10th Report, 2009 (Session 3)

The Pig Industry

CONTENTS

Remit and membership

Report
Summary of main conclusions and recommendations
Introduction
Previous work undertaken by the Committee

The Pig Sector Task Force report and the Scottish Government’s response

Key themes arising from the inquiry

Lessons to be learned from the Pig Sector Task Force report and its reception
The future of pig production in Scotland
Targeted support to increase confidence and improve the sector’s efficiency
Demand for Scottish pigmeat products - factors influencing consumer choices

Annexe A: Minute extracts
Annexe B: Oral evidence and associated written evidence
Annexe C: Other written evidence

Remit and membership

Remit:

To consider and report on agriculture, fisheries and rural development and other matters falling within the responsibility of the Cabinet Secretary for Rural Affairs and the Environment.

Membership:¹

Karen Gillon
Liam McArthur
Alasdair Morgan
Elaine Murray
Peter Peacock
John Scott (Deputy Convener)
Maureen Watt (Convener)
Bill Wilson

Committee Clerking Team:

Clerk to the Committee
Peter McGrath

Senior Assistant Clerk
Roz Wheeler

Assistant Clerk
Lori Gray

The Pig Industry

The Committee reports to the Parliament as follows—

summary of main conclusions and recommendations

Lessons to be learned from the Pig Sector Task Force report and its reception

1. The Committee notes the Cabinet Secretary’s frank acknowledgment that he and his department have learnt lessons from the handling of the Pig Sector Task Force. This should certainly include ensuring in future that the remit of any group set up to examine critical issues in the agricultural sector clearly sets out the parameters within which the group is expected to operate. This should be seen not as limiting the independence of a group, but as managing expectations for the group’s benefit.

2. The Committee also considers that shortcomings in the handling of the task force resulted in a missed opportunity for the Scottish Government to try to restore confidence in the industry, at a particularly troubled time when such confidence was badly needed.

3. As far as the future of the pig industry is concerned, the Committee considers that it is now time to look forward, and to consider the merits of the constructive solutions that the National Farmers’ Union Scotland and others have put on the table in the course of this inquiry.

Securing a thriving pig industry in Scotland

4. The Committee believes that the best solution for the long-term future of the pig industry lies in trying to move the debate on from a focus on particular livestock numbers. This is not because concerns about the sector losing critical mass are groundless – they clearly are not, particularly in relation to concerns over the future of the plant at Broxburn (Scotland’s only industrial scale pig processing plant) – but because the discussion about numbers obscures the key question.

5. The key question in the debate should instead be whether we want the pig sector to have a future as a thriving, valued and significant component of a diversified and balanced Scottish agricultural sector, making an important contribution to Scottish food production. The answer should surely be an emphatic yes, not least because there is clear evidence that the Scottish public, given the opportunity, want to go on buying Scottish pork. The Scottish Government has a key role in delivering this positive message, which must of course be accompanied by actions demonstrating its commitment to the long-term future of the industry.

The future of the processing plant at Broxburn

6. The Committee urges the Scottish Government to take all reasonable steps to support the continuation of pig processing services at the Broxburn plant, including considering whether grant funding could be offered. If so, any such funding should be linked to a clear commitment from Vion Ltd towards the plant’s future in the longer term. The Committee invites the Scottish Government to clarify what steps it has been taking, and is proposing to take, to secure the future of the Broxburn plant, insofar as considerations of commercial confidentiality allow.

The Single Farm Payment Scheme inquiry and the pig sector

7. The Committee also suggests that included within the remit of the recently announced independent inquiry into the role of the SFP scheme should be consideration of whether and, if so, how the scheme could be tailored to help farmers in the pig sector. The Committee recognises that the SFP scheme may not be appropriate for producers of indoor-bred pigs but considers that there is no reason in principle why breeders of outdoor pigs should be excluded from its ambit.

Is support and stimulus from the Scottish Government needed to help the industry recover?

8. The Committee concludes that a succession of events over and above the normal cyclical operation of the pig industry have cumulatively helped bring the industry into its current reduced state. Government support and stimulus therefore has an important role to play.

9. The Committee notes the clear difference of views between pig producers and retailers as to the state of the industry and its future prospects. Whilst the sector’s difficulties should not be under-estimated, the Committee notes the positive picture conveyed by retailers which indicates that the industry does have a viable, indeed potentially thriving future, provided underlying structural weaknesses are addressed and confidence is restored.

The case for a supermarket ombudsman

10. The Committee considers that the best interests of farmers and consumers would be met if there were a supermarket ombudsman empowered to help producers and retailers agree a fair price, and to offer to adjudicate in cases of dispute. It appears to us that this has the potential to deliver greater industry stability in the longer term and to maintain effective channels of communication between producers and retailers. The Committee invites the Scottish Government to bring this conclusion to the attention of the UK Government.

Regulations on Nitrate Vulnerable Zones and on Integrated Pollution Prevention and Control

11. Whilst the Committee recognises that the Scotland Rural Development Programme has helped many producers meet the cost of the NVZ regulations, we consider that the imminent Scottish Government review of the administration of the scheme provides an ideal opportunity to amend the relevant conditions of application so as to clarify that any fundamentally sound proposal to secure compliance with the regulations will be accepted. The opportunity should also be taken to address concerns that the application process is too bureaucratic (and, in making this recommendation, the Committee recognises that similar concerns will have been expressed in relation to other application procedures under the SRDP).

12. The Committee does not consider that it would be realistic at this stage to seek to resist revised IPPC regulations at European level. The Scottish Government’s attention should instead focus on seeking to ensure that the regulations are transposed proportionately and in a manner that enables a reasonable period for compliance. The Government should also provide assurances to producers that sound proposals for compliance will be assisted under the SRDP.

Targeted assistance under the Scotland Rural Development Programme to secure a more efficient and competitive industry in the longer term

13. The Committee calls for the SRDP to make provision—

• to encourage new entrants into pig farming (for instance by providing financial incentives for potential entrants into outdoor sow rearing); and
• to encourage established producers to invest in their businesses (for instance in buildings for finishing pigs) so as to ensure that producers are equipped with infrastructure that is fit for purpose for international competition in the 21st century.

Clearly and accurately labelling and marketing Scottish pork

14. The Committee supports Scottish Government efforts to press for a “product of Scotland” label that consumers across Europe could rely on. We are pleased to note that the UK Government is apparently supportive of such efforts. The European Commission’s recent consultation on country of origin labelling affords an opportunity to make progress. The Committee would welcome an update on this issue from the Scottish Government when it responds to this report.

15. Efforts to move towards a European solution, which may take some time, should not rule out supermarkets expanding voluntary schemes to introduce clearer country of origin labelling. The Scottish Government has an ongoing role to encourage and promote voluntary schemes that help provide clarity to the consumer.

16. The Committee would encourage local authority trading standards officers to use the powers already at their disposal to crack down on misleading marketing of non-Scottish pork products. The Committee would also welcome a view from the Scottish Government as to whether it considers that trading standards officers have sufficient legal powers and resources to address the sort of misleading practices identified in evidence.

Public procurement contracts

17. The Committee acknowledges that some progress has been made in encouraging greater consumption of local produce via public procurement contracts, but urges the Scottish Government to continue to press for increased uptake, as unexploited opportunities still exist. In the context of the pig sector, this would include continuing to publicise the message that locally produced pork comes from pigs that will have generally been reared to higher welfare standards than in importing countries. The Committee notes that this approach must go hand in hand with producing a scheme for identifying the provenance of Scottish pork clearly and simply.

Associating Scottish pork products with high welfare standards through labelling, marketing and education

18. The Committee notes the current lack of certainty and consistency in communicating via labelling the welfare standards under which pigs are bred. The Committee would exhort the Scottish Government to work with producers, processors and retailers to develop a simple, clear means of labelling and marketing the generally superior welfare conditions under which Scottish pigs will have been raised, on which the Scottish consumer can rely, and which should help increase the competitiveness of Scottish pig products against imported meat.

19. The Committee would encourage the Scottish Government to learn from initiatives practised elsewhere such as the Austrian “animal welfare goes to school” scheme and to promote farm visits for school children, which would enable them to learn more about all aspects of farming, including the pig sector, as well as about related environmental and welfare issues.

Growing the market for the whole pig

20. The Committee is pleased to note evidence of increased use of the whole pig in the domestic market in the current economic climate. The Committee would welcome an indication from the Scottish Government as to whether it proposes to take action (for instance via dialogue with Quality Meat Scotland) to sustain and increase this trend towards wider consumer preferences.

Introduction

21. The Rural Affairs and Environment Committee held a short inquiry into the challenges facing the pig industry in response to long-standing concerns from stakeholders about the industry’s sustainability and the perceived lack of an effective response from the Scottish Government.

22. The Committee began taking evidence at its meeting on 1 April 2009², hearing from Gordon McKen, Chair of Scottish Pig Producers Ltd, the country’s main pig marketing group; Philip Sleigh, Chair of the National Farmers Union Scotland (NFUS) Pigs Working Group; Brian McMonagle, Managing Director of Vion Hall’s (Scotland’s only industrial scale pig abbatoir and pigmeat processor, sited in Broxburn); Stuart Ashworth, Head of Economic Services at Quality Meat Scotland; Gavin Dick of the Scottish Agricultural College; and Professor Christopher Wathes, Chair of the Farm Animal Welfare Council.

23. The Committee then took evidence on 22 April³ from Chris Brown, Head of Ethical and Sustainable Sourcing at Asda; followed by Richard Lochhead MSP, Cabinet Secretary for Rural Affairs and the Environment and his officials. Written evidence was also sought and obtained from other major retailers, which for various reasons had declined the Committee’s invitation to give evidence in person, or were unable to do so.

24. The Committee is grateful to all those who gave evidence or contributed to our preliminary investigation into the pig industry, as detailed below.

Previous work undertaken by the Committee

25. In advance of the inquiry, the Committee had been keeping a watching brief on challenges facing the pig industry since the end of 2007. We began this work after receiving a number of representations from the NFUS and other industry stakeholders.

26. The Committee held an initial evidence session on 16 April 2008⁴, hearing from a panel comprising representatives of the pig and pigmeat industry: Mr McKen, Robin Traquair (Mr Sleigh’s predecessor on the NFUS’s Pigs Working Group); and Mr Ashworth. We then heard from the Cabinet Secretary and accompanying officials.

27. Evidence from industry representatives conveyed a picture of an industry that was increasingly unprofitable, reducing in size, and losing confidence. Specific issues raised included the loss of supermarket contracts as a result of bans on the movement of stock following the 2007 foot and mouth disease (FMD) outbreak elsewhere in the UK; significant increases in feed costs; and additional expense arising from the requirement to comply with new regulatory measures.

28. During his evidence session, the Cabinet Secretary announced that, in response to the concerns that had been raised, he intended to establish a short-life task force, to analyse the challenges facing the industry and produce recommendations.

29. This Pig Sector Task Force was duly set up and was chaired by Gordon McKen, the other members being Mr Traquair, Mr Sleigh, two further pig producers and Mr McMonagle. Scottish Government officials assisted the task force but were not part of it. The task force reported⁵ on 18 June 2008 and the Scottish Government published its response on 15 August. The report and the response are discussed further below.

30. The Committee considered both the report and the Cabinet Secretary’s response and agreed to seek an explanation from the Cabinet Secretary as to why the Government had not agreed to adopt the majority of the task force’s recommendations. Having received and considered his reply, we agreed to write to industry representatives for an update on the challenges facing the industry.

31. In February 2009 the Committee agreed that the responses clearly showed that the state of the industry continued to give cause for concern, and that it was important to ascertain what steps the Government proposed to take to ensure the continuing viability of the industry, given that it had rejected most of the Pig Sector Task Force recommendations. We therefore agreed to conduct this inquiry.

The Pig Sector Task Force report and the Scottish Government’s response

32. The task force’s report identified the main problems facing the sector as high feed costs, the 2007 FMD outbreak (there were no cases in Scotland but movement was severely restricted), and the cost of regulation. It also identified the lack of awareness as to the above-average welfare standards in which pigs in the UK are reared as a missed opportunity for the industry and suggests that misleading labels enable imported pigmeat processed here to be marketed as British. The report made six, costed, recommendations:

• de minimis aid⁶ of up to €7500 for pig producers (estimated maximum cost to Government £694000);
• compensation (following EU authorisation) for losses incurred during the FMD outbreak, when many producers were required to keep and feed sows for several months rather then send them for slaughter (estimated cost £539000);
• research into, and vaccination against, the porcine circovirus type 2 (PCV2) infection, a non-notifiable disease harmless to humans which is thought to contribute towards wasting illnesses in pigs (costed at up to £570000 assuming the Government meets half of the cost);
• measures to eradicate sarcoptic mange, a parasitic infection caused by mites, which is known to have taken hold in a minority of Scottish herds (estimated at £42000 if the Government were to meet half the costs);
• development of an on-farm recording system to enable health improvement measures to be benchmarked (estimated cost starting at £90000 over three years; and
• research on improving pigmeat labelling to increase consumer confidence.

33. In his response⁷ to the report, the Cabinet Secretary provided detail on the distribution of a £1 million long-term assistance package:

• £200000 had already been spent to improve the marketing of pig meat products following the 2007 FMD outbreak;
• £100000 had been spent on labelling and on work to improve animal health, in line with two recommendations from the task force;
• the remaining £700000 for future projects was to be allocated in partnership with the industry.

34. The response noted that these measures at least partly implement two of the report’s recommendations, but that the Scottish Government was not able to accept the remaining four. The Cabinet Secretary’s follow-up letter⁸ to the Committee elaborates on his reasoning:

“Recommendations accepted:

Development of an on-farm recording system – this work is now fully included in the Scottish Pig Business Network.

Research on improved pig meat labelling – this research was announced in August and is now underway. Conclusions are expected by November 2008.”⁹

Recommendations not accepted:

De minimis scheme … Only about 117 businesses would have benefited and while the scheme might have provided short term relief to some pig producers, it did not address the fundamental causes of financial difficulty in the pig sector … and therefore would not have had any long term value for the sector as a whole.

Compensation for loss of cow sow market – The scheme would have provided only short-term support for the pig sector. It was backward looking with no long-term benefits to be gained.

PCV2 vaccination – Government officials are in negotiation with the Royal Veterinary College on involvement in research into post-weaning multi-systemic syndrome. If it goes ahead, the research will be funded from the £1m for the pig sector. The work would be the subject of a contract and therefore I cannot be specific about costs. With regard to the actual vaccination, Government took the view that it would set a dangerous precedent to provide vaccine for a non-notifiable disease. … The project … would not be the best use of £570000 for the longer term.

Sarcoptic mange – at a cost of £41000, this project would have benefited the few producers who have not already dealt with the problem of mange within their herd...it would have set a precedent for Government to supply a treatment for a non-notifiable disease.”

35. The submissions received from industry representatives commenting on the Cabinet Secretary’s response expressed disappointment at the Government’s decision not to adopt task force recommendations, and queried whether the establishment of the task force had been worthwhile. Responses also highlighted challenges that continued to affect the sector, whilst also noting a slight stabilisation in the industry in the second half of 2008.

36. The Committee went on to discuss these challenges with stakeholders in greater detail during the course of our inquiry.

Key themes arising from the inquiry

37. A number of key themes emerged from evidence-taking. All are to some extent inter-linked, two of them – the future of the processing plant at Broxburn and the current low size of the Scottish herd – critically so. Other concerns relate mainly to consumer issues such as improving food labelling or addressing the lack of domestic demand for certain cuts of the pig. In all cases, the critical underlying issue is confidence – or rather the lack of it. Despite evidence from retailers (discussed later) that producers had reasons to be hopeful, producers themselves were far from optimistic. This is a particularly important issue for the pig industry because pig farming is generally considered easier¹⁰ to get out of than other forms of livestock rearing and serious concerns have been expressed that the industry is in danger of falling below its critical mass. Providing reassurance to producers that they have a future in pig farming is more than just a public relations exercise; it should be a policy imperative for any Government dealing with the industry in its current fragile state.

Lessons to be learned from the Pig Sector Task Force report and its reception

38. In this regard, pig producers gave clear evidence that fall-out from the Scottish Government’s rejection of most of the task force report had knocked industry confidence. As Philip Sleigh from NFUS commented—

“The lack of confidence [in the future of the industry] might stem from the fact that although the Cabinet Secretary for Rural Affairs and the Environment responded to our requests for help last year by setting up a task force—of which I was a member and that worked with Scottish Government representatives on what we believed were plans that would really help the industry to get over last year's challenges—he decided in the end not to take up its recommendations. That really shook the industry's confidence, because we were looking for some assistance and guidance and some sign that we were a valued industry within the Scottish agricultural sector.”¹¹

39. Mr Sleigh even went on to argue that it would have been better for industry confidence if the task force “had never been set up”.¹²

40. The Cabinet Secretary acknowledged these criticisms to some extent, whilst also defending the decision he reached—

“I do not regret setting up the task force, but I learned some hard lessons in that we were clearly unable to accept a number of its recommendations. If I were to establish such a task force again, I would take on board those lessons by making it much clearer to the participants what measures we could and could not implement.” ¹³

41. He continued—

We have taken forward two of the six recommendations. Although the industry was unhappy that we did not adopt all the recommendations, my discussions at the time with processors and others in the industry—in particular with Vion, whose takeover of Grampian Country Foods coincided with the task force's work—and the feedback that I received from most people suggested that we should look to the long-term viability of the sector. Therefore, we have proposed measures to deliver greater profitability, efficiency and stability in the longer term. Clearly, I felt that we could not go down the path of introducing measures on headage payments.”¹⁴

42. Pig producers have acknowledged in evidence that it is probably now best to move on from the work of the task force, and to their credit have constructively put forward new suggestions for assisting the industry, many of which are discussed further below. However, lessons do have to be learned from this unhappy episode. It is disappointing to note producers’ concerns that the setting up of a task force formed to help shore up confidence in the industry has had the opposite effect. And, whilst the task force, as an independent group, was of course at liberty to produce whatever conclusions it considered appropriate, it is also disappointing – indeed mystifying – how a group supported and administered by the Government could be left to come up with key recommendations that the Cabinet Secretary apparently would never have been able or minded to support, without any apparent forewarning.

43. The Committee notes the Cabinet Secretary’s frank acknowledgment that he and his department have learnt lessons from the handling of the Pig Sector Task Force. This should certainly include ensuring in future that the remit of any group set up to examine critical issues in the agricultural sector clearly sets out the parameters within which the group is expected to operate. This should be seen not as limiting the independence of a group, but as managing expectations for the group’s benefit.

44. The Committee also considers that shortcomings in the handling of the task force resulted in a missed opportunity for the Scottish Government to try to restore confidence in the industry, at a particularly troubled time when such confidence was badly needed.

45. As far as the future of the pig industry is concerned, the Committee considers that it is now time to look forward, and to consider the merits of the constructive solutions that the NFUS and others have put on the table in the course of this inquiry.

The future of pig production in Scotland

The overall size of the Scottish herd
46. The fundamental question underlying this inquiry was whether the Scottish pig sector has a future as a significant part of the agricultural sector. One of the key issues which arose in evidence was concerns over the size of the Scottish herd. The Committee heard that in the last year the industry lost 8000 to 10000 breeding sows and is now operating with around 35000. This is 10000 below the figure of 45000 which a Scottish Agricultural Organisation Society (SAOS) Strategic Review proposed as the critical mass below which it would become inefficient to run a cost-effective pig sector in Scotland.

47. There is nothing unprecedented about fluctuations in the size of the pig sector in Scotland. Indeed, they would appear to be an intrinsic element of it, as a function of the so-called pig cycle – when production is increased, pigmeat prices fall, causing producers to downsize production or leave the industry entirely, which leads to a decrease in production followed by rising prices, which means production increases – and so on. As Chris Brown of Asda noted—

“the pig industry has always been driven by supply and demand; the first lesson that anyone ever learns in an economics course is the pig cycle.”¹⁵

48. In this respect, the sector differs notably from the beef and lamb sectors which, for reasons which include generally more limited opportunities for farmers to diversify land use in Scotland, are much less prone to this repeating pattern of growth and decline.¹⁶ The comparatively short production cycle for pigs, which allow producers to respond to changed market conditions relatively rapidly, also has an effect.¹⁷

49. A December 2008¹⁸ report from the House of Commons Environment, Food and Rural Affairs (EFRA) Committee on the English pig industry, acknowledges the naturally cyclical nature of the industry, but goes on to note (discussing the UK industry as a whole) that—

“it has been argued that the reduction in production of 36% between 1998 and 2007 is not simply a low point in the “pig cycle” … but is indicative of a long-term erosion of the competitiveness of the industry.”

50. The Committee sought to address this argument in a Scottish context. We sought to clarify first whether the sector was experiencing anything more threatening than a “typical” low point in the pig cycle, from which it could be expected to recover. If the answer is yes, then two further questions naturally arise; what are the causes of the industry’s competitive erosion, and is there a risk of the industry becoming so small as to be unviable.

Vion’s plant at Broxburn
51. In relation to this final point, mention should be made of the significance of the plant at Broxburn, now trading as Vion Hall’s, to the future of the pig industry. This is the only industrial scale pig slaughterhouse and pigmeat processing plant in Scotland, run since 2008 by Vion, an international company with large pigmeat processing plants elsewhere in the UK and on the continent. Concerns were expressed that, with the decline of the Scottish herd, the plant was now operating significantly below capacity, making its future uncertain. At the same time, producers told us that concerns about the plant’s future made them hesitant to invest in growing their herds and infrastructure.

52. In other words, independently of any concrete factors directly leading to reduced profitability or competitiveness within the industry, concerns about the future of the Broxburn plant and about the decrease in pig numbers have in themselves come to feed off of each other, helping create and sustain a climate of uncertainty and pessimism.

53. Brian McMonagle of Vion Hall’s told the Committee that the plant was operating “under a question mark”—

“Where last year we killed 13500 pigs, this year we killed 9500. That represents a 30% reduction in the number of pigs which affects the site’s viability and profitability. … With pig numbers deteriorating the debate is whether the cost of running Vion Hall’s is viable in the long term.”¹⁹

54. In supplementary evidence, Mr McMonagle asked for the Scottish Government’s support for Halls to secure its future—

“There is currently a manufacturing review within Vion over where products and processes should sit. This presents both a threat and an opportunity to the site as Vion can choose to move this volume to Europe or down south to seek the benefits of more favourable grant funding. I would seek the help of the Committee to lobby Scottish Enterprise for support for the Hall’s option due to the impact it would have on the Scottish community.”²⁰

55. The closure of Halls of Broxburn would clearly have a serious impact on Scottish pig producers, most of whom would have to arrange to have their pigs transported further afield. Although it was not directly raised in evidence, another concern for producers might be that if pigs come to be processed south of the border, this might have a knock-on effect on how the resulting pigmeat could then be labelled, and therefore on its marketability. The consequences of lengthier transportation times on pigs’ welfare may also become more of a concern.

56. The retail sector would of course be affected too. Chris Brown of Asda, by far the plant’s largest client, told the Committee that if Vion Hall’s closed “it would leave me looking for 75 per cent of my pork.”²¹ Tesco’s²² and Sainsbury’s²³ written evidence also highlighted the importance of the plant; both source all of their Scottish pork from Vion Hall’s, underlining that it is not apparently a lack of retail demand that is threatening the plant; the market appears to be there.

57. More widely, the Committee received evidence that closure of the plant would have a knock-on effect on other suppliers and contractors not directly connected to the pig industry, with the apparent potential loss of hundreds of jobs. Whilst that is not a matter within the remit of this inquiry, it is of course another cause for concern.

58. It is important to put concerns over Vion Hall’s into a wider context. Rationalisation of processing premises is apparently going on in many parts of Europe, in part because herd reduction appears to be an EU-wide phenomenon, with many retailers looking to eastern Europe and further afield for their pig supply.²⁴ What perhaps marks Scotland out is the extent to which our industry is tied to one particular plant which makes it strategically important too in terms of food production and processing.²⁵

The critical mass argument
59. The critical mass argument is quite easily put: if overall sow numbers fall below a particular level, the infrastructure and trading arrangements needed to sustain a pig sector of any size or significance will become unviable. Vion Hall’s will close. Supermarkets will pull out of contracts with Scottish producers because they cannot secure an adequate supply. Farmers will then accelerate the process of running down their businesses.

60. The uncertainty is at which point this all begins to happen. The SAOS report²⁶ had well-argued reasons for claiming that 45000 sows is the critical number, yet numbers are now apparently 10000 or more below this figure and farms are breaking even or becoming profitable again. Retailers are continuing to support the Scottish industry, with Asda’s Chris Brown telling the Committee—

“We sell about 300 tonnes of fresh pork each week, of which 250 tonnes comes from Broxburn. Seventy-five per cent of the British pork that I sell comes from Scotland … In terms of the global demands and dynamics within the industry, it is interesting that the pork market is now growing ahead of the food market. Pork sales are rising and, consequently, pig prices are rising. I hope that that is stimulating pig farmers to think about the future in a much more positive light. I understand that the two companies that provide pig housing have full order books, which is very encouraging.”²⁷

61. The Committee asked the Cabinet Secretary for a view on the 45000 target figure—

“I take the industry's advice and I have heard that target mentioned several times. If that target is sensible, that is the sensible target to which we should refer. As for the Government adopting formal targets for livestock numbers, I would be reluctant to go down that road. It would not be sensible for any Government to pick a target for the number of livestock in any sector in Scotland. However, we want the pig industry to move in the right direction—we do not want it to move towards a decline that would jeopardise the sector's critical mass.”²⁸
The Committee’s view

62. The Committee notes the argument that 45000 is the crucial breeding sow number beneath which the Scottish pig industry risks becoming unsustainable. This is a view that appears to have taken hold amongst producers, and appears to have become one of the factors affecting overall industry confidence. The fact that the industry is continuing to function with considerably fewer than 45000 sows is therefore almost beside the point; the perception that the whole sector may be on the point of severe contraction because it has lost critical mass has in itself become a problem.

63. The Committee believes that the best solution for the long-term future of the pig industry lies in trying to move the debate on from a focus on particular livestock numbers. This is not because concerns about the sector losing critical mass are groundless (they clearly are not, particularly in relation to concerns over the future of the plant at Broxburn) but because the discussion about numbers obscures the key question.

64. The key question in the debate should instead be whether we want the pig sector to have a future as a thriving, valued and significant component of a diversified and balanced Scottish agricultural sector, making an important contribution to Scottish food production. The answer should surely be an emphatic yes, not least because, as we go on to discuss, there is clear evidence that the Scottish public, given the opportunity, want to go on buying Scottish pork. The Scottish Government has a key role in delivering this positive message, which must of course be accompanied by actions demonstrating its commitment to the long-term future of the industry.

65. The Committee is not currently persuaded that these actions should include the Government making the growth of the sector a national priority under the Scotland Rural Development Programme (SRDP), as the NFUS has recommended. Without wishing to diminish the travails of the pig sector over the last few years, we consider that it could reasonably be argued that the beef, lamb and dairy sectors could make similar claims. An objective of growing the sector also implies that there is a target number that the Government should be aiming at²⁹ and, as discussed, the Committee subscribes to the view that the aim should be to secure a thriving sector, unconstrained by views about whether there should be a given number at a particular time.

66. Retaining adequate industrial sized pig processing facilities within Scotland is, however, of critical importance. Doing so is not only of huge importance in encouraging producers to stay in the industry; it also ensures that Scotland will retain a truly national industry, the “Scottishness” of which is uncompromised from field all the way to plate. This is important for securing brand integrity.

67. As Vion Hall’s is, at present, the only plant providing those facilities, the Committee urges the Scottish Government to take all reasonable steps to support the continuation of pig processing services at the Broxburn plant, including considering whether grant funding could be offered. If so, any such funding should be linked to a clear commitment from Vion Ltd towards the plant’s future in the longer term. The Committee invites the Scottish Government to clarify what steps it has been taking, and is proposing to take, to secure the future of the Broxburn plant, insofar as considerations of commercial confidentiality allow.

68. The Committee also suggests that included within the remit of the recently announced independent inquiry³⁰ into the role of the Single Farm Payment scheme should be consideration of whether and, if so, how the scheme could be tailored to help farmers in the pig sector. The Committee recognises that the SFP scheme may not be appropriate for producers of indoor-bred pigs but considers that there is no reason in principle why breeders of outdoor pigs should be excluded from its ambit.

Reasons for the decline of the herd
69. Beyond the debate over critical mass, there is the more fundamental question of why the national herd has been in quite steep decline since the 1990s. Evidence led before the Committee helped clarify that discrete factors over and above the usual pattern of relatively manageable expansion and contraction within the pig cycle have contributed towards the decline.

70. Written evidence from Phillip Sleigh of the NFUS helped put matters in context—

“If we go back to the mid 1990s there were approximately 73000 sows on Scottish farms and prices peaked at about 150p per kilo, interestingly just where we are at the moment 14/15 years later. Prior to then the ‘pig cycle’ worked, with prices rising and falling over a 5 year period, so if you lost money one year, chances were pretty good you would make it back over the next four. After 1997 the price collapsed and struggled to come back for various reasons, including two foot and mouth outbreaks and a poor exchange rate with Europe. The numbers also took a hit because of the requirement, only in the UK, to loose house sows during gestation, the cost of converting old buildings, or building new proving prohibitive for some.”³¹

71. As Mr Sleigh’s submission suggests, welfare requirements have been an element in the decline of competitiveness since the mid-90s. In 1999 the UK introduced improvements to pig welfare by banning tethers and close-confinement stalls for breeding sows. The UK bans were introduced ahead of EU wide bans on tethers in 2006 and sow stalls expected in 2013.

72. It is important to make clear that the Committee is supportive of the early ban on tethers and cramped stalls. We should be proud that our industry has higher welfare standards than most of our competitors. However, as discussed later, any benefits that might be obtained from being able to market a more ethical product have not been properly realised. As a result, we have been put at a competitive disadvantage over the last ten years, not only against our European neighbours but also against pig producers furth of Europe, where welfare standards can be even lower.

73. As Gordon McKen of Scottish Pig Producers Ltd explained—:

“When the welfare rules were tightened in the UK in 1999, the retailers changed their purchasing criteria virtually overnight by adopting EU welfare standards. … Pork that is produced to EU welfare standards is cheaper, and that is what is used in promotions that move huge volumes. … We have not gained in any way from the welfare measures that were introduced in Britain, which have helped to maintain a price difference. When retailers want to shift a high volume of product, they purchase pork that has been produced to EU welfare standards.”³²

74. Other factors cited as contributing towards the decline of the past ten years include:

• the steep rise in feed prices in 2007-08, linked to the global spike in commodities around this time. Farmers who depended on imported feedstuff were particularly hard hit by this development;³³
• unfavourable exchange rates between Sterling and the euro for most of the last ten years;³⁴
• the BSE crisis, which led to consumers switching preferences away from beef for a period, and which led Chris Brown of Asda to advise great caution in making direct comparisons between the size of the herd now and its size ten years ago³⁵; and
• the UK Government’s withdrawal, in 2008, of the annual capital allowance on industrial buildings (discussed later).

75. It is reasonably clear, therefore, that the reduced size of the herd is not indicative merely of another low point in the pig cycle. Rather, the Committee concludes that a succession of events over and above the normal cyclical operation of the pig industry have cumulatively helped bring the industry into its current reduced state. Government support and stimulus therefore has an important role to play. The forms that this might take are discussed in the remainder of the report

Grounds for optimism?
76. Far less certain was whether, a more normal, predictable and manageable economic pattern is now likely to resume within the pig sector, which might give producers grounds for optimism. In other words, while the Committee is clear that producers do need some help, it is less clear from the evidence at this stage just how much help they may need. It was not so much that there was no consensus about the future of the industry, but that the consensus of two key groups of stakeholders differed almost irreconcilably.

77. Producers appeared uniformly pessimistic, telling the Committee that there was even less confidence in the industry now than there was when they addressed us in April 2008.³⁶ Surprisingly, this was despite their leading evidence that businesses had started making profits again, that demand was steady or increasing,³⁷ and that pig sectors in many of their main competitor countries were contracting.³⁸ Reasons given for this shaky confidence included the outcome of the Pig Sector Task Force report, worries over the future of Vion Hall’s, and concerns that gains in exports arising from the pound’s recent slide could easily be reversed if the pound were to strengthen, as it has in fact begun to do since evidence was taken. Of particular concern was the cost of implementing two new sets of regulations emanating from Europe, discussed later.

78. By contrast, retailers indicated that producers had good reason to be optimistic. A characteristic view was expressed by Chris Brown of Asda. Asda’s views are particularly notable because it is by far the single biggest retail purchaser of Scottish pigmeat—

“Things are increasingly in balance. In fact, there is a shortage of pigs. When I spoke to an abattoir this morning, it was chasing pigs. That is why the price is rising. When the price rises, people are more confident. I do not know whether all pig farmers will seek to expand. I certainly hope that the present demand creates a floor in production. I would like to see production increase. As I grow my pork sales and my business, the Scottish pork industry has an opportunity to take advantage of that.”³⁹

79. Tesco’s written evidence⁴⁰ expressed similar sentiments and noted that the continued level of pigmeat sales indicated consumer confidence in the product. Tesco suggested that the economic downturn may have done the sector more good than harm because of pigmeat’s relative value for money and versatility.

80. The Cabinet Secretary’s evidence⁴¹ came down somewhere in the middle between the views of retailers and producers. He acknowledged that the sector continues to face many challenges, but indicated confidence that the sector does have a future. He argued that the long-term effects of the “ten years of turbulence”⁴² referred to by Mr Sleigh in evidence had left the industry with long-term structural problems that pre-dated both the current administration and the task force report. This had led to a lack of meaningful investment (especially capital investment) within the sector, which the Scottish Government was committed to addressing through the SRDP and other mechanisms, including—

• investment in a variety of research and development projects to enable the industry to make the most effective use of the latest scientific advances;
• the setting up of two monitor farms to enable pig producers to disseminate best practice and increase efficiency;
• financial support for Quality Meat Scotland to employ a specialist pig vet to work with all producers; and
• working with processors to enhance the potential for making the most of lesser-value cuts.

81. The Committee notes the clear difference of views between pig producers and retailers as to the state of the industry and its future prospects. Whilst the sector’s difficulties should not be under-estimated, the Committee notes the positive picture conveyed by retailers which indicates that the industry does have a viable, indeed potentially thriving, future, provided underlying structural weaknesses are addressed and confidence is restored.

82. However our concerns remain that, because of a long-term lack of confidence, investment in infrastructure that would normally be being made at this upturn point in the pig cycle may not be forthcoming, notwithstanding the Cabinet Secretary’s recent announcement⁴³ on the future of the agricultural sector. This is particularly concerning given the imminent requirement on farmers to comply with new regulations (discussed below) on slurry disposal and pollution prevention.

Farmgate pricing of pigmeat and producer confidence
83. Producer confidence in large part rests on a perception that they are getting a fair price from major retailers.⁴⁴ This is of course a complex issue and the Committee did not expect to find any consensus between buyers and sellers as to what a “fair” price would be.

84. Philip Sleigh of NFUS argued for an auction system for live pigs—

“We undoubtedly suffer from pressure from supermarkets and other retailers on price. They say, ‘I know you want more, but you're not getting it.’ … If we had a bidding process in the pig industry, I am convinced that our price would be higher than it is at the moment. … Economics say that our price should be moving up quite rapidly, but that is not happening because of the retailers. Perhaps it would be increasing if we were not in a credit crunch. I am certain that Governments across Europe are asking their retailers to keep a lid on prices because the pressure is on Governments to keep inflation low.”⁴⁵

85. Chris Brown of Asda disagreed with the suggestion that an auction system would have any particular effect on deadweight prices. On supermarkets’ pricing policies he argued—

“The issues of price, quality and value are secondary to ensuring that we have something to sell. No trader in my business or any other is congratulated on organising a price that means that no one supplies. We have to find the balance within any trading relationship. However, we have to spend an awful lot of time ensuring that we secure supplies. As Government intervention in agricultural markets is withdrawn supermarkets and processors are increasingly securing their supplies and taking more responsibility for the procurement of their raw materials.”⁴⁶

86. Mr Brown’s remarks on supermarkets’ increasingly direct approach to procuring food from producers is echoed in comments made by other retailers in written evidence, in which they stressed their commitment to working with the industry.⁴⁷

87. The Committee notes both sides of the argument. The issue of pricing based on “fairness” is complex, and European law partially limits Governmental powers of intervention anyway. We do not doubt that, given the opportunity, retailers will try to drive down farmgate prices.

88. In the event of there being serious dispute between buyers and sellers in any sector of agriculture – and the Committee is pleased to note that this has not generally been the case in the pig sector – the Committee would expect the Scottish Government to be an honest broker, acting in the best interests both of the Scottish consumer and of the Scottish agricultural sector. In this connection, regard should be had to the possibility that reductions may not always be passed on as price cuts to the consumer, so it is not a simple matter of one interest being played against the other. In addition, the Committee considers that the best interests of farmers and consumers would be met if there were a supermarket ombudsman empowered to help producers and retailers agree a fair price, and to offer to adjudicate in cases of dispute. It appears to us that this has the potential to deliver greater industry stability in the longer term and to maintain effective channels of communication between producers and retailers. The Committee invites the Scottish Government to bring this conclusion to the attention of the UK Government.

89. The Committee would also observe that any measures, whether deriving from Government or industry, to increase direct links between farmers and retailers are to be encouraged, and notes progress in this regard.

90. On creating an auction system, the Committee expresses doubt as to whether there would be a consistent benefit to the pig sector, including when the market is falling, but considers that it is for the pig sector to continue to make the case for an auction system if it thinks that it would. In any case, the Committee notes that it would lie within the industry’s own hands to seek to move to an auction system and to work with auctioneers to develop such a system.

Targeted support to increase confidence and improve the sector’s efficiency

91. The Committee is clear that the pig sector needs help to return to full profitability and competitiveness. This involves moving forward from the task force recommendations of summer 2008 and considering which measures are needed to help the sector overcome its current fragility and to prosper both nationally and against international competition. Possible solutions can be found both on the supply side (ie improving producers’ efficiency) and the demand side (ie increasing the distinctiveness and marketability of Scottish pork), and both approaches are discussed below.

Meeting the costs of environmental legislation
92. Of more urgent concern to producers, however, are two new sets of environmental regulations originating from Europe – the Nitrate Vulnerable Zone (NVZ) regulations and proposed revised regulations on Integrated Pollution Prevention and Control (IPPC) – both of which, producers consider, will require them to make substantial investment in their businesses. Producers identified these rules as an immediate and serious threat to the future of the industry.

93. The NVZ regulations were introduced into Scotland on 1 January 2009. They govern when farmers farming in NVZs are allowed to spread manure, and require producers to build storage tanks large enough to provide a minimum of 26 weeks’ storage for pig slurry during the closed season. NVZs cover only around 14% of the Scottish landmass but these are the areas where the vast majority of pig producers are based. The regulations have been implemented with a three year window period for compliance.

94. The Committee heard of fears from the industry that the introduction of the NVZ regulations will have the same detrimental affect on producers as the introduction of new welfare standards in 1999. Gordon McKen of Scottish Pig Producers Ltd, linked the issue to producers’ general lack of confidence in the future of the industry, arguing that—

“For units that have not invested in the past 10 years, the easy option – in fact the sound business option – is to take the derogation for three years, not invest in the business and simply run things down.”⁴⁸

95. A 40% grant is available from the SRDP to help meet the cost of slurry storage but the Committee heard that the bid process can be confusing and that a successful outcome is not guaranteed.⁴⁹

96. The proposed new rules on IPPC would require producers to demonstrate satisfactory environmental management of their site and to prevent or minimise waste production.

97. Stuart Ashworth of Quality Meat Scotland remarked of both sets of regulations that they were—

“challenges for the industry in that they are legislation that it must comply with and it is difficult for the industry to see the benefit in the marketplace of its having made such investments. There is a distinction to be made between the investment that is required for a mandatory purpose and the investment that is required to drive a business forward. I therefore support what was said earlier about the need to consider using the SRDP or other mechanisms to provide the investment that is needed to support the industry in complying with the NVZ and IPPC regulations.”⁵⁰

98. Philip Sleigh agreed, describing prospective industry investment to satisfy the IPPC regulations as “dead money” that would not improve efficiency. He called for action at European level to push back the regulations.⁵¹

99. Gavin Dick of the Scottish Agricultural College warned that the likely requirement to invest was coming at a particularly difficult time for the industry—

“I do not believe that producers who are faced with spending a considerable amount of capital in the next few years that will not contribute to their profitability have the confidence to make a commitment on that at the moment. … Things are made worse by the fact that producers have come through a prolonged period of low margins or losses, so they do not have cash reserves to spend money on something that will not give them a direct return.”⁵²

100. Supplementary evidence from the NFUS called for the Scottish Government to “allocate SRDP funds to allow assistance to be provided for all projects aimed at achieving compliance within NVZ rules.”⁵³

101. The Cabinet Secretary was asked whether he would consider modifying the SRDP scheme so as to guarantee pig producers payment of the 40% grant towards slurry storage, rather than having to go through a bid process—

“We expect the regional committees, which decide the priority of applications, to prioritise under the rural development programme applications relating to slurry storage. I would be disappointed if that is not happening. … There have been between 40 and 50 successful applications under the existing 40 per cent assistance arrangements for slurry storage. I do not have a breakdown of how many of those were from pig farmers, but we should certainly consider that. Assistance is therefore provided. Indeed, the 40 per cent assistance in Scotland is 100 per cent more than what is available in other countries, including, I understand, south of the border. Therefore, we are prioritising assistance and access to support for pig farmers in Scotland.

102. In subsequent correspondence with the Committee, the Cabinet Secretary confirmed that application assessors under the SRDP had already been instructed to “place significant emphasis on supporting slurry storage” through the scheme.⁵⁴

103. An independent review of the SRDP⁵⁵ was completed shortly before the Committee concluded this report, and the Scottish Government has responded to it, accepting most of its recommendations.⁵⁶ The Cabinet Secretary has also made a statement to Parliament on the review.⁵⁷ In it, he stated that he was committed to increasing grant support for slurry handling projects to 50% for young farmers.⁵⁸ Both the review and the Cabinet Secretary’s statement recognise that there are shortcomings in the overall bureaucracy of the SRDP, without addressing directly any concerns specifically about grants for assistance with slurry storage.

104. The Committee considers that assistance in meeting the cost of compliance with the NVZ regulations is precisely the sort of targeted short-term aid that pig producers need to help tide them over current difficulties and give them confidence that the Government is supportive of the industry. Whilst the Committee recognises that the SRDP has helped many producers meet the cost of the NVZ regulations, we consider that the imminent Government review of the administration of the scheme provides an ideal opportunity to amend the relevant conditions of application so as to clarify that any fundamentally sound proposal to secure compliance with the regulations will be accepted. The opportunity should also be taken to address concerns that the application process is too bureaucratic (and, in making this recommendation, the Committee recognises that similar concerns will have been expressed in relation to other application procedures under the SRDP).

105. The Committee does not consider that it would be realistic at this stage to seek to resist revised IPPC regulations at European level. The Scottish Government’s attention should instead focus on seeking to ensure that the regulations are transposed proportionately and in a manner that enables a reasonable period for compliance. The Government should also provide assurances to producers that sound proposals for compliance will be assisted under the SRDP.

Helping make the sector more efficient and competitive
106. The Committee heard that the Scottish pig industry was reasonably competitive but that there were grounds for improvement.

107. Gavin Dick of the Scottish Agricultural College told the Committee that pig production is reliant on good technical efficiency to a greater extent than other areas of agriculture but that there is “a wide range of technical performance in the pig industry, relative to the beef, sheep or even arable sectors.”⁵⁹

108. Mr Dick went on to identify a number of areas in which efficiencies could be made—

“Pig farmers could continually update buildings and ventilation and feeding systems, and make use of the most up-to-date genetics. All of those things involve spending money. Other things, such as the labour force, could be considered. It is difficult for pig producers to get good labour. Some of the environments in which pig staff have to work are not ideal compared with other agricultural systems. We could encourage training among pig staff. There is no single solution; rather, a series of little additions or efficiencies will make an impact on businesses.”⁶⁰

109. Gordon McKen of Scottish Pig Producers Ltd argued that the industry in Scotland is “very efficient”,⁶¹ selling heavier and healthier carcases than the UK average. However Mr McKen went on to argue for an expansion in the size of units, and for an increase in investment, which, he argued, was “badly needed for improving the industry’s efficiency and putting us ahead of world competition.”⁶² He identified investment in new buildings for finishing pigs as the key priority in increasing efficiency, an approach which, he argued, would help keep producers in the industry for the next ten to 15 years.⁶³

110. Philip Sleigh of the NFUS expressed concerns at the extremely low number of young people entering pig farming, and proposed that the SRDP’s new entrants scheme should prioritise entrants into pig farming so their applications would be more likely to succeed. In particular, he identified the keeping of outdoor sows as an area of real opportunity for new entrants, provided they got help starting up.⁶⁴ This was picked up in the NFUS’ supplementary written submission, which pointed out that the keeping of outdoors sows, requiring less investment than indoor production, was the traditional point of entry into pig farming, and called for SRDP capital assistance for new entrants seeking to establish outdoor herds.

111. The UK Government’s 2008 decision to withdraw the annual capital allowance on industrial buildings was seen by many witnesses as a particular blow to the pig industry. As Gavin Dick explained—

“Pig buildings deteriorate quite quickly if they are empty simply because of the nature of pig slurry – the ammonia is corrosive. In my experience, if pig buildings have been empty for more than 19 months, it takes a significant capital cost to bring them back into a useful state.”⁶⁵

112. The NFUS picked up on this point, arguing that—

“Frequent changes in rules on welfare and the management of slurry and solid waste mean that it is often more cost effective to replace buildings rather than modifying them. Therefore it is unreasonable that they cannot currently be written off as is possible for fittings and equipment.”⁶⁶

113. Mr Sleigh argued that if the UK Government could not be persuaded to change the rules, the SRDP should allow producers to obtain interest relief for investment in significant pig farming infrastructure.⁶⁷

114. The Cabinet Secretary responded to the suggestions coming from producers by noting that many of them related to the role of the SRDP—

“I am perfectly willing to investigate how that programme can better deliver the investments to which the industry referred in evidence. I do not believe that any obstacles exist at the moment. In the south of Scotland, for instance, pig farmers have made a couple of successful applications to the SRDP for significant investment in their farms. Such things which related directly to suggestions that were made on 1 April [the date of the first evidence-taking session] are already happening. However, if processes must be made easier, I will consider that.”⁶⁸

115. On whether the new entrants scheme should be expanded to include entrants breeding outdoor sows, he said—

“At the moment, new entrants can get extra support from some of the schemes—usually 10 per cent extra grant. I would have to understand why the industry does not think that what it is suggesting is not possible at the moment.
We have to review the whole issue of support in the programme for new entrants, given the changing economic situation. At the moment, we have one specific new-entrant proposal, which is to subsidise interest on loans for new entrants. However, given that interest rates are coming down significantly, that has less value than it had before, so there have not been a huge number of applications, for obvious reasons.”⁶⁹

116. The Cabinet Secretary also confirmed that he had made representations to his UK counterpart on reverting to the old capital allowance rules on farm buildings, but that he was continuing to pursue the issue.⁷⁰

The Committee’s view
117. The Committee notes and accepts the Cabinet Secretary’s view that the current SRDP may well have the potential to provide producers with assistance. However, the Committee also considers that, with the pig sector keen for a demonstration of support from the Scottish Government following the disappointment of the task force report, and with a revision of the SRDP now commencing, this is an excellent time for the Government to demonstrate, through delivering a new and, hopefully, improved SRDP, that it is committed to building a more efficient and competitive pig sector.

118. The Committee also recognises the financial constraints within which the Government must operate but considers that tailored measures designed to address particular structural weaknesses within the industry need not necessarily be prohibitively costly. It would appear to the Committee that two such weaknesses to be addressed as priorities under a revised and more effective SRDP are the lack of entrants into pig farming, and producers’ lack of investment in infrastructure over recent years, because of cash flow problems, changes to taxation, and general concerns over where the industry is going. Therefore, the Committee calls for the SRDP to make provision—

• to encourage new entrants into pig farming (for instance by providing financial incentives for potential entrants into outdoor sow rearing); and
• to encourage established producers to invest in their businesses (for instance in buildings for finishing pigs) so as to ensure that producers are equipped with infrastructure that is fit for purpose for international competition in the 21st century.

Demand for Scottish pigmeat products - factors influencing consumer choices

119. Evidence taken during the inquiry has made clear that opportunities to increase the efficiency of the sector lie on the consumption as well as the production side. Boosting demand would address producers’ and processors’ current lack of confidence in the future of the industry, in turn giving them more reason to invest in infrastructure and livestock for the longer term.

120. The Committee recognises that there is only so much Government and public agencies can do to alter consumer preferences and attitudes. Recommendations must be targeted and realistic and the fundamentals (such as a labelling system in which the consumer can have confidence) must first be in place. Our overall approach rests on six main conclusions reached over the course of evidence-taking:

• price is a key consideration, if not the main one, for consumers, particularly in the current economic climate;⁷¹
• there is a degree of brand loyalty amongst Scottish consumers towards Scottish pork. All things being equal (including cost), Scottish consumers prefer to purchase Scottish pork;⁷²
• unlike Scotch beef or lamb, however, Scottish pork is not identified as a premium product outside of the UK, or indeed apparently outwith Scotland itself, thus currently limiting opportunities for Scottish producers to benefit from the export market;⁷³
• consumers, if provided with sufficient information, are often willing to pay more for pork from pigs raised to higher welfare standards, although, to reiterate, in the current economic climate, price would be the key consideration for many or most consumers;⁷⁴
• consumers, however, appear somewhat unaware that pigs raised on Scottish farms (and elsewhere in Britain) will have been bred to higher welfare standards than pigs bred in most of the main importing countries;⁷⁵
• most parts of the animal are currently under-used in the domestic market, which means producers get less for if than they might.⁷⁶

121. There are therefore both challenges and opportunities on the demand side. Perhaps the biggest single challenge is that it can be difficult to sell Scottish pork at a more competitive price than imports. Brian McMonagle of Vion Hall’s noted—

“There is Scottish bacon but I do not make money supplying it. … The price people would have to pay in order to support the cost of raising that pig would be uneconomical.”⁷⁷

122. This lack of competitiveness arises partly from UK welfare standards and, partly from exchange rates, although recent changes in the pound-euro rate have pulled the industry in a different direction. Whilst both factors are having a notable impact on the fortunes of the pig industry at present, it should be borne in mind that the playing field in relation to welfare standards will eventually level across Europe in 2013. As for exchange rates, these are beyond the direct influence of the Parliament or the Scottish Government. The focus should therefore be on longer term issues where change can be effected.

The labelling and marketing of pork products
123. Ensuring the consumers know what they are buying is a necessary first step in seeking to maximise demand-side opportunities. This led the Committee to identify the labelling and marketing of Scottish pork as a key theme. We heard evidence about the challenges facing consumers who would be favourably inclined to ‘buy Scottish’, including concerns about the level and consistency of information provided on the product and displayed by retailers. Evidence was led of misleading wording on labels such as ‘product of Scotland’ where the product has actually been made from the produce of several different countries but part of the processing had taken place in Scotland.⁷⁸ Evidence was also led of misleading marketing techniques such as pork being sold under signs proclaiming that the retailer was ‘Proud to serve Scotland’⁷⁹ or in shelves marked with saltires, when the product itself was imported.⁸⁰ The NFUS stressed the need to challenge such practices⁸¹.

124. The Cabinet Secretary acknowledged some of these concerns—

“We wanted to display Scottish food and drink on supermarket shelves in Scotland and, if possible, beyond, but that has led to a proliferation of the saltire in supermarkets. Many in the industry are asking whether that might jeopardise our reputation for quality produce and be misleading, as there are questions around how we define what is Scottish. Because the last place of processing often determines what is on the packet, you can end up with a packet that has a saltire over the words ‘Made in Northern Ireland’, which is confusing.”⁸²

125. The Committee recognises that a comprehensive solution to concerns over misleading country of origin labelling is best found at European level. In this regard, the Cabinet Secretary informed us—

“Improving labelling and making it less complicated has been a high-profile issue for many years in Scotland. The current European consultation⁸³ offers Scotland an opportunity in that regard. I am confident that we now have UK Government support to give Scotland the option of being a country of origin for labelling purposes. We need UK support to apply the regulation to Scotland, otherwise it will just apply to the member state. The UK Government is much more sympathetic now to country-of-origin labelling and allowing member states to take it up. We are hopeful that we will have UK Government support to allow country-of-origin labelling to apply to Scotland under the European regulations.⁸⁴

126. The Committee supports Scottish Government efforts to press for a ‘product of Scotland’ label that consumers across Europe could rely on. We are pleased to note that the UK Government is apparently supportive of such efforts. The European Commission’s recent consultation on country of origin labelling affords an opportunity to make progress. The Committee would welcome an update on this issue from the Scottish Government when it responds to this report.

127. Efforts to move towards a European solution, which may take some time, should not rule out supermarkets expanding voluntary schemes to introduce clearer country of origin labelling. The Scottish Government has an ongoing role to encourage and promote voluntary schemes that help provide clarity to the consumer.

128. It may be possible to address concerns about misleading marketing and displaying of products at a more local and immediate level. Some of the practices described in evidence would appear to the Committee to be in danger of contravening trading standards. Accordingly, the Committee would encourage local authority trading standards officers to use the powers already at their disposal to crack down on misleading marketing of non-Scottish pork products. The Committee would also welcome a view from the Scottish Government as to whether it considers that trading standards officers have sufficient legal powers and resources to address the sort of misleading practices identified in evidence.

Public procurement contracts
129. One way of signalling confidence in the Scottish pig industry would be to award more public procurement contracts to Scottish producers. Evidence from the continent strongly suggests that it should be possible to do so whilst remaining fully compliant with EU public procurement rules.

130. Stuart Ashworth of Quality Meat Scotland said—

“we need to see public authorities committed to Scottish agricultural produce in general, which has not yet been mentioned. Although there are challenges within that, if public authorities are committed to Scottish produce, that signals that the country values the industry. That is one way in which demand in the market can be influenced.”⁸⁵

131. Mr Ashworth has since provided the Committee with information about QMS activities in Scotland’s public sector which have been ongoing for over four years to provide support to buyers and suppliers who source products which meet the ‘Scotch’ or ‘Specially Selected’ criteria. Support includes: contract terminology; advertising new contracts to suppliers; market reporting; promoting sustainable sourcing; and health and education. QMS literature explains that “Sustainable sourcing of red meat in the public sector supports our communities by sustaining jobs and local economies and makes it possible for school children in our local communities to eat fresh red meat to assured standards such as those achieved by the Scottish industry. This includes the associated guarantees of quality, production standards and animal health and welfare.”⁸⁶

132. In supplementary evidence submitted to the Committee, NFU Scotland asked for the Scottish Government to “continue to encourage Scottish Government departments and public bodies to utilise Scottish produce.”⁸⁷

133. The Cabinet Secretary acknowledged that the issue was a work in progress—

“I have seen improvements in the Scottish Parliament's and the Scottish Government's procurement policies lately in relation to their sourcing of Scottish pork. We want to spread such improvements across Scotland. In the past, I have written to local authorities and retailers about the sourcing of Scottish pork, and I continue to fulfil such a role at every opportunity.”⁸⁸

134. The Committee acknowledges that some progress has been made in encouraging greater consumption of local produce via public procurement contracts, but urges the Scottish Government to continue to press for increased uptake, as unexploited opportunities still exist. In the context of the pig sector, this would include continuing to publicise the message that locally produced pork comes from pigs that will have generally been reared to higher welfare standards than in importing countries. The Committee notes that this approach must go hand in hand with producing a scheme for identifying the provenance of Scottish pork clearly and simply.

Associating Scottish pork products with high welfare standards
135. Evidence suggests that many consumers are willing to pay more for products from animals raised to higher than average welfare standards. Anything which adds to consumers’ understanding of how animals were reared is to be welcomed, not least because the Scottish pig industry would benefit from it. However, the existence of a range of welfare-related schemes and labels and a lack of awareness of what each one signifies can add to the challenge for the consumer.

136. Stuart Ashworth of QMS appeared to acknowledge this challenge—

“We have a number of identities such as Scotch pork that have a provenance attached to them and we will work hard to get that message into the consumer’s vision.”⁸⁹

137. Individual retailers may of course add their own particular labels to products. Evidence from retailers, whilst showing that efforts are clearly made to promote quality Scottish pork products, also illustrate the amount of information that the consumer is expected to absorb when making purchasing decisions. For instance, Morrisons’ submission states that—

“All our fresh pork in Scotland is sourced from across Britain and is labelled as British. We also have good representation of Scottish cooked meats…that sell well suggesting a good preference for Scottish meat.

Stores also apply additional “Love Pork” logos. Given the higher welfare standards for pigs produced in Britain, communicating that our fresh pork is of British provenance is important information for our customers. For some products, e.g. under ‘The Best’ label, additional information is included, e.g. whether the pig was outdoor reared.

The priority is to communicate information to the customer on pack. For fresh pork this can be done with clear labelling stating that it is British, showing the British flag and also the Quality Assured Pork mark. This assures the customer that the meat is consistent with high welfare standards. Additional information can also be communicated, e.g. whether the pig was outdoor reared. Particular properties, such as Freedom Food or Organic, are also clearly stated.”⁹⁰

138. The situation is further complicated by evidence that different retailers may have different approaches to welfare issues. Chris Brown of Asda told the Committee that there were dangers in making assumptions about what conditions were and were not good for pigs as opposed to other animals. He added (in relation to pork products)—

“I do not do outdoor reared and I do not do free range; I have always resisted them on the grounds that I cannot define them and no one can tell me what they are. With outdoor bred, I am reasonably confident that there is a standard – or at least a practice accepted by the industry.”⁹¹

139. Mr Brown made a plea for—

“a single farm standard that I could then apply throughout the United Kingdom, but I acknowledge the difficulties that might arise.”⁹²

140. There would therefore appear to be a need for a common standard accepted by both the industry and retailers; one which will tell consumers that the pork they are buying is from pigs raised to decent and humane standards. Professor Christopher Wathes of the Farm Animal Welfare Council offered a possible blueprint in the egg industry’s voluntary measures on labelling according to method of production. These were ultimately reinforced by Europe-wide requirements on labelling and accompanied by an increased move from battery-cage eggs to free-range eggs despite the absence of a ban on the battery cage in Europe until 2012—

“Labelling does not come within a single country’s competence – it has to be set at an EU level – but voluntary labelling can certainly be introduced. That is what happened with the egg producers, who were rather canny in being able eventually to make the rules on labelling mandatory in the EU. The pig industry could follow that example. Labelling does not have to be compulsory; there can be voluntary schemes such as the freedom food or Fairtrade schemes.”⁹³

141. The Committee notes the current lack of certainty and consistency in communicating via labelling the welfare standards under which pigs are bred. The Committee would exhort the Scottish Government to work with producers, processors and retailers to develop a simple, clear means of labelling and marketing the generally superior welfare conditions under which Scottish pigs will have been raised, on which the Scottish consumer can rely, and which should help increase the competitiveness of Scottish pig products against imported meat.

142. Another critically important way of developing consumers’ awareness of the importance of high welfare standards is via the education system. Professor Christopher Wathes advised that—

“The committee may want to consider the Austrian Government's Tierzucht macht Schule—or animal welfare goes to school—initiative. In Austria, every child is now required to take part in, or learn about, farming and food production by making two visits a year to farms. Countries elsewhere in Europe are taking the agenda forward by educating children responsibly about the consequences of their decisions when they are adults—in fact, they are even educating them about the consequences of the decisions that they take when they are younger, because they influence their parents' decisions, too. ⁹⁴

143. Professor Wathes added that such initiatives could aid understanding not only of animal welfare but also “about environmental impacts, water use, energy, carbon footprints – the whole gamut”⁹⁵

144. The Cabinet Secretary was asked for the Scottish Government’s opinion on this initiative—

“We are keen to pursue that under the food and drink policy. There are many issues to pursue through that policy, and there is a lot more to be done on education. We have worked with organisations in Scotland that go into schools to link up food production with education and enable pupils to understand where their food comes from. That is connected to what you are talking about, and there is a lot more scope to pursue that in the future. I was interested to read the evidence that you took about what happens in, I think, Austria. I am sure that we can learn from that.”⁹⁶

145. The Committee would encourage the Scottish Government to learn from initiatives practised elsewhere such as the Austrian “animal welfare goes to school” scheme and to promote farm visits for school children, which would enable them to learn more about all aspects of farming, including the pig sector, as well as about related environmental and welfare issues.

Growing the market for the whole pig
146. The Committee considered whether there is room for growth in the market for premium or more specialist products. Evidence was led that now was not the best time for premium products, but that this should not rule out efforts to continue to create niche markets. For example, Stuart Ashworth of Quality Meat Scotland remarked—

“there is an ability to create niches in the market to meet demand. Organic produce and freedom food are examples of brands that built up when consumers were feeling good about themselves, and they are now under pressure. With the best will in the world, farmers markets are niche operators. We need to get more of the mainstream operators involved and reward them for doing so … freedom food and organic produce are growth areas. I hope that, in the longer term, they will continue to grow but, at the moment, they are feeling the squeeze.”⁹⁷

147. The Committee also heard from producers and processors that the UK market preference is for prime cuts such as loins but there is little or no UK market for legs, shoulders and offal which are sold to overseas markets at prices lower than they cost to produce.

148. Evidence from Chris Brown of Asda suggested that that situation may have begun to change—

“One of the happy consequences of the present economic circumstances is that we are seeing a switch to other cuts, and not just in the pig industry. Our sales of vacuum-packed (shrink wrap plastic) legs and shoulders have risen substantially because people recognise the value of such cuts.”⁹⁸

149. Other retailers provided similar evidence. Of course, it remains to be seen whether this is a long-term trend or whether consumers will revert to hitherto preferred cuts in due course.

150. In supplementary evidence submitted to the Committee, the NFUS asked the Scottish Government to “work more closely with processors to achieve a better balance in utilisation of all parts of pig carcasses and greater standardisation of cuts.”⁹⁹

151. The Committee is pleased to note evidence of increased use of the whole pig in the domestic market in the current economic climate. The Committee would welcome an indication from the Scottish Government as to whether it proposes to take action (for instance via dialogue with Quality Meat Scotland) to sustain and increase this trend towards wider consumer preferences.

ANNEXE A: EXTRACTS FROM MINUTES OF THE RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

10th Meeting, 2007 (Session 3), Wednesday 19 December 2007

Work Programme: The Committee reviewed its current work programme. It agreed not to undertake further scrutiny of the issues raised by the Crown Estate Review Working Group report, The Crown Estate in Scotland: new opportunities for public benefit, prior to taking evidence from The Crown Estate on its 2008 "Scottish supplement", but in the meantime to seek clarification from the Parliament’s directorate of legal services on where the boundary between reserved and devolved matters lies in relation to the Crown Estate and its management. The Committee noted various potential topics for scrutiny later in the session and agreed that a decision on its next major inquiry would be taken when it next reviewed its work programme towards the end of June 2008, and accordingly to seek authorisation to hold an awayday in early June. The Committee agreed to invite the Scottish Parliament Information Centre to prepare a briefing on financial pressures on the pig industry, with a view to taking evidence at a suitable time early in 2008. The Committee agreed in principle to hold an item in private at the end of each meeting at which oral evidence in an inquiry is taken, in order to agree preliminary conclusions emerging from that evidence.

3rd Meeting, 2008 (Session 3), Wednesday 6 February 2008

Pig industry: The Committee considered briefings from the Scottish Parliament Information Centre and National Farmers Union Scotland and agreed to ask the Scottish Government what action it is taking to support the pig industry. It also agreed to invite representatives of the pig industry and the Scottish Government to give evidence at its meeting on 16 April 2008.

7th meeting, 2008 (Session 3), Wednesday 16 April 2008

Pig industry: The Committee took evidence from—

Gordon McKen, Managing Director, Scottish Pig Producers Ltd; Robin Traquair, Chairman, Pig Working Group, National Farmers Union Scotland; and Stuart Ashworth, Senior Business Analyst,Quality Meat Scotland,

and then from—

Richard Lochhead, Cabinet Secretary for Rural Affairs and the Environment

17th Meeting, 2008 (Session 3), Wednesday 1 October 2008

Pig industry: The Committee considered correspondence from the Cabinet Secretary for Rural Affairs and the Environment and agreed to write to the Cabinet Secretary for details of the reasoning behind the decision not to implement recommendations from the report of the Pig Task Force

22nd Meeting, 2008 (Session 3), Wednesday 26 November 2008

Pig industry: The Committee considered correspondence received from the Cabinet Secretary for Rural Affairs and the Environment. The Committee agreed to write to industry representatives requesting views on this correspondence and inviting them to provide an update on the issues that remain of concern within the industry.

4th Meeting, 2009 (Session 3), Wednesday 4 February 2009

Pig industry: The Committee considered correspondence received from representatives of the pig industry. The Committee agreed to hold a one-off evidence session on the pig industry, including evidence from the Cabinet Secretary for Rural Affairs and Environment, at a future meeting

6th Meeting, 2009 (Session 3), Wednesday 25 February 2009

Pig industry (in private): The Committee agreed witnesses for a one-off evidence session.

10th Meeting, 2009 (Session 3), Wednesday 1 April 2009

Pig industry: The Committee took evidence from—

Philip Sleigh, Chair, Pigs Working Group, National Farmers' Union Scotland;

Gordon McKen, Managing Director, Scottish Pig Producers Ltd;

Brian McMonagle, Managing Director, Vion Halls;

Professor Christopher Wathes, Chairman, Farm Animal Welfare Council;

Stuart Ashworth, Head of Economic Services, Quality Meat Scotland;

Gavin Dick, Rural Business Consultant, Scottish Agricultural College.

Pig industry (in private): The Committee reviewed the evidence heard earlier in the meeting.

11th Meeting, 2009 (Session 3), Wednesday 22 April 2009

Pig industry: The Committee took evidence from—

Chris Brown, Head of Ethical and Sustainable Sourcing, Asda.

Asda agreed to provide the Committee with supplementary information.

Pig industry: The Committee took evidence from—

Richard Lochhead MSP, Cabinet Secretary for Rural Affairs and Environment, Martin Morgan, Head of Livestock Policy Branch, and Gerry Smith, Senior Policy Analyst, Livestock Policy Branch, Scottish Government.

The Cabinet Secretary agreed to provide the Committee with supplementary information.

Pig industry (in private): The Committee reviewed the evidence heard earlier in the meeting. The Committee agreed to write to a number of supermarkets inviting responses on some issues raised with the witness from Asda.

13th Meeting, 2009 (Session 3), Wednesday 13 May 2009

Pig industry (in private): The Committee agreed not to consider a discussion paper at this meeting but instead to consider a draft report at a later meeting.

15th Meeting, 2009 (Session 3), Wednesday 27 May 2009

Pig industry (in private): The Committee considered a draft report.

16th Meeting, 2009 (Session 3), Wednesday 10 June 2009

Pig industry (in private): The Committee considered a draft report.

17th Meeting, 2009 (Session 3), Wednesday 17 June 2009

Pig industry (in private): The Committee considered a draft report.

18th Meeting, 2009 (Session 3), Monday 22 June 2009

Pig industry (in private): The Committee agreed its report.

ANNEXE B: ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE

The Committee took oral evidence at the following meetings:

16 April (7th meeting 2008 (Session 3))

1 April (10th meeting 2009 (Session 3))

22 April (11th meeting 2009 (Session 3))

All written evidence associated with oral evidence is available at:

http://www.scottish.parliament.uk/s3/committees/rae/inquiries/Pig%20Industry/Pigoralandwritten.htm

ANNEXE C: Other Written Evidence

The following written evidence, which can be accessed at:

http://www.scottish.parliament.uk/s3/committees/rae/inquiries/Pig%20Industry/Pigotherwritten.htm

was received by the Committee from organisations who did not give oral evidence:

Morrisons
Sainsburys
Tesco

Footnotes: