Red meat production plays a vital role in the Welsh economy, contributing 43% of the annual total value of Welsh agricultural output to the value of around £361m and employing 33,000 people in Wales. For some years, however, Welsh sheep and beef herds have been contracting and abattoirs closing. As is happening elsewhere in the UK, sustained levels of poor profitability, and recent hikes in feed and fuel prices have crippled Welsh farmers.
In a bid to reverse the decline of Welsh red meat production, the Welsh Assembly and industry body Hybu Cig Cymru - Meat Promotion Wales (HCC) have developed a 'Strategic Action Plan for the Welsh Red Meat Industry', which aims to "deliver a profitable, efficient, sustainable and innovative Welsh red meat industry that responds competitively to ever-changing market trends and benefits the people of Wales".
HCC chairman Rees Roberts has described the Action Plan, which was launched on 28 April 2009, as "one of the most important and forward-looking documents ever produced for the red meat industry in Wales". Developed in close consultation with the red meat supply-chain, it identifies the key challenges facing the industry and sets strategic actions to deal with them. "It's a challenging document and addresses a huge number of different issues, including marketing, research and development, future trends and climate change," says Roberts.
A quick flick through the Action Plan reveals that the challenges facing the Welsh red meat industry are familiar to the UK meat industry as a whole. A combination of CAP reform and animal disease outbreaks has stifled Welsh red meat production over the past few years, and a sustained period of low prices and low profitability has left many farmers struggling to make ends meet. "Producers have historically suffered sustained periods of low prices, often coinciding with outbreaks of disease such as foot-and-mouth, which have hit our important export market," says Roberts.
Farmgate prices did see some improvement in 2008, but steep increases in energy and feed costs mean profitability is still low and the industry is heavily reliant on subsidies. On average, in 2007/8, Welsh market returns only covered 75% of the costs of lamb production, and 56% of the costs of suckler calf production.
The result of poor profitability has been a steady decline in production. Between 1999 and 2008, the Welsh breeding ewe flock has declined by approximately 29%. The cattle herd has seen more fluctuation, but since 2004, it has declined by 8% overall.
The decline of the Welsh dairy breeding herd has also had implications for the overall Welsh cattle herd, because the dairy sector is an important supplier of animals for beef production, with an estimated 49% of UK prime beef originating from the dairy sector. The dairy situation has been worsened by the recent collapse of the milk co-operative Dairy Farmers of Britain, which has gone into receivership. This has more than 1,800 farmer members, many of whom have not been paid for last month's milk supply, with some owed as much as £15,000 and rising.
"This will have a significant knock-on effect for the entire rural economy," says Roberts. "The dairy sector is a source of calves for the beef finishing industry. If the failure of Dairy Farmers of Britain leads to dairy farmers going out of business, it may impact on beef supplies."
Profitability and production are further limited by the structure of the Welsh red meat industry, which is characterised by a large number of family farms. "Many of the farms in Wales are family-owned, which may influence the industry's ability to keep pace with technological developments in farming practices," states the Action Plan. Fewer family successions and a failure to attract new entrants means that the Welsh industry also suffers from an ageing population - the average age of the Welsh farmer is now 57 years old.
The Action Plan predicts further declines in livestock production in the future, with increasing pressure on margins and problems with profitability. "The beef dairy and pig herds will continue to decline over the next few years due to de-coupled subsidy payments, continued pressure on margins, competition with other more profitable enterprises, less labour availability, and fewer family farm successions," it states.
The Welsh processing sector also faces challenges - with margins under pressure due to low fifth-quarter returns, the costs of by-product disposal and MHS charges. Small-scale abattoirs have been hit harder than larger operations, and the Welsh sector has undergone significant rationalisation over the past few years.
Since 1990, the number of abattoirs operating in Wales has fallen from 58 to 24, in addition to one seasonal plant. There are currently two major cattle plants in Wales - St Merryn Meat and Randall Parker Foods, and five major sheep plants - Welsh Country Foods, Dunbia Llanybydder, St Merryn Meat, Randall Parker Foods and Fairfield Meat Co. Despite mounting costs, large Welsh abattoirs are generally performing well and defying trends seen elsewhere in the UK, where sheepmeat and cattle slaughterings have steadily fallen over recent years. Between 2000 and 2007, clean sheepmeat slaughterings in Welsh abattoirs increased by 3 to 4 million and cattle slaughterings increased by 246%.
Large abattoirs are increasingly concerned about maintaining their sources of supply in the face of declining production levels, however. They are also facing significant fluctuations in prices and steep increases in energy, fuel, hygiene and waste disposal charges.
In the coming years, it looks likely that producers' and processors' problems will be compounded by factors such as the looming possibility of a World Trade Organisation (WTO) free-trade agreement, rising animal welfare concern, increasing regulation, the environment and changing market conditions.
For all the challenges it faces in the future, however, the Welsh red meat industry also has opportunities. As HCC chief executive Gwyn Howells pointed out to an inquiry on Welsh food production recently: "Meat purchasing is increasingly driven by consumer insistence on provenance, together with safe, healthy natural products with high standards of animal welfare." Wales, with its grass-based production systems, family farm tradition and local processing network, offers both quality and provenance to satisfy the modern-day consumer.
Welsh branded meat has a good reputation, both nationally and internationally, especially since achieving Protected Geographical Indication (PGI) status. "The fact that Welsh Lamb and Welsh Beef have PGI status is a major marketing tool, particularly in Europe, where consumers look for the logo as a symbol of quality and natural production methods," says Howells. HCC's integrated advertising, promotion and public relations campaign focuses on the natural landscape of Wales, an approach that Howells says is "proving succcessful". Research shows that awareness of Welsh Lamb is now greater than any other lamb brand in southern England, overtaking New Zealand for the first time. With a strong brand, the Welsh red meat industry is well placed to take advantage of a thriving global export market, which has taken off since the devaluation of sterling. Exports are currently worth almost £108m a year to the Welsh economy, with 63% of Welsh lamb and 89% of Welsh beef is sold into the rest of Britain and 33% of lamb and 7% of beef exported to Europe and worldwide. EU countries remain the main market for Welsh red meat and France is the single largest importer, importing Welsh Lamb to the value of almost £66.5m and Welsh Beef worth more than £2.5m in 2008.
Opportunities are opening up outside Europe, however, particularly on the back of UK trade missions to Asia and the Middle East. "Sales of Welsh Lamb were worth almost £200,000 in Dubai, Singapore and Hong Kong last year," says Roberts. "HCC has completed a trade mission to the Middle East, where interest in Welsh Lamb is continuing to build, and we are optimistic that we will find new customers."
Another advantage for the red meat industry is the Welsh Assembly government's commitment to protecting the environment and promoting the development of rural areas, which is set out in the Rural Development Plan for Wales 2007-2013. The Welsh Assembly recognises that the livestock industry has a valuable role to play in safeguarding the rural environment and economy, and pays out subsidies through five schemes developed under the Axxis Two of the Rural Development Plan. One of these schemes, Tir Mynydd, rewards farmers who maintain livestock production in less favoured areas (LFAs) of Wales. Another, Tir Gofal, pays farmers who commit to safeguarding the rural environment and heritage. "Tir Gofal means land care. We believe it is the first scheme in the EU aimed at promoting whole farm conservation and management," says Siôn Aron Jones, HCC industry development manager. "It is designed to support the farming community by protecting the rich heritage of Welsh farms."
Requirements include management of existing habitats, providing new access for the public and restoring hedgerows. "The scheme includes a menu of options that the farmer can enter into. We have been doing things such as restoring traditional hedgerows to make wildlife corridors and preventing stock from entering the woodlands to promote biodiversity," explains Tir Gofal farmer Myrddin Davies - who is also the first-ever 'Face of Welsh Lamb'. Davies, who works with his parents on a 180-acre family-run farm in Nant y Wrach Bach at Llanrwst near Conwy, North Wales, says the subsidies are an invaluable addition to the farm's income. "Beef and lamb prices are volatile and Tir Gofal gives extra security when times are tough," he says.
Subsidies under schemes such as Tir Mynydd and Tir Gofal are a key advantage for Welsh livestock farmers, but Jones says that strict requirements means they are currently only accessed by a limited number of farmers. In a bid to combat this, the Welsh Assembly recently reviewed its agri-environmental schemes and has decided to scrap the five existing schemes for an all-encompassing two-tier scheme, called Glastir. Jones says that the new scheme "should make subsidies more accessible", because more farmers will meet the requirements.
Announcing the new scheme in May, Welsh rural affairs minister Elin Jones said: "My decision to go ahead with one all-encompassing scheme will mean a reduction in red tape for farmers, lower administration costs, and greater environmental benefits. The land management scheme for the coming decade must respond to the challenges of climate change, water management and biodiversity, as set out in last year's CAP Health Check Agenda. Glastir will help us to do just that."
Looking to the future, the 'Strategic Action Plan for the Welsh Red Meat Industry' sets out a number of key actions to address the opportunities and challenges faced by Welsh red meat. These include promotion of Welsh red meat products, research activity, an environmental roadmap, training, information dissemination and supply chain integration. The Action Plan recognises that the key to sustainable meat production is a healthy supply chain and, as a result, a lot of the proposed actions focus around the provision of research and training to help processors and producers improve their business performance.
HCC is currently carrying out a research and development programme to this end, which has three major strands. The first centres around genetic improvement in the sheep and beef sectors. "This project aims to improve the financial returns of Welsh sheep and cattle farmers by better aligning the characteristics of breeding stock with market requirements," explains Dewi Hughes, HCC project executive. Through this project, sheep producers will be assisted in introducing desirable traits to their flocks, such as meat quality and disease resistance. "This will ensure that there is an increase in the percentage of finished lambs and cattle meeting market specification, an improvement of maternal ability and a development of disease resistance within the Welsh flock," says Hughes.
The second strand centres on "technology development", with a particular focus on genetic improvement, environmental issues, product quality and safety, nutrition, animal health and traceability. "Up-to-date relevant information and best-practice will be disseminated through the supply chain. Training will be provided for farmers and essential information will be fed back to producers from farmers," says Hughes. It is hoped this will result in a stronger, more knowledgeable, confident and sustainable red meat industry.
The final strand of R&D involves economic intelligence and benchmarking. "HCC will source a wide range of market intelligence relevant to the Welsh red meat industry, to use as a basis for informed decision-making in determining priorities and the direction of individual enterprises," Hughes explains.
Information will be delivered to the industry through Farming Connect, the Welsh Assembly's flagship support service for farming businesses. "Farming Connect is a technology transfer programme, created by the Welsh Assembly government and managed by HCC," explains HCC's Jones. "It offers one-to-one support, knowledge, training and advice on climate change, environmental management, animal health, welfare and communications technology."
With a strong brand, a thorough plan of action in place and commitment from the Welsh Assembly government, there is light at the end of the tunnel for Welsh red meat. Now, only time will tell whether the industry's ambitious aims can be translated into effective action.
All data from Hybu Cig Cymru
Strategic action plan
Key action points
* Promote Welsh red meat products among the supply chain
* Undertake research activity for the Welsh red meat industry
* Develop an environmental roadmap for Welsh red meat production
* Provide training to the Welsh red meat industry
* Encourage new entrants into the Welsh red meat industry
* Seek to enhance Welsh red meat supply-chain transparency and integration
* Support Welsh red meat product development (new products, alternative uses of products, new markets, etc)
* Collate, analyse and disseminate information and advice to the Welsh red meat industry
* Advise, assist and influence regulatory development
* And undertake contingency planning to assist the Welsh red meat industry during times of difficulty (including animal health and market impact).