.nottingham.ac.uk/economics/research/dp/school_dp/dp.98.13.pdf
A46 Agricultural Futures and Implications for Environment: Defra ISO 209
Lloyds TSB Bank (2002a) Your guide to farm business expansion. Bristol: Lloyds TSB Agriculture 48 pp. Lloyds TSB Bank (2002b) Your guide to farm business diversification. Bristol: Lloyds TSB Agriculture 68 pp. Lloyds TSB Bank (2002c) Your guide to farm and rural grants 2002. Bristol: Lloyds TSB Agriculture 68 pp. Lloyds TSB Bank (2002d) The UK food market – consumption and spending trends. London: Lloyds TSB Bank plc 4 pp. National Assembly for Wales (2003) Statistics for Wales. http://www.wales.gov.uk/keypubstatisticsforwales/topicindex/topics.htm Accessed 24 April 2003. Renewable Energy from Agriculture (2003). Biodiesel Set To Boost Rural Economy. http://www.greenshop.co.uk/news/Biodiesel%20Set%20To%20Boost%20Rural%20E conomy.htm Accessed 28 April 2003. Russell Eggitt, P.W. (1977) Choosing between crops: aspects that affect the user, Philosophical Transactions of the Royal Society London B, 281, 93-106 The Economist (2000) A Survey of Agriculture and Technology. March 25 2000. The Economist (2001) From bad to worse, down on the farm. The Economist March 9 2001.
A47 Agricultural Futures and their Implications for the Environment: Defra ISO 209
TOPIC PAPER 4
THE LIVESTOCK SECTOR IN ENGLAND AND WALES
1 Introduction
This paper describes the present state and the development of the livestock sector in England and Wales since the Second World War. An overview is given of the changes in the different sectors of livestock production, i.e. the sheep, cattle, pig and poultry sectors, with particular reference to differences between hill and lowland farming for grazing livestock and the areas utilised as permanent or rough grazing. Impacts of epidemics, changes in technology and changing consumer behaviour are reviewed; the changing role of the subsidies is explored.
The second part of the paper looks at the key drivers for future developments; the last part deals with four possible scenarios of livestock production within the coming agricultural era.
2 Current position and past trends identified
2.1 Agricultural area – crops and types of grassland
Between the years 1950 and 2000 the agricultural area in England declined by about 10% (from 10.5 million ha to 9.4 million ha). During the Second World War the arable area increased considerably to ensure the national food supply, with a corresponding decline in permanent grassland. Since 1950 the arable area in England has further increased from 3.6 million ha to 4.3 million ha, whereas in Wales the arable area declined from 250,000 ha to 62,000 ha, in accordance with local conditions more favourable to grass production.
Further changes occurred in the use of grassland over the second half of the last century: In England rough grazing, permanent and temporary grass all declined (Table 1); whereas in Wales rough as well as temporary grazing declined, but the area of permanent grass increased at the equivalent rate (Table 2). Some agricultural land has also been planted with trees, as the government strove for transfer of hill land to forestry, the official target being 30,000 ha per year after 1945. (Cunningham and Groves, 1985)
Increasing numbers of sheep, and consequently a decline of cattle in the uplands has led to a net loss of 20% of heather moorland in England and Wales between 1947 and 1980. This has been a result of a combination of factors related to the economics of cattle and sheep production over a couple of decades, sheep and suckler cow quota rules and headage payments. The crisis in the beef sector and in beef consumption brought about by BSE in the late 1990s has only served to accelerate these changes. The replacement of cattle by sheep is of particular significance here, for sheep are more selective grazers than cattle and less likely to graze the coarse grasses that compete with heather (Winter et al., 1997).
Table 1 Types of grassland in England 1950 to 2000 (ha)
1950 1960 1970 1980 1990 2000 Permanent grass 3,649,239 3,659,322 3,262,789 3,154,927 3,053,795 2,863,551 Rough grazing 1,470,497 1,228,905 1,261,438 *750,432 731,345 624,611 Temporary grazing 1,236,521 1,543,529 1,234,527 1,029,160 830,409 628,579 *sole rights only from 1980 onwards Source: National Statistics, 2003
A48 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 2 Types of grassland in Wales 1950 to 2000 (ha)
1950 1960 1970 1980 1990 2000 Permanent grass 600,000 705,263 739,271 843,275 903,712 933,009 Rough grazing 744,130 685,020 629,150 538,398 516,230 441,753 Temporary grazing 174,494 208,097 182,591 164,400 148,600 133,300 Source: National Assembly for Wales, 2002
2.2 Relative Importance of Livestock in the Agricultural Economy
Table 3 shows the relative share of total agricultural outputs attributable to the livestock sectors in England and Wales.
Grazing livestock constituted by far the most important part of gross output of farming in Wales in 1999. Figures for 2001 showed a marginal increase in the share of crops (from 3.9 % to 5%), and correspondingly a fall in the share of livestock and livestock products from 87.9% to 86% (National Assembly for Wales, 2002).
Table 3 Crop and Livestock Shares (%) of the Total Value of Agricultural Output, 1999
Wales England UK EU15 Total Crops 3.9 45.3 38.5 50.7 Cattle 26.1 7.6 12.4 10.3 Sheep 24.0 3.9 6.3 1.9 Pigs 1.4 5.4 4.9 9.6 Poultry 7.0 8.4 7.8 5.0 Total Livestock 58.6 26.3 32.3 28.1 Milk 26.5 15.7 16.6 17.8 Eggs 1.2 2.4 2.2 2.2 Total Livestock Products 28.9 18.2 19.2 20.3 Other 8.6 10.2 10.1 0.8 Gross Output (at basic prices) 100.0 100.0 100.0 100.0 Total Value (£ Million) 1,031 13,020 16,053 209,164 Source: DARDNI, 2000
In England non-land-based livestock had a greater importance than grazing livestock, and the total gross output from livestock and livestock products had roughly the same value as the output from crops (Table 3).
2.3 Farm types and sizes
There are currently about 190,000 farm holdings in England and about 37,000 in Wales, a reduction of about, 47% of farms in England between 1950 and 2000, and 52% in Wales between 1950 and 1999. These figures do not specify the types of farms, only the size in ha. The trend has continuously been towards larger farms. (A direct comparison over the years is difficult, as the thresholds for the size categories were changed during the years of data collection).
Numbers for different farm types are only available for 2000 in Wales only (Table 4), and for 2002 in England and Wales, with farm sizes in ESU (European Size Units. These figures show that in Wales the majority of livestock farms are situated in hill areas (LFA, SDA or DA), whereas in England most cattle and sheep farms are to be found in lowland areas.
Recognising the particular disadvantages of upland farming, The Hill Farming Act, 1946, provided assistance “…to promote the rehabilitation of hill farming land; to pay subsidies for hill sheep and
A49 Agricultural Futures and their Implications for the Environment: Defra ISO 209 cattle; to control the keeping of rams; and to regulate the burning of heather and grass” (Lambert and Navarro, 2002).
Table 4 Farm types and number of holdings in Wales, 2000 – main holdings
Dairy Specialis Specialis Mixed Cattle and sheep Pigs and Arable Total t sheep t beef cattle and poultry and sheep others LFA a Lowland SDA b SDA DA c Lowland 1,951 1,430 4,480 595 2,536 4,608 3,230 407 9,173 28,410
(a) less favoured areas, (b) seriously disadvantaged areas, (c) disadvantaged areas Source: National Assembly for Wales, 2002
2.4 Intensity of cultivation: use of fertiliser and pesticides, and grassland systems
Much of the increase in productivity of grassland has been associated with an increase in the use of fertiliser. In the 1940s the average N application to grassland from fertilisers other than organic was less than 5 kg N/ha in England and Wales. Since the 1950s this increased to about 135 kg N / ha in the mid-1980s (with a few farmers in the 1960s applying up to 600 kg N / ha). After the introduction of milk quota in 1984 the rate of N application declined somewhat, further aided by evidence of inefficiency of high N use on grassland. Particularly in grazing systems, where part of the N is returned to the soil in excreta, fertilisers are now being used at a lower rate. Livestock manures and biological N fixation (use of legumes) have come to be seen as more important (Wilkins, 2000).
Concerns about the environmental impact of N fertilisers (organic as well as non-organic) led to practical measures being introduced to reduce the total amounts applied, such as increased precision in rates and timing of application. Due to a change in the fertilisers used (from sulphate of ammonia and superphosphate to compounds containing less or no sulphur) a deficiency of sulphur has been apparent in some areas since the late 1970s. Anti-pollution measures which reduced sulphur emissions from industrial sources further reduced S deposits on pasture (Frame et al., BGS 1995)
The use of pesticides in grassland started in the 1950s, however, they never became as important as in arable crops and is often used only in temporary grassland at the point of reseeding. (Frame et al., BGS 1995)
Research conducted in the 1940s and 50s suggested higher yields of dry matter could be achieved in a rotational grazing system than in continuous grazing. Although the benefits were doubted as early as the 1950s, rotational grazing was adopted by many farmers, particularly for dairy herds. Nowadays a modified version of this, continuous stocking with fields reserved as conservation or grazing “buffers” is widespread in England and Wales, occasionally supplemented by buffer feeding of conserved grass in summer.
For hill areas, the Welsh Plant Breeding Station and the Hill Farming Research Organisation developed the “two pasture system”, which could, on better hill farms, more than double output. This involved the improvement of a proportion of the land area and the grazing of these improved areas at key times of the year. (Cunningham and Groves, 1985)
Mixed stocking, clean grazing, leader – follower or creep systems are all being practised, but have not been universally accepted. In an attempt to lower production costs, some farmers have recently tried extended grazing systems in which the livestock remain at pasture for longer in spring and autumn than has been traditional.
In 1996 the first Nitrate Vulnerable Zones (NVZ) were designated in the UK. These areas were greatly enlarged in 2002, so that now approximately 55% of England and 3% of Wales are NVZs. For
A50 Agricultural Futures and their Implications for the Environment: Defra ISO 209 these areas upper limits are in place with regard to the total N and the N in manure or slurry applied, and, for sandy and shallow soils, restrictions as to the time of year when application is allowed. After a transitory phase with slightly higher limits, no more than 170kg may be applied per ha in these areas each year.
For Wales, this does not pose a significant problem, as there are not large numbers of non-land-based livestock producers (pig and poultry holdings), the stocking rate in the predominantly upland regions are rarely high enough to reach the limit for N application, and the total area in NVZs is small. In some parts of England, however, this necessitates new arrangements for storage of manures, as well as finding larger areas of agricultural land for application. Table 5 shows the calculated land areas for manure disposal to keep within the NVZ limits. The average producer of table fowl with 53,508 broiler places (in 2000, see Table 13) now needs 106 ha of agricultural land to spread the resulting manure. Government grants are available in certain cases for the installation of farm waste facilities. (Defra, 2002d)
Table 5 Area of land required for manure disposal from non-land-based livestock animal production systems to remain within the NVZ limits
Livestock Unit no of hectares 1 breeding sow place including piglets up to 4 weeks 0.078 1 weaner place 0.012 1 grower pig place 0.024 1 light cutter pig place (35 – 85kg) 0.038 1 bacon pig place (35 – 100kg) 0.042 1000 laying hens 2.640 1000 broiler places 1.980 Source: Environment Agency, 2002
2.5 Livestock types, systems and numbers
Various terms are used to define agriculture in mountainous regions: e.g. “upland” systems, “hill” farms and farming and “lowland” systems for ruminants are used; furthermore areas are described as LFA (Less Favoured Areas), SDA (Seriously Disadvantaged Areas) and DA (Disadvantaged Areas). Some authors seem to use upland and hill synonymously (“hill farm allowance is being paid in less favoured areas in England” … “which are mainly upland areas” (Defra, 2002), however, hill farm allowance is also be paid in certain disadvantaged lowland areas. Others speak of upland and hill farmers and might even distinguish between higher and lower hill farms (MAFF, 1999). The June census 2002 lists beef and sheep farms as LFA or lowland.
Johnson and Merrell (1994) differentiate without giving clear cut thresholds as follows: “Hill systems are generally sheep-based with purebred flocks such as Scottish Blackface or Swaledale and few other animal species. They would also have minimal in-bye land for conservation, and have extensive areas of indigenous vegetation. Upland systems can be considered as those systems based largely on sown pastures in more marginal areas, often associated with areas of indigenous vegetation which may be incorporated into the system in late summer and winter. Here a purebred flock will often produce crossbred lambs for sale and in some more favoured situations may maintain such a flock for production of finished lambs. Cattle may be involved in either system but would combine with the upland system more readily due to the reduced need for winter food purchases.”
Bunce (1987) defines upland by degrees of rainfall, evapotranspiration, insolation, soil types and certain types of vegetation.
This report generally uses upland and hill farming as well as LFA and upland/hill areas synonymously, as opposed to lowland farming and lowland/non-LFA areas, except where specific differences are pointed out.
A51 Agricultural Futures and their Implications for the Environment: Defra ISO 209
For pigs and poultry, statistics often give a joint number of holdings. This is justified in so far as they are both non-land-dependent farming systems; however, as they can be affected by different management decisions and market pressures and might well develop differently separate data are used wherever possible.
2.5.1 Cattle
Beef cattle
After 1945 the total numbers of cattle were rising both in England and Wales, propelled by firstly the government’s aim to produce more food (coupled with advances in technology), and after the joining of the EEC by guaranteed prices which were considerably above world market prices. From 1980 onwards numbers dropped due to reductions in support prices in an attempt to stop the build up of meat mountains and milk lakes.
Beef cattle production is often associated with a wide range of other enterprises depending on location. On lowland farms, a beef enterprise would typically be used either to exploit arable by- products in intensive or semi-intensive systems, or for more extensive production from grass or a forage crop used as a break crop in an arable rotation.
In LFAs sheep are the dominant farm enterprise (Table 4); there are 7.5 times as many specialist sheep farms in Wales as specialist beef farms. Where beef cattle are also farmed, their grazing is likely to be confined to both open and enclosed land in valleys or lower slopes, although in some English LFAs, such as Dartmoor, they are to be found on the same range of land as sheep.
Most beef cattle systems fall into one of four main systems:
• Suckler Systems – LFA and Non-LFA: Beef breeding systems made up of breeding cattle and calves. Calves are usually weaned at 6-9 months and either sold, usually to lowland farms, or retained for further finishing. Suckler herds can be sub-divided into upland systems or lowland systems depending on the premium they attract and the type of grassland on which they are grazed. • Extensive rearing and finishing systems: Beef animals reared for slaughter which graze outdoors in summer but are housed in winter. • Intensive rearing and finishing systems: Beef animals reared for slaughter and housed for their entire lives (Winter et al., 1997).
Dairy cattle
The development of dairy cattle numbers followed roughly the same lines as for total cattle. Various policy measures influenced the drop in numbers after an initial steep rise in the post war years: the most important of these being the introduction of milk quota in 1984; with rising yields per cow and a limit on volume produced, the number of cows fell. (At that time, many farmers changed to suckler cow production.) The abolishment of the Milk Marketing Boards in 1993 may also have induced some farmers to reduce or give up production. The rise and drop were more pronounced in Wales than in England. In both countries, numbers of dairy cows are now well below those in the 1950s.
Dairy farming in Britain is a highly specialised sector utilising specialist breeds (now mainly Holsteins) rather than traditional dual purpose breeds, and is no longer common within the LFAs except in parts of west Wales (Winter et al., 1997).
A52 Agricultural Futures and their Implications for the Environment: Defra ISO 209
2.5.2 Sheep
Sheep numbers in the UK peaked in 1992 at 44 million. Numbers had grown steadily since 1980, when there were 31.5 million. This growth was mainly attributable to the introduction of the EU sheep meat regime in 1980, which resulted in the Variable Premium Scheme in the UK, and partly due to the imposition of milk quotas, which encouraged dairy farmers to diversify their operations.
There are about 40 native breeds of sheep and many crossbred sheep kept primarily for meat production, with wool an important secondary product. Throughout the period 1986-95 about 70 per cent of sheep farms also raised cattle, and the combined farms accounted for about 81 per cent of sheep and half of the cattle farmed in England and Wales.
Sheep production in the UK is based on a stratified breeding system. Of the 20 million or so breeding ewes maintained in the UK during 1986-95, 6 million were specialised breeds kept in the hills. Surplus female lambs, not required as breeding replacements from these hill ewes were sold to farmers in the upland areas, where they were mated with longwool breeds. Crossbred female offspring from these matings were sold to lowland farmers to be mated with lowland breeds to produce quality lamb carcasses demanded by the market.
The sheep industry is characterised by extensive buying, selling and movement, not only as a consequence of the stratified breeding system, but also in response to price differentials across different regions. Furthermore, the expansion of sheep production during the 1980s and early 1990s itself led to the movement of larger numbers of sheep around the UK, (MAFF, 2000).
2.5.2.1 Hill sheep
It is very difficult to obtain figures for sheep production that distinguish between hill and lowland systems, particularly historically: “Statistical information specifically describing hill sheep farming is difficult to isolate from the body of official statistics” (AAU, 1970). Table 4 above shows the numbers and types of holdings in Wales in 2000; divided into LFA and lowland, but does not distinguish between cattle and sheep farms. However, most holdings in Wales have always belonged to what is currently classed as LFA, whereas in England the majority of farms are in lowland regions. Table 6 gives the percentage of ewes claiming Hill Livestock Compensatory Allowance (HLCA) in 1980 and 1988. About 35% and 75% of ewes are eligible for HLCA in England and Wales respectively.
Table 6 UK ewe numbers (‘000s) and percentage claiming HLCA
1980 1988 No. % claiming No. % claiming HLCA HLCA England 6,788 32.5 8,905 36.3 Wales 4,159 70.0 5,131 75.5 Total UK 14,887 56.4 19,345 59.2 Source: Slade, 1990
2.5.2.2 Lowland sheep
In the traditional stratified sheep production structure, lowland farms specialised in finishing lambs, which were bought as stores from hill farms, where it was not possible to finish lambing. However, the introduction of Sheep Annual Premium (SAP) in 1992, paid only on female breeding sheep, as the only direct support for sheep farmers has to some extent broken up this system and tempted farmers to raise stocking rates, or to specialise in sheep production, where previously they also kept cattle. Before 1992 producers of finished lambs in Great Britain also received variable premium payments which reduced the size of the ewe premium payment.
A53 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Although no figures are available for the increase in sheep numbers in hill/upland or lowland areas, it was observed that “the result of this intensification, and in some cases increased specialisation, has resulted in a breakdown of the traditional stratification of the sheep industry whereby hill sheep producers traditionally sold breeding sheep and store lambs to upland and lowground producers, and the loss of sheep production in some lowland areas. The Countryside Agency considers that the loss of stratification has the potential to result in abandonment of some hill farms as the market for store and breeding sheep declines” (Defra, 1999a).
2.5.3 Pigs
Pig numbers rose steeply after 1945, until the 1970s in Wales, and the 1980s in England. This reflects the higher proportion of arable crops in England, and the better suitability of the Welsh landscape for grazing livestock. Since then the numbers have dropped considerably both in England and Wales. However, the numbers for 2000 in England (ca. 5.5 million pigs) were still more than twice those in 1950, whereas in Wales (ca. 70,000) there were only about one third of the 1950 population.
Table 7 Pig and poultry holdings (England)
1990 2000 2000 2002 all holdings all holdings main holdings all holdings Pig holdings 1,778 Poultry holdings 3,175 Pig + poultry holdings 5,635 6,122 7,000* * estimate Source: Defra, 2003
Numbers of pig and poultry holdings are rarely available separately. Table 7 shows, however, that in England the total number of these two enterprises has risen – despite the fact, that production units are getting larger, and that pig numbers have fallen considerably over the same time. This suggests that the number of poultry holdings in England must have risen at a higher rate than the number of pig holdings has fallen (see next section).
2.5.4 Poultry
In Wales, poultry production has clearly risen since 1945. This is mainly due to a pronounced increase in the national demand for table chicken, but also turkeys, whereas the number of laying hens has declined.
For England, no equivalent data are available as pig and poultry farms are generally counted together. However, Table 8 shows that the number of laying hens in the UK overall has declined since 1985, and Table 9 gives figures for total poultry and poultry meat production in the UK from 1973 to 2002. From the National Food Survey we also know that the consumption of poultry meat has risen (from 10g /week/person in 1950 to 253g/week/person in 2000).
A54 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 8 Hen eggs – UK production and consumption
1975 1980 1985 1990 1995 2000 2001 2002* Eggs produced n/a 1,079 926 890 873 855 917 967
(million dozen) Eggs for human consumption 1,029 1,011 854 804 774 747 806 854
(million dozen) Laying hens producing eggs for n/a n/a 39.6 37.1 33.4 30.8 33.4 35.4 eating
(millions) Average yield per layer n/a n/a 258 260 279 291 290 290 Production as % of total n/a 100% 96% 93% 95% 91% 88% 87% egg consumption * provisional Source: Defra, 2003
Table 9 Poultry and poultry meat production in the UK
1973 1980 1990 2000 2001 2002 Production (provisional )
Total number ('000 head) . . . . 117,045 157,051 166,896 155,745 of which: chickens and other table fowls . . . . 73,944 105,688 112,531 105,137 birds in the laying flock . . . . 33,624 28,686 29,895 28,778 fowls for breeding . . . . 7,258 10,667 12,083 10,724 turkeys, ducks & geese . . . . 2,218 12,010 12,387 11,107 '000 tonnes carcass weight 641 713 1,140 1,513 1,565 1,533 Source: Defra, 2003
2.5.5 Other livestock
Other livestock types have, since the abolishment of horses as working animals, not been of any great importance in the UK. However, depending on policy changes farmers may, in the future, be looking for new products to produce to increase income, it is not inconceivable that some other livestock types might become more widely spread.
For goats, figures are only available for England since 1990. Numbers declined by about 5% between 1990 and 2000, from about 60,000 to about 57,000. According to the British Goat Society (2003), definite figures are, however, difficult to arrive at, as many small goat keepers are not registered. The number of dairy goats (herd book registered) in the UK declined after the Second World War, when many goats were kept to improve the food supply. Numbers increased in the late 1970s, as self- sufficiency and diversification became more popular, and has declined steadily again since 1980 (see Table 10), partly due to new regulations in dairy hygiene.
A55 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 10 Numbers of herd book registered dairy goats in the UK
Year Number registered 1949 4,452 1950 2,904 1955 1,217 (lowest) 1965 1,345 1970 1,795 1975 3,409 1978 8,924 1980 10,358 (highest) 1985 8,077 1990 4,979 1996 3,163 2000 2,698 2002 2,411 Source: British Goat Society, 2003
The first deer farms in the UK were set up in the early 1970’s. The first data are available for 1989; the numbers rose steeply until 1993, when over 40,000 deer were recorded for England and Wales. The steep decline in numbers after this date is partly due to the fact that MAFF did not include deer in parks after this date. Another factor was that after initially high prices the value of breeding stock fell to a more sustainable level. England had far more deer than Wales in 2000(26,003 in England and 964 in Wales; BDFA, 2003).
Ostriches were first farmed in the UK in the early 1990s. Although the returns were at first high due to the high demand for breeding stock, this has now declined, as the market is saturated. As there is no compulsory registration of the birds, it is not known how many ostriches are currently kept in the UK. In 1998 the estimated figures were 10,000 – 12,000, including about 2,000 breeding females, in approximately 400 flocks. (Adams and Revell, 1998)
2.6 Changes in technology
2.6.1 Genetic improvements
Introduction of new cattle breeds from other countries (as well as genetic improvement of existing breeds) started as early as the late 1940s (MAFF, 2000) – the first Friesians had been imported in the 1800s.
The Friesian enjoyed great expansion in the 1950s, through to the 80s, until the “North Americanisation” of the national herd in the 1990s (with the introduction of extremely high yielding Holstein cows, with a high use of concentrates). This trend is being questioned by some commercial farmers in the current financial climate, with the need to exploit grazing resources to the full (BFBC, 2003).
Data on the development of the share of foreign breeds in the cattle herds of England and Wales (as shown by the sires used for 1st inseminations, Table 11) are available for 1966 to 1992. By 1991-92 Holstein-Friesians accounted for 95% of inseminations in the dairy sector. In the beef sector over the same period national breeds like the Hereford and Aberdeen Angus declined and exotic breeds increased dramatically following the first importation in the early 1960s. As with the Holstein- Friesians, the imported beef breeds had higher production, although this has been achieved with high levels of inputs, especially concentrates. In some cases, e.g. with the double muscled Belgian Blue, frequent problems with calving give rise to welfare issues.
A56 Agricultural Futures and their Implications for the Environment: Defra ISO 209
The impact of breeding improvement has been helped by artificial insemination (AI), which was first developed in the 1930s and now accounts for most pregnancies in dairy herds, and more recently by embryo transfer. AI is also used, but less commonly, for beef cattle and pigs and even less for sheep.
Table 11 First inseminations in England and Wales (%)
1966-7 1976-7 1986-7 1991-2 Dairy breeds: Holstein-Friesian 80.9 93.0 94.4 95.6 Other exotic 0.04 0.05 0.1 0.1 Native 19.0 7.0 5.5 4.3 Beef breeds: Exotic 11.1 22.0 72.0 74.2 Hereford 61.8 61.1 20.6 18.2 Aberdeen Angus 19.3 11.9 5.5 5.8 Other native 7.9 4.9 1.8 1.8 N.B. Official data are no longer collected Source: Defra, 2002
The influence of foreign breeds has not been so marked for sheep. Although a change has occurred in the breeds used, this has been mainly restricted to British breeds, at least initially (see Table 12). In particular the numbers of Mule type crossbred ewes increased in the 1980s.
However, a survey conducted by the MLC (Meat and Livestock Commission) in 1987 also showed considerable numbers of foreign breeds newly introduced, e.g. Oldenburg, Bleu du Maine, Friesland, Texel, Charollais, Vendeen, New Zealand Romney and Merino (Curran, 1990). Many of these had in the past been improved in their own countries with the help of British breeds. Texel in particular has become very popular as a terminal sire for heavier lambs.
Table 12 UK sheep breed structure as a percentage of national flock mated
1971 1987 Hill breeds Scottish Blackface 19.6 14.8 Cheviots 6.7 3.9 Swaledale 4.2 7.0 Welsh Mountain 16.5 9.4 Welsh Speckled Face 2.7 4.6 Beulah 1.7 2.9 Other purebreds Romney 2.5 1.2 Suffolk 1.5 2.5 Clun 0.5 0.7 Crossbreds Mule types 2.6 23.6 Longwool X Hill 13.4 9.2 Suffolk 6.6 10.1 Source: Slade, 1990
Although there was provision in European Council Regulation 2078/92 for headage payments of 100 Euro per grazing livestock unit on endangered breeds of livestock, this has never been implemented in the UK. In spite of Government legislation to specifically support endangered breeds, there were no national initiatives (Defra, 2002b).
A57 Agricultural Futures and their Implications for the Environment: Defra ISO 209
2.6.2 Production systems: Machine milking, fodder production technology, herd/flock size
Machine milking was already practised before 1945. No reliable data for numbers of milking machines are available, as the recording was very inconsistent. For example, in Wales, in some years the numbers of installations are recorded (2,616 in 1942), in other years the numbers of units (43,885 in 1960), then the number of “teat dup clusters” [sic] (19,700 in 1970). No data are available for other livestock-related machinery in Wales except farmyard manure spreaders (first available figure for 1954 – 5,531, rising to 15,050 in 1971), and none at all for England.
Initial attempts during the post-war phase of intensification to maximise yields from grazing were not wholly successful, and with progress in silage making technology this way of conserving feed became increasingly popular from about 1970 onwards. In 1952 silage production was estimated at 0.48 M t dry matter in the UK, in 1968 this had risen to 1.5 M t, and then rose steeply to 11 M t in 1993. The production of hay declined at a slower rate, so that all in all the total production of conserved forage rose. This allowed more flexibility through buffer feeding of conserved forage in summer. On the other hand, the proportion of grassland utilised for grazing fell from 72% in 1970 to 53% in 1990 (Wilkins, 2000).
All livestock types have one aspect in common – the numbers of herds or flocks has declined since 1945, and the average size of the herds or flocks has increased. Tables 13 – 17 show these changes although the form of the data makes comparisons across all species difficult.
The UK was ahead of the European neighbours in terms of legislation on pig welfare: Individual sow stalls were banned in 1991. (Defra, 2002)
Table 13 Average size of herd/flock on UK holdings
Average size of herd/flock (head) Species 1990 1995 2000 Dairy Cows 63.1 66.8 73.3 Beef Cows 21.6 25.2 28.0 Sheep Breeding Flock 214.9 231.6 249.4 Pig Breeding Herd 60.8 76.7 85.4 Fattening Pigs (>20kg) 367.4 450.7 501.3 Broiler Chickens 25,571 33,869 53,508 Laying Fowl 950 1385 1482 Source: Defra, 2003a
Table 14 Breeding herd size and numbers of holdings with pigs in the UK, 1984-1999
1984 1989 1994 1999 Number of holdings 17.7 13.1 11.1 8.4 (‘000) Average herd size 45 58 70 91.5 Source: MAFF, 2000b
Table 15 Percentage of the UK laying hen flock in different flock sizes
Flock size 1976 2000 < 5,000 birds 20 % 6 % 5-20,000 birds 30 % 15 % > 20,000 birds 50 % 79 % total 100 % 100 % Source: Defra, 2003a
A58 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 16 shows that, surprisingly, the smallest size group of dairy holdings (<10 cows) is not declining at the same rate as all other groups under 60 cows. This could be explained by the fact that these holdings may be “hobby” or part time farms, which carry on milking because they have always done so, and therefore they do not rely on milk production as a main source of income.
Table 16 Distribution of dairy herds by herd size in England and Wales
Size Group 1994 1997 2000 (number of dairy cows) percent of total herds 3 - 9 4.1 3.3 5.0 10 - 19 6.5 6.5 4.8 20 - 29 8.2 8.1 6.3 30 - 39 10.3 10.9 8.5 40 - 49 10.9 10.5 9.4 50 - 59 9.5 10.2 8.9 60 - 69 8.5 8.2 8.4 70 - 99 19.3 19.6 19.9 100 - 199 19.7 19.8 24.4 200 and over 2.9 2.9 4.2 Total 100.0 100.0 100.0 Total herds ('000) 30.5 27.2 22.8 Source: Dairy Council, 2003
2.7 Output
2.7.1 Milk
The Dairy Council (2003) commented on the current situation in the industry:
“UK producer numbers: The long-term decline in herd numbers continued in 2002, with a fall of 7% compared to 2000. (2001 data is absent due to FMD.) Small herds (1-49 cows) fell by 5%, medium sized herds (50-99 cows) fell by 12% and large sized herds (100+ cows) fell by 2.5%. The constraint of quota means that as cow yields rise, dairy cow numbers in the UK inevitably fall, and currently available economies of scale mean that the average herd size in the UK continues to rise.” Tables 17 and 18 illustrate this development in the dairy sector.
Table 17 Dairy herd sizes and yields UK
1970* 1988^ 1990^ 1995* 2000^ 2002^ Average herd size (cows) 30 England: 78 71 England: 88
Wales: 58 Wales: 69 Average milk yield/ 3750 4,950 5,145 5395 5,940 6,451 cow/year (litres) Sources: *FAWC, 1997; ^Dairy Council, 2003
Table 18 Number of dairy farms and milk production in Wales
1950 1960 1970 1980 1990 2000 Dairy holdings 29,438 24,225 15,433 7,792 5,867 3,522 Production (1000 819.05 1,097.50 1,263.56 1,555.30 1,523.50 not litres) available Source: Welsh Agricultural Statistics, 2003
A59 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 19 Average net price received by producers from Milk Marketing Boards for wholesale milk, 1944 – 1990 (pence per litre)
Actual price Price at 1990 values* 1944 – 1953 1.45 27.69 1954 – 1963 2.81 40.19 1964 – 1973 3.89 26.92 1974 – 1983 11.17 24.48 1985 – 1986 15.42 19.35 1989 – 1990 18.94 19.53 * converted using the Retail Price Index Source: Moffitt, 1995
Milk Marketing Boards were abolished in 1994, prior to the introduction of the Milk Development Council.
Table 20 Gross margins (GM) in dairy production and milk prices England and Wales
Year GM p/l milk GM £/cow milk price p/l year milk price p/l 1997-1998 13.24 808 21.28 1998-1999 12.18 751 19.36 1999 18.35 1999-2000 10.54 669 18.01 2000 16.93 2001 19.26 2002 17.09 2003 17.58 Source: Dairy Council, 2003; Defra, 2003
Tables 19 and 20 show the fall of the milk price over the last 60 years, and Table 20 also shows the fall in gross margin between 1997 and 2000.
2.7.2 Wool
The total number of sheep producers in Great Britain is well recorded as any producer with 4 sheep or more over has to register with the British Wool Marketing Board. (British Wool Marketing Board, 2003)
The change in the number of wool producers (Table 21) reflects the change in the number of sheep farms – a steady decline since the 1960s. The weight of the wool handled, on the other hand, started to decline much later than the number of producers, as flock sizes increased. Wool prices have also returned almost to the 1960 level.
A60 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 21 Wool production in Great Britain
Year Weight of wool Registered producers Average clip value handled (million at end of season (p/kg) kg) (‘000s) 1950-51 26.3 97.4 29* 1960-61 35.5 130.8 45* 1970-71 31.5 100.3 41* 1980-81 38.6 86.0 91* 1990-91 53.0 99.4 92* 2000-01 44.0 71.0 51** 2001-02 36.3 67.0 47** 2002-03 37.9 61.8 49** * Guaranteed Price ** Market Price Source: British Wool Marketing Board, 2003
2.7.3 Farm income
There is considerable variation between years in some farm types, particularly pigs and poultry. Generally, the trend in income was downward until the year 2000/2001. The following two years can not be so easily compared with the foregoing, as FMD had an influence on farming that reached further than those farms actually subjected to a cull.
Table 22 shows the income of dairy farms of different sizes in 1998-99 and 1999-2000, and Table 23 shows similar data for 1967. Not surprisingly, the larger farms (whether larger by herd size in 1998 or standard man days in 1967) have generally higher incomes.
Table 22 Net dairy farm income in £ thousand per farm
Farm Size England Wales Small (< 50 cows) 1998-99 1.6 n.a. 1999-00 0.1 n.a. Medium (50<100 cows) 1998-99 10.3 16.0 1999-00 6.5 14.7 Large (100+ cows) 1998-99 25.9 28.7 1999-00 18.3 30.9 All sizes 1998-99 14.1 14.4 1999-00 9.4 14.2 Source: Dairy Council, 2003
A61 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 23 Average net farm income per farm, by size and type of farm in England and Wales 1967
Farm Type SMD* groups 275 – 599 600 – 1,199 1,200 and over All sizes Net Farm Income Net Farm Income Net Farm Income Net Farm Income £ £ £ £ mainly sheep 558 945 2,633 1,262 sheep and cattle 1,047 2,093 3,749 1,592 Specialist dairy 1,018 1,881 4,148 1,306 mixed farms 1,586 1,825 5,303 2,487 pigs and poultry 1,048 2,228 4,947 2,648 * SMD = Standard Man Days Source: AAU, 1970
2.8 Consumer demand
2.8.1 National
Consumer demand for livestock products has changed considerably since 1945. With the improvement in living standards, the proportion of income spent on meat and meat products rose steadily until about 1980. Since then there has been a slight decline.
In terms of consumption of products, after initial rises (eggs until the mid-1960s, pork until 1980, beef and lamb until the mid-1950s), the demand for pork (including bacon and ham), beef/veal and mutton/lamb fell steadily, if slowly until 2000. The demand for cheese, eggs and milk also fell. The exceptions were low fat milk and yoghurt, which were becoming increasingly popular after 1980, with the result that total milk consumption stayed relatively constant from about 1990 onwards, and poultry consumption, which was still rising in 2000. (Wheelock 1995, Defra 2000)
These figures only cover household consumption. Data on food consumed outside the home were not available before 1994; the figures for 1995 and 2000 show a rise of 16%. This might be an indication that the amounts of animal products eaten outside the home could be increasingly important in addition to those quantities known from the Food Survey for home consumption.
2.8.2 Exports / imports
The most dramatic changes took place in the export of beef (from the peak of £600 million in 1995, down to £21 million in 2000). Also notable was the rise in imports of poultry meat and pork (poultry from £97 million in 1988 up to £545 million in 2002 and pork from £76 million in 1988 to £330 million in 2002). This was a consequence of the BSE crisis and the ban on exports of beef from the UK.
The export of lamb increased considerably in the 1980s, in parallel to production (see Tables 24).
A62 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 24 Lamb exports
Year carcass Export of live export trade lambs ‘000 ‘000 tonnes head 1975 36.9 1980 36.9 1984 47.2 101.6 1986 195.8 1988 76.0 509.6
2.9 Role of subsidies
After 1945, the British Government provided schemes for the improvement particularly of hill farms and paid subsidies to upland farmers. Soon after the UK’s accession to the EC, the source of support for the hills changed Hill Livestock Compensatory Allowances (HLCAs) were introduced. In 1983/84, over £91M was paid out for breeding cows and ewes in LFA; 65% of all beef breeding cows and 57% of all breeding ewes in the UK qualified for HLCA payments (Cunningham and Groves, 1985).
Table 25 Direct government support* to hill and upland farms in Great Britain
Total paid (£m) as % of total Government support to agriculture 1955-56 6.8 3.3 1960-61 7.8 3.0 1965-66 15.8 6.6 1968-69 23.3 8.8 * To this would be added a share of other support, e.g. fertiliser, price guarantees, farm improvement etc. Source: AAU, 1970
In 1981 Sheep Annual Premium (SAP) was introduced. This helped improve the real gross margin of sheep enterprises significantly from the 1980 level. From 1992 the SAP was paid as the only direct subsidy to sheep farmers, with the consequences described in section 2.4.2.2. A “Rural World” supplement was paid in LFA. The regime payments made annually since 1980 have played a significant part in maintaining profitability but they have not been sufficient to maintain parity with 1980 levels for the sheep or suckler cow sector see Table 26.
Table 26 Relative gross margin for different sheep and suckler cow enterprises in the UK (1992 = 100)
Hill Upland Lowland Hill Upland Lowland sheep sheep suckler cows suckler cows sheep suckler cows 1980 128 133 130 100 109 109 1985 134 126 134 98 108 100 1992 100 100 100 100 100 100 1997 105 111 112 99 93 80 Source: Defra, 1999a
Table 27 shows that in Wales in recent years the cash income of livestock farms is almost equivalent to the subsidies. Table 28 shows the total sums paid in Wales in 1981, 1991 and 2001.
A63 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 27 Economics of dairy and livestock farms in Wales
£ thousands Annual percentage change 1998-99 1999-00 2000-01 1998-99 to 1999-00 to Final provisional forecast 1999-00 2000-01 Total farm output 66.9 66.0 66.1 -1 - of which: direct subsidies 21.1 18.6 17.3 -12 -7 Total inputs 60.3 60.2 61.9 - 3 Net Farm Income (a) 6.6 5.7 4.1 -13 -28 Cash Income (b) 20.3 20.5 18.8 1 -8 Total non-farming 5.0 5.0 n/a 2 n/a income of which:
on farm income 0.6 0.4 n/a n/a n/a off farm income 4.4 4.6 n/a 6 n/a Source: National Assembly for Wales, 2002
(a) Net farm income is defined as the return for the principal farmer and spouse for their manual and managerial labour and on the tenant-type capital of the business. It makes allowances for rent (on a notional basis if the farmer is an owner-occupier) and for depreciation. Interest payments, net of interest received, are included as a cost, and crop and livestock valuation changes are excluded. (b) Cash Income is defined as the cash return to the group with an entrepreneurial interest in the business for their manual and managerial labour and on all their investment in the business.
Table 28 Principal grants to agriculture in Wales (a)
1981 1991 2001 Sheep Annual Premium Scheme 7,685 66,107 28,103 Rural World Initiative - 14,316 18,790 HLCA cattle - 9,528.3 . HLCA sheep - 28,655.3 . Tir Mynydd . . 42,300 Beef Special Premium Scheme - - 22,730 Extensification premium - - 14,043 Suckler Cow Premium Scheme 1,970.0 10,756.5 20,842.0 Source: National Assembly for Wales, 2002
From 1992 a process of reform has been underway in the EU beef sector involving a movement away from price support to increased levels of direct aid payments to farmers (see Table 28). This has involved increasing headage premiums whilst progressively reducing the intervention price for beef.
2.10 Impact of epidemics and diseases
Any sizeable occurrence of diseases in livestock has a negative impact on the livestock farming sector, as it is likely to destroy the consumers’ confidence in the quality, safety and wholesomeness of nationally produced livestock products.
The longest and furthest reaching crisis in the livestock sector was caused by Bovine Spongiform Encephalopathy (BSE).
The stages of development were (MAFF, 2000a):
A64 Agricultural Futures and their Implications for the Environment: Defra ISO 209
- 1984 First symptoms observed. - 1985 First tested. - 1987 First case of BSE confirmed. - 1988 Change in production processes of meat and bone meal (MBM) in early 1980s suspected as cause. Ban on MBM from ruminants for cattle. - 1992 Peak of confirmed cases. - 1995 Increase of sheep and lamb production; in Wales largest sector of agriculture by 1995. - 1996 Connection made with vCJD and ban on sale of over 30 month old cattle (30-month scheme). Ban on beef exports (see chapter 2.7.2).
Table 29 Herd incidence of BSE in England, Wales and GB, up to 20 March 1996
Total no. herds No. BSE-affected herds Cumulative incidence England 60,837 25,506 41.93% Wales 16,747 4,926 29.41% GB 92,067 35,536 36.43% Source: MAFF, 2000a
Table 29 shows the herd incidence of BSE in England, Wales and Great Britain. Until 2000, 4.3 million cattle had been slaughtered in the UK under the 30-month scheme (MAFF 2001).
No recent figures are available for the sources of home produced beef (Table 30), but as cull cows older than 30 months have not been allowed in the food chain, the proportions will have changed accordingly.
Table 30 Sources of home-produced beef in the UK, 1986 – 1995
1986 1995 UK bred dairy herd 43% 52% Cull cows dairy herd 13% 14% UK bred beef herd 36% 23% Cull cows beef herd 7% 5% Republic of Ireland cattle 1% 6% Source: MAFF, 2000
Scrapie in sheep is not only the suspected cause of BSE (through in-properly rendered infected carcasses fed to cattle), but a disease with potentially serious consequences in its own right. It has been notifiable since 1993; data about the prevalence in GB are therefore only available from that point onwards (Tables 31 and 32).
A65 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 31 Summary of scrapie cases in GB from 2002 to 1993
Year Positive Negative Inconclusive Pending 2002 421 106 1 10 2001 295 57 9 0 2000 568 86 0 0 1999 598 117 2 0 1998 499 99 1 0 1997 508 83 4 0 1996 460 87 3 0 1995 254 56 1 0 1994 235 90 2 0 1993 328 163 3 0 Source: Defra, 2003d
Table 32 Confirmed scrapie cases in sheep and goats 1998 - 2002
1998 1999 2000 2001 2002
(to 30/9) England 326 381 359 175 190 Wales 68 105 125 43 83 Source: Defra, 2002e
New legislation came into force in 2001, increasing the level of compensation for confirmed cases of scrapie from around £30 per animal to a flat rate payment of £90 (though a flat rate payment of £30 applies to cull females). These arrangements were designed to encourage the notification of animals suspected of having scrapie (Defra, 2002e).
Foot and Mouth Disease (FMD) in pigs, sheep and cattle had been endemic in the UK. Between 1922 and 1967 only two years were without any FMD cases. There were larger outbreaks in 1954 and 1967/1968. After this, except for one small outbreak on the Isle of Wight in 1981, the country was FMD free until 2001. In 1967/68 434,000 animals were slaughtered, but in 2001 2,382,000 animals were killed. This last FMD outbreak severely threatened some local breeds of sheep such as the Herdwick, Rough Fell and South Country Cheviot which lost 35-40% of their population. This loss can have serious consequences for hill areas, where most of the grazing is done by hefted flocks of hill sheep (Defra, 2002a).
One of the reasons for the rapid spread of FMD was the long transport distances taken by livestock and the frequent change of owner during their lifetime. In 1974/75 there were 1,600 abattoirs in GB, in 1995 this had fallen to 488, with numbers still falling. Similarly the number of cattle markets in the UK fell from 360 in 1986 to 250 in (MAFF 2000a).
Bovine Tuberculosis (TB) has been on the increase in some parts of England and Wales. The counties particularly affected are:
¾ in England – Cornwall, Devon, Somerset, Avon, Gloucestershire, Hereford and Worcester, Staffordshire and Wiltshire; ¾ in Wales – Dyfed, Gwent, Powys and West Glamorgan.
Whereas before 1990 the number of new cases per year (indicated by the number of cattle slaughtered) was relatively constant, numbers have increased steadily every year since then (Tables 33 and 34).
A66 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 33 The number of herds affected by new confirmed incidents of bovine TB
1996 1997 1998 1999 2000 2001 England 339 440 631 741 886 346 Wales 110 55 86 127 150 127 Great Britain 459 503 720 875 1040 474 Source: Defra, 2002c
Table 34 Number of cattle compulsorily slaughtered (GB)
Year Total Year Total 1999 (provisional) 6890 1988 782 1998 6083 1987 1173 1997 3760 1986 638 1996 3881 1985 843 1995 3451 1984 733 1994 2773 1983 660 1993 2455 1982 605 1992 1626 1981 1011 1991 1304 1980 942 1990 1570 1979 1160 1989 1098 1978 921
All figures include cattle reacting to the tuberculin test and contact animals. The animals are from herds which have had their Official Tuberculosis Free Status suspended. Some herds will have disease confirmed, others will not. Source: MAFF, 2000c
Although the numbers of cattle lost are overall not significant, the dangers of a further spread are taken seriously, with comprehensive testing carried out in the most affected areas. The government has initiated research into the development of a cattle vaccine, and, alternatively, a badger vaccine (as badgers are important carriers of the disease and are believed to be at least partly responsible for the spread). A badger culling trial is also being carried out.
Johne’s Disease (paratuberculosis) has been on the increase in cattle since 1993 (Defra, 2002c). Although the link between Johne’s disease in cattle and Krohn’s disease in humans has not been proven, the holding time in the pasteurisation process of milk has been increased as a precautionary measure (Dairy Council, 2003). Here again other wild animals (rabbits) are suspected to be carriers of the disease and responsible for its spreading.
In the past, diseases have not generally caused the poultry industry major problems. The last outbreak of Avian Flu was in 1992 in Norfolk, where a flock of 8,000 turkeys was infected. Avian flu has recently caused devastating losses of millions of birds in Italy (2000) and the Netherlands (2003). This might to a certain extent have influenced the imports of poultry to the UK.
Table 35 shows the number of swine fever cases since 1950. There was a peak occurrence in the early 1960s, with recurrence of high incidence in 2000.
A67 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 35 Classical Swine Fever outbreaks in Great Britain for selcted years 1950-2000
Year Number of cases Total number of animals attacked 1950 430 192 1955 1,403 324 1960 1,213 184 1963 1,243 254,786 1964 402 110,922 1965 113 42,141 1966 25 8,098 1971 3 215 1986 10 7,824 2000 16 74,793 Note: until 1962 inclusive - pigs were slaughtered for diagnostic purposes only Source: Defra, 2001
3 Future developments
3.1 National demand
National Statistics is predicting a rise in the UK human population of more than 5 million between 2001 and 2021 i.e. more than 10% in 20 years (Table 36). Considering that in the 20 years from 1980 to 2000 the total consumption of meat and meat products declined by more than 10% in GB in the face of a 5% increase in population and a % rise in real GDP, it is likely that the total demand for these products will at best stay constant, although the pattern of consumption within the sector is likely to change, depending on tastes and income distribution. Much depends on whether the Government’s efforts to induce the population to eat more fruit and vegetables are successful, at the further cost of reduced meat intake per person.
It is, of course, not clear whether the proportions of meat types will stay at their current levels; poultry consumption still seems to be rising. However, it is likely that a ceiling of consumption may be reached soon (currently one chicken per person per week). Unforeseeable events can, of course, change consumer preferences very quickly (e.g. BSE).
Milk, cream and butter consumption has also dropped considerably over the past 20 years, and so if the trend continues, higher production levels would not be required from the dairy sector. One particular aspect of the dairy industry is the increasing popularity of low-fat products (milk and yoghurt). This raises the question whether bonus payments for milk with higher fat content will continue in the future.
A68 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 36 Population numbers (thousands)
England and Wales UK 1951 43,758 50,225 1961 46,196 52,807 1971 49,152 55,928 1981 49,634 56,357 1991 50,758 57,472 2001 52,085 58,832 2011* 55,580 62,382 2021* 57,730 64,492 * These projections are 2000 based. Source: National Statistics, 2003
3.2 Changes in retailing
UK food retailing is increasingly being dominated by a few large supermarket chains, which has often led to accusations that they are effectively forcing farmers to sell their produce at prices below production cost. Should the supermarkets (which are the largest customers for farm produce) become bigger and stronger in future, this accusation may continue to be reinforced.
3.3 International trade
Imports of livestock products into the UK have overall been much higher than exports, with the exception of milk powder and condensed milk.
Changing international demands should therefore not have too great an influence on livestock production in England and Wales, with the possible exception of a crisis situation in other countries (i.e. epidemic with total loss of one type of livestock over a considerable area), which might drive world market prices and consequently demand up. However, as livestock output can not be significantly increased overnight, nor rarely within one year, this would initially mean better returns for the farmers, and only possibly in the medium term intensified production. More important in the context of international trade will be the exchange rate of the pound.
3.4 Role of EU / CAP / development of subsidies / effect of new members
Under the Agenda 2000 reforms the shift away from market price support towards direct income measures is continued. Intervention ends and is replaced by Private Storage Aid. A slaughter premium will be paid for all categories of cattle. In accordance with a move to more environment friendly agriculture, the qualifying criteria for extensification premium have been changed, so that in effect some farmers will have to lower the stocking densities to qualify.
Fischler (2003) expects beef production to decrease by 3% in 2009 while producer prices over the same period are forecast to go up by 7%. Furthermore, the greatest impact is foreseen for the suckler cow herd, where farm incomes have been particularly low.
Milk quotas will stay in place until 2014. However, an increase in milk prices is not in sight in England and Wales, and it is to be expected that more dairy farmers will give up farming, while others try to increase yields from their herds (Fischler, 2003). An annual decline of about 1.5% in numbers is assumed (Economics, 1999).
Sheep farmers will also be affected by the new stocking density for extensification premium. Some may have to lower sheep numbers to fully take advantage of the premium.
A69 Agricultural Futures and their Implications for the Environment: Defra ISO 209
The reduction in cereal intervention prices might have a slight effect on the feed-based livestock sectors poultry and pig meat. However, cheap imports (mainly from Brazil and Asia) are likely to have a more substantial impact. Furthermore, some poultry and pig holdings will have to increase their land holdings for application of slurry and manure under the new NVZ regulations, or come to agreements about application with other farmers.
For laying hens, under new European legislation barren cages will be banned from 2012. Furthermore, from 1st January 2003, no new barren battery cage systems may be brought into use. (Defra, 2003e) There are fears within the industry that imports of battery-produced eggs will increase, as prices will have to rise under the new management systems. However, some European countries have already gone further and banned even enriched cages from 2012 (Germany and Netherlands, which both produce more eggs than UK).
All farm types will be affected, to varying degrees, by decoupling, which is envisaged for the future. Fischler (2003) predicts that this will enable all farmers to have a greater degree of market orientation and a higher degree of flexibility with higher income. However, as France and Ireland still seem to be opposed to the idea of taking subsidies away from production, the extent of this reform plan is as yet open.
The joining of the EU by new member states will, overall, decrease the level of subsidies paid to each state, and might initially lead to problems with higher imports from these countries. The import/export levels could be expected to even out after the first few years, as production in all countries is adapted. However, the subsidy levels are unlikely to rise again, and unless additional measures are taken (possibly on a regional or national level), farm numbers will probably decline at a higher rate than before.
3.5 Climate change
Although it is not possible to predict the exact extent of climate change, most scientists seem to agree that it will get warmer and wetter. A rise in temperature will mean for the livestock industry in England and Wales that silage maize might be produced in currently less favourable areas. More feed legumes such as soybeans will grow in the UK, and generally plants will be grown that are currently imported. It might be possible to extend grazing seasons (depending on the “spread” of higher temperatures over the year).
Although this seems to bode well for better flexibility of production, less dependence on feed imports and lower costs, other problems might arise like warmth-loving pests and diseases (in fodder plants as well as animals). Furthermore, more erratic weather with more storms and extreme conditions will bring more natural disasters like floods, hail and snowstorms, which will make all agricultural production more volatile.
3.6 Technological developments
Tractors and machines have been getting bigger and more sophisticated over the last half century. Technological improvements will continue. However, certain limitations are set to the size of machinery by the weight and its negative impact on the soil.
In the dairy sector, milking robots will become more sophisticated and will be widely used on large dairy holdings, thus reducing the need for labour while increasing the yield per cow (BBC, 2003). This will contribute to the profitability of larger units.
3.7 Biotechnology
Research is going on into the viability of cloning of livestock or genetic modification (GM). In sheep, goats and cattle, GM has been applied to achieve the production of therapeutic proteins in milk, or to alter the composition of milk to improve the nutritional value for humans. Should the use of GM in
A70 Agricultural Futures and their Implications for the Environment: Defra ISO 209 livestock production for human consumption be accepted in the UK, this might provide a new branch of diversification incoming years, while using existing knowledge and installations for husbandry, although whether this is ever likely to need only a few animals is debatable.
In future GM might enable breeders to accelerate the rate of improvement in livestock performance, and to take advantage of genes not accessible through conventional selective breeding (transgenetic manipulation). Targets for improvement include enhanced disease resistance, for example to develop chickens that resist infection by salmonella (Straughan 2000). Ultimately this would mean better animal welfare as well as lower operation costs.
3.8 Diversification
There have been two developments in recent years – on the one hand specialisation with increasing herd or flock sizes, to make use of the efficiency of scale, and on the other hand diversification, to be less susceptible to changing markets and add value to the product. Diversification has meant either taking up non-farming work on the holding, like tourism, forestry or processing activities, or introducing another line of livestock production (or, on mixed farms, other crops, e.g. energy crops). Deer and ostrich farming have been tried, or goat production, often combined with processing of goats milk.
For the future, both these directions will be followed as before. A change of agricultural production from livestock to all arable is rarely feasible, and there is a limit to the extent of diversification that is still profitable (depending largely on what other farmers in the region are doing); it also requires wider skills, which not every farmer has. Energy production from livestock (biogas) will be one of the relatively new ways to diversify, which is, however, most suitable for larger farms or cooperatives.
In some suitable LFAs forestry and agroforestry should become more wide spread, particularly if supported by woodland grants. This is also a way of producing renewable energy (either from trees or coppicing), even the use of bracken as biofuel is a possibility (Lawson 1987).
Particularly farm types with a high level of investment in machinery (e.g. dairy farms) will try to improve returns from their investments by increasing herd sizes and often by streamlining production by discarding other activities.
4 Future scenarios
The following scenarios were described at the Project Partner Meeting in February 2003 (see Figure 1): a. world agricultural markets (WTO driven, minimal intervention) b. world sustainable agriculture (world market orientation with “conditionality” interventions to deliver environmental protection/enhancement as implied by, but deeper in application than, post- Agenda 2000 reformed CAP c. provincial agriculture (protectionist and farmer income support regimes similar to that which prevailed under CAP mid 1990s pre Agenda 2000) d. local community agriculture (with emphasis on agricultural self sufficiency at local level and strong regulation to protect/enhance environment)
A71 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Figure 1: Possible Futures, based on Foresight
(DTI, 2002; see minutes Project Partner Meeting 20th February 2003)
Globalisation/interdependence
Global Sustainable World Agric markets Agriculture Consumerism/ Conventional Community/ development
utilitarianism conservation
Provincial Local Community Agriculture Agriculture
Regionalisation/autonomy
Implications for the Livestock Sector
How would the livestock sector in England and Wales react given the scenarios in their pure form?
World agricultural markets:
Livestock production depends largely on the cost of feed, land and installations (buildings, machinery etc.), and the cost of labour. In a purely world market driven environment, it is possible that the cost of feed actually decreases, as cheap imported grain becomes available; it is unlikely that even large holdings in the UK could compete on the level of cost of installations and labour. Due to climate restraints, high investments have to be made for winter housing; the cost of land is driven up in many regions through the need for new housing and leisure developments; labour costs are higher than in many other countries.
Livestock production would fall and be restricted to serve a speciality market, where premium prices are paid. A proportion of customers will always be suspicious of imported food and equate “cheap” with “low quality”. The dairy market would possibly suffer least, as it is not feasible to import fresh milk from those countries that have low production costs (i.e. Australia, Asia, South America), whereas there are no such restraints on frozen or chilled meat. Eggs also have a longer shelf life and are suitable for import.
The only chance to sustain livestock production in hill areas would be to finance it through another sector, probably the tourism industry, as they would have an interest to maintain the landscape which has been created by grazing animals.
Sustainable agriculture
“Think global act local” could be written on the banner over this scenario. Global sustainability is seen as more important than local profit. Environmentally friendly farming methods are being actively supported through farm income support measures; national food production has preference over imports, as food miles and the resulting pollution through air or road transport are being frowned upon. Overseas imports are allowed for foods that can more sustainably be produced outside the UK or Europe, thus safeguarding environmental protection in the supplier countries, too. Fair trade is guaranteed by legislation.
A72 Agricultural Futures and their Implications for the Environment: Defra ISO 209
England and Wales would be capable of filling their own needs of livestock products, making imports superfluous to a large extent. If the right prices were paid, or farmers received a guaranteed income, production could increase by the necessary degree to fulfil most domestic demand. In eggs, for example, the UK was self sufficient in the early 1980s, and has been above 90% since then; the same goes for poultry meat, although cheap imports have changed the market somewhat in recent years. Pig products which have been at a lower level (around 75%), could, however, be increased if British prices were acceptable to the consumer. Beef and lamb were, before the BSE crisis, exported at a higher rate than imported; this indicates that there is scope for higher production levels.
Provincial Agriculture
Under this scenario national farmers come first and are protected against competition from outside. Imports are strictly only allowed where the product cannot be produced in the country (does not apply to livestock produce), or in situations where national demand cannot be satisfied by home production. Special incentives are given to encourage those sectors that are currently not reaching a self- sufficiency level of 100% (pig and poultry meat). Intervention prices are paid in years when production exceeds demand, and the surplus cannot be exported.
Local Community Agriculture
This combines the environment protection features of “world sustainable agriculture” with the economic protection aspects of “provincial agriculture”.
Sir Julian Rose (Rose 2000) coined the phrase “the proximity principle” to encapsulate this sort of model: an “integrated sustainable development” programme that incorporates social, economic and environmental criteria at the local / regional level.
Taking "an acre per person" as a broad rule of thumb, Rose estimates that 12,000 acres (almost 5,000 ha) would supply a market town's 12,000 residents with their basic and seasonal primary food requirements. This would be based on production methods emphasising "optimum yield", rather than maximum output. The Proximity Principle would supply its market in the most efficient and environmentally benign way by working with the closest 12,000 acres of productive agricultural land in meeting local demand. This would mean much of the UK's agricultural land meeting requirements of the home market, with a minimum of "food miles" and long shelf life processing and packaging. Export would only take place once food surplus to local demand had supported other undersupplied areas, imports would only be allowed for exotic products and in times of serious shortages.
In complementing this principle, particular attention would be paid to the local geographical and climatic conditions, i.e. hill areas would predominantly be used for beef cattle and sheep. Pig and poultry / egg production (free range) would be integrated into arable systems, which could also accommodate dairy cattle, using grass leys for fodder production. All livestock production would follow strict sustainable or organic standards, where necessary supported by subsidies and farm income measures. As these farming methods are more labour intensive, local employment would be created, which would also make up for losses in the long-distance haulage industry.
A73 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Reference List
AAU (Agricultural Adjustment Unit, 1970): Hill sheep farming today and tomorrow. A workshop report, University of Newcastle upon Tyne, p. 15 Adams, J. and Revell, B.J. (1998) A review and Feasibility study of opportunities in the EU http://www.mluri.sari.ac.uk/livestocksystems/feasibility/ostrich.htm BBC (2003): Gentle touch of robot milker (12/03/2003). news.bbc.co.uk/1/hi/wales/2843205.stm BDFA (2003): personal communication BFBC (2003): www.britishfriesian.co.uk BLCS (2003): www.limousin.co.uk/breed/history.html British Goat Society (2003): Personal communication from Ruth Goodwin, Scientific Liaison Officer British Wool Marketing Board (2003): Personal communication from Jean V. Murphy Bunce, R.G.H. (1987): The extent and composition of upland areas in Great Britain. In: Bell, M. and Bunce, R.G.H. (eds): Agriculture and conservation in the hills and uplands. Institute of Terrestrial Ecology, Grange-over Sands. Cunningham, J.M.M. and Groves, C.R. (1985): The hills and uplands of the UK. In: Macwell, T.J. and Gunn, R.G. (eds.): Hill and Upland Livestock Production; Occasional Publication No. 10, British Society of Animal Production, Edinburgh, pp 1-8 Curran, M.K. (1990): Practical breeding developments and future prospects. In: Slade and Lawrence (eds): New Developments in Sheep Production. Occasional Publication No. 14, British Society of Animal Production. Dairy Council (2003): www.mdcdatum.org.uk DARDNI (2000): www.dardni.gov.uk/file/revrep/chpt1.doc Defra (1999a): www.defra.gov.uk/esg/economics/econeval Defra (1999b): National Food Survey http://statistics.defra.gov.uk/esg/publications/nfs/1999/default.asp Defra (2000): National Food Survey Defra (2001): Classical Swinefever Disease Information Defra (2002a): Hill Farm Allowance – explanatory booklet http://www.environment4business.com/GRANTDOCS/hfa%20guidance.pdf Defra (2002b): UK Country Report on Farm Animal Genetic Resources 2002 Defra (2002c): Surveillance Reports Cattle, Vol 6, No4: Endemic Animal Disease Surveillance Defra (2002d): Farm Waste Grant Scheme England Defra (2002e): http://www.defra.gov.uk/news/2002/020131e.htm Defra (2003a): www.defra.gov.uk/esg/work_htm/publications/cs/farmstats_web/default.htm Defra (2003b): http://statistics.defra.gov.uk/esg/publications/auk/2002/error.pdf Defra (2003c): http://statistics.defra.gov.uk/esg/index/list.asp?i_id=059 Defra (2003d): http://www.defra.gov.uk/animalh/bse/bse-science/scrapie/inciden.html Defra (2003e): http://www.defra.gov.uk/news/2003/030318a.htm http://statistics.defra.gov.uk/esg/publications/nfs/2000/default.asp Economics (1999): Agenda 2000. Will the CAP fit? Environment Agency (2002): http://www.environment-agency.gov.uk/commondata/105385/manure.pdf Fischler, F. (2003): europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=SPEECH/03/166|0|RAPID &lg=EN&display= Johnson, J. and Merrell, B.G. (1994): Practical pasture management in hill and upland systems. In: Lawrence et al (eds.): Livestock Production and Land Use in Hills and Uplands. Occasional Publication No.18, British Society of Animal Production, Edinburgh Lambert, D. and Navarro, M. (2002): Hill Farming Act 1946 (http://www.wales-legislation.org.uk/agriculture/acts/HillFarmingAct1946.html) Lawson, G.J. (1987): Hill weed compensatory allowances: very alternative crops for the uplands. In: Bell, M. and Bunce, R.G.H. (eds): Agriculture and conservation in the hills and uplands. Institute of Terrestrial Ecology, Grange-over Sands MAFF (1999): Supporting the hill farmer: A consultation document MAFF (2000a): http://www.bseinquiry.gov.uk
A74 Agricultural Futures and their Implications for the Environment: Defra ISO 209
MAFF (2000b): www.wholehog.org MAFF (2000c):Tuberculosis in Cattle (TB), http://www.defra.gov.uk/corporate/publications/pubcat/cvo/2000/chapa2.pdf MAFF (2001): BSE in GB – A Progress Report. http://www.defra.gov.uk/farm/agendtwo/hillfarm/consult.htm ) Moffitt, J.E. (1995): The Milk Development Council. In: Pollot, G.E. (ed.): Grassland into the 21st century. BGS Occasional Symposium No. 29, p. 330 – 336 National Assembly for Wales (2002): Farming Facts and Figures; www.wales.gsi.gov.uk National Statistics (2003): Annual Abstracts of Statistics. http://www.statistics.gov.uk/downloads/theme_compendia/Aa2003/Annual_Abstract_2003.pd f Rose, Julian(2000): The proximity principle.www.ruralfutures.org/frame.htm Slade, C.F.R. (1990): The UK sheep industry: Current position, economics and emerging trends. In: Slade and Lawrence (eds): New Developments in Sheep Production. Occasional Publication No. 14, British Society of Animal Production. Straughan, R. (2000): Ethics, Morality and Animal Biotechnology . http://www.bbsrc.ac.uk/tools/download/ethics_animal_biotech/ethics_animal_biotech.pdf Welsh Agricultural Statistics (2003): Digest of Welsh historical statistics 1974 to date. Chapter 3 - Agriculture Wheelock, V. 1995: Demand for animal products from grassland. In: Pollot, G.E. (ed.): Grassland into the 21st century. BGS Occasional Symposium No. 29, p. 83 – 95 Wilkins, R.J. (2000): Grassland in the twentieth century. In: IGER Innovations, 4/2000, p.26-33, Aberystwyth Winter, M., Rutherford, J.A. and Gaskell, P. (1997): Beef farming in the GB LFA - the response of farmers to the 1992 CAP reform measures and the implications for meeting world trade obligations. In: LSIRD Nafplio Conference Papers, MLURI
A75 Agricultural Futures and their Implications for the Environment: Defra ISO 209
TOPIC PAPER 5:
FARMING SYSTEMS DEVELOPMENT
1 Introduction
Recent developments in farming have been encouraged by a mix of concerns associated with the potential risks of intensive farming systems for human health and the environment. At the same time, advances in bio-sciences, particularly in the form of genetically modified organisms, offer both potential benefits and risks, such that their future role has yet to be defined. Alongside these systems there is continuing scope for improvement in yields through conventional crop and livestock regimes, livestock feeding systems, crop fertilisation and protection methods. Advances in engineering and systems operations, such as ‘precision farming’, improved environmental control in buildings, improved irrigation systems, minimum and combination mechanised systems including gantries, have potential to provide efficiency gains as well as reducing the energy and environmental ‘footprint’ of farming.
Simultaneously, the relative decline in the profitability of conventional farming systems has encouraged farmers to pursue alternative farming systems associated with for example organic produce, niche specialist produce such as venison meat or flowers, or non food crops such as amenity horticulture, farm woodlands and bio-fuels.
This paper examines selected developments in farming systems and future possibilities.
2 Current position and past trends identified
2.1 Organics
Organic farming enjoys popular support among the British public (Rimal et al., 2005). However, initially the scale of organic production, and financial support for it, was extremely limited, particularly compared with other European countries (Ward, 2000). Now the UK has one of the fastest expanding organic production growth rates in the EU (Barrett et al., 2002). The European annual growth rate the agricultural area under organic production over the last 10 years is 25% which, if extrapolated forward, would result in 10% of European farmland under organic production by 2010 (Soil Association, 1999). In the UK, only 0.34% of the total agricultural area was either certified as organic or in conversion in 1997, compared to 1.53% for the 15 EU Member States (Lampkin et al., 2000). Recently, growth in organic production in the UK has expanded from 0.5% of the total agricultural area in 1998 to 4% in 2004. In January 2004 over 4,000 organic producers managed 695,619 ha of land (10% in conversion, 90% fully converted). Thus, organically managed land accounted for 2.8% of all English farmland. Over the whole UK 4% is under organic management. (ONS, 2004), this marks a small decline since 2002. In 2002, the area of fully organic farmland reached 458,600 ha and was almost double the area of that from the previous year. Including land in conversion, 729,550 ha of agricultural land was managed organically by April 2002, 4.3% of the agricultural land area (Soil Association, 2002).
However, not all farms are suitable for organic production, as soil types, the range of possible farming systems and other factors can significantly limit the potential (National Trust, 2000). The majority (75%) of organically managed land is grassland, most as rough grazing and permanent pasture. Overall England accounts for 37% of organically managed land (Scotland 54%, Wales 8%, and Northern Ireland 1%; ONS, 2004).
A76 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Nevertheless, government financial support for organic conversion is generally outstripped by demand, although the total resources for organic conversion schemes have been significantly increased (double in England) for the period 2000-2006 through the Rural Development Regulation (RDR). Accordingly, the UK organic market has increased rapidly over recent years (Defra, 2002, 2003), but it still represents a small proportion of the total food and farming sector. In 1998/99 the total value of retail sales of organic food in the UK was £390 million (Ward, 2000), £802 million in 2000/2001 (Defra, 2002, 2003) and £920 million in 2001/2002, (Soil Association, 2002).
Approximately 80% of organic food sales take place through the multiple retailers. The rest is through independent retailers or direct sales (Defra, 2002, 2003; Soil Association, 2002). The sharp rise in availability of organic products has inevitably led to marketing difficulties for farmers in some sectors with considerable pressure put on organic prices (Defra, 2003). In terms of marketing, almost a quarter of organic farmers carry out some form of value adding, primarily some form of processing (NFU, 2003).
The fall in level of profitability is having an impact on business confidence, and the dominance of foreign produce in the organic sector is a principal concern for UK organic farmers (NFU, 2003). Imported products are currently also more profitable to retailers reflecting lower costs of production, further offset by exchange rate factors (Defra, 2003). There is also the issue of reliable availability of UK produce (Soil Association, 2002).
In 1998/99, some 70% of organic produce was imported was imported (Ward, 2000), despite clear government targets to expand organic production. In contrast roughly the same proportion of conventional food in the UK is supplied from UK producers (Defra, 2003). Although the proportion of imported products has fallen, the UK is still a net importer of organic produce, importing 56% (Soil Association, 2004).
With regard to the produce itself, horticulture is the most important organic category for consumers. Imports predominate as the UK is not suited to year round production, and intensive conventional systems are difficult to convert. In livestock production, hill and upland farms are over represented compared with lowland, and a fall in conventional prices has put pressure on organic prices, forcing reductions. In arable systems there is a relative shortage of organic arable production, for both livestock feed and human consumption (Defra, 2003).
Nevertheless there has been an increase in all organic product markets in relation to production and sales. Meat and poultry product sales have expanded significantly, horticulture has increased marginally, and there has been some increase in milk and dairy products, arable crops and fruit (Soil Association, 2002).
In terms of the customer base there is a committed core of consumers (8%), although this is unlikely to increase substantially, although there is some potential amongst less regular buyers in relation to increasing value and frequency (Soil Association, 2002).
In relation to the wider economic benefits, it is suggested that organic farming gives rise to the following environmental benefits (Defra, 2002; Soil Association, 2001, 2002b):
• Higher levels of biodiversity • Lower environmental pollution from pesticides • Lower use of energy inputs (e.g. inorganic N fertilisers) which in turn contributes to a reduction of carbon dioxide emissions • Reduced reliance on external materials produces smaller quantities of waste (Defra, 2002)
A77 Agricultural Futures and their Implications for the Environment: Defra ISO 209
• Emissions of nitrous oxide, methane emission per hectare, and ammonia emissions are likely to be lower, • improve water resources and quality, reduce N leaching, • increase soil organic matter and therefore soil protection (Soil Association, 2001).
In terms of social benefits (Defra, 2002), organic production meets demands from consumers for high standards of assurance regarding production methods, helps develop the link between the buyer and seller in relation to interest in how land is farmed, promotes animal welfare standards, and can provide rural employment benefits through farming practices and marketing systems. It is also suggested that organic produce is healthier than non-organic food because it is safer and more nutritious (Soil Association, 2002b).
2.2 Low input, integrated farming systems
Awareness of the environmental impacts of agricultural production, coupled with excessive supply of some products, has highlighted the need to find more sustainable farming practice. Low input, Integrated Farming Systems (IFS) are seen by some as one way of achieving this goal (Park et al, 1997).
IFS aims to maintain financial viability through optimising the use of inputs by substitution and/or reduction, to reduce off-farm inputs whilst maintaining food quality and income, to offer environmental benefits when compared to conventional systems (Jordan and Hutcheon, 1994; Park and Seaton, 1996). Unlike organic or ecological farming where reliance is placed on self-regulating agro-ecosystems rather than external inputs, an IFS combines organic concepts with the need to maintain yield and farm income using a combination of farming practices – be they mechanical, biological or chemical – to sustain production, maintain income and safeguard the environment (Bailey et al, 2002).
Further, and again unlike organic systems, IFS receive the same support from CAP as conventional farmers. Linking Environment and Farming (LEAF), was set up as a registered charityin 1991 to promote the concept of Integrated Farm Management (IFM). LEAF defines IFM as “a whole farm policy providing the basis for efficient and profitable production which is economically viable and environmentally responsible. IFM integrates beneficial natural processes in modern farming practices using advanced technology. It aims to minimise environmental risk while conserving, enhancing and recreating that which is of environmental importance.” (LEAF, 2003a). LEAF works through demonstration farms, promotional material, technical guidance and lobbying. In 2001, it had 41 demonstration farms plus other corporate, college and farming members. LEAF members represented around 15% of the cropped land in the UK and 275,000 hectares of land was assessed through the LEAF audit (LEAF, 2001). In November 2002, the LEAF Marque was launched (LEAF 2003b), an assurance scheme for the fresh produce sector whereby produce is grown to IFM standards.
2.3 Woodland and energy crops
2.3.1 Wooded Areas
In prehistoric times, England was largely covered by woodland (Smith, 2003). Based on an analysis of the Domesday Book, Rackham (1980) estimated that approximately 15% of England was covered with woodland. At the end of the 19th century, the proportion of England covered by woodland was only 5%, but since then woodland area has expanded.
In 2004, the woodland cover (over an area of 0.1 ha) was estimated to be 1,115,000 ha (8.6% of the land area) in England, and 286,000 ha (13.8%) in Wales (Figure 1). By comparison the
A78 Agricultural Futures and their Implications for the Environment: Defra ISO 209
woodland area in Scotland was estimated to be 1,330,000 ha (17% of total area; Forestry Commission, 2004a). These percentages are substantially below those of other European countries such as France (28%), Spain (29%), Germany (31%) and Italy (34%) (Forestry Commission, 2004).
Approximately two-thirds of the woodland in England is broadleaf (745,000 ha) and a third in coniferous (370,000 ha). This compares with an area of arable crops (including set-aside) in England and Wales of 3,778,000 ha and 62,000 ha respectively (Defra, 2004). Approximately 81% of the woodland in England is privately owned (910,000 ha), with the remainder owned by the Forestry Commission, primarily based in Kielder, the North York Moors and Thetford (Forestry Commission, 2004a).
1500
1000 Non-FC broadleaves nd ('000 ha)
a FC Broadleaves Non-FC conifers 500 FC Conifers woodl
Area of 0 England Wales Scotland
Figure 1 Area of Forestry Commission (FC) and non-Forestry Commission woodland in England, Wales and Scotland in March 2004 (Forestry Commission, 2004b)
2.3.2 New planting
Since 1992, in England and Wales, approximately an additional 5,000 to 6,000 ha of new woodland have been planted each year (Figure 2). These levels are broadly similar to the level of replanting of existing woodland. Approximately 86% of this new planting comprises small blocks of broadleaf planting on farmland, typically planted with environmental or conservation objectives. Future timber production is usually a minor concern. Most of this planting take place with support from the Woodland Grant Scheme (WGS) and the Farm Woodland Premium Scheme (FWPS). The ERDP provides for a total expenditure over 7 years of £77m on the FWPS and £139m on the WGS over the 7 years 2000 to 2006. Between 1980 and 1996, the area of broadleaf woodland in England showed a 36% increase in area, whereas the area of conifers was calculated to have declined by 7% (Smith, 2003). The WGS and FWPS were closed to new applicants in 2004 and are being replaced by the English Woodland Grant Scheme, which will be open in July 2005.
A79 Agricultural Futures and their Implications for the Environment: Defra ISO 209
8
) 6 ting Forestry Commission a n 4 Wales 000 h
' England w pla ( 2 Ne 0 92 93 94 95 96 97 98 99 00 01 02 03 04 Year
Figure 2 Area of new woodland planting on private woodland in England and Wales and on Forestry Commission land in both England and Wales (Forestry Commission, 2004b)
2.3.3 Value of forestry and timber prices
Forestry provides employment for about 14,700 people in England and 4,099 people in Wales (Forestry Commission, 2004). In 2003 forestry employed Forestry’s contribution to the GDP is considered to be 0.04% of the gross values added (CJC Consulting, 2003).
The timber market is dominated by world market conditions. Over the last 30 years, there has been a long-term decline (-2.2% per year) in the real price received for timber (CJC Consulting, 2003) (Figure 3). CJC Consulting (2003) cites the following key sources of pressure on the price of home-grown timber:
• The high value of the pound against the currencies which export timber to Britain • The increased recovery of recycled paper • Cost pressures arising from increased legislation, regulation and insurance premiums • High values placed on industrial land for alternative use, particularly in the South of England.
60 50 50
40 ) -3 40 m
; £1996) 30 -3 (£ 30 20 e lu
a 20 ous standing sales 10 V
price (£ m 10
Conifer 0 0 74 78 82 86 90 94 98 02 94 96 98 00 02 Year Year
Figure 3 a) Average coniferous standing sale price for Great Britain (expressed in terms of £1996) (Forestry Commission 2003b), and b) approximate value of sawlog prices and standing sales of timber in the UK from 1994 to 2002 (FCAP Supply and Demand Sub-Committee, 2002).
2.3.4 Changes in forestry policy
During the past 20 years, the key changes in the area of forestry and woodland management in England and Wales have been related more with changes in policy, rather than
A80 Agricultural Futures and their Implications for the Environment: Defra ISO 209
technological innovation. Perhaps, in advance of agriculture, forestry policy has increasingly focussed on social and environmental objectives. In terms of public sector investment, the focus is no longer on timber production, but on other social and environmental benefits. Some of this has stemmed from 1992 Rio Earth Summit and the forestry guidelines agreed in 1993 which provided the framework for sustainable forestry in the UK (Forestry Commission, 1998). The potential non-market benefits of woodlands include open access recreation, landscape, biodiversity, carbon sequestration, an impact on water quality and supply, and pollution absorption. Various attempts have been made to quantify an economic value for these benefits (CJC Consulting, 2003).
Current UK forestry policy (Forestry Commission, 1998) has two main aims:
• The sustainable management of the existing woods and forests, and • A continued steady expansion of the woodland area to provide more benefits for society and the environment
The English Forestry Strategy has set out a national programme for forestry (Forestry Commission (1998), and it currently has four key elements:
• Forestry for rural development • Forestry for economic regeneration • Forestry for recreation, access and tourism, and • Forestry for the environment and conservation.
2.3.5 Energy crops from woody biomass
The development of biomass crops for renewable energy has been suggested as a potential land use change that could meet the UK’s renewable energy needs in the short-term (English Forestry Forum, 2002). Potential energy crops include willow and poplar and miscanthus. In order to supply 1% of the UK electricity from energy crops would require about 160,000 ha. Coates (1999) estimated that to make a significant contribution to Kyoto targets, then a total of 125,000 (ha) of energy crops would be required.
In 2001, biofuels and waste were estimated to contribute about 85% of energy produced from renewable resources (DTI, 2003). However almost all of this is from electricity and heat generated from municipal waste, landfill, and sewage (Figure 4); the amount produced from other sources including farm waste, bone meal, industrial waste, poultry waste and coppice was only about 11% (DTI, 2003). The amount generated from bespoke energy crops is very small.
A81 Agricultural Futures and their Implications for the Environment: Defra ISO 209
4,000 3,500 Heat: other 3,000 Heat: straw and coppice tion Heat: wood 2,500
duc Heat: waste o 2,000 Heat:solar pr 1,500 Electricity - other incl coppice gy
r Electricity: landfill,sewage, waste e
n 1,000 Electricity: hydro E 500 Electricity: wind
('000 tonnes oil equivalent) - 1996 1997 1998 1999 2000 2001 Year
Figure 4 Renewable sources to generate electricity and heat (Department of Trade and Industry, 2003)
In 2002, the total area of energy crops planted in England was 1,500 ha (English Forestry Forum, 2002). The closure of the ARBRE (ARable Biomass Renewable Energy) project, which aims to produce 10 MW of electricity, has been a recent setback in the development of short rotation coppice (Smith, 2002). Some small-scale local projects have also faced resistance because of the landscape impact of the conversion-plant.
A82 Agricultural Futures and their Implications for the Environment: Defra ISO 209
3 Future Developments
3.1 Organics and low input systems
Extrapolation of recent trends suggest that consumer preferences are likely to move in favour of healthy, ethical foods that are likely to be passed through to food processors and producers through the procurement actions of the major retailer. This will impose more conditions and responsibilities onto the supply chain but simultaneously will offer new market opportunities. Rising disposable income and leisure time are likely to increase participation rates in rural recreation activities, increasing the call for public access and recreational services on the countryside.
In relation to the organic sector, there are suggestions that the organic sector will account for 30% of production and 20% of the retail food market by value by 2010 (Defra, 2003; The Organic Targets Bill Campaign, 2001). However, there is a need to address a number of issues if this is to be achieved (The Organic Targets Bill Campaign, 2001), specifically keeping production and market growth in balance, linking supply chains, improving production and information services, and developing production standards. Currently, there is inadequate training capacity and access to technical information and more research is required to develop best practice. Bottlenecks exist in the supply chain particularly with regard to seed and feed, and the conversion of arable and horticulture production is relatively slow. The slow development of distribution networks for organic produce is also a significant barrier.
In relation to other systems, market forces such as the rising cost of fertilisers and pesticides, and lower and more variable product prices have forced farmers to examine their costs of production as a way of securing profitability (Park et al., 1997). As a result, many have been adopting some integrated techniques such as reduced cultivation, precision fertilisation, and the use of reduced dose pesticides (Bailey et al, 2002, 2003). Many of the techniques, suggested as part of an IFS approach, have been tried and widely used at various times in the past (Park et al, 1997).
Although farmer response to reduced commodity prices could lead to less intensive farming, this is not necessarily integrated, environmentally benign farming practice with more precise targeting of inputs. The adoption of full IFS is therefore likely to be limited at present (Park et al, 1997). Farmers are generally risk averse and may be inclined not to adopt the more radical IFS techniques, which are perceived to offer limited financial benefit in the absence of Government incentives. Integrated systems may offer commercial advantage when it supports a traceability or assured quality system, such as LEAF Marque (Bailey et al, 2002).
A distinction therefore needs to be made between farmers adopting selected environmentally beneficial techniques which fit with their existing farming system and those who more purposefully adopt a comprehensive integrated approach Relying on market forces to drive the adoption of different methods may mean that the overall rate of change is slow (Park et al, 1997). Organisations such as LEAF will have a key role in demonstrating that integrated techniques can offer relative advantage and be easy to adopt (Park et al, 1997). The growing number of farmers adopting a LEAF (1994) or organic farming systems indicates that, even under existing market and support regimes, farmers are moving towards less intensive, less environmentally damaging.
A83 Agricultural Futures and their Implications for the Environment: Defra ISO 209
3.2 GM crops in the USA and UK
3.2.1 GM technology: a global Industry
GM technology involves the engineered transfer of genetic structures and characteristics of plant and animal from one to species to another such that the resultant genotype has potentially beneficial features. In the case of crop and livestock products, these are potentially yield enhancing characteristics whether increased responsiveness to inputs, resistance to direct damage by pest and diseases or indirect damage associated with the use of chemical prophylactics. In the case of animal bio-technology, interventions can also be designed to modify behavioural characteristics. Since 1999 in the UK, there has been a voluntary moratorium on the commercial use of GM technology in agriculture, subject to the outcomes of field trials and the current public debate.
The bio-science sector is international. Of the six major companies that now dominate the biotechnology sector, three are US owned: Monsanto, DuPont and Dow, and three are European: Bayer, BASF (German) and Syngenta (Swiss). These companies specialise either entirely in agricultural biotechnology, pesticides and seeds (Monsanto and Syngenta), or have developed specialist businesses to cover these areas (Dow AgroSciences, DuPont Agriculture and Nutrition, BASF Plant Science, Bayer Crop Science). Monsanto is the world leader in GM crop sales. In 1998, it had 88 per cent of the total market. The companies have varied histories, DuPont, Dow, BASF and Bayer are traditional, well established chemical companies, with long involvement in agrochemicals, while Monsanto had focused on discovery of herbicides, but became a leader in GM technology and grew by acquisitions. There has been a concentration of power in US agriculture concomitant with the introduction of GM. In first five years that GM was commercially available, during the mid to late 1990s, suppliers of inputs, and numbers of seed companies went from over 400 to just five major players.i
In the United Kingdom, the biotechnology sector has been in decline for the last twenty years. Since 1980, the number of research and development posts in the agrochemical and biotechnology sector has decreased by over sixty per cent. The largest annual decrease was between 1999 and 2000, in the period following the Great GM Food Debate. No agrochemical company has its headquarters in the UK, and there is only one major commercial centre, Syngenta in Berkshire. There has been a moratorium on commercial production of GM crops in the United Kingdom since 1999.ii
3.2.2 GM: the USA experience
GM crops, notably maize and soya, are grown widely in USA and Canada, Argentina and China. In the United States, more than 70 per cent of processed food contains genetically modified ingredients. Around 80 per cent of soy and one-third of maize became GM within five years of commercialisation. In an average US supermarket, 2000 products contain maize and soy, thus most of these contain GM ingredients.iii
The USA experience gives an indication of the patterns of adoption. Agri-business has been quick to adopt GM technology, in pursuit of potential benefits of some yield enhancement (especially in maize), but mainly cost reduction through reduced labour, machinery and herbicide costs (especially in soya). Family farms have largely resisted GM in the USA because of the implications for freedom to farm. Farmers using GM products sign “technology use agreements” with the supply company. If they adopt GM, it is difficult for them to guarantee that other crops are GM free, because they cannot secure the required separation distances between fields. Thus while the GM area is high, a large proportion of farms do not use GM technology.
A84 Agricultural Futures and their Implications for the Environment: Defra ISO 209
The evidence on GM benefits is mixed. In the case of maize, GM has provided resistant to corn borer, but other crops problems such as stalk rot have arisen which has led to crop lodging.
Where they co-exist, it has been difficult to segregate GM and non GM crops in the supply chain. Seed supply companies cannot guarantee that seed is GM-free and grain merchants operating elevators do not separate GM and non-GM crops. As a result, many US farmers find it impossible to produce GM-free maize for the US or European market, giving rise to an estimated loss of $200 million per year. This niche has been exploited by Brazil, which has a moratorium on commercial production (NFFC, 2000; Hollingham, 2003). However, in 2003 Brazil admitted that a large part of its soya production had been illicitly produced with Argentinean seed, removing the country’s ability to claim GM free status.
3.2.3 The UK GM debate
In early 1999, a period of intense media interest in GM took place, which came to be known as “The Great GM Food Debate” sparked public concern about the potential risks to human health associated with consumption of GM foodiv.v Some of the factors contributing the heated nature of the exchanges included:
• the erosion of public confidence in the UK food industry following the BSE crisis in 1996, • the importation of unsegregated soya and maize in 1999, and • the establishment of a coalition of GM critics including Friends of the Earth, the Soil Association, the Vegetarian Society, and public figures such as the Prince of Wales.vi
The debate remained in the news in subsequent years following a successful campaign spearheaded by the group Five Year Freeze advocating a moratorium on commercialisation of GM crops and further safety testing.
A Public Debate was held between June 2002 and July 2003 to aid the UK government in making a decision on commercialisation. The debate was comprised of three strands, a scientific review, an economic review and a public consultation. In early 2003, the UK Government decided to process nineteen applications for growing and importing GM crops and forward them to relevant member states and eventually the European Commission for authorisation. Critics claimed this action effectively by-passed the public debate. Margaret Beckett, the Environment Secretary claimed that many of the applications were “not new” and “already in the pipeline”.vii Sue Mayer of Genewatch UK said “It is premature not to say outrageous, to carry on the licensing of GM crops before either the scientific evidence has been gathered or the public consulted. It makes the whole exercise seem pointless”. Other members of the steering committee echoed this sentiment.viii The government response was that it had not taken any decision about commercialisation, and that in any event, it would not know whether the applications that were submitted were successful until after the public debate had concluded, which may suggest that the government was confident that the conclusions from the debate would advocate commercialisation.
It is apparent that public views on GM technology revolve around key institutional players, including the government, corporations, and NGOs. Non-experts are not necessarily anti-GM, but in a recent survey ixmost expressed concerns that the process by which GM was entering the food chain in the UK was already a fait accompli, and essentially undemocratic.
A85 Agricultural Futures and their Implications for the Environment: Defra ISO 209
3.2.4 GM futures
Most involved in the GM public debate believe that commercialisation will take place within the next few years. There has been a ‘de facto’ moratorium in the EU since 1998, which the UK government and other member states maintain is illegal. A recent survey of UK farmers revealed a resistance to GM because they believe it will erode what little control they have left over their production. All have said they would use GM technology where this would improve profitability. When looking at GM futures, analysts draw parallels with the green revolution, which, while increasing yields, benefited large farmers to a greater extent than smaller farmers. If we are considering what will happen in the UK, we can draw lessons from GM’s introduction in the United States.
For the most part, GM technology is consistent with globalisation, of bioscience and of agri- business. Indeed the world market model, driven as it is by economic imperatives, will drive investment in GM technology as well as secure its acceptance, not least by removing any ‘artificial’ barriers to trade. GM technology is much less compatible with a local stewardship model.
3.3 Woodlands and energy crops
The key drivers in terms of the future development of the woodland and energy crop sector are considered in terms of the supply and demand for timber, the profitability of agriculture, climate change, support for amenity and conservation measures, and technical developments.
3.3.1 Supply and demand for timber
In 2001, output of timber from Great Britain was 9.6 million m3 (CJC Consulting, 2003). Of this less than a third (2.3 million m3 of conifer and 0.6 million m3 of broadleaf) was derived from England (CJC Consulting, 2003). The forecast for future UK annual round wood production is estimated to peak at 16 million m3 around 2025 (Figure 5), before declining to about 11 million m3 in 2050 (Whiteman, 1996).
20 UK Broadleaf sawlogs
) re 3
tu 15 m Coniferous sawlogs upply fu f s
000 10 0, st o 5 Broadleaf small ('00 wood roundwood eca r
o 0 Coniferous small F 2000 2010 2020 2030 2040 2050 roundwood
Figure 5 Forecast of future UK average annual roundwood supply (Whiteman, 1996)
The total demand for wood in the UK (expressed in terms of wood raw material equivalent (WRME) is predicted to rise to about 93 million m3 year-1 by 2025 and about 114 million m3 year-1 by 2050 (Figure 6) (Whiteman, 1996). A key factor in determining the demand for wood is the level of recycling within the paper industry. In 1996, the UK paper industry used recycled paper for about 50% of its raw material (Whiteman, 1996). In 1989-91, for the UK, the level of self sufficiency in wood-based products was about 10%; the predicted levels of self sufficiency in 2025 and 2050 are 17% and 10% respectively (Whiteman, 1996). In the case of saw-wood self-sufficiency is expected to peak at about 50% in 2025 before falling back to about 40% in 2050 (Whiteman, 1996).
A86 Agricultural Futures and their Implications for the Environment: Defra ISO 209
120 Other incl fuelwood
UK 100 e ) 3 nd Sawnwood m 80 ma
000 60 of futur t
00, Wood-based panels s 40 0 a ' ( wood de ec 20 Paper products For 0 1990 2000 2010 2020 2030 2040 2050 Year Figure 6 Forecast demand for wood in the UK (mean of high and low growth scenario) (Whiteman, 1996)
Such a high level of imports means that the domestic price of wood is effectively set by the world price. Conversely because domestic supply is very small compared to world supply, UK production has little impact on world prices. At present there seems little scope for a long-term increase in timber prices (CJC Consulting, 2003).
3.3.2 Profitability of agriculture
The use of land for forestry or farm woodland planting is closely linked with the demand for land for agricultural production. The uptake of woodland planting schemes, such as the Woodland Grant Scheme and the Farm Woodland Premium Scheme, are likely to increase if the profitability of alternative crop or livestock enterprises is low.
As the climax habitat for many parts of the country, woodland also represents the natural habitat if other forms of land management become uneconomic. In upland regions, in particular, a decline in sheep numbers and an uptake of livestock exclusion grants can result in the natural regeneration of woodland. In lowland regions, woodland planting is possible on set-aside land.
3.3.3 Legislation related to climate change
The UK government has committed itself to reduce carbon dioxide levels by 20%, and greenhouse gases by 12.5% by 2010 compared to 1990 levels. In order to help lock up carbon dioxide, the government is likely to continue its support for farm woodland planting. In 2002, the Renewable Obligation Order came into effect in England (DTI, 2003), with the aim that by 2010, 10% of licensed electricity sales in the UK will come from renewable sources. This is an obligation on all electricity suppliers. There may be increased opportunities for energy crops and tax breaks for the production of biodiesel (Renewable Energy from Agriculture, 2003).
Although the 10 MW ARBRE plant is currently closed, there remain opportunities for increasing the value of straw, such as the 31 MW straw-fired power station at Ely (DTI, 2003). It consumes 50 to 60 half-tonne straw bales per hour fed by a stream of trucks collecting from farms up to 50 miles away (Cyberium, 2003).
3.3.4 Support for amenity and conservation
The UK government is also likely to continue to support woodland planting in terms of its amenity and recreation particularly near urban areas (Table 1). There are also benefits in terms of creating wildlife habitats. Biodiversity and conservation commitments, within the
A87 Agricultural Futures and their Implications for the Environment: Defra ISO 209
UK Biodiversity Action Plan, include woodland Habitat Action Plans involving lowland beech and yew woodland, native pine, upland mixed ash woodlands, upland oakwoods, wet woodland, and wood pasture and parklands. Benefits in terms of maintenance of water quality, reduction of pollution, and mitigation of flooding are often cited as benefits from woodland planting, but these benefits are hard to quantify.
Table 1 Estimated benefits from government intervention to procure different woodland outputs (CJC Consulting, 2003)
Woodland output Estimated benefit (£ ha-1 Present Value at 3.5% in perpetuity) New urban amenity >£1,000,000 for 5000 households, but dependent on context Urban regeneration Benefits greater than for amenity Rural amenity Insufficient evidence Additional local access >£30,000 Recreation £5,500 (based on Forestry Enterprise woodlands) Biodiversity £29,000 (based on new broadleaf native woodland) Carbon sequestration Dependent on market Timber Intervention inappropriate Water pollution reduction Minimal benefits Rural development Limited evidence
3.3.5 Technical developments
Whiteman (1996) predicted an annual increase in timber productivity per area of land of only one third of a percent per year. Increased timber yields can arise from better plant handling, site preparation and protection and the use of genetically superior stock. By contrast the inclusion of greater areas of open space in restock forests and retaining some mature stock is likely to reduce timber productivity per hectare.
One potential area where there may be technical developments is in the development of biodiesel crops (this is addressed in more detail in topic paper 11). Rapeseed oil is reported to provide a particularly high quality of biodiesel (Greenergy, 2003),
4 Future scenarios
The four scenarios are illustrated in Figure 7. They can be described by narratives or story- lines and selected indicators. The current dominant development paradigm is shown to be mainly a mix of World Markets and Provincial Enterprise.
A88 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Globalisation
World markets Global sustainability
Conventional development Consumerism Community
Provincial enterprise Local stewardship
Regionalisation
Figure 7 Possible futures, based on Foresight
4.1 World markets
World markets are characterised by an emphasis on private consumption and a highly developed and integrated world trading system. Agriculture becomes increasingly concentrated, industrialised, and driven by global markets. The emphasis on efficiency and sophisticated but standardised production methods has driven producers towards specialist, technologically advanced, intensive farming. Environmental concerns features in so much as they effect the economics of production and asset value. GMO’s are widely adopted, partly delivering increased yields, but mainly allowing reductions in crop protection costs. Free trade reduces barriers to international acceptance. Organic farming serves a niche market, for crops and livestock products, but potentially significant given high incomes.
England and Wales are very small-scale producers of timber and it will be difficult to compete with high volume producers such as Sweden, Canada, Finland and increasing the republics of the former Soviet Union. There is the agronomic potential, due to large plantings during the 20th century, for timber production in Britain to rise until 2025.
The value of forests is increasingly focussed not on their value to produce timber, but in terms of their recreational, conservation, landscape and carbon sequestration benefits which are marketable, traded services. Carbon sequestration benefits may also be traded internationally.
4.2 Provincial enterprise
Provincial enterprise is characterised by emphasis on private consumption but with decisions made at national and regional level to reflect local priorities and interests. Although market values dominate, this is within national/regional boundaries. Agriculture is highly protected and supported with emphasis on home produce and self-sufficiency. Farming systems are relatively intensive, with limited importance attached to non-food outputs, including environmental services, except where these affect productivity. Consumer sensitivity to social and environmental concerns is low. Technology change slows down and becomes mainly remedial. GMO adoption is patchy and yield oriented. Organics are not important.
Woodlands for timber are unlikely to meet national needs, especially given dominance of agriculture, but there will be some national and regional forest development to meet paper industry needs. Regional energy crops based on coppicing will feature.
A89 Agricultural Futures and their Implications for the Environment: Defra ISO 209
4.3 Global sustainability
Global sustainability is characterised by more pronounced social and ecological values, which are evident in global institutions and trading systems. There is collective action to address social and environmental issues. Growth is slower but more equitably distributed compared with the World Markets scenario.
The farming sector is market oriented, targeting domestic and international markets, but facing external competition. Farming tends towards high technology solutions but modified to meet social and environmental objectives concerned with supporting the rural economy and enhancing biodiversity. Agricultural policy is compliance driven, with promotion of agri- environmental schemes by government and by the food industry, including organics and IFS. GMOs are used only where they can deliver environmental gain.
Woodlands are likely to expand in order to deliver biodiversity, amenity and recreation benefits which are highly valued, particularly involving new broadleaf woodlands and the extension of ancient semi-natural woodlands. The case for carbon sequestration is likely to grow in importance, and it has relevance to both woodland planting and energy crops. There will be a modest increase in biomass crops.
4.4 Local stewardship
Local stewardship is characterised by strong local or regional governments which emphasise social values, encouraging self-reliance, self sufficiency and conservation of natural resources and the environment. The adoption of organic, low input and integrated farming systems is promoted and diffusion is widespread as part of a commitment to sustainable resource management and rural communities. GMOs are banned.
There is greater integration of forestry, woodlands and agriculture, with silviculture, agro- forestry, and pastoral/woodland options featuring strongly as apart of an integrated approach to land management. Locally managed community forests are common place.
A90 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Table 2 Summary of scenarios and components Component World Markets Global Provincial Local Sustainability Enterprise Stewardship Organic adoption Limited, niche Encouraged Limited to Widespread due market through agri- hobby/lifestyle to health, safety environment farmers and ethical schemes and concerns diversification options Low input Not financially Promoted in Limited adoption, Widespread as adoption viable, extensive marginal areas as mainly high part of sustainable farming systems part of input:output farming, and land use sustainability systems driven by community based, largely abandoned package, and as subsidies labour intensive part of systems. Justified compliance in ethical terms requirements Integrated Limited adoption Promoted as part Limited, non- Widespread Farming Systems in the absence of of good practice existent adoption as part clear financial and compliance of locally defined advantage solutions Precision Adopted as part of Adopted as part of Limited economic Limited adoption. /Spatially intensive, compliance or environmental Principles of Variable Farming mechanised requirements in drivers and precision farming in pursuit pursuit of reduced therefore limited achieved by other of economies of environmental incentive to adopt (labour intensive) scale impacts means, rather than expensive. sophisticated solutions GMOs Widely promoted Selected adoption, Patchy adoption, GMOs rejected on and adopted, driven by driven by limited ethical grounds driven by environmental economics economics benefits incentives, but little concern about side effects Woodlands Mainly import Driven by Economics Woodlands and driven. Domestic sustainability driven, but forestry feature as sector driven by objectives, inevitable an integrated ‘economics’ of potential multiple dependency on component of recreation functions and imports. Some land and natural tourism, and benefits, farm regional markets resource ‘purchased’ woodlands for bio-mass and management environmental support linked to energy crops services. compliance Energy and Global energy Feature as part of Local markets for Positive biomass prices and sustainable energy, but not promotion of markets offer solutions to attractive renewable energy limited scope renewable energy compared to at local level agriculture
A91 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Reference List
Bailey, A.P., Rehman, T., Yates, C.M., Park, J.R. and Tranter, R.B. (2002) An Assessment of Low Input Farming Systems and their Adoption: Some Evidence from the UK. Paper presented at the 17th Symposium of the International Farming Systems Association, November 17th-20th, Orlando, Florida. Bailey, A.P., Basford, W.D., Penlington, N., Park, J.R., Keatinge, J.D.H., Rehman, T., Tranter, R.B. Yates, C.M. (2003) A Comparison of Energy Use in Conventional and Integrated Arable Farming Systems in the UK, Agriculture, Ecosystems and Environment, 97, 241-253 Barrett, H.R., Browne, A.W., Harris, P.J.C. and Cadoret, K. (2002) Organic certification and the UK market: organic imports from developing countries, Food Policy, 27, 301-318 Defra (2002) Action Plan to Develop Organic Food and Farming in England. Defra, London. Defra (2003) Action Plan to Develop Organic Food and Farming in England. England’s Organic Sector: Prospects for Growth. www.defra.gov.uk/farm/organic/actionplan/prospects.htm. Accessed 15/01/03 Defra (2004) Land by agricultural and other uses, Defra, London. http://www.defra.gov.uk/environment/statistics/land/download/xls/ldtb01.xls. Accessed 26/05/05 Jordan, V.W.L. and Hutcheon, J.A. (1994) Economic Viability of Less Intensive Farming Systems Designed to meet Current and Future Policy Requirements: 5 Year Summary of the LIFE Project, Aspects of Applied Biology, 40, 61-68 Lampkin, N., Padel, S., Foster, C. (2000) Organic Farming, pp.221-38, in, F. Brouwer and P. Lowe (eds.) CAP Regimes and the European Countryside. Wallingford, CAB International. LEAF (1994) A Practical Guide to Integrated Crop Management. LEAF. The National Agricultural Centre, Stoneleigh. LEAF (2001) LEAF Annual Review 2001. The National Agricultural Centre, Stoneleigh. LEAF (2003a) Integrated Farm Management. www.leafuk.org/leaf/organisation/ifm.asp. Accessed 26/06/03. LEAF (2003b) LEAF Marque. www.leafuk.org/leaf/producers/join.asp. Accessed 26/06/03. National Trust (2000) Agriculture – 2000 and Beyond. An Agricultural Policy for the National Trust. The National Trust. NFU (2003) Overview of the Organic Survey. www.nfu.co.uk/info/organicsurvey.asp Accessed 24/01/03. Park, J. and Seaton, R. (1996) Integrative Research and Sustainable Agriculture, Agricultural Systems, 50, 81-100 Park, J., Farmer, P., Bailey, A.P., Keatinge, J.D.H., Rehman, T. and Tranter, R.B. (1997) Integrated Arable Farming Systems and their Potential Uptake in the UK, Farm Management, 9, 483-494. Soil Association (1999) The Organic Food and Farming Report 1999. Bristol, Soil Association. Soil Association (2001) Organic Farming and the Environment. Briefing Paper. Soil Association. www.soilassociation.org.uk. Updated August 2001. Accessed 24/01/03. Soil Association (2002a) The Organic Food and Farming Report 2002. Bristol, Soil Association. Soil Association (2002b) Evidence of the benefits of Organic Farming. Research Paper. Soil Association. www.soilassociation.org.uk. Updated July 2002. Accessed 24/01/03. Soil Association (2004) The Organic Food and Farming Report 2004. Bristol, Soil Association. Rimal, A.Moon, P. Wanki, B. (2005) Agro-biotechnology and organic food purchase in the United Kingdom, British Food Journal, 107, 84-97 The Organic Targets Bill Campaign (2001) An Outline Organic Action Plan – A Discussion Document. August 2001. The Organic Targets Bill Campaign, c/o Sustain, London.
A92 Agricultural Futures and their Implications for the Environment: Defra ISO 209
Ward, N. (2000) Actors, Institutions and Attitudes to Rural Development: the UK National report. The Nature of Rural Development: Towards a Sustainable Integrated Rural Policy in Europe. Department of Geography, University of Newcastle-upon-Tyne.
GMOs
AEBC (Agriculture and Environment Biotechnology Commission) (2001) Crops on Trial: a report by the AEBC. London: AEBC. BEPCAG [Biotechnology and the European Public Concerted Action Group] 1997. ‘Europe ambivalent on biotechnology’ in Nature, 387, 845-847. Brown, P. (2003) “GM Licensing Gets Go Ahead: Scots and Welsh Furious as Crop Trials are Sidelined”. The Guardian. 4 March. Woodlands and Forestry Coates, D. (1999) Sustainable rural development and the role of new farm woodlands in England. In: Farm Woodlands for the Future 1-10. (Editors: P.J. Burgess, E.D.R. Brierley, J. Morris and J. Evans). Oxford: BIOS Scientific. A93 Agricultural Futures and their Implications for the Environment: Defra ISO 209 Coed Cymru (2003) Coed Cymru. http://www.coedcymru.org.uk/index.htm Accessed 3 July 2003. Countryside Commission (1996) Woodland Creation: Needs and Opportunities in the English Countryside. Taking Forward the White Paper on Rural England. Northampton: Countryside Commission. Cyberium (2003). Where now for biofuels? http://www.cyberium.co.uk/biofuels.htm Accessed 4 July 2003. CJC Consulting (2003) Economic Analysis of Forestry Policy in England. Final Report for the Department of Environment, Food and Rural Affairs. CJC Consulting; Oxford. http://statistics.CJC Consulting.gov.uk/esg/evaluation/forestry/ch2.pdf Accessed 2 July 2003. Department of Trade and Industry (2003). 7.6 Renewable sources to generate electricity and heat. http://www.dti.gov.uk/energy/inform/energy_stats/renewables/index.shtml Accessed 3 July 2003. English Forestry Forum (2002). Biodiversity Working Group Progress Report. http://www.forestry.gov.uk/website/pdf.nsf/pdf/eff-paper12-02.pdf/$FILE/eff- paper12-02.pdf Accessed 2 July 2003. FCAP Supply and Demand Sub-Committee (2002). Quarterly Market Reports: Forest Enterprise http://www.forestry.gov.uk/website/pdf.nsf/pdf/feqmr.pdf/$file/feqmr.pdf Accessed 19 May 2003. Forestry Commission (1998) English Forestry Strategy. A New Focus for England’s Woodlands. Cambridge: Forestry Commission Forestry Commission (2002). Forestry Facts and Figures 2002. Edinburgh: Forestry Commission http://www.forestry.gov.uk/forestry/ahen-5g5gn7 Accessed 2 July 2003. Forestry Commission (2003a). Area of woodland. http://www.forestry.gov.uk/forestry/ahen-5g5gn7 Accessed 2 July 2003. Forestry Commission (2003b) Coniferous standing sales price index. 22 May 2003. Accessed 3 July 2003. Forestry Commission (2004) Forestry Statistics. Edinburgh: Forestry Commission http://www.forestry.gov.uk/pdf/fcfs004.pdf/$FILE/fcfs004.pdf. Accessed 26th May 2005 Forestry Commission (2004). Forestry Facts and Figures 2004. Edinburgh: Forestry Commission http://www.forestry.gov.uk/pdf/fcfs204.pdf/$file/fcfs204.pdf Accessed 26 May 2005. Greenergy (2003). Introducing the field to forecourt contract. http://www.greenergy.com/eng.htm Accessed 2 July 2003. National Forest (2003). http://www.nationalforest.org/ Accessed 3 July 2003. Rackham, O. (1988). Ancient Woodland. London: Arnold. Renewable Energy from Agriculture (2003). Biodiesel Set To Boost Rural Economy. http://www.greenshop.co.uk/news/Biodiesel%20Set%20To%20Boost%20Rural%20E conomy.htm Accessed 28 April 2003. Smith, R. (2002). Is there life after Arbre? Quarterly Journal of Forestry 96, 285-288 Smith, S. (2003). The National Inventory of Woodland and Trees http://www.forestry.gov.uk/website/pdf.nsf/pdf/national_inventory.pdf/$FILE/nationa l_inventory.pdf . Accessed 2 July 2003. Whiteman, A. (1996). Revised Forecasts of the Supply and Demand for Wood in the United Kingdom. Forestry Commission Technical Paper 19. Edinburgh: Forestry Commission Footnotes for GM i Prime Minister’s Strategy Unit, 2003. ii Prime Minister’s Strategy Unit, 2002. iii Hollingham, 2003. A94 Agricultural Futures and their Implications for the Environment: Defra ISO 209 iv Ewen and Pusztai, 1999. v See the Daily Mail 28 January 1999 and the Express 18 February 1999. vi Durant and Lindsey, 2000. vii The UK government confirmed that their actions conformed to EC Directive 2001/18, which introduces new requirements including a more rigorous risk assessment, post-market monitoring, mandatory public consultation and mandatory traceability and marketing (Secretary of State for Environment, Food and Rural Affairs, 2003). viii Brown, 2003. ix Ian, 538-540. A95 Agricultural Futures and Implications for Environment: Defra ISO 209 TOPIC PAPER 6: ECONOMIC ANALYSIS 1 Introduction This paper provides a broad overview of the economic significance of the agricultural industry. First, it reviews the current economic situation and trends within the sector, specifically incomes, productivity, structural adjustment, employment, and links with the wider rural economy. Second, the paper examines likely future developments. The paper concludes with a section identifying the possible linkages of the various economic indicators with the four Future Scenarios. 2 Current position and past trends identified This section reviews the current economic situation, including trends that have occurred over the last fifty years. 2.1 The Economic role of the sector Over the past 50 years the economic significance of the agricultural industry has declined (Defra, 2002a), although there are some areas where agriculture and its associated sectors underpin the rural economy. In the UK, agriculture currently contributes only 0.8% to Gross Domestic Product (GDP) compared to an EU15 average of 1.6% and a contribution of 5% to UK GDP in the 1950s. Nevertheless, in 2004, agriculture contributed £7.9 billion to the national economy, employing 546,000 farmers and farm workers, or 1.8% of the UK workforce (Defra, 2004). Table 1 Agricultures contribution to the UK economy 1980 1990 2000 2004 Agriculture’s contribution to total economy gross value added: At current prices (£ million) 4,471 7,224 6,669 7,905 % of GVA (current prices) 2.1 1.4 0.8 0.7 Workforce in agriculture (‘000 persons) 671 656 557 546 % of total workforce in employment 2.7 2.3 1.9 1.8 Imports of food, feed and drink (£m) 6,341 12,298 16,828 20,944 (2003) Imports from the EU - - 10,910 11,694 Imports from the rest of the world - - 6,107 6,706 % of total UK imports 12.7 6.1 7.6 7.9 (2003 datum) Exports of food, feed and drink 2,520 6,352 8,737 8,612 Exports to the EU - - 5,348 5,197 Exports to the rest of the world - - 3,389 3,415 % of total UK exports 6.1 6.1 4.7 5.2 (2003 datum) UK self-sufficiency in food as a % of: All food 52.6 56.5 66.5 62.5 Indigenous type food 67.9 72.1 80.0 74.7 Household expenditure on food 29,893 83,263 92,758 98,500 Retail price indices (2000 = 100) Food 50.4 83.3 100 106 All items 39.2 74 100 109.6 Source: Defra, 2005; MAFF, 1992, 1991, 1989. A95 Agricultural Futures and Implications for Environment: Defra ISO 209 Table 2 Agricultures contribution to the economy in 2003: UK, England and Wales (£ million) Gross Gross Value Total Income % Total % Total Output Added (GVA) from farming Economy GVA Employment UK 16,496 7,951 3,186 0.8 1.8 England 12,091 6,013 2,368 0.7 1.4 Wales 1,081 427 165 1.1 4.4 Source: Defra, 2005 However, the real and potential economic value of farming is the wider value of its product – the raw material for the food processing industry, attractive landscapes that are the setting for a rural tourism industry, energy crops for cleaner fuels, and public benefits like flood plain management (Countryside Agency, 2001). For example, agriculture feeds into a dynamic food processing sector including food and drink manufacturing, wholesaling and retailing, and food service, taking the agri-food sectors GDP up to 8% and accounting for 12.5% of total employment. Retail and catering sales in 2001 were over £100 billion (NFU, 2003). Agriculture is also the market for many successful ancillary industries, providing products such as farm machinery and fertiliser and a wide range of services. Agriculture forms the basis of the whole food industry which is the country’s biggest employer. The sector as a whole contributes 14% to GDP. It is also the foundation for the countryside tourism industry worth £12 billion (NFU, 2003). Returning to the economic position of the agricultural industry, the key components of post- war agricultural change are (Winter, 2002): increasing farm size, enterprise specialisation, mechanisation, higher use of chemical inputs, a declining labour force, and intensification of land use. These are trends associated with high productivity and a vibrant industry. Broadly, these characterised agriculture from the 1950s to the early 1980s. With the imposition of milk quotas in 1984 and the MacSharry reforms in 1992, there was a major change to policy. The 1992 reforms were the first major step to bring EU farm commodity prices in line with world prices. In the immediate aftermath, world market prices reached high levels and farmers were also in receipt of compensatory payments. The weakness of sterling served to exaggerate these benefits. Since 1996, however, and with the increasing value of sterling, CAP support prices and direct payments have fallen in real terms. Agricultural organisations stress farming’s sharply declining economic fortunes since 1996 (Ward, 2000), and the threats posed to farm viability by future CAP reforms and the burden of regulations, including environmental regulations. Nevertheless, in 2000 there was evidence of a modest improvement in net farm income in a number of sectors. However, in 2001 the extent and severity of the FMD epidemic has further shaken the financial stability of agriculture, and the farming industry is facing extremely difficult economic conditions which has implications for the structure of the industry and its contribution to the rural economy (Winter, 2002). An additional factor of note in relation to the economic structure of the industry is the changes in land prices that have taken place. The depressions in the 1870s to 1890s and again in the inter-war years led to falling land prices. Post-war, support payments have been capitalised into higher land prices and, despite falling output prices and support payments, agricultural land prices since 1997 have not fallen. There are a number of reasons for this including: (i) stocking rate requirements associated with livestock and extensification premia encouraging farmers to seek more land, and (ii) the buoyancy of the residential market for farms. In the south-west counties, between 51% and 70% of farms for sale as now marketed as residential (Winter, 2002). The high prices attached to farms and to land because of residential demand presents a serious impediment to agricultural profitability and to adaptation of land use by conventional farmers. In previous agricultural depressions, falling land prices allowed innovative farmers to come to the fore with new systems of farming to match the changed economic conditions. In contrast, current high land prices do not serve to A96 Agricultural Futures and Implications for Environment: Defra ISO 209 encourage existing farm owners to experiment in unconventional land uses or to extensify land use. The disincentive for heavily mortgaged new buyers is even greater. 2.1.1 Incomes Despite very high levels of support and protection under the CAP, financial pressures on farm businesses has increased as agriculture has moved from labour to capital intensive forms of production (English Nature, 2001), and farmers’ incomes have declined in real terms. Known as the “cost-price squeeze”, agricultural prices have declined while costs have risen substantially, the benefits of the CAP being capitalised in the values of agricultural inputs such as land and rents. In real terms, farm incomes in the UK halved between the late 1970s and early 1980s, and then almost halved again by the early 1990s (English Nature, 2001). The decline in incomes is exacerbated by currency fluctuations, which have had a disastrous effect on long term business planning and sensible investment decisions. A few years ago there was a marked recovery in farm incomes, primarily because of the fall in the value of the pound sterling. However, from 1997 farmers saw another marked fall in farm incomes and became increasingly dependent on direct and indirect government support. Weak world commodity prices, the strength of the pound compared to the Euro, and the impact of the BSE crisis coincided to cause a 60% decline in ‘Total Income from Farming’ in the UK between 1995 and 1999 (MAFF, 1999a). In Wales, the farming crisis has had a very high profile, with particular concern about the future of the Welsh Family Farm (Ward, 2000). However, farm income successfully increased through 2001-2003, although still below its 1995 peak. Farm incomes dipped slightly in 2004 (Defra, 2005). Further, many farm families have, by necessity, sought additional income from off-farm employment and diversification such as tourism and recreation. These are now seen as a means of maintaining the farming population (English Nature, 2001). The ‘crisis’ in farm incomes is, thus, hitting farming dependent households much harder than pluriactive households. However, opportunities for diversification might not always exist or hold sufficient potential, in themselves, to underpin the profitability of a farm (National Trust, 2000). Alternatives are part-time farms with individuals who generate income from employment or business activities elsewhere. The economic well-being of farming families will thus depend increasingly on the dynamism of other aspects of the rural economy. For the future, agriculture is polarising, with a modest growth of on-farm processing, organic farming or other premium products. This is counter to trends in farming for bulk commodities, increasing scale, efficiencies in production and use of technology (English Nature, 2001). Table 3 Average net farm income by type of farm (2003/2004 prices) 1997/98 2000/01 2003//04 England Wales England Wales England Wales Dairy 19,700 22,900 14,000 12,300 25,100 18,100 Cattle and Sheep (LFA) 12,700 8,100 5,900 3,900 14,900 15,900 Cattle & Sheep (Lowland) 2,200 2,800 -400 800 7,200 8,900 Cereals 18,400 - 7,500 - 38,700 - General Cropping 20,000 - 18,600 - 59,900 - Pigs and Poultry 19,300 - 36,200 - 44,900 - Mixed 6,400 - 7,600 - 25,100 - Source: Defra, 2005 A97 Agricultural Futures and Implications for Environment: Defra ISO 209 2.1.2 Productivity In terms of productivity (output in relation to input) and output, British agriculture saw, until recently, unprecedented growth from 1945 onwards. This was primarily driven by continued public support, first through the Deficiency Payments of the 1947 Agriculture Act and then by the Common Agricultural Policy from 1973. Since 1973, the productivity of the UK agricultural industry has increased by over 40%. This is despite production quotas in some sectors. Increases in labour productivity, which since 1973 has more than doubled, has been the key factor driving this growth. Guaranteed support prices for agricultural output have also given a continuous impetus to production and fostered technical change to improve efficiency and maximise productivity. This has been complemented by Government funded research and development and advisory services. Taxpayers spend £3 billion annually on agricultural support (Policy Commission, 2002; Pretty et al, 2005), and total support to UK agriculture is estimated at £5.27 billion (MAFF, 1999b). Despite an annual increase in productivity since World War II, agriculture’s contribution to GDP is falling steadily and currently stands at 0.8%, a drop of almost 1.4% over the last 16 years. In addition, productivity gains have been smaller than those in the rest of the EU (Defra, 2002a) reflecting differences in terms of the structure of farming industry and the importance of different commodities. In the mid 1970s, agricultural productivity was above the EU average. By the early 1990s it had fallen back to around the EU average. Since then the UK appears to have fallen further back, although in the late 1990s, productivity increased significantly, with labour productivity increasing by 8% alone in 1999 (NFU, 2000). Nevertheless, a study by the National Farmers Union concludes that agricultural productivity in the UK is now below the top performing EU countries in all the main farming sectors: dairy, cereal, horticulture and livestock (NFU, 1998). The UKs slow productivity growth reflects a slower pace of restructuring in UK farming with reductions in the number of farms and in the number of people working in farming having been at a slower pace in the UK than in the rest of Europe (Lobley et al, 2002; MAFF, 1999b). Further, the development of farmer controlled businesses or cooperatives, with their potential for economies of scale, purchasing power regarding input supplies and more effective marketing is more pronounced in other EU countries. Additionally, the level of education and skills in the agricultural workforce in the UK is lower than in many other EU countries (Schimmelpfenning and Thirtle, 1999). However, a comparison of the productivity performance of the different farm businesses in the UK shows that there is significant scope to improve performance. There are significant differences across UK agriculture between the better performing farms - in terms of productivity and profitability – and the less successful farms. The main differences in performance reflect differences in costs and differences in the value added achieved from differentiating higher product quality (MAFF, 2001b). Economies of scale are important but equally so too are other factors, relating to skills and business organisation (MAFF, 2001b) as well as externally determined factors to do with climate and geography. Studies also show that farmers with higher levels of skills are more likely to re-structure their business to improve its performance and that higher levels of skill are associated with greater on-farm innovation and technology transfer (Lobley et al, 2002). 2.1.3 Structural adjustment Productivity improvements, linked with other developments, have had a significant impact upon the economically optimum size of an agricultural holding. Since 1945, the number of A98 Agricultural Futures and Implications for Environment: Defra ISO 209 farms in England and Wales has virtually halved to 184,000 but the average size of holdings has increased (English Nature, 2001), in terms of both area (hectares) and numbers of livestock on individual farms, with increases in livestock ranging from 40% to 150%. Generally speaking, farm enterprises are now more specialised and intensive and there is less mixed farming. In the light of changing economic circumstances, agriculture has to adjust to remain viable in the face of competition from other land uses. This has lead to a degree of farm diversification and also to changes in land-use practice. Farmers have looked to diversify their land using activities in order to supplement incomes. Much farm-based work is now concerned with activities such as woodland management, farm shops, equestrian activities, recreation, holiday cottages and various agricultural services. Findings from a recent survey based on a random sample of June Census holdings, indicate that 58% of farms have diversified in some way (Turner et al., 2003). The same report shows that since 1989 diversification has increased substantially, both in the number of holdings diversifying and in the number of diversified enterprises per holding; diversification is more established with few giving up the enterprise once entered. Economically, diversification compares favourably with agricultural activities. The more attractive options include accommodation and catering, agricultural services, trading, e.g. box schemes, and certain non-tourist activities, e.g. the letting of buildings. The outlook for the future is that there will be more diversification, with a number of holdings expanding and adding to their activities. As well as alternatives to agriculture, change is also taking place within agricultural production activities. Changing agricultural systems and practices are influencing the rural environment as land use patterns change. Contract farming and collaboration (share farming) activities have grown in popularity in the last 10-15 years. A Dispersals Survey examining structural change (FPDSavills, 2001) observed an increase in contracting arrangements, use of farm business tenancies, and share farming. In the same report, the Farmer Survey observed commitment to farming as highest amongst those on large farms. Livestock, cattle and sheep, farms were notably more inclined to say they would be leaving farming. Consequently, this has meant the emergence of a dualistic agricultural sector, with large farm realising economies of scale alongside the growth of smaller pluriactive farms. With regard to farm expansion; it is common amongst those already above average size, but expanding farmers did not tend to increase the intensity of farming on land they had taken on (FPDSavills, 2001). Also of interest, is that as farm size has increased, interest in participation in agri-environment schemes has also increased, particularly with arable farmers. There is also currently, more interest in agri-environment schemes amongst livestock farmers but this is unrelated to size (FPDSavills, 2001). Since 1996/97 new issues have emerged about the rate and scale of agricultural restructuring as a result of sharply declining farm incomes, brought on by falling commodity prices and the BSE crisis and compounded by the strength of the pound compared to the weak Euro (ward, 2000). Farming groups emphasise the recent sharp decline in farming incomes and the challenge of strengthening agricultural competitiveness (NFU, 1998, 1999). In England, there are clear signs of restructuring, with some distinct regional differences: for example, in the east the low levels of off farm employment and the presence of expanders are above average, in the midlands the levels of diversification and off farm employment were ‘notably high’(FPDSavills, 2001). In Wales, the levels of land and dispersal sale activity are below average, suggesting adjustment is less radical. There is some expansion, but also debt accumulation, and levels of off-farm employment are high (FPDSavills, 2001). Economic A99 Agricultural Futures and Implications for Environment: Defra ISO 209 pressures are particularly acute among livestock producers, who are concentrated more in Wales and in the north and west of England (Ward, 2000). Significant structural adjustment will continue as different categories of land owners/occupiers adopt different survival strategies in response to the policy and market signals that come out of the Common Agricultural Policy (CAP) reforms and international trading rules (English Nature, 2001) 2.1.4 Employment Traditionally, agriculture has provided substantial employment in rural areas but technological development and mechanisation over the last 25 years has reduced labour requirements substantially (National Trust, 2000). Of the total labour force only 2%, i.e. 550,000, are currently employed in agriculture (Ward, 2000), compared to 6% in the 1950s. The volume of paid work has dropped by 46% between 1973 and 1999. Part time workers have risen from 25% to nearly 40%. Full time employment in agriculture was reduced by nearly 80% between 1960 and 1996 (MAFF June census figures). One of the factors regarding the reduction in labour is the increased use of contractors; the greatest inclination for this option is amongst the mid-sized (100-200 hectares) farms (FPDSavills, 2001). These changes have inevitably affected the composition of rural communities and had implications both upstream and downstream in associated business (National Trust, 2000). This reduction in the agricultural labour force has occurred in all industrial countries. Farm workers leaving the industry have gone to better paid and more attractive employment (“pull” factors), while mechanisation and other technological advances have often displaced some hired labour (“push” factors). However, agriculture still provides employment in areas of the country where alternative opportunities are scarce. In a small number of rural districts in England, agricultural employment can be much higher than the national average, and in much of rural Wales farming represents 15-20% of the workforce (MAFF, 1999c). Additionally, the lower pace of structural change in the livestock sector and continuing role of family farming, combined with diversification and off-farm working has meant that there has been less of a fall in employment on these farms. (Winter, 2002) With regard to employment and income, a survey by FPDSavills (2001) indicates that off farm employment is a more significant source of income for farmers than farm diversification. A fifth (21%) received income from non-agricultural enterprises. Almost a tenth (9%) received half or more of their business income from these sources. A third of farmers (33%) were dependent to some extent on off-farm employment, which, on average, contributed 50% of their family income. Almost a tenth (9%) considered that they are extremely dependent on this source of income, with it accounting for, on average, 75% of total family income. 2.1.5 Links to wider rural economy The wider economic importance of agriculture is exemplified by the fact that approximately 14% of the population is employed in agriculture-related industries which are not always located in rural areas (English Nature, 2001). However, financial pressures, the move from labour to capital intensive farming, other sources of income, coupled with the wider social change in rural Britain, have weakened the links between farmers and rural communities (English Nature, 2001), especially in relation to larger scale commercial farms. Set against this is the scope to improve efficiency in adding value through better linkages in the food chain. Further, the desire amongst consumers for local sourcing of foods is exemplified by A100 Agricultural Futures and Implications for Environment: Defra ISO 209 the growth of farmers markets. Finally, foot and mouth disease has shown how much rural tourism is dependent upon the health of agriculture (Countryside Agency, 2001). Further detail in Topic Paper 7 (Social Issues) 2.2 Economics and the environment Finally, agriculture provides substantial economic benefits through its provision of environmental goods and services. The positive externalities associated with agriculture are predominantly associated with landscape and biodiversity. External costs associated with agriculture are gaseous emissions and effects on water supplies and biodiversity. Additionally, there is an increasing, but still modest as a share of total agricultural support costs, environmental component in policy. Further detail in Topic Paper 8 (Environmental issues) 3 Future developments In most of the UK the economic viability of farming has long been dependent upon financial input from grant, subsidy and price support (National Trust, 2000). Even with this support, there has been a continuous decline in total farm income reflecting the decline in agriculture’s share of the economy and also the decline in UK’s competitiveness (MAFF, 2001b). The recent drop in ‘farm gate’ product prices has demonstrated how vulnerable the industry is (National Trust, 2000). The farming sector faces severe financial pressures which, with policy and regulative developments, such as modulation, are likely to increase (MAFF, 2001b). Government and European policy is set to move towards world prices for agricultural produce which also highlights the fact that farmers can expect to receive less income from their outputs in the future (National Trust, 2000). The steep decline since 1990, however, is a result of more immediate drivers. The exchange rate is of greatest significance, as farming is particularly exposed to exchange rate movements because the value of its outputs is highly sensitive to shifts in the pound/euro rate whilst the prices of most inputs are largely insensitive to the exchange rate (MAFF, 2001b). The high value of the pound against the euro encourages food imports and hits exports (NFU, 2003). Thus, with the recent increase in the pound/euro rate there is a corresponding loss in farming profitability. Other relevant factors are weak world commodity prices as growth in the world economy slowed in the late 1990s, and the impact of BSE and, more recently, foot and mouth (NFU, 2003). In the longer term other environmental factors such as climate change and the availability of water could fundamentally change the profile of world agriculture. For the foreseeable future this will continue the trend in the industry as a whole towards larger farms and more intensive agriculture. Where amalgamation is not a practical or desirable option there will be a need for farmers to diversity their income as it becomes more difficult to derive a living from agriculture alone. (National Trust, 2000) The future business prospects for farming will reflect the inter-action of the key drivers (both long term and short term) which have shaped the present position. MAFF (2000) suggested that the key factors to consider may include the following: • A modest extent of expected recovery in world commodity markets over the next five years would be likely to provide for only a marginal increase in the average level of income per farmer. A101 Agricultural Futures and Implications for Environment: Defra ISO 209 • The continued importance of the pound/euro exchange rate. Macroeconomic forecasters expect the euro to rise against the pound, which would leave incomes at a relatively depressed level. • Productivity – high rates of productivity growth (which were achieved late 1990s under severe financial pressure) could reverse the decline in total income (if could be achieved again in the 2000s). Further, agriculture is an industry where specific events, poor weather or a disease outbreak can shift incomes from the underlying trend in individual years. The downturn in total farm income may be cushioned by other sources of income – off farm employment or other types of business on the farm. Government policy, in this respect, has focused on policies to support the largest industrial sector of farmers, where there is a marked concentration of capital, land, expertise and technology, and access to markets. However, there are many smaller farm businesses, increasingly distinct from this industrialised sector (English Nature, 2001). This requires the pursuit of a twin track policy, liberating large scale farms to maximise opportunities driven by markets, at the same time supporting a diverse, extensive and socially acceptable agriculture (English Nature, 2001). This is recognised within Government who state that environmental and rural development interests have highlighted the need for a more forward-looking perspective that embraces a range of approaches to agricultural competitiveness, focussing on food quality, value added, and marketing, as well as agri-environment schemes (Performance and Innovation Unit, 1999; Country Landowners Association, 2000). The replacement of the CAP with an integrated rural development policy, which moves financial support from commodities to the environment and rural development, is likely to continue. Supporting this policy switch is the fact that it is unlikely that most farmers will be able to make a living through the income from conventional farm produce alone. The enlargement of farms will not always be an acceptable solution, and there may be a limit to value added products, marketing products associated with specific areas, and farm produce sold at point of production. Where farm incomes are under pressure, there is a need to generate revenue from other, non-agricultural, sources (National Trust, 2000). However, the goal of encouraging farmers to seek new sources of income has at times proved contentious with some farmers and farmers groups pointing to what they see as an over-emphasis on non-agricultural solutions to farming’s problems (Ward, 2000). Nevertheless farmers who derive income from sources additional to agriculture, through rural development initiatives, can create jobs and contribute, in a broader sense, to the economic and social well-being of their rural communities (National Trust, 2000). In relation to the above, it is likely that the future will give rise to a number of income streams. Winter (2002) suggests there will be four income strands in the future: • Commodity prices at world market levels – with the problems facing farmers compounded by the exchange rate difficulties and uneven application of regulations internationally. • Commodities marked at higher than world prices, through value added or premium markets (based around specified production standards). • Rewards, for example, through second pillar payments, for the provision of public goods. • Diversified activities, such as new uses for farm buildings and new land uses (e.g. energy cropping). A102 Agricultural Futures and Implications for Environment: Defra ISO 209 4 Future scenarios This section describes the four identified scenarios presented in Topic Paper 2, Figure 1. In this topic paper, the four scenarios are described in narrative form, topic specific inputs are identified, and relevant quantities indicators and their values are given for each scenario. 4.1 World markets The emphasis on private consumption and a highly developed and integrated world trading system means that UK agriculture is subject to strong international competition. As European commodity prices fall, although world prices themselves rise marginally, and with cheaper imports, the agricultural industry further concentrates production to larger business units. There is a corresponding reduction in the number of holdings and farmers who leave the industry. For those producers remaining in agriculture, efficiency in production has increased gradually reflecting technological developments. There is a corresponding decline in employment, the majority of work undertaken by contract farming. Alongside this, there has been an associated increase in off-farm employment and diversification. Incomes on both the more efficient and high technology farms and the diversified enterprises are maintained. However, agriculture’s contribution to the rural economy continues to decline, although there is an increasing contribution from the diversified enterprises. 4.2 Global sustainability The more pronounced social and ecological values, which are evident in global institutions and trading systems, results in a situation where economic growth is slower than that of the World Markets scenario but more equitably distributed. At the same time international competition is greater than under the existing CAP regime. Prices to EU farmers for previously supported commodities fall to somewhere between the existing and the World Markets scenario, but world market prices are relatively strong. Thus, although imports reduce the viability of many enterprises, the collective action to address environmental issues realised through agri-environment scheme payments helps to maintain small and medium sized farmers within the industry. Further, the increasing competition and falling prices eventually lead to greater production efficiencies, with a corresponding reduction in the agricultural labour force set against increasing technology adoption. Unlike the World Markets scenario, however, there is less emphasis on contract farming, although the majority of the environmental work is contractor based. Incomes are maintained through reduced input costs and incentive payments received. However, as with the World Markets scenario, the industries contribution to the rural economy continues to decline although greater economic benefit could be said to derive from the environment. 4.3 Provincial enterprise The continued high level of intervention and protectionism under the CAP regime, mean that recent attempts to decouple farm income support from commodity price support have not significantly reduced output. Commodities which are supported by CAP continue to command prices significantly higher than existing world market levels. Nevertheless, real output prices are falling, especially compared to input prices. This means reductions in the profitability of both cropping and livestock systems. However, there are market premiums for quality assured crop and livestock products. These pressures and incentives eventually encourages greater efficiency use, with increasing attention paid to the use of inputs. There is a gradual adoption of new technologies and corresponding reductions in the agricultural labour force. In a few cases, alternative income opportunities are sought through diversification and off-farm employment. Similarly, the industries contribution to the rural economy continues to decline. A103 Agricultural Futures and Implications for Environment: Defra ISO 209 4.4 Local stewardship Markets and local/regional policy intervention encourage more extensive systems that use on- farm resources more efficiently. Efficiencies are encouraged through better use of on-farm and natural resources, and prudent use of off-farm external inputs. Soil and water conservation, and landscape and wildlife biodiversity are enhanced and encouraged through the appropriate adoption of new technologies. Ultimately, with the fall in yields, and despite the increase in agricultural land area, average farm commodity prices rise but input costs fall. Further, as regional and local area markets place less emphasis on appearance related quality criteria with more emphasis on food miles and food provenance competition is reduced. Employment and incomes are maintained through continuing agricultural production alongside diversification into associated enterprises. Agriculture’s contribution to the rural economy is also stabilised. Table 4 A summary of economic conditions under the different Future Scenarios World Markets Global Provincial Local Sustainability Enterprise Stewardship Contribution to Declines Declines Declines Stabilised the economy World Increase slightly Increase Little change Increase commodity prices EU commodity Reduced Reduced Same or Increase prices substantially increase Competition High Low Protected from Reduced On farm income Falls Maintain, or Maintained Maintain, with marginal fall Declines some increases Off farm income Increases Little change No change Some increase On farm Declines in total Little change Maintained Increase employment Productivity / Increases Increases slowly Increases Increases slowly efficiency rapidly slowly, but stagnates Technology High technology High but High Appropriate adoption systems sustainable and technology, sustainable cleaner production technologies, technologies focus, risk of mix of high and stagnation ‘intermediate’ technologies A104 Agricultural Futures and Implications for Environment: Defra ISO 209 Reference List Country Landowners Association (2000) Towards a Sustainable Rural Economy: CLA’s Strategy for Agricultural and Rural Business. CLA, London. Countryside Agency (2001) Policy Commission on the Future of Farming and Food. A Submission by the Countryside Agency, October 2001. Defra (2002a) Farming and Food’s Contribution to Sustainable Development. Economic and Statistical Analysis. Defra Publications, London. Defra (2002b) Agriculture in the UK. The Stationery Office, London. Defra (2002c) Farm Incomes in the United Kingdom, 2000/2001. Defra Publications, London. Defra (2003) News Release, 34/03, 30 January 2003. Defra (2005) Agriculture in the United Kingdom in 2004. The Stationary Office. London. English Nature (2001) Sector Analysis: Agriculture, March, 2001. http://www.english- nature.org.uk. Accessed 20/01/03 FPDSavills (2001) Structural Change in Agriculture and the Implications for the Countryside. Report prepared for the Land Use Policy Group of the GB Statutory Conservation, Countryside and Environment Agencies, September 2001. Lobley, M., Errington, A. and McGeorge, A. with Millard, N. and Potter, C. (2002) Implications of the Changes in Structure of Agricultural Businesses. Final Report to Defra, July 2002. Department of Land Use and Rural Management, Seale-Hayne Campus, University of Plymouth. MAFF (1989) Agriculture in the UK 1988. HMSO, London. MAFF (1991) Agriculture in the UK 1990. HMSO, London. MAFF (1992) Agriculture in the UK 1991. HMSO, London. MAFF (1996) Agriculture in the UK 1995. HMSO, London. MAFF (1999a) MAFF Statistical Release 61/99, 29 November 1999. MAFF, London. MAFF (1999b) Re-Structuring of Agricultural industry. Working Paper prepared by the Economics and Statistics Group of the Ministry of Agriculture, Fisheries and Food. MAFF, London. MAFF (1999c) Reducing Farm Subsidies – Economic Adjustment in Rural Areas. MAFF, London. MAFF (2000) Economic Appraisal of Rural Development Options. Working Paper prepared by the Economics and Statistics Group of the Ministry of Agriculture, Fisheries and Food. MAFF, London. MAFF (2001a) Agriculture in the UK 2000. HMSO, London. MAFF (2001b) The Structure of Agricultural Input Costs: The Impact of Input Prices and Input Utilisation. Working Paper prepared by the Economics and Statistics Group of the Ministry of Agriculture, Fisheries and Food. MAFF, London. National Trust (2000) Agriculture – 2000 and Beyond. An Agricultural Policy for the National Trust. The National Trust. NFU (1998) Is UK Agriculture Competitive? A European Perspective. National Farmers Union (NFU) Economics, NFU, London. NFU (1999) Routes to Prosperity for UK Agriculture. National Farmers Union (NFU) Economics, NFU, London. NFU (2000) Farming for Britain. Our Contract with Society. March, 2000. NFU, London. NFU (2003) Positive Points about British Food and Farming. Information web pages http://www.nfu.co.uk/info. Accessed 24/01/03. Performance and Innovation Unit (1999) Rural Economies. Cabinet Office, London. Policy Commission on the Future of Farming and Food (2002) Farming and Food. A Sustainable Future. Report of the Policy Commission on the Future of Farming and Food. January, 2002. Cabinet Office. Pretty, J.N., Ball, A.S., Land, T. and Morison, J.I.L. (2005) Farm costs and food miles: an assessment of the full cost of the UK weekly food basket, Food policy, 30, 1-19 A105 Agricultural Futures and Implications for Environment: Defra ISO 209 Schimmelpfenning, D. and Thirtle, C. (1999) The Internationalisation of Agricultural Technology: Patents, R & D Spillovers and their Effects on Productivity in the European Union and the United States, Contemporary Economic Policy, 17, 457-468 Turner, M., Winter, M., Barr, D., Errington, A., Fogerty, M., Lobley, M. and Reed, M. (2003) Farm Diversification Activities: Benchmarking Study 2002. Report to Defra. CRR Research Report, Centre for Rural Research, University of Exeter. Ward, N. (2000) Actors, Institutions and Attitudes to Rural Development: the UK National Report. The Nature of Rural Development: Towards a Sustainable Integrated Rural Policy in Europe. Department of Geography, University of Newcastle upon Tyne. Winter, M. (2002) Rural Policy: New Directions and New Challenges. Research to identify the policy context on rural issues in the South West. Final Report to South West of England Regional Development Agency and the Regional Assembly. Centre for Rural Research, University of Exeter. A106 Agricultural Futures and Implications for Environment: Defra ISO 209 TOPIC PAPER 7: SOCIAL ISSUES 1 Introduction This paper provides an overview of some of the social issues within the agricultural sector. The aim of the paper is twofold. First, structural change and associated issues within the farming sector are examined. Subsequent to this is a review of farmer attitudes and adoption characteristics. Second, the paper highlights the primary concerns of the wider public, such as quality assurance, food safety, bio-security, animal welfare, and environmental issues, and the impact of these on the agricultural sector. The relationship of the issues with the four Future Scenarios is drawn out in the final section. 2 Current position and past trends identified At the same time as the importance of agriculture’s role in the rural economy has been falling, a combination of underlying economic and social trends has resulted in different sources of economic growth in many rural areas. However, farming is still important politically and it has a dominant and central role in land use and the sustainability debate. This is despite the fact that it no longer provides the foundation of the rural economy, or the continuity for social stability. Further, and despite its declining economic significance, agriculture still retains a symbolic importance in rural life. Additionally, in areas where economic performance is less buoyant and which remain significantly dependent on agriculture, particularly the more remote and less accessible areas of the country, agriculture continues to make an important contribution to social and economic sustainability of rural communities. Alongside this, increasing attention is paid by those outside the industry to the way in which food and fibre is produced. These issues are examined below. 2.1 The farming community 2.1.1 Farm lifestyle issues: structural change Two recent surveys of farmers (Harvey, 2000; Lobley et al., 2002) have highlighted the loss of confidence and optimism within the farming sector. Despite this progressive decline in confidence, the industry has remained surprisingly resilient as many farmers are resigned to continuing as before (Harvey, 2000). It is also recognised that many farming families are long established and that a high proportion expect to remain in farming (Lobley et al., 2002). Harvey (2000) also notes that, despite the recent loss of optimism, there is some expectation of recovery. However, although there is a relatively high dependency on farming as the primary source of farm household income (Lobley et al., 2002), changes are taking place as farmers adopt a number of different strategies to continue with the rural lifestyle. A wide ranging variety of factors operating at different levels are driving structural adjustment in agriculture (Lobley et al., 2002), including the changes in policy framework, market forces, technology and knowledge (Entec UK Ltd. 2000). Globally, the WTO trade agreements and the pursuit of vertically integrated global markets are major forces. Regionally, the development of regional/local brands is a key feature. At the farm household level, there is the concern of intergenerational succession and retirement. Within these categories and levels, the drivers include: • farm economics and the relative decline of agriculture, declining output prices and a subsequent focus on savings in input costs (Harvey, 2000); A107 Agricultural Futures and Implications for Environment: Defra ISO 209 • farm household drivers such as the diversity of management performance amongst farmers, the age of farmers and existence of successors, and the cost of servicing farm business debt; • technology, knowledge and skills which have driven a replacement of labour by machinery and accentuated the benefits of management ability; • economies of scale; • EU and national drivers such as changing food and input markets, changing subsidies, and specific policy mechanisms and regulations, such as agri-environment schemes; • a growing interest in the country as a place to visit and in which to live and work; and • disruption by unexpected events such as FMD. Ultimately, the majority of drivers fall under the heading of farm finances and economics, and although BSE and FMD has been a prime motivation for restructuring activities, these problems have only served to advance a process that was already underway (Lobley et al., 2002). This is despite the finding from the Harvey (2000) survey where farmers suggested there was no intention of change. With regard to the changes that have taken place, Haines-Young and McNally (2001) state that recent structural change has involved three processes: • consolidation , that is concentrating production into fewer, larger farms • specialisation, that is the concentration of fewer enterprises at the farm level and thus a decline in the number of mixed and general cropping farms, and • diversification, that is the process of developing other income sources through additional activities either on or off the farm. Within the Lobley et al. (2002) survey, just over just over 25% of respondents showed little or no change, just over 25% had introduced various forms of diversification, and just under 50% had undergone traditional restructuring – farm expansion, switching enterprises, reductions in hired labour. In terms of traditional restructuring the Harvey survey suggested that the primary response to business pressure was the attempt to become large and more cost efficient, and that this would continue into the future. Farm amalgamation was a feature in both the pastoral and arable sectors, and there was also farm expansion through renting or whole farm contracting, reflected in the expansion of varied tenure arrangements. The Lobley et al. survey also recognised the greater concentration of productive resources in the hands of fewer farmers. Alongside this consolidation of resources, there was also some specialisation, with some local intensification, particularly by dairy farmers. However, at the same time there were others who quit dairying for more extensive livestock systems. Further, land use changes indicated a general drift to greater extensification (lower stocking rates and/or use of agro-chemical inputs). The most significant change identified by the Lobley et al. survey was for farmers to exit a particular agricultural enterprise (often beef or dairy in livestock areas) or to turn all or much of the farm over to contractors (in arable areas). Getting out of dairying, for example, releases capital (livestock sale and quota) and time which can then facilitate diversification. Although the Harvey survey suggests that there were only a few farmers who intended to explore new business and enterprise mixes, diversification has grown in importance – in terms of both the number of businesses, and contributions to income. Lobley et al. found that the largest group of diversifiers are ‘agricultural integrators’, those who have embarked on activities closely related to farming, and therefore are highly dependent on the future A108 Agricultural Futures and Implications for Environment: Defra ISO 209 prosperity of mainstream agriculture. This includes agricultural haulage or farm business consultancy, as well as whole farm and agricultural contracting. The use of contractors is widespread. According to Lobley et al. the use of contractors for specific tasks has increased and whole crop and whole farm contracting is taking on greater significance. MAFF (1999a) estimates suggest between 10% and 20% of farmer arable land is currently managed under contract. The suppliers of contracting services are themselves usually large, highly capitalised, diversified farm businesses, supplying services as a means of benefiting from economics of scale without purchasing or renting additional land. Within the different sectors of the farming community a number of approaches to restructuring are apparent. In the arable sector, little change was anticipated in the Harvey survey, where change was suggested this was likely to be an expansion of the enterprise. The Lobley et al. survey found a mix of traditional agricultural restructuring and diversification of business activities (agricultural integration and off farm diversification) had occurred. The traditional agricultural restructuring tended to focus on an on-going process of upgrading and enlarging, increasing the area of land farmed under contract. On such farms, agriculturally productive land is still managed very intensively, and has led to the marginalisation of livestock farming and larger arable monocultures. The diversification of arable farms is a result of changes made by what Lobley et al. call rural based entrepreneurs rather than farmers. This has included the release of land for house building and non- agricultural investment, such as purchasing property for investment, lorries for haulage businesses and investments in stocks and shares. In the livestock sector, the Harvey survey suggests a decline in confidence and activity. On lowland pastoral farms, where there is a significant number of small farms worked by family labour, there appears to be a strategy of reducing dependency on agricultural income (Lobley et al., 2002). There is also a process of traditional restructuring and on-farm diversification, including enterprise change and change in employment structure, and farmers joining co- operative and marketing schemes. In upland areas, change has occurred, in the majority of cases, through traditional agricultural restructuring (Lobley et al., 2002). These have either been minor changes, a number of farmers also showed no change, or there has been significant enterprise change, for example, a farmer has gone out of dairying or sheep to facilitate expansion of an existing remaining agricultural enterprise. A large amount of the changes that have occurred have taken place in the dairy industry, primarily through traditional restructuring and expansion. There has been less change within the beef, sheep and pig sectors, although there has been some exodus from the beef sector. There has been a growth in enterprise size within the poultry industry. The impact of these changes with regard to capital assets and labour has manifested itself in a number of ways. The Harvey survey highlighted the intention of farmers not to make significant new capital investment in buildings. The Lobley et al. survey found that a significant proportion of farmers had liquidated assets, either to reduce debt or allow for further investment, e.g. in diversification. The liquidation of assets included reductions in machinery, and correspondingly an increased use of contractors, the selling of land, including for development, the disposal of buildings, and finally the selling of quota. Conversely, there was also significant investment in areas such as major land acquisition, and where this occurred, in machinery and quota. Thus new capital investment was generally associated with an increase ion farm size in pursuit of economies of scale. In terms of labour, Harvey suggested that little change was anticipated. However, the Lobley et al. survey found that widespread labour shedding has occurred, with a small shift to part time working, i.e. part time employment and part time farming, both hired and family. To A109 Agricultural Futures and Implications for Environment: Defra ISO 209 some extent this was a result of shifting from an intensive enterprise (dairying) to more extensive (beef). Alongside this there has been an increase in off farm working by the farm and family members. The Lobley et al. survey also found that there had been some investment in human capital through further education and training. This was frequently in communications and information technology, a useful skill for the farm business, other business interests and for off farm employment. Related to this is the provision of jobs by diversification activities. Lobley et al. question whether existing farm employees have the skills to undertake the new activities or are they simply replaced. A related issue is that of farming exit and succession. The Harvey survey found that the majority of farmers were leaving farming due to retirement, although a significant number, about 10%, expected to cease trading altogether. In relation to retirement, the survey also found that only 25% of all farmers surveyed were reasonably sure of a successor. The Lobley et al. survey found that farms lacking a successor were less likely to be managed intensively, the process of retirement involving a reduction in farm scale, the letting of land, putting land out to contract, extensification and/or movements out of intensive systems, e.g. dairying. Conversely, the identification of a successor can act as a trigger for development. The existence of a successor was a powerful motivation for ongoing investment in the business. Finally, the Lobley et al. survey considered the impact of the recent changes in the farming community on the environment. On arable land, the intensification that had occurred was considered detrimental, and the suggestion was that an increase in contract farming would continue this trend. However, there was also evidence of beneficial land management changes, specifically habitat changes, although many farmers had not entered agri- environment schemes. On lowland pastoral farms, the intensification that had occurred led to the fragmentation of habitats and negative impacts on biodiversity. This was alongside the extensification that has occurred elsewhere which has the potential to be more environmentally beneficial. The authors also expressed concerns regarding the visual impacts associated with diversification – e.g. building conversion, and the neglect of traditional features. In upland areas, as with the arable and lowland farms, the intensification of the remaining dairying was also considered detrimental with the loss of landscape features, issues of pollution, and lack of investment in environmental management raised as key concerns. 2.1.2 Farmer motivation and preferences Within the farming industry, there are a range of attitudes and approaches. Many farmers still retain a strong productivist attitude, and are uncomfortable with the new multi-functional roles expected of them. This stems from the CAP policy of the last 50 years which has led to systems of intensive specialised production and farmers who are technically progressive. Set against this is the more extensive types of farming. The interest in organic farming has increased, resulting in a small but growing group of farmers driven by profit and/or idealistic motives. Additionally, hobby farming and part time farming has also become more significant, with a tendency for increased variety, countering the general trend towards simplification. A study by Lobley et al. (2002) identified three main categories of farmers: embracers, reactors/adaptors, and resistors. • Embracers represent about 30% of the farming population. They actively exploit/embrace opportunities offered, recognising the shift in the economy and policy framework. Primarily, the exploit opportunities to ‘get bigger’ through increases in farm area, turnover and/or intensity or opportunities to ‘get different’ through developing market opportunities, value added activities and increasing uses of ERDP funds to diversify. Examples include active enterprise change, extensifying farming practice, embracing agri-environment opportunities, investing on and off the A110 Agricultural Futures and Implications for Environment: Defra ISO 209 farm. However, problems arise when barriers are raised, e.g. perceived planning barriers and barriers in niche markets, e.g. food hygiene. Ultimately, these barriers may mean that the farmers eventually leave agriculture altogether. Embracers tend to be associated with high level management capacity, good IT skills, access to capital, and are well educated. The group includes contractors servicing traditional farmers and other land management needs. • Reactors/adaptors who change in response to new pressures and opportunities represent about 50% of the farming population, and are the largest single group. They are willing to change when this is made easier by policy. They are probably more risk averse, and found on small and medium farms. They have a similar profile to embracers and generally lower rates of activity in similar areas, although some have intensified (rather than extensified) and they are less likely to undertake off- farm investment. • Resistors represent the remaining 20% of the farming population. They are unwilling or unable to engage with the political, economic and policy changes occurring in agriculture. They may be reluctant as they lack access to capital, the appropriate skills and/or they face locational/sectoral barriers to change. There are also active resistors who are strongly opposed to the idea of change. Resistors tend to be found on small farms, which are more likely livestock. They are highly dependent on farm income sources. Few have joined an agri-environment scheme or undertaken significant non-agricultural investment. Despite the generalisations above, the three categories of farmers are found in all age groups, farm size, farm type, however, embracers do tend to be more highly educated, are usually younger, and on larger farms, and part time. In relation to the environment and agri-environment schemes: Harvey (2000) states that the majority of farmers are aware of but have no intention of joining an agri-environment scheme. Lobley et al. (2002) found that agri-environment payments were regarded by farmers as more conditional and constraining sources of government support than other sources, and also possibly a less reliable basis on which to plan for the future. Despite this, a survey by McInerney et al. (2000) suggests a farming population consciously oriented towards managing the countryside. Farmers feel they have an obligation to wildlife and the countryside and many undertake regular ‘maintenance’ and specific projects of improvement. However, although agri-environment payments are an important stimulus, the bulk of management is undertaken without remuneration. 2.2 The wider community 2.2.1 Quality assurance, food safety, environmental concerns and animal welfare The way in which food is produced, its safety, environmental impact, and animal welfare status has become increasingly important to consumers. Many people are disconnected from agriculture, but retain some nostalgic notions of what farming should be, often rooted in a mainly historic view of traditional farming. As a result they tend to be critical of farmers and farm policy that contradict this view (Winter, 2002). Furthermore, successive food scares and the farming crisis have left consumers feeling increasingly alienated from the way in which their food is grown and processed, compounded by concerns about the external costs of potential environmental and health impacts. (CPRE, 2001; 2002). For farmers to remain competitive in a global market place they will require more than improved production efficiency – they must provide customers with products and services that meet very exacting specifications about quality, food safety, environmental and animal A111 Agricultural Futures and Implications for Environment: Defra ISO 209 welfare standards, as well as convenience/availability, variety and price (CPRE, 2001, 2002; Evans et al., 2002; MAFF, 1999b; Winter, 2002). Environmental concerns, animal welfare, and food safety have all become drivers of rural policy (Winter, 2002). This has led to the politicisation of rural issues and subsequent regulation, and an increasing degree of controls on farming practices. There has also been the emergence of quality foods linked to these consumer concerns. As a result there are implications for conventional mass food production (Evans et al., 2002). These issues and standards are also actively promoted by retail chains in order to differentiate their supermarket products and as a way of maintaining market advantage. Further, consumers increasing concerns about the conditions under which their food is grown or reared, and the environmental implications of agriculture and food production are also recognised by government (MAFF, 1999b), who state that consumers are seeking reassurance on traceability and production techniques. The role of assurance schemes in helping to promote confidence in the integrity and origin of products and in the standards of welfare, crop and animal husbandry, processing and storage are also recognised (MAFF, 1999b). Opportunities to exploit these trends are demonstrated by the growth in the organic and speciality and local foods sector. The economic value associated with these concerns, particularly those related to quality and animal welfare, is evident through consumers purchasing decisions. Although there is a lack of direct evidence, consumers will buy particular foods for a variety of reasons including some perceived aspects of quality, the associated environmental impact and animal welfare standards (Winter, 2002). Consumers want choice – good quality, value for money, sustainable UK grown produce that is safe. Given consumer demands for quality, safety and traceability, primary producers can secure a niche in a buoyant market and a more realistic price for their produce. The criteria of importance are that food is safe, nutritious, can be traced back to suppliers and processors and is benefiting their local environment and countryside. Lobley et al. (2002) confirm that the growth in demand for traceability and the development of Quality Assurance Schemes (QAS) has introduced a completely different dynamic into the countryside, creating new niche markets for farmers able to diversify into quality products. This has begun the process of agricultural integration within the food chain. However, the food chain is already subject to substantial regulation on food safety and labelling in production, handling, and storage (MAFF, 1999b). It appears the main opportunities will be in value added in the food chain and the expansion of farmers’ markets and through regional and speciality foods (MAFF, 1999b), using the Designation of Protected Origin Regulations for products with distinctive regional and local characteristics regarding production and marketing (Lobley et al., 2002). 2.2.2 Animal welfare Animal health and welfare policies and standards of production are one of the most high profile issues raised by consumers (Defra, 2003). Concern for animal welfare and animal rights now impacts on rural policy in a manner unrecognisable 20-30 years ago (Woods, 1998). Food standards which are marketed alongside food can be identified easily, and it is recognised that consumers are prepared to pay a premium for higher standards in production. Theses are frequently animal welfare related (MAFF, 1999b). This is reflected in the commitment to the belief that farm animals have the right to the basic "five freedoms" at every stage of their lives. These "freedoms," updated by the independent Farm Animal Welfare Council (FAWC) define ideal states, rather than standards of acceptable welfare. They are freedom from hunger and thirst; discomfort; pain, injury or disease; fear and distress; and freedom to express normal behaviour A112 Agricultural Futures and Implications for Environment: Defra ISO 209 In addition to the time spent on the farm, animal welfare standards are also important at markets, before and during slaughter in abattoirs and other places, and during the transport of animals to and from markets, to slaughter, and particularly on export journeys (Defra (2003). There are EU rules in relation to transport for journey times, feeding, watering, rest, and recovery times. In addition to the ethical concerns for the animal, there are also concerns regarding the impact of poor animal health and disease on risk to humans. Furthermore, poor animal health affects production, the viability of livestock farming, and can affect exports, rural communities, the environment and tax payer. 2.2.3 Farmers and the rural community Finally, there are the conflicts between farmers, other rural dwellers and visitor to the countryside. These conflicts relate to a perceived limited understanding of contemporary farming practices, specifically mud and slurry on roads, smell, sounds and by-products of agricultural production, and plans to sell off agricultural land for development. Public access is one of the most contentious issues for land managers, and yet enjoyment of the countryside through improved access is a key objective of the Rural White Paper (Milbourne et al., 2000). 3 Future developments The extrapolation of recent trends, an interpretation of policy statements (Rural White Paper), and indicators from the most recent statement on CAP reform by the UK Government, point to a more internationally competitive farming sector, with declining real returns to farming, but a more diverse, multi-functional activity base. This will encourage structural adjustment towards larger scale farming and a relative decline of the importance of farming per se within the rural landscape. Some commentators such as Lobley et al. (2002) suggest that there will be no mass exodus from farming, although the links may become more tenuous. Farmers with no successor may sell up, but most will let out land or have it contract farmed. At the same time there will be a gradually declining dependence on income from traditional agricultural activities for surviving farms, and as a result agricultural policy drivers will have less effect on the management of the rural landscape in the future. Correspondingly, there is likely to be an increasing proportion of lifestyle farms. Within agricultural production, the pace of enterprise change is likely to slow down, although reductions in land use intensity and the use of inputs will continue. There will be further development and rationalisation of market niches through supermarket initiatives, farm shops and farmers’ markets, and increasing importance will be placed on food quality, labelling and marketing and direct contact with customers, i.e. vertical integration (Lobley et al., 2002). CPRE (2001) suggest that the local foods sector will remain relatively small in comparison with the total food sector, but that it could become significant with regard to gross output and underpin local economies in rural areas. MAFF (1999b) highlight the following trends in the food chain as important: • globalisation of markets and erosion of trade barriers, global competition at all stages of the chain; • greater emphasis on food safety, requirements for due diligence, traceability; • greater consumer choice and market segmentation; greater environmental concerns and awareness including desires for organic production, lower input farming, high animal welfare standards, local area/branded produce; • consumer and media concerns including GMOs, food scares; A113 Agricultural Futures and Implications for Environment: Defra ISO 209 • changes in society and in eating habits; • technological developments leading to lower input farming, freshness, new foods; • diversification in the rural economy. They also propose branding of production systems that shape local environment and systems and that are beneficial. Correspondingly, Lobley et al. (2002) propose that interest in agri-environment schemes is set to increase in the near future resulting in greater uptake. However, they also state that there will be less time to carry out countryside management activities. There will also be significantly more interest in non-farm activities. For example, plans for farm building conversions are set to increase in the near future. In arable areas, it is suggested that grassland (and livestock, including dairy) will be marginalized and possibly abandoned, and that uptake into agri-environment schemes will be affected by the increased amount of land under contract farming agreements. Additionally, there may be some deployment of farm/family labour off-farm. However, significant capital investment in agriculture will continue through a process of upgrading and enlargement. There is also likely to be some vertical integration, and there may be a limited move into biofuels. In lowland pastoral systems, the polarisation between intensively managed dairy and more extensive livestock will continue. Associated with this is the decoupling of farm household income from agricultural income, improved agri-environment management, marketing and branding schemes and direct sales, and non-residential building conversion. Similar patterns of polarisation will continue in the uplands with the continued loss of smaller dairy enterprises. There is also the possibility of abandonment. There is also likely to be some increase in agri-environment scheme adoption, co-operative buying and selling, branding and direct sales, and building conversion. For all farming systems and areas, the main barriers to future restructuring are seen as financial. However, there are perceived problems with the regulation of planning consents for the development of business activities on farm properties (currently the subject of policy guidance). Additionally, there are general implications for agro-ancillary industries and rural/small town businesses. 4 Future scenarios This section describes the four identified scenarios presented in Topic Paper 2, Figure 1. In this topic paper, the four scenarios are described in narrative form, topic specific inputs are identified, and relevant quantitative indicators and their values are given for each scenario. 4.1 World markets The emphasis on private consumption and a highly developed and integrated world trading system has led to a contraction in the value and volume of farm output, a reflection of the generally lower competitiveness in relation to other trading partners. Land prices, and other input costs adjust downwards, and with this there are opportunities for land management by the non-agricultural community. There is significant redistribution of production in favour of products and enterprises which remain more profitable, and acceleration of the polarisation of the agricultural industry into productive units and those which manage to survive through diversifying their income base. On the productive units income sources are primarily agricultural, enhanced through contracting operations, and labour is effectively fully employed in agriculture. On the diversified enterprises, greater proportions of income and employment result from the diversified enterprises and off-farm activities. Land managers A114 Agricultural Futures and Implications for Environment: Defra ISO 209 demonstrate a range of motivations, agricultural productivists, lifestyle farmers, and land managers focused on other objectives, e.g. environmental. In relation to consumer concerns, there are a number of hot topics, however, the emphasis for standards of production focuses on food safety and quality. 4.2 Global sustainability The more pronounced social and ecological values evident in global institutions and trading systems results in less polarisation than the world markets scenario. Although the sector is increasingly market oriented, targeting domestic and international markets, there is greater interest in agri-environment management and scheme adoption. There is also some decoupling of household income from agricultural income, and deployment of farm/family labour off-farm. Farmers demonstrate a broad range of motivations, from those focused purely on agricultural production, those actively incorporating positive environmental enhancement activities, to those embracing other opportunities both on and off-farm. A number of these opportunities have led to an increase in co-operative buying and selling, branding and direct sales. Consumer concerns are less significant than in the world markets in the sense that these are incorporated with the standards required for production and subsequent payment. 4.3 Provincial enterprise The emphasis on private consumption, high level of intervention and protectionism has resulted in an agricultural community focused on large arable monocultures, with grassland and livestock systems marginalized. However, with agricultural support focused on rural development and agri-environment, opportunities for small and medium livestock enterprises do exist. There has been increasing enterprise expansion and intensification in the dairy sector. Beef cattle and sheep producers reflect more extensive principles relying on income support through payments unrelated to productive output. Income sources for the arable producers primarily come from agricultural production, although income from other diversified sources is of increasing importance. The majority of labour is employed primarily on the farm, all though there is some evidence of part time working. For a number of producers, opportunities to dispose of capital via the sale of land and buildings have taken place, the emphasis on increasing specialisation. For others, the purchase of these assets has allowed efficiency improvements through consolidation and amalgamation. Farmers demonstrate a range of motivations as a result of these situations, from those concerned with only increasing efficiencies in production to those who balance concerns for financial viability with interest in the environment. Regulations and standards are widespread, the emphasis on quality and safety standards. There is limited integration in the market place. 4.4 Local stewardship The emphasis on local governance has led to an agricultural community which operates more extensively. Diversification of farm enterprises is a major feature. Incomes sources are varied, involving both traditional on-farm, other on-farm, and off-farm activities. Family and hired labour employment reflects this. Motivations within the sector reflect a number of objectives, profit maximisers exploit the increasing opportunities offered by niche markets, and at the same time there are a large number of so-called lifestyle/hobby farmers. Market integration is a key feature of this scenario, with a significant number of farmers involved in co-operative and marketing schemes, branding and direct sales. The emphasis is on quality criteria, but environmental and animal welfare standards are widely marketed. Increasing importance is also attached to the distinctiveness of regional and local characteristics in production. Consumer concerns are reflected in the increased opportunities for the general public to make informed choices. A115 Agricultural Futures and Implications for Environment: Defra ISO 209 Table 1 Summary of social issues under the different future scenarios World Global Sustainability Provincial Local Markets Enterprise Stewardship Farming Market driven: Globally competitive Large arable Extensive and systems Polarisation sustainable farming monocultures, greatly into intensive systems driven by market intensive dairy, diversified specialist bulk opportunities modified by extensive more systems, going commodity compliance requirements. environmentally beyond production Diversification/multifuncti beneficial beef and agricultural units and onality important on sheep systems production ‘others’ smaller farms addressing niche markets for food and other products and services Income Either purely Some decoupling of In the arable and Varied, on and source agricultural or household income from dairy sectors income off-farm. other activities farm income comes primarily Household from agricultural income production, in other decoupled sectors alternative from farm sources have to be income sought income, other sources in the Labour Fully Some deployment of Primarily on farm, Full (employment) employed on farm/family labour off- some evidence of employment intensive units, farm part time working ‘on-farm’, not on other units necessarily in a large agriculture proportion comes from other activities Farmer Polarisation Productivists, tempered by Focus on production Profit attitudes / into increasing interest in agri- efficiency, although maximisation, motivation productivists environment, embracers increasing in agri- embracing and lifestyle environment niche markets, farmers. and lifestyle farmers Market Integration at Increase in co-operative Limited Co-operative integration world level buying and selling, and marketing branding and direct sales schemes, branding and direct sales widespread Regulation / Emphasis on Cover quality, safety, Widespread, Quality, standards quality and environment and animal emphasis on quality environmental, safety welfare and safety animal welfare Consumer Food safety Commitment to Food safety issues Reflected in concerns issues ‘sustainable food’ associated with purchase associated expressed through market intensive systems opportunities with intensive, preference reliant on regulation and behaviour global food in favour of systems healthy, welfare foods, A116 Agricultural Futures and Implications for Environment: Defra ISO 209 Reference List CPRE (2001) The Speciality and Local Foods Sector. CPRE, London. CPRE (2002) Local Foods. Policy Position Statement. CPRE, London. Defra (2003) Farm Animal Welfare. www.defra.gov.uk/animalh/welfare/farmerd/. Updated 13/01/03. Accessed 15/01/03. Entec UK Ltd. (2000) Drivers of Change and Future Scenarios. Countryside Agency, Cheltenham. Haines-Young, R. and McNally, S. (2001) Drivers of Countryside Change. Final Report. Centre for Ecology and Hydrology, Cambridgeshire. Harvey, D. R. (2000) Farmers’ Intentions Survey, 1994-1997: Final Report to the Economics (Farm Business) Division, Ministry of Agriculture, Fisheries and Food. Special Studies in Agricultural Economics: Number 47, Department of Agricultural Economics and Food Marketing, The University of Newcastle upon Tyne. Lobley, M., Errington, A., McGeorge, A., Millard, N. and Potter, C. (2002) Implications of Changes in the Structure of Agricultural Business. Final Report to Defra. MAFF (1999a) Re-Structuring of Agricultural industry. Working Paper prepared by the Economics and Statistics Group of the Ministry of Agriculture, Fisheries and Food. MAFF (1999b) Working Together for the Food Chain. Views from the Food Chain Group. MAFF, London. McInerney, J. P., Turner, M. M., Barr, D. and MacQueen, G. (2000) Who Cares? A Study of Framers’ Involvement in Managing and Maintaining the Countryside. Centre for Rural Research Publication Series, Report No. 250, February 2000. School of Geography and Archaeology, University of Exeter Milbourne, P., Mitra, B. and Winter, M. (2000) Agriculture and Rural Society: Complementarities and conflicts between farmers and incomers to the countryside in England and Wales. CCRU Report to MAFF. Cheltenham. Winter, M. (2002) Rural Policy: New Directions and New Challenges. Research to identify the policy context on rural issues in the South West. Final Report to South West of England Regional Development Agency and the Regional Assembly. Centre for Rural Research, University of Exeter. Woods, M. (1998) Mad cows and hounded deer: political representations of animals in the British countryside, Environment and Planning A, 30, 1219-1234 A117 Agricultural Futures and Implications for Environment: Defra ISO 209 TOPIC PAPER 8: ENVIRONMENTAL ISSUES 1 Introduction This paper provides an overview of the relationship between agriculture and the environment. The first section of the paper highlights the impact that agriculture has on the environment, examining both the costs to the environment and the provision of environmental benefits. A subsequent sub-section highlights the work on the environmental values of these costs and benefits. The paper then goes on to explore the likely future development of these relationships, setting these in context with the policy mechanisms outlined in Topic Paper 2. Finally, these linkages are assessed in relation to the four Future Scenarios. 2 Current position and past trends identified The environmental impact of agriculture and its importance to nature conservation stem from the scale of farming and the way it is practiced. It occupies a far greater proportion of the land surface than any other economic activity, and is both a creator and destroyer of environmental assets and resources. Its dependence on natural resources – land, soil, clean water and air, and natural process – gives agriculture an exceptional and easily distinguished position from most other economic activities (English Nature, 2001). It therefore has a large environmental impact through its effect upon the rural landscape, wildlife habitats and its use of natural resources. Holdings in the agricultural sector differ widely in size, type and farming practices. There are varying approaches to farming evident in the type and mix of farm enterprises, the type and mix of inputs and production processes, the quality and quantity of outputs, including the generation of wastes and potential pollutants. All of these characteristics interact with and impact on the local environment in accordance with local circumstances. Modern agriculture, with an emphasis on intensive inputs and outputs, has been associated with negative consequences for natural resources and the environment, with claims that current levels of intensity cannot be sustained over the longer term (Rigby et al., 2001). By comparison low intensity farming has come to be regarded as relatively beneficial and sustainable from an environmental viewpoint, and also potentially from social and economic viewpoints. Furthermore, and over time, technical developments in farming and incentives embedded within the mechanisms of the Common Agricultural Policy have often tended to result in adverse environmental trends. Since the war, the agricultural industry has had a clear objective of maximising food production. The success of the industry in meeting this objective has led to serious environmental impacts, which have, until recently, tended to increase with advances in agri-technology (National Trust, 2000). Environmental services integral to traditional farming systems have been reduced by developments in modern farming practice or by perverse policy incentives (Cobb, 1999). In general, it is likely that there has been a significant increase in negative environmental effects arising from farming in the post-war period. However, there is now increased awareness of adverse environmental effects and actions to remedy this have been implemented through a variety of policy mechanisms (Hodge, 2001). In short, farming activities can give rise to both positive and negative impacts operating at local, regional, national and global levels (Erisman et al., 2003). It is important that these are recognised and accounted for in policy interventions which shape or respond to agricultural futures. A118 Agricultural Futures and Implications for Environment: Defra ISO 209 2.1 Agriculture and costs to the environment Agriculture is in many ways synonymous with the rural environment, as a key occupier, user and indeed generator of the rural landscape (van der Vart, 2005). For the most part, agriculture is perceived to generate negative impacts on the natural environment benchmarked against some natural state. In this respect agriculture results in environmental costs which are borne by society. 2.1.1 Landscapes The attractiveness and appeal of the rural landscape are important ingredients for the economic success of rural areas in the UK. However, rates of landscape change and the loss of valued landscape features have been dramatic, particularly in the period since the early 1970s (Ward, 2000). Countryside features – such as hedges, walls, and ponds – are a valued part of the countryside, as well as providing valuable habitats. These landscape features have been on a downward trend because of their reduced cost effectiveness in modern agriculture. However, from 1990 this trend has been halted (Petit et al., 2003), although the Countryside Survey 2000 showed that the condition of habitats in the wider countryside continues to decline. Losses have been highest in the English lowlands, and local studies have identified rates of loss of field boundaries as high as 30% in just 15 years (Ward et al., 1990). The UK government stresses that “gradual change in the landscape is inevitable, reflecting developments in agriculture, forestry and rural communities”, but recognises that “changes must be well-managed and not cause unacceptable impacts on countryside character” (DETR, 1999). Some economic interests claim that landscape protection is at times over-prescriptive and risk stifling economic development in rural areas (see, for example, British Chambers of Commerce, 1999). The loss of countryside is also not just primarily a rural issue. CPRE calculated that an area the size of London has been urbanised every decade since 1945 (CPRE, 1999) with implications for those who live in towns. 2.1.2 Wildlife Agriculture is one of the main influences on the quality and survival of wildlife in the countryside (English Nature, 2001). The interdependence of agriculture and nature conservation and the role of farmers in managing the rural environment is well recognised (Ouin et al., 2004; Hodge 2000). Over time, agriculture has moulded the countryside to form landscapes enriched with a diversity of wildlife, natural features, historic places and distinctive local character. However, the intensification and specialisation of farming methods over the last 50 years has seriously reduced the range and abundance of wildlife habitat and natural features, resulting in a gradual erosion of the traditional relationship between agriculture and nature conservation. Financial pressures and falling incomes and a move from labour to capital intensive farming have been powerful forces for change. This has affected the nature of farming practices and therefore their environmental consequences, and the ability to manage biodiversity and landscapes (English Nature, 2001). In the uplands, there is evidence that agricultural policy has encouraged the over-stocking of land in parts of the UK’s Less Favoured Areas to the detriment of valued environmental resources (English Nature, 1999; Ashworth et al., 1997). The major environmental concern relates to the impact of overstocking which has led, in some areas, to serious overgrazing of sensitive habitats in the uplands, particularly on common land. The main source of this problem has been the increase in sheep numbers. In the UK sheep numbers increased from 22 A119 Agricultural Futures and Implications for Environment: Defra ISO 209 million in the 1940s to around 43 million in 1999 (National Trust, 2000). The sheep population in England and Wales rose by 80% from 1970 to more than 31 million in 1998 (Environment Agency, 2000). This has partly been led by production subsides on a headage basis, which encourages farmers to produce more sheep. By contrast with the uplands, in some lowland situations under-grazing can be a serious problem for nature and landscape conservation, for example, for semi-natural chalk or acid grasslands, where lack of grazing can lead to invasion by coarse grasses and scrub. Other examples of the adverse impacts of changes in farming practice in the lowlands include the dramatic loss of hedgerows or habitats such as downland, heathland and unimproved meadows. For example, since 1940, in England and Wales, there has been a decrease in neutral grassland by 97%, and calcareous grassland by 80%. Further examples of the impact of these and other specific practices are given by English Nature (2001): • The loss of crop rotations and arable pasture mosaics leads to a severe reduction in characteristic farmland species • The shift from spring sown to autumn sown cereals leads to the loss of winter stubbles and, thus, loss of suitable nesting sites for characteristic bird species • The universal application of artificial fertiliser, leads inter-alia to the loss or degradation of characteristic hedgerow or field-margin vegetation • Pollution, siltation and eutrophication of surface and groundwaters leads to the loss or degradation of aquatic ecosystems • Over-grazing, mainly in the uplands, degrades and damages semi-natural habitats • Abandonment or under-management of existing semi-natural in-field habitats, mainly in the lowlands • Pasture improvement or conversion to arable leads to the loss and fragmentation of semi- natural infield habitats; hence lowland habitat often survives as neglected fragments • Drainage and over-abstraction lead to the drying out of wetlands Overall, it is recognised that there has been a decline in some highly valued species and habitats over the last 30 years, especially on farm land. There is also evidence across wide areas of rural England of a more general decline in habitat quality and species richness (DETR, 1999). The net effect, therefore, of the processes of agricultural intensification and specialisation has been to replace ecological and landscape diversity with uniformity. Generally, biodiversity has been pushed to the margins of modern conventional agriculture where it now subsists as a residual resource peripheral to most farming systems. In relation to particular species, Pretty et al. (2000) state that 170 native species have become extinct within one century. In addition, 95% of wildflower rich meadows, 30-50% of ancient lowland woodlands, 50% of heathland, 50% of lowland fens, valley and basin mires, and 50% of hedgerows have been lost since 1945 (DETR 1998, Pretty, 1998). Further, much attention is focused on the fact that between 1978 and 1998 the populations of 12 keys species of farmland birds fell by 58%. This decline is taken to suggest the continued threat posed by modern agricultural practices. However, since 1993 for the UK there are indications that the decline of farmland birds has lessened (Gregory et al., 2004). There have also been significant declines in plant species diversity in moorland grass, infertile grassland and upland woodland habitats between 1978 and 1990. Finally, over a quarter of native species of fish, amphibians and reptiles, along with 10-20% of invertebrates, vascular plants and lower order plants are considered by the Joint Nature Conservation Committee for Great Britain to be threatened. Species diversity is also declining in the farmed habitat itself. In addition to the replacement of wildflower meadows with grass monocultures, overgrazing of uplands has reduced species diversity, and herbicides have cut biodiversity in arable fields. A120 Agricultural Futures and Implications for Environment: Defra ISO 209 2.1.3 Soil Soil loss is becoming recognised as a serious issue for farming, with soil erosion, declining organic matter and runoff problems related to poor soil structure becoming problems in UK agriculture and accelerated by modern farming, particularly over the last 20 to 30 years. Factors that influence the rate of soil loss include: the conversion of marginal lands, the conversion of pasture to arable, cultivation of winter cereals, increased intensification, fewer fallow periods, poor soil management practices, the decline in use of organic and increase in use of inorganic fertilisers, the removal of hedgerows and field boundaries, overgrazing practices and compaction of soils by livestock, compounded by the use of heavy machinery, untimely vehicle use, and soil cultivation practices that cause slumping and capping of the soil (Evans, 1995, 1996; RCEP, 1996; DETR, 1997; EEA, 1998). Further, larger fields increase slope length and run-off velocity, and allow for larger machinery, therefore potentially increasing soil compaction. Bigger fields also mean fewer hedgerows to serve as wind breaks or buffer strips (Environment Agency, 2002). One of the main long term pressures on soil sustainability comes from soil erosion. The expansion of arable land up to the 1990s, and also the growth in sheep numbers, has increased soil erosion pressures (Evans, 2005). The Environment Agency (2002) suggests that agriculture contributes 95% to soil erosion overall and that some 36% of arable land in England and Wales is estimated to be at ‘moderate’ to ‘very high’ risk of erosion, including much of the better drained and easily worked land (Environment Agency 2000). The pressures on the soil resource give rise to the following problems: falling soil productivity (through soil losses and plant damage), increased fertiliser and sowing costs, increased council expenditure (removing soil from roads to prevent traffic accidents), the siltation of lakes, ponds and watercourses and blockage of ditches, and the pollution of water through sediments and associated nitrate, phosphate and pesticides, and thus eutrophication, aquatic habitat and ecological damage and increased drinking water treatment costs (Environment Agency, 2002; Pretty et al., 2000). Despite this, soil erosion is not generally considered to be a pressing policy issue in the UK, although some scientists have warned that sustained production beyond 2025 is threatened because of soil losses (Morgan, 1985). Further, there is concern over the increased risk of flooding as a result of changes in land use and cultivation practices leading to increasing run- off alongside increased sedimentation in water bodies. Where flooding does arise, the resultant flood damage costs can include: loss of life and health impacts, stress, property damage, damage to highways, drains and sewers, traffic disruption, environmental impacts and evacuation costs. There may also be on-farm costs, ultimately related to loss of crops and livestock (Environment Agency, 2002). Climate change, and associated greater severity of rainfall events, could exacerbate flood risks. However, there are indications that Defra are beginning to recognise a need to deal with these issues. Options to protect soils from erosion are now included in the new Environmental stewardship scheme (Defra, 2005a). 2.1.4 Pollution: air, water and land Agricultural activity also generates a number of polluting substances affecting air, water and land. Concern about environmental pollution – once primarily focused on industrial pollution, is now also focused on agriculture. In the 1960s pesticides came to prominence with regard to arable agriculture, in the 1980s livestock agriculture figured highly (Winter, 2002). In the late 1980s and early 1990s, problems of agricultural pollution generally became more widely recognised (Ward, 2000). A121 Agricultural Futures and Implications for Environment: Defra ISO 209 For example, agriculture, at 89%, is the largest user of pesticides (Environment Agency, 2002). These are dispersed into the air and received in soils leading to adverse impacts on ecosystems and reducing species diversity. They may also have human health impacts. Additionally, they can cause water pollution, entering surface waters through spillage, spray drift and run-off, and leaching into groundwaters. It is not only chemicals used for crop protection that are of concern, veterinary medicines (sheep dip, antibiotics, hormone growth regulators) and disinfectants are also a possible source of water pollution. 2.1.5 Climate change and air quality Air pollution by agriculture arises from smell and the release of damaging gases. The relationships between climate change and sustainable rural development are only beginning to be explored. Most research has focused on the implications of climate change for agricultural crop production. (Countryside Commission, 1998; Defra 2005b). Greenhouse gas emissions arising from agriculture include carbon dioxide, methane, and nitrous oxide. Overall, agriculture is responsible for about 8% of total greenhouse gas emissions, but is a major source of methane and nitrous oxides (MAFF, 2000). Carbon dioxide arises as a result of the cultivation of arable land or semi-natural vegetation, peat/fenland drainage, and the combustion of fossil fuels in farm machinery. However, agriculture contributes only 2% of total emissions (Environment Agency, 2002; MAFF, 2000). Methane arises as a result of the decomposition of animal wastes and enteric fermentation in livestock. Agriculture is the second largest source of methane after landfill sites, contributing 40% of the total, with 90% of this coming from ruminant livestock production (Environment Agency, 2002; MAFF, 2000). Nitrous oxide arises from nitrogen fertilisers, and the treatment and disposal of animal wastes. Agriculture is the largest source of nitrous oxide in the UK (Hartridge and Pearce, 2001), responsible for about 70% of nitrous oxide emissions, a proportion that has risen significantly as emissions from industrial processes have been greatly reduced (MAFF, 2000). Fertilisers and animal wastes, contributing 90% of this, are responsible in equal measure. The remainder is derived from crop residue incorporation, biological nitrogen fixation and the cultivation of organic soils (MAFF, 2000). Agriculture also contributes 80% of the UK’s ammonia emissions (Defra, 2002). The primary impacts of ammonia are its contribution to acidification of soils and water, eutrophication of ecosystems and particulate matter pollution. Agriculture also contributes to acid rain through the release of sulphur dioxide (less than 1% of total emissions) and nitrogen oxides (NOx; less than 2% of total emissions) during the combustion of fossil fuels (Environment Agency, 2002). Finally, agriculture may also contribute to local air pollution created by airborne particulate matter through the burning of fossil fuels (agriculture’s contribution is negligible) and by non- methane volatile organic compounds arising naturally from forests (around 8% of total emissions and decreasing) (Environment Agency, 2002). 2.1.6 Water quality Water quality is a relatively high profile issue. Water pollution from agriculture arises from both point source pollution and diffuse pollution, including pollution by pesticides, nutrients such as inorganic fertiliser, manure and slurry, through both run-off and leaching, soil and micro-organisms (Pretty et al., 2000). These contribute to both ground and surface water A122 Agricultural Futures and Implications for Environment: Defra ISO 209 pollution. Additionally, inadequate dirty water collection and drainage systems associated with silage effluent, manure and slurry stores, and yard washings and track run-off can all lead to problems. Pollution from pesticides arises as a result of both point (spillage accidents on farms) and diffuse sources (Environment Agency, 2002). Pesticides used primarily on crops enter the soil, surface waters, groundwater and air, both during and after application, by a number of pathways: direct application, spray drift, volatilisation, run-off, leaching and soil erosion. Pollution of surface waters by sheep dip is also widespread, occurring as a result of spillage, runoff, disposal of waste dip or via fleeces of freshly dipped animals (Environment Agency, 1998). One of the major concerns with pesticides relates to their presence within drinking water supplies. Data from the late 1980s shows that, in many areas of England and Wales, the presence of agricultural pesticides in drinking water supplies was at levels above those stipulated by the 1980 EC Drinking Water Directive (Friends of the Earth, 1988). In addition there are health issues associated with food residues, spray drift, operator health and adverse ecosystem impacts (Environment Agency, 2002). Inorganic fertilisers, specifically nitrates, in groundwater supplies are also of concern, although the policy response at this stage is control through water treatment, rather than on in- field use. Nitrogen entering water courses, predominantly via leaching, can result in increased water treatment costs and eutrophication effects in estuarine and marine systems. (Environment Agency, 2002). It is suggested that 70% of nitrogen entering inland surface waters and about 20% entering marine waters is from agricultural sources (WRc, 1999). Where organic fertilisers such as manure and slurry are used, phosphate, rather than nitrate, is the greater problem, particularly with regard to surface waters. Manure and slurry have a low N:P ratio, so where enough is applied to meet N requirements, this means more than enough phosphates. The Environment Agency estimate that 43% of phosphate in surface water comes from agriculture, 29% from livestock and 14% from fertiliser. The phosphate from manure and fertiliser leaches into rivers and lakes and, together with phosphate in sediment from soil erosion, causes excessive algal growth in up to 200 freshwaters each year. Pollution from farm waste, when pollution incidents from farms doubled during the 1980s, was addressed by encouraging farmers to upgrade their pollution control and farm waste storage facilities (Ward et al., 1990). Phosphate concentrations have been reducing over the last 10 years. However, nitrate concentrations (where agriculture is a major contributory source) have remained more stable. Nevertheless, the number of point source incidences have fallen, and the quality of rivers is generally improving. In addition to the problems with phosphates, manure and slurry also present problems where pathogens are present in animal faeces, and heavy metals and ammonium compounds are produced by the decomposition of organic material. These lead to increased health risks, and increased water treatment and monitoring expenditure (Environment Agency, 2002). 2.1.7 Water and abstraction There are environmental costs in relation to water associated with the abstraction of water for irrigation. There are about 400 rivers within England and Wales that suffer from low water flows and levels, with worst affected rivers drying out completely once every four years. In many cases, this is because of over abstraction. Agriculture is only a small user of river water (around 1-2% of total use) (MAFF, 2000), although it is a significant user at some locations in times of scarce supply. The increasing use of spray irrigation will also contribute to future costs (Environment Agency, 2002). A123 Agricultural Futures and Implications for Environment: Defra ISO 209 2.1.8 Integrated impacts Many environmental impacts are inter-related, for example poor land management leads to soil erosion, which in turn causes water pollution. The run-off of soil particles increases water turbidity, also reducing water flow and aeration. Soil particles also carry phosphates, pesticides, faecal pathogens, and other pollutants into surface waters. In addition to the relationship between soil and water, there are similar relationships between these media and the atmosphere. Soil management and applications of agro-chemicals to the land can give rise to atmospheric emissions thus, for example, contributing to global warming. Further, these impacts then also affect either directly or indirectly habitat and wildlife. With regard to those issues of most concern, there is general agreement that current rates of loss of biodiversity, development of green land and loss of soil through intensification are not sustainable in so much as they are leading to a critical deterioration in the stock of natural capital and the flows of services that emanate from this. There are signs that water pollution from agriculture is currently on the decline and less of an issue of concern. The implications of climate change for rural areas are only just beginning to be considered (Ward, 2000). 2.2 Agricultural provision of environmental benefits In the context of England and Wales, given that most landscapes are managed in some way, agriculture has the potential to enhance landscapes and wildlife through judicious management. In this respect, agriculture has potential to deliver environmental benefits to society through protection of otherwise endangered wildlife and landscapes, positive provision of new services to society, and remedial services, such as carbon sequestration which help overcome environmental pressure arising elsewhere in the economy. Thus, whilst it might be argued that agriculture by definition can only provide a lower environmental quality than the natural, unmanaged state, the pragmatic counterfactual in England and Wales is that of a farmed landscape charged with meeting food and other needs. In this respect agriculture can be managed to provide environmental enhancement relative to this counterfactual. It can also provide multi-functional benefits to a predominantly urban population, as well as helping remediate negative environmental effects associated with urban and non agricultural development. The positive externalities that arise from agriculture include: landscape and aesthetic value; recreation and amenity value; water accumulation and supply; nutrient recycling and fixation; soil formation; wildlife protection, including agriculturally beneficial organisms; storm protection and flood control; and carbon sequestration by trees and soils (Environment Agency, 2002; Hanley, 2001; Hartridge and Pearce, 2001; Pretty et al., 2000; Willis et al., 1993). These are likely to be substantial (Daily, 1997). Other positive social benefits include the provision of jobs and the contribution to the local economy and rural communities (Environment Agency, 2002). It is worth noting that the area of agricultural land under some form of agri-environmental management has risen more than 15 fold to almost 700,000 ha between 1987 and 1998 and in 2004 was 1,824,000 ha in England and Wales (Cabinet Office, 2000; Defra, 2005c). Farmer participation in conservation schemes such as Environmentally Sensitive Areas (ESA) and Countryside Stewardship (CS) grew steadily through the 1990s, and around 33,345 farmers in England and Wales have entered farmland into agri-environment schemes designed to protect the environment (Defra, 2005c). Though the CS and ESA are both voluntary, the two schemes operate differently. The ESA offers automatic eligibility within a given geographic area in return for adoption of predefined environmental prescriptions. The CS scheme is discretionary, rationed by budget allocation, and targets specific environmental outcomes. The benefits that arise include environmental conservation, by preventing changes that otherwise might have occurred (Environment Agency, 2002). However, environmental A124 Agricultural Futures and Implications for Environment: Defra ISO 209 groups argue that the level of resources given over to agri-environmental programmes is grossly inadequate to meet need (WWF-UK, 2000a, 2000b). The two schemes are also perceived to differ in terms of the motivation of participants. Whereas the main driver for ESA participation is reportedly financial benefit, in the case of CS it is reportedly more that of conservation benefit (Morris and Potter, 1997). The schemes have been criticised for not offering sufficient incentives to farmers to make a significant difference, especially in intensively farmed arable areas: most of the uptake has been amongst grassland rather than arable farmers. They have also tended to concentrate on selected environmental qualities to the exclusion of others. Additionally, participation is not necessarily an indicator of an enhanced environment, as farmers with the lowest opportunity cost are more likely to enter, being paid for things they might have done anyway. Nevertheless, ecological appraisals of ESAs report an enhanced landscape quality, and also that reductions in species diversity have been halted (Environment Agency, 2002). The CS and ESA schemes are now closed to new applicants and are to be replaced by the two-tiered Environmental Stewardship scheme (ES). The lower tier of this scheme is called the ‘entry level’ scheme which takes a ‘broad’ but ‘shallow’ environmental protection and enhancement, providing a £30 ha-1 payment for farmers who reach a target level of stewardship. The higher level scheme adds to the entry level scheme, but aims to reward farmers for higher standards of stewardship. In addition, even without the agri-environment policy framework, agriculture does provide a complex range of habitats and foods sources for farmland wildlife – much of England’s biodiversity has evolved or adapted with farming systems. Habitats are embedded in the farmed countryside (Hodge, 2001). Agriculture could also be credited with maintaining the basic environmental resources of soil and water – farming is the primary mechanism for managing soil and its functioning. This can benefit water accumulation and supply, nutrient recycling and fixation, soil formation as well as flood control (Environment Agency, 2002; Pretty et al., 2000). Agriculture also provides an environmental sink in which potentially polluting substances from outside agriculture, such as sewage sludge, can be absorbed. Finally, agriculture provides a net carbon sink, with: (i) carbon accumulation in biomass in plantation forests and on-forest land and in soil in afforested land, set-aside land and undrained peat; and (ii) increasing atmospheric concentrations of nitrogen compounds, which act as fertilisers to (Hartridge and Pearce, 2001). 2.3 Environmental values and agriculture Environmental values associated with agriculture have become more important as drivers of policy at the UK and European scale. Whereas before the mid-1980s environmental policy was rarely a part of agricultural policy, it now constitutes a mandatory part of the CAP. However, putting a value on the various contributions of agriculture to environmental sustainability is difficult because the impacts are not directly valued in the market place. This means that estimates of the costs and benefits have very broad margins of uncertainty. Results (Table 1) from three studies (Environment Agency 2002; Hartridge and Pearce, 2001; Pretty at al., 2000) have estimated the costs of negative impacts on the environment through pollution or over use of natural resources in the range £1 billion to £1.5 billion. This can be compared against the gross output of UK agriculture at £15.1 billion in 2001. In comparison Hartridge and Pearce (2001) estimated the overall value of the environmental services A125 Agricultural Futures and Implications for Environment: Defra ISO 209 provided by agriculture in the UK at £600m a year (Table 2). The Environment Agency (2002) suggests that according to recent research, agri-environment services are worth £0.9 billion annually. Table 1 Table 2 In more detail, values attached to agricultural landscape, forest and woodland, Environmentally Sensitive Areas, and Sites of Special Scientific Interest are estimated as £569 million annually (Hartridge and Pearce, 2001). Agriculture as a net sink of carbon dioxide is estimated to be valued at £345 million annually (Environment Agency, 2002). In contrast, the Environment Agency (2002) state that there are significant environment and natural resource costs from agriculture as a result of phosphates, nitrates, pesticides, organic wastes, atmospheric emission, soil flooding and low flows, and environmental consequences of disease. These are estimated to be £1.2 billion annually. In relation to damage to water sources as a result of complying with standards, restoring water courses through the removal of chemicals and soil, Pretty et al. (2000) state that significant financial costs arise from contamination of drinking water with pesticides (£120m/year), nitrate (£16m), Cryptosporidium (£23m), and phosphate and soil (£55m). The Environment Agency (2002) estimate that the damage costs of eutrophication attributable to agriculture equate to £19 million annually. A126 Agricultural Futures and Implications for Environment: Defra ISO 209 In relation to atmospheric pollution, Pretty et al. (2000) state that the emission of gases costs £1,113m. This is further broken down into methane from livestock (£280m), nitrous oxides from fertiliser (£738m), ammonia from livestock wastes and some fertiliser (£48m), and carbon dioxide from energy/fossil fuel consumption and loss of soil carbon (£47m). Similarly, Hartridge and Pearce (2001) estimate the annual costs of atmospheric emissions from agriculture as: £94m for methane, £279m for nitrous oxide, £100m for carbon dioxide, £9m for sulphur dioxide, £4m for nitrogen oxide, £11m for airborne particulate matter and £220m for non-methane volatile organic compounds. With regard to soil, Pretty et al. (2000) estimate damage from soil erosion and organic carbon losses as £106m. The off-site external costs to roads and property of soil erosion are estimated as £14m, with organic matter and carbon dioxide losses estimated at £82m. Similarly, Evans (1996) suggests that the costs of damages of soil loss and dredging stream channels are £8m. The Environment Agency (2002) suggest that the annual on-farm costs of soil erosion are also £8m and the annual cost of flooding attributable to agriculture, where soil erosion is a factor, is around £115 million. The damage to wildlife, habitats, hedgerows and drystone walls is estimated by Pretty et al. to be £125m. This includes the cost of restoring species and habitats, and targets and action plans under BAPs (£25m), and the costs of replacement/restoration of hedgerows and drystone walls (£25m). Pretty et al. (2000) estimate the damage to human health as a result of food poisoning (£169m) and from bovine spongiform encephalopathy (BSE) (£607m). 3 Future developments The most damaging effects of agriculture according to the Environment Agency (2002) are, in order of importance, air, soil and water. However, the greatest potential to reduce damage costs are in order of importance soil, water and air. The Agency therefore suggests that initial policy should target soil problems where the biggest reduction in damage costs can be achieved in the short term. This will also cost significantly less than other management practices regarding water and air. Additionally, soil management practices address both soil and other issues such as water pollution, atmospheric issues and flooding. Their recommendations include preventative practice, the establishment of good farming practice guidelines, a need to update the regulatory framework, a change to agri-environment schemes and the introduction of an environment management system for farms. Current Government policy reflects this thinking. The Policy Topic Paper has highlighted the shift of agricultural policy to encourage market orientation of production on the one hand, but also recognising the important multiple functions of agriculture on the other, where the latter may not find immediate expressions in market mechanisms. In this latter respect, environmental objectives have emerged as a key component of agricultural policy, with the emphasis on baseline minimum environmental standards, supported by incentives concentrating on positive management activities. The current trends suggest that environmental standards are likely to be underpinned by a strong and consistent regulatory base controlling environmentally damaging activities including the protection of wildlife sites and habitats, water and soil protection, and energy efficiency. The increasing role of environmental initiatives is reflected in the ongoing move away from production related aspects with the re-orientation occurring through modulation. Within England and Wales, the future of the current agri-environment schemes is likely to be one where the current schemes are combined to create a larger unified scheme to address land, water and pollution encouraging diffuse pollution and land management actions A127 Agricultural Futures and Implications for Environment: Defra ISO 209 (Environment Agency, 2002). Additionally, these are likely to be targeted for a range of specified habitats/species, reflecting local and regional characteristics. Capital grants for certain works as an integral part of agri-environment schemes (Petersen, 1998) and compulsory purchase of land for environmental purposes are further possibilities. The need to introduce an Environment Management System for Farms, as stated above, with the initial focus on nutrient and waste management has been proposed. These measures are likely to co- exist with cross-compliance and regulatory measures to improve environmental protection and performance. In relation to this, there is some frustration expressed by many groups at what they see as a relatively slow pace of change (CPRE, 1999). In addition, although agri- environment funding will increase markedly via modulation during the period 2000-2007, some argue for a higher rate of modulation to fund a more radical greening of the CAP (House of Commons Environment, Transport and Regional Affairs Committee, 2000). Set against this is the concern about the regulatory burden that is being imposed on farmers, specifically the reform of the Nitrate Directive and the forthcoming IPPC Directive (Better Regulation Task Force, 2000). The Environment Agency (2002) has a more extensive list of the European Directives and national regulations which have been recently introduced or are expected soon: • groundwater regulations; • integrated pollution, prevention and control (pig and poultry units; • habitats and bird directives; • nitrate vulnerable zones extension; • agricultural waste regulations; • landfill directive; • water framework directive; • waste incineration directive; • eevision of waste management licensing regulations (exemptions); • composting regulations; • sewage sludge directive; • revision of bathing water directive; • groundwater directive; • environmental liability directive. The Agency states that the implementation costs for these are likely to be substantial, for Government, for relevant agencies and for the agriculture sector. Alongside this are proposals for better environmental regulation, through streamlining regulations into a single framework incorporating basic environmental quality standards alongside the introduction of the licensing of some farm activities. In addition to regulatory mechanisms, consideration has been given to fiscal measures, penalising or incentivising certain activities. For example, evidence suggests that a fertiliser tax would reduce its use. Conversely, however, in relation to a pesticide tax, the evidence suggests a relatively inelastic response (Environment Agency, 2002) such that uses would pay the tax rather than change behaviour. The Crop Protection Association committed its members to a voluntary agreement of measures to reduce the environmental problems of pesticides. However, if this fails to deliver, Government may apply a tax on pesticides (Environment Agency, 2002). There is scope to use fiscal measures by tying income support measures to best practices which reduce environmental effects, such as soil erosion or water run-off. A128 Agricultural Futures and Implications for Environment: Defra ISO 209 Conservation organisations have vigorously expressed their views on how farming can best deliver environmental enhancement. For example, English Nature (2001), argue that: • grazing on upland moorland should be reduced from present levels, with a reduction in the intensity of production in other pastoral areas; • active management of semi-natural in-field grassland and arable habitats, and between field habitats such as hedges and field margins; • more mixed farming, including organic, through diversification of arable areas to create arable/pasture mosaics, reduce soil and nutrient run-off, and to secure the management, expansion and links between semi-natural habitat; • better use of inputs such as pesticides and fertiliser, and the need to minimise the exploitation of exhaustible resources such as soil, water and energy; • broadening of the genetic base facilitating the adoption of new technologies in support of environmentally sensitive management; • diversification of agricultural land into, for example, forestry, energy crops, short rotation coppice, and the creation of habitats targeted in wetland and coastal areas. In addition to the future developments in policy and agricultural systems, there is evidence that market mechanisms are incorporating environmental criteria into farming methods, through retailer led quality assurance and environmental risk protocols, driven in turn by the activities of environmental and consumer pressure groups. Red Tractor and Soil Association Logos are examples of these. However, there is some criticism that, in a fiercely competitive food retailing sector, farmers carry a disproportionate share of the costs of these schemes. More recently concerns have been raised about the ability of farmers to maintain environmental features and/or adopt low intensity farming systems in the face of declining farm incomes (Petersen, 1998). This indicates the potential synergy between farming prosperity and environmental quality in a managed environment. Environmental payments have been benchmarked against income from farming, and as the latter decline, so will agri- environment payments. They will however need to be sufficient to retain the viability of farm units, if it is considered desirable to engage the farming community in environmental management, rather than say move to an institutionalised land management option. 4 Future scenarios This section describes the four identified scenarios presented in Topic Paper 2, Figure 1. In this topic paper, the four scenarios are described in narrative form, topic specific inputs are identified, and relevant quantities indicators and their values are given for each scenario. 4.1 World markets The emphasis on private consumption and a highly developed and integrated world trading system means that environmental protection is left to the market place, although production standards do incorporate environmental specifications. In relation to landscape and wildlife there are distinct differences between those areas managed intensively for agriculture or that have been abandoned and those areas that are now managed for other purposes. There are areas of limited environmental value aesthetically, specifically those under intensive agriculture and those that have been abandoned. Greater environmental value is associated with the land that is now managed for other purposes. On the intensive agricultural land there are also concerns over soil management. However, in relation to the problems of pollution and the use of water, the emphasis on efficiency in production, which has encouraged a better use of inputs, has led to a number of environmental gains. A129 Agricultural Futures and Implications for Environment: Defra ISO 209 4.2 Global sustainability The more pronounced social and ecological values, which are evident in global institutions and trading systems, results in a situation where the environmental impact of agriculture is closely monitored. There is collective action to address environmental issues. With regard to landscape and wildlife there are payments for positive management and the enhancement of features. The uptake of these are particularly evident on the smaller and medium sized farms who require income supplements. The single agri-environment scheme incorporates management plans for soil, nutrient and waste management going some way to addressing a number of the detrimental impacts of agriculture. There are also restrictions on fertiliser and pesticide use, and water abstraction and irrigation. Farmers qualify for support on the condition that they comply with environmental standards. 4.3 Provincial enterprise The continued high level of intervention and protectionism under the CAP regime means that there is little commitment to environmental factors. Policy still favours intensive production systems, with government and farmers driven to derive maximum benefit from the regime through increasing production. This is considered detrimental to landscape and wildlife, soil and water resources, and for climate change. However, the drive towards greater efficiencies in production, with a corresponding focus on inputs does allow for some environmental gains in relation to reductions in agriculturally polluting activities. 4.4 Local stewardship This scenario describes a situation where priorities reflect social and environmental concerns. The emphasis of national/regional policies, which have replaced CAP, is on environment management rather than productive activity. Markets and local/regional policy intervention encourage more extensive systems which use on-farm resources more efficiently. This encourages better use of natural resources and prudent use of off-farm external inputs. Resource degradation, particularly in terms of polluting activity is reduced. Soil and water conservation, and landscape and wildlife biodiversity are enhanced and encouraged through the appropriate adoption of new technologies. A130 Agricultural Futures and Implications for Environment: Defra ISO 209 Table 3 Summary of environmental issues under the different future scenarios World Global Provincial Local Markets Sustainability Enterprise Stewardship Policy No Compliance A few selected Comprehensive intervention requirements schemes local schemes Landscapes Locally Incentive Agriculture Incentive defined, payments generally payments intensive available detrimental, available agriculture is schemes achieve detrimental little Wildlife Locally Incentive Agriculture Incentive defined, payments generally payments intensive available detrimental, available agriculture is schemes achieve detrimental little Soil Severely Management Degraded Soil degraded plan conservation supported Climate change Efficiency Restrictions on Some efficiency Policy gains mean polluting gains mean intervention, reductions in substances reductions in the extensive the use of use of polluting systems, and polluting substances efficiency gains substances Water quality Efficiency Restrictions on Some efficiency Policy gains mean polluting gains mean intervention, reductions in substances reductions in the extensive the use of use of polluting systems, and polluting substances efficiency gains substances Water quantity Efficiency Restricted Efficiency gains Water gains result in abstraction result in better conservation better water water use supported use A131 Agricultural Futures and Implications for Environment: Defra ISO 209 Reference List Ashworth, S., Waterhouse, A., Topp, C. and Treacher, T. (1997) The European Union Sheepmeat and Goatmeat Regime and its Effects on the Environment. Scottish Agricultural College, Auchincruive, Ayr. Better Regulation Task Force (2000) Environmental Regulations and Farmers, London, Cabinet Office. British Chambers of Commerce (1999) Memorandum of Evidence, in House of Commons Environment, Transport and Regional Affairs Committee, 1999, Rural White Paper – Memoranda, HC paper 887, London, Stationary Office. Cabinet Office (2000) Sharing the Nation’s Prosperity: Economic, Social and Environmental Conditions in the Countryside. Cabinet Office, London. Chartered Institution of Water and Environment Management (2000) Diffuse Pollution Impacts. The Environmental and Economic Impacts of Diffuse Pollution in the UK. Edited by Arcy, B., Ellis, J., Ferrier, R., Jenkins, A. and Dils, R. Terence Dalton Publishers, Suffolk. Cobb, D., Feber, R., Hopkins, A., Stockdale, L., O’Riordan, T., Clements, B., firbank, L., Jarvis, S. and Macdonald, D. (1999) Integrating the environmental and economic consequences of converting to organic agriculture: evidence from a case study, Land Use Policy, 16, 207-221 Countryside Commission (1998) Climate Change, Air Pollution and the English Countryside. Research Note. Countryside Agency, Cheltenham. CPRE (1999) Memorandum of Evidence, in House of Commons Environment, Transport and Regional Affairs Committee, 1999, Rural White Paper – Memoranda, HC paper 887, London, Stationary Office. Daily, G. (Ed.) (1997) Nature’s Services: Societal Dependence on Natural Ecosystems. Island Press, Washington, DC. Defra (2002) Ammonia in the UK. Defra. London. Defra (2005a) Entry level stewardship handbook. Defra. London. Defra (2005b) The impacts of climate change on agriculture: a vision for our rural landscape. Defra. London. Defra (2005c) Agriculture in 2004. Defra. London DETR (1997) Indicators of Sustainable Development in the UK. Environmental protection statistics and information Management Division http://www.environment.detr.gov.uk/epsim/indcs/isd.htm DETR (1998) Digest of Environmental Statistics No. 20. DETR, London. DETR (1999) Quality of Life Counts: Indicators for a Strategy for Sustainable Development in the UK – A Baseline Assessment. DETR, London. EEA (1998) Europe’s Environment. The Second Assessment. Report and Statistical Compendium. European Environment Agency, Copenhagen. English Nature (1999) 8th Annual Report, 1998-1999. English Nature, Peterborough. English Nature (2001) Sector Analysis: Agriculture, March 2001. http://www.english- nature.org.uk Accessed 20/01/03. Environment Agency (1998) A Strategic Review of Sheep Dipping. Report prepared by ADAS, R&D Technical Report P170. Environment Agency (2000) The state of the Environment in England and Wales: the Land. Bristol, Environment Agency. Environment Agency (2002) Agriculture and Natural Resources: Benefits, Costs and Potential Solutions. Environment Agency Evans, R. (1995) Soil Erosion and Land Use: Towards a Sustainable Policy. Cambridge Environmental Initiative, University of Cambridge, Cambridge. Evans, R. (1996) Soil Erosion and its Impact in England and Wales. Friends of the Earth Trust, London. A132 Agricultural Futures and Implications for Environment: Defra ISO 209 Evans, R. (2005) Reducing soil erosion and the loss of soil fertility for environmentally-sustainable agricultural cropping and livestock production systems, Annals of Applied Biology, 146, 137-146 Erisman, J, W., Grennfelt, P. and Sutton, M. (2003) The European perspective on nitrogen emission and deposition, Environment International, 29, 311-325 Friends of the Earth (1988) An Investigation of Pesticide Pollution in Drinking Water in England and Wales. Friends of the Earth, London. Gregory, R.G., Noble, D.G. and Custance, J. (2004) The state of play for farmland birds: population trends and conservation status of lowland farmland birds in the United Kingdom, Ibis, 146, 1-13 Hanley, N. (2001) (ed.) Estimating the Value of Environmental Features. Report to MAFF. Hartridge, O. and Pearce, D. (2001) is UK Agriculture Sustainable? Environmentally Adjusted Economic Accounts for UK Agriculture. CSERGE – Economics Paper. House of Commons Environment, Transport and Regional Affairs Committee (2000) Rural White Paper, Session 1999-2000, HC Paper 32-I. London, Stationary Office. Hodge, I. (2000) Agri-environmental relationships and the choice of policy mechanism, The World Economy, 23, 257-273 Hodge, I. (2001) Beyond agri-environmental policy: towards an alternative model of rural environmental governance, Land Use Policy, 18, 99-111 MAFF (2000) Climate Change and Agriculture in the United Kingdom. MAFF, London. Morgan, R. (1985) Soil conservation measurement and soil conservation research in cultivated areas in the UK, The Geographical Journal, 151, 11-20 National Trust (2000) Agriculture – 2000 and Beyond. An Agricultural Policy for the National Trust. The National Trust. Petersen, J-E. (1998) Agri-environment Schemes in Europe – Lessons for Future Rural policy. Report from the Conference in Konstanz, 25-27 February. Prepared on behalf of the Land Use Policy Group. Ouinn, A., Aviron, S., Dover, J. and Burel, F. (2003) Complementation/supplementation of resources for butterflies in agricultural landscapes. Agriculture Ecosystems and the Environment, 103, 473-479 Petit, S., Stuart, R.C., Gillespie, M.K. and Barr, C.J. (2003) field boundaries in Great Britain: stock and change between 1984, 1990 and 1998, Journal of Environmental Management, 67, 229-238 Pretty, J. (1998) The Living Land: Agriculture, Food and Community Regeneration in Rural Europe. Earthscan, London. Pretty, J.N., Brett, C., Gee, D., Hine, R.E., Mason, C.F., Morison, J.I.L., Raven, H., Rayment, M.D. and van der Bijl, G. (2000) An Assessment of the Total External Costs of UK Agriculture, Agricultural Systems, 65, 113-136 RCEP (1996) Sustainable Use of Soil. 19th Report of the Royal Commission on Environmental Pollution, Cmnd 3165. HMSO, London. Rigby, D., Woodhouse, P., Young, T. and Burton, M. (2001) constructing a farm level indicator of sustainable agricultural practice, Ecological Economics, 39, 463-478 Van der Vart, J.H.P. (2005) Towards a new rural landscape: consequences of non-agricultural re-use of redundant farm buildings in Friesland, Landscape and Urban Planning, 70, 143-152 Ward, N. (2000) Actors, Institutions and Attitudes to Rural Development: the UK National Report. The Nature of Rural Development: Towards a Sustainable Integrated Rural Policy in Europe. Department of Geography, University of Newcastle upon Tyne. Ward, N., Marsden, T. and Munton, R. (1990) Farm Landscape Changes: trends in upland and lowland England, Land Use Policy, 7, 291-302 Willis, K.G., Garrod, G.D. and Saunders, C.M. (1993) Valuation of the South Downs and Somerset Levels and Moors Environmentally Sensitive Area landscapes by the General Public. A Report to the Ministry of Agriculture, Fisheries and Food. Centre A133 Agricultural Futures and Implications for Environment: Defra ISO 209 for Rural Economy, Department of Agricultural Economics and Food Marketing. University of Newcastle upon Tyne. Winter, M. (2002) Rural Policy: New Directions and New Challenges. Research to identify the policy context on rural issues in the South West. Final Report to South West of England Regional Development Agency and the Regional Assembly. Centre for Rural Research, University of Exeter. WRC (1999) Potential Benefits and Costs of Implementing the Proposed Water Resources Framework Directive. Report for the Department of the Environment, transport and the Regions. WWF-UK (2000a) Money makes the Countryside Go Round: (England). WWF, Godalming, Surrey. WWF-UK (2000b) Money Makes the Countryside Go Round: (Wales). WWF, Godalming, Surrey. A134