Vertical integration is farming’s way ahead

NFUS president Nigel Miller tells Iona Walton that hedging risk and working closely with the Government and the supply chain will be vital as DEFRA budgets are cut
Imminent cuts in DEFRA spending could have a huge potential impact on animal health and welfare structures, and Nigel Miller, the new president of NFU Scotland, says producers must be prepared for real change.
“Whatever happens, farmers must focus on efficiencies within their own businesses, look at innovative ways of working and new technology to take costs out of traceability, surveillance and disease control,” he advises.
The former vice-president and chairman of the union’s livestock committee, Mr Miller farms 485 hectares in the Scottish Borders and is a qualified vet. His upland hill farm supports 170 cows and 800 breeding ewes.

Mr Miller says problems in the milk sector are a long-term issue, tipped into crisis by costs escalating in an unpredictable way.
“Oil price rises won’t go away,” he warns, listing one of the threats to farming’s profitability. “It’s not been possible for NFUS to get an immediate solution to imbalances in the marketing system, but we’re working with considerable energy with other partners on contracts that may make a real difference.
“In the medium-term, the European Union’s High Level Working Group looks to be opening doors for more meaningful co-operation and a more balanced position for producers in the marketplace, which is welcome.
“With the overall EU backdrop there are real opportunities for producers to work more closely together and in partnership with the processing sector and the Government to develop an increasingly diverse processing sector in Scotland. A new approach to the Scotland Rural Development Programme could open the door to collaborative processing projects and a more diverse processing sector could change the future prospects for Scottish milk.”
Many issues affecting the milk sector – such as high input costs and an unresponsive market that does not deliver costs back to producers – have caught the pigmeat sector in the same way, highlighted by the recent demonstration at Westminster, organised by pig producers .
“We plan to monitor retailers’ commitments through a shelfwatch scheme during the next few months,” says Mr Miller.
“The proposed Grocery Supply Chain Code of Practice adjudicator may be a key player and NFUS is scrutinising the passage of this issue through Westminster abecause it’s vital that the adjudicator is proactive.”
The industry itself must get smarter about using hedging tools and the futures market, says Mr Miller, perhaps backed by the European Commission’s proposed tools to counterbalance volatility. “There’s also a role for a cost index where a transparent index could act as a modifying co-efficient, indicating in as close to real time as possible the critical input costs of the industry which can be subject to extreme volatility; it would complement the deadweight average pig price (DAPP) as well.”

Common Agriculture Policy
Mr Miller believes the Common Agriculture Policy (CAP) is a tool for the future that underpins good quality food and EU food security, which brings benefits to the environment and landscape that the wider community enjoys.
“UK farmers deliver high quality products to the market, but an area of weakness is the lack of control over processing and marketing. The challenge is for primary producers to develop structures and arrangements that give meaningful vertical integration,” he says.
“In Scotland the focus must remain on underpinning food production and ensuring continued activity in all our regions, and Pillar I support is crucial in that respect.
“Scotland’s historical share of the CAP budget is well below the EU average, yet ours is a country with significant areas of disadvantaged land. CAP spend must be maintained and in Scotland should be at least the same as the average spend in the rest of the EU.
“The next two to three years are bound to throw up difficulties for producers, but I would like to see innovation and continual technical improvement in UK farming. I hope to be involved in changing the balance in the market and building on the momentum that has been generated in the past few years to leave Scotland in a stronger position to produce food in the future,” Mr Miller concludes