September 7, 2006

  

Scottish beef sector remains promising despite difficulties

 

 

Naysayers who said the Scottish suckler herd is heading for a major downturn are being proven wrong, said David Douglas, head of rural business at the Clydesdale Bank.

 

Clydesdale Bank, with 150 branches in Scotland, is a subsidiary of National Australia Bank Group (NAB). NAB is one of the world's top 30 financial services companies.

 

Even as statistics show a dip in cow numbers, it does not represent a major change in production base, Douglas said. In fact, some of the larger operations are slowly increasing numbers at present, perhaps balancing those who have taken advantage of the new single farm payment to reduce herd size.

 

The reformed CAP subsidies places almost no obligation on farmers to produce, which allows them to drastically reduce the scale of their operations. However, Douglas cautioned that cutting back must be planned and handled very carefully. The cut in herd size, for example, must be proportionate to overhead costs.

 

In reality, this would be hard to achieve, since beef operations would still carry the cost of land, labour, machinery and building overheads which only allow better profits when there is economy of scale.

 

He also noted that the SFP payments are going well. The SFP (Small Farm Payment) was introduced in January 2005 to aid farmers disadvantaged by policy changes. It segregates payment of subsidies from production and payments were made based on subsidy receipts from 2000-2002.

 

Douglas also praised the efforts of the meat trade, Quality Meat Scotland and the Scottish Executive to rebuild beef exports since the ban was lifted at the beginning of May.

 

He noted that the industry is making up for lost time to recover from the UK beef ban which started in 1996.

 

The good news is that Scottish beef remains highly valued across Europe.

 

However, he warned there would be challenges in trying to regain its share of the highly competitive and price-sensitive market. These would come in the form of increased distribution costs and changes in food safety legislation. 

 

Douglas said that the sheep and beef sector, along with grain prices, appear to be doing well. In the dairy sector, even as low milk prices are raising concerns, farmers who possess good management skills would be able to cope, he added.