Welsh face uphill battle

25 June, 2010
It has been all change in Wales in the past year and, for the Welsh meat industry, there are some large obstacles on the horizon, writes Adam Baker

Politically speaking, Wales has gone through quite a few transitions in the past year. Rhodri Morgan is no longer the country's First Minister, the Welsh Assembly is in uncharted territory, with no nationwide Labour Government, and the Red Meat Industry (Wales) Measure received Royal Approval on 11 May, meaning that Assembly Members (AMs) are now directly accountable for the industry.

Welsh livestock production is also hotting up. In particular, one subject is keeping the rest of the UK's eyes glued on Wales the country's decision to go ahead with a controlled badger cull. While, under a new government, England may be slowly following in its shadow, there seem to be no plans for such a move in Northern Ireland, and Scotland seems unaffected by the debate. So the Labour/Plaid Coalition has gone it alone with a decision for a cull and there will be many people waiting to see how it turns out. Yet interested parties will have to remain patient. An appeal to the High Court, brought by the Badger Trust, means the move is now on ice until 30 June.

The problem with culling is that politicians never want to be associated with killing animals it is not really what they got into politics for. In the television comedy Yes Minister, the Secretary of State Jim Hacker squirms in blind panic when he is dubbed 'the Badger Butcher' in the papers, and this is no different in real life.

The fact is nothing really changes. Under a Labour government, Defra avoided going down this route, for good or ill, and the same held true for the SNP in Scotland. A badger cull splits people. For their own safety, contractors in Wales have even had to wear balaclavas when attempting to enter farmland just to survey badger setts it is that divisive an issue.

Both Welsh farming unions are fully behind the cull and both recognise that, for many people, it is not popular. Even rock group Queen's guitarist Brian May has waded into the argument, putting cull supporters under pressure by speaking up for badgers in recent months. "The cull is certainly a divisive issue because the badger is such an iconic creature," says Farmers' Union of Wales (FUW) agricultural policy director Dr Nicholas Fenwick. "Many still believe the creature is rare, and some associate any culling with the horrendous image of badger-baiting, which was banned in the 1800s."

However, Dr Fenwick adds that farmers have seen badger numbers rise to previously unheard-of levels to the extent that they are not just causing bovine tuberculosis (bTB), he says, but are also causing damage to farmland and killing livestock. "We cannot run away from an issue just because it is divisive, especially when it concerns a dangerous enzootic disease epidemic."

NFU Cymru is also firmly behind a 'limited' cull, as it believes that evidence from other bTB eradication programmes across the world shows that dealing with the infection includes not only the cattle, but also the surrounding wildlife. Hybu Cig Cymru Meat Promotion Wales (HCC) joins the unions in calling for a cull. "Bovine TB is a terrible disease and HCC supports a concerted and scientifically sound effort to eradicate it," says Gwyn Howells, HCC chief executive. "HCC wants the outcome of any effort to eradicate the disease to result in healthy livestock co-habiting with a healthy and thriving wildlife population. The decision to stage the cull, in conjunction with severe restrictions on cattle movements and coupled with increased testing, has been taken democratically by AMs following a long and detailed examination into the scientific case supporting this action."

A spokesperson for the Welsh Assembly Government, speaking before the decision by the High Court on 11 June, said the pilot to remove badgers in an area where 42% of farms have had TB in the past six years, is only one part of the picture. "We expect that culling badgers, together with cattle measures in this area will, over time, significantly reduce TB in cattle."

But whatever happens in Wales in the next few months will be closely watched by Whitehall in England either to follow its example or avoid its mistakes. And this will have a big effect on both the Welsh and English beef industries.


Lambing time


While badgers are the topic of the moment for Welsh Beef, high prices are the hot topic for Welsh Lamb. Prices for lamb increased slightly in the week ended 5 June and, in April, traders were reporting that prices were nudging the £5/kg mark at £4.70/kg. This has been great for producers, but not so for processors, retailers and consumers.

Although welcomed by farmers, according to NFU Cymru's Ed Bailey, there are still negative aspects to this situation. "Higher market prices for lamb have obviously helped to restore some much-needed confidence to sheep farmers in Wales, but concern remains over profitability," says the Union's president. "Figures recently published by HCC show that, in 2008/09, only the top third of Welsh sheep farms returned a profit. Profitability is not just about increasing the value of sales; it is about keeping costs to a minimum and, unfortunately coinciding with increased lamb prices, we have seen significant rises in fuel and fertiliser costs. The long winter has certainly been an expensive one for Welsh farmers in terms of increased feed bills."

The HCC research, released in April, showed that the average hill farm had the lowest cost of production at 152p/kg liveweight, but they also recovered the lowest percentage of costs just 84% from their market returns. Meanwhile, upland farms had an average production cost of 160p/kg liveweight and recovered 88% of expenses, while the average lowland farm had production costs totalling 155p/kg and recovered 95% of costs. So high prices coming through for lamb are only fair, says HCC. "All sheep producers have benefited from improved prices in recent months, following a decade of low returns for farmers. A fair return for their investment over the long term is vital if farmers are to continue to produce enough Welsh Lamb to meet the growing demand for this premium product, particularly from abroad," says HCC's Gwyn Howells.

On the whole, the high prices have been good news for all producers, says the FUW, with the vast majority benefiting, and higher prices for cull ewes also being of significant help. Dr Fenwick says that with the euro/sterling exchange rate a significant driving force behind these prices, there is naturally concern regarding the impact the financial problems experienced in some Member States will have on the euro. "With the French market accounting for around two-thirds of total UK exports, there is also concern regarding declining consumption in France. However, work done by HCC highlights the industry's continuing reliance on Common Agricultural Policy (CAP) payments, in spite of the recent high prices, so the outcome of the current discussions on CAP reform post-2013 are also important."

With CAP reform, HCC's Howells believes that there is a need to ensure support payments address the declining livestock numbers and that contributions from each industry are used for the benefit of that industry. "Welsh red meat producers have faced a number of challenges following a sustained period of low prices and low profitability, which has left many farms struggling with financial viability," he says. "Any changes in Single Farm Payments in the future should therefore be made over a period of years in order to minimise disruption for the industry and aid necessary long-term business planning, thereby limiting the overall impact on the profitability and viability of the Welsh red meat industry."

He adds that it is important that the EU subsidies contribute significantly to Welsh red meat business incomes. Financial results for 2008/09 show that EU subsidies contributed 38%, 31% and 27% to the average annual income on Welsh hill, upland and lowland cattle and sheep farms respectively. "Had these farms not received any subsidies, then all would have made a financial loss. The impact would have been greatest on Welsh hill cattle and sheep farms which account for 56% of the land in Wales with the average farm making a loss of £17,678. As such, should the level of subsidy decline in future, the Welsh red meat industry could face an uncertain future, as market returns would not be sufficient to cover the cost of production."


Subsidy fears


The Rural Development sub-committee of the Welsh Assembly also believes the Welsh industry is over-reliant on subsidy money. In a recent report it has called for a review of how legislation governing abattoirs is implemented in Wales, particularly highlighting a concern of the threat to the subsidies that are currently provided to Welsh abattoirs and slaughterhouses by the Food Standards Agency (FSA) in London. Plaid Cymru AM Rhodri Glyn Thomas even believes that all but three of Wales' abattoirs would disappear if these subsidies do not continue in one form or another. There is no decision yet made on this issue, though, with a Welsh Assembly Government spokesperson saying the report is currently being considered by the government. HCC was one of a number of organisations that gave evidence to the sub-committee in January, with the levy body stating that the merger of the Meat Hygiene Service into the FSA provided an ideal opportunity to improve efficiency without compromising food safety or animal welfare.

As part of a greater efficiency drive, HCC also feels that consideration should be given to the separation of the delivery of inspection tasks from the audit and enforcement functions in Wales, which ensure the smooth running of plants, without adversely affecting food safety or animal welfare. "HCC also believes that funding provided by the Welsh Assembly Government to the FSA to discount the cost of meat hygiene charges imposed on food operators was vital to the red meat industry in Wales, and that it should continue," says Howells.

Now, any concerns about the Welsh red meat industry can be brought to the Welsh Assembly Government through the AMs, which means these concerns can be scrutinised in the Assembly, making Welsh rural affairs ministers more accountable. "Welsh Ministers now have the flexibility to change the way that the red meat levy is determined and collected within Wales and this may be an avenue that the industry wishes to explore in future," says NFU Cymru's Bailey. "We are concerned that the current system of levy collection and distribution is purely based on the location of abattoirs rather than on where livestock production is concentrated. The Red Meat Industry (Wales) Measure allows for us to investigate all possible avenues to secure a more equitable means of revenue collection and distribution."

FUW members have also made it clear in recent years that the HCC should be directly accountable to the Welsh Ministers and therefore supports this further devolution of powers to Wales. "Whether or not this actually changes things remains to be seen, and will depend on future circumstances," adds Dr Fenwick. "The critical issue here is that Welsh Ministers now have the powers to change things relatively quickly if needed. At the moment, changes are not necessarily a priority."

HCC reckons that changes mean government policies and industry needs will be closely matched in order to benefit the entire industry and underpin its viability and sustainability in the future. It also predicts that the move will provide a joined-up approach to improve all aspects of the industry in Wales and will be beneficial for all.




Encouraging results


While all the movements towards more accountability in Wales are ongoing, the Welsh Lamb and Beef industry abroad could not be in a rosier position. During 2009, exports hit £140m, an increase of £30m over the previous year, with lamb accounting for £109m of that total. HCC says that, as well as existing markets in mainland Europe, it has helped expand the market in the Middle East through the United Arab Emirates and in Asia, particularly Hong Kong and Singapore. Plans are also afoot to build a private industrial park for Islamic goods and produce in south Wales, which could mean Wales becoming the halal lamb hub of the world.

On the domestic front, Welsh Lamb is also making successful moves against rival New Zealand. HCC claims that, in the key sales target area of south-east England, sales of Welsh Lamb have overtaken New Zealand lamb for the first time and, from being the least-recognised type of lamb by consumers, with just 7% in September 2005, it is now the people's favourite at 29% to New Zealand's 24% in recent market research.




Potential goldmine


The Welsh meat industry could also be sitting on a '£3m goldmine' if the true demand of skin-on sheep meat is to be believed. Said to be popular in West African Muslim communities, 'smokies' are currently illegal to produce in the UK, but it is a subject that HCC is extremely keen to push. "HCC was delighted when the FSA wrote to the European Commission in May, seeking to change the law that currently bans the production of smokies," says Howells.

A decision and a change in the law could take several years, but if it were to get the thumb-ups, HCC believes it would result in a huge economic boost for farmers. According to the FUW's Dr Nicholas Fenwick, there are only 24 abattoirs left in Wales. Any new routes to market, whether it be skin-on meat or halal, will hopefully mean this figure will never go down to single digits.

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