Wednesday, 30 November 2011

Climate change debate remains close to home

It appears there is already a cooling of relations between some of the countries at this year’s UN climate change summit in Durban, South Africa, which started this week. There is significant disagreement on fairly fundamental principles, such as when talks should start on a new global emissions agreement. India and Brazil – both significant contributors in terms of emissions – are the latest countries to say they do not want to start talks before 2015, while other countries, including the EU block and smaller, developing nations, would like to see a deal finalised by then.

Meanwhile, “rich” countries such as Japan, Russia and Canada are refusing to commit to targets under the Kyoto Protocol – adopted at the summit in Japan in December 1997 – which should have been met by next year. This was a set of binding targets calling for a reduction in greenhouse gas emissions amounting to an average of five per cent against 1990 levels over the five-year period 2008-2012.

The ultimate aim of the summit is to form an agreement that can constrain greenhouse gas emissions enough to keep the global average temperature rise below 2⁰C. This will be no mean feat with so many countries involved with different opinions and, of course, the whole science behind climate change being such a young one.

In the beef and sheep sector it is fair to say there is still a degree of scepticism about climate change. This can lead some to dismiss it and continue with “business as usual”. However, this is not an option and we do need to address the challenge to reduce our emissions. The simple fact is that the Government believes in it and so has set targets via the Low Carbon Transition Plan, backed up by the targets in the industry-led Greenhouse Gas Action Plan (GHGAP) that we must strive to meet. If not, the reality is that legislation and regulation may follow to force farmers to make changes.

EBLEX has taken a lead in this work. As well as being prominent in the GHGAP project, it has already published two reports under our environmental roadmap banner benchmarking where we are in terms of emissions and energy use, and exploring practical ways that these figures can be reduced. You can find both of these reports here. These practical measures for change are being delivered through our Better Returns Programme.

We are currently finalising content for the third chapter of our roadmap for the beef and sheep meat sector, which we expect to publish in January 2012. This will include the biggest yet on-farm data set, which backs up figures from previous years, showing similar trends and ranges of emissions. It also picks out characteristics of high and low carbon farms, allowing people to look at their own business and see where they might be under-performing.

It also involves sections from the main multiple retailers examining how they are working with their beef and lamb supply chains to improve environmental efficiency, while a further section looks at the issue of carbon sequestration – how land grazed by livestock has a positive effect on emissions by sucking carbon out of the atmosphere and storing it.

In the run up to the 2009 climate change summit in Copenhagen, it is fair to say that livestock farming was the scapegoat for climate change. It appeared everyone was suggesting that reducing meat consumption and therefore livestock numbers, would bring the necessary emissions cuts in one foul swoop. The reality is this would do nothing to improve efficiency, would adversely affect food security and any food producing enterprise which replaced it would have its own negative GHG affect. We would also lose the huge benefits that grazing livestock bring to the countryside, not just as a carbon sink but also in terms of landscape value and making the most efficient use of land that could not realistically be used for anything else in terms of food production.

So we are watching the debates in Durban with interest but should not lose sight of the measures already identified that can make an impact on our own carbon footprint.

Wednesday, 23 November 2011

Taking machinery to task to oil the wheels of efficiency

It’s been said that efficiency is to do better what is already being done, which is of course obvious to anyone in any industry looking to improve their margins.

And while we’re currently enjoying higher prices for beef cattle, it isn’t always translating into significantly greater returns for producers. Inefficient practices are often the root cause of the problem.

With that in mind EBLEX’s 2011 Business Pointers costs of production survey tells an important story, with fixed costs emerging as one of the key differentiators in improving financial margins for beef suckler herd producers.

Latest figures have highlighted a £250 per head difference in fixed costs between top third and bottom third lowland suckler herd producers in England, with £95 difference in variable costs. Similarly, for suckler herds in Less Favoured Ares (LFAs), there is a notable difference on fixed costs of £176 per head between the top third and the bottom third. Variable costs are also £93 per head higher for those in the bottom third.

The result? A significant difference in margins, with bottom third lowland suckler producers making a loss of £397 per head compared to a £4.60 positive margin for top third producers after cash costs – a modest positive margin but a positive margin nonetheless. It’s worth bearing in mind though that these costs relate to the 12 months to March 31st, 2011 - before prices really strengthened. In LFAs, top third suckler herds are seeing returns £261 better than those in the bottom third.

If anything, the Business Pointers data has pinpointed the huge spread in terms of inputs which ultimately has a huge impact on the bottom line. Scratch beneath the statistical surface of fixed costs for lowland suckler herds and you soon discover power and machinery as the biggest villains of the piece. Less efficient producers are contributing £110.70 per head towards machinery upkeep and running costs, plus £78.29 in depreciation on machinery and fixings. For the top third the tale is altogether different with machinery upkeep and running costs coming in at £37.63. With less machinery, of course, comes less depreciation, at £27.36.

The upshot is the suggestion that some producers, at worst, may have too much machinery or, at best, more machinery than they need to effectively manage a beef herd. One potential solution could of course be looking into the possibility of reducing vehicle numbers. Interestingly, contract costs also appear significantly higher for the lower performers, suggesting again that they may have too much machinery. If contractors are doing more of the work, less machinery should be needed.

Labour costs, administration charges and contract fees are other contributing factors to fixed costs that could be reduced, as could variable costs like feed prices, vet bills and bedding. Too much machinery, however, certainly appears to be the key challenge. And with any challenges we face, quick and decisive action is almost always the best way to oil the wheels of improving efficiency.

  • To view the full Business Pointers report and to see a break down on individual enterprise types click here.

Wednesday, 16 November 2011

Healthy option to keep industry fit for future growth

‘Future proofing’ is a phrase often lauded in business and industry to help ensure enduring success and profitability.

In this respect the beef and lamb sector is no different to any other enterprise but, unlike many other industries, the beef and lamb and other livestock sectors face the monumental challenge of keeping one step ahead of the potentially devastating effects of animal disease.

BSE and Foot-and-Mouth (FMD) crises live long in the memory, not least because of the emotional and financial devastation caused. And while the industry is going through somewhat of a purple patch, animal health should remain high on the agenda to help ensure everything stays rosy in the beef and lamb sector garden.

EBLEX sector director Nick Allen highlighted the issue at the recent annual conference, stressing the need for the livestock industry to think more carefully about animal health if it’s to continue to benefit from current high prices. Warning against complacency, he said disease had upset the markets in the past and that the industry needed to protect itself against future shocks, citing previous devastating effects of both bluetongue and FMD.

Of course disease has no respect for international boundaries. It’s encouraging to see then that the EU has just earmarked more than €203million to support programmes to eradicate, control and monitor animal diseases and zoonoses – infectious diseases that can be transmitted to humans from animals. The aim is to further strengthen the protection of human and animal health in 2012.

The decision was taken by the Standing Committee on the Food Chain and Animal Health (SCoFCAH). Member states also unanimously endorsed Commission proposals to contribute €11.5million for the emergency measures and vaccination plans taken to combat some animal diseases over the last four years.

Overall 138 annual or multi-annual programmes have been selected for EU funding to tackle animal diseases that impact on human and animal health and trade. The lion’s share of earmarked funds - €65million - will finance bovine TB programmes in five member states.

The €11.5million in support of emergency measures will include €1.95million for bluetongue in Germany and around €4million for bluetongue emergency vaccination in the Netherlands, Luxembourg, Austria, Sweden, Italy and France.

The EU has also granted a financial contribution of €890,000 to support Bulgaria for measures such as surveillance, database, information campaigns, laboratories and disinfection in a bid to control the spread of FMD among wild animals in the south east of the country.

So it certainly appears that the wider industry is thinking along the same lines, making all the right noises to keep animal health high on the agenda and diseases at bay. As we’ve said though eyes can’t be taken off the ball. Yes, the industry is enjoying a resurgence which we all welcome but, to quote Thomas Edison ‘We shall have no better conditions in the future if we are satisfied with all those which we have at present’.

  • The principles of the EU strategy on animal diseases can be viewed by clicking here.

Wednesday, 9 November 2011

Exports to China - ‘A single day of sub-zero temperature is not enough to create three feet of ice’

If nothing else, the Eurozone crisis has again brought into sharp focus China’s role as the world’s major financial player.

While Greece and Italy continue to dominate the headlines, commentators have again reiterated Asia’s destiny to become the global economic powerhouse, with China at its heart. And of course, with China’s own meteoric economic rise comes opportunity.

There’s simply no escaping the importance of China on the global economic stage. It’s the world’s second largest economy, with average growth rates of 10 per cent per annum over the last 30 years. In 2010, Foreign Direct Investment (FDI) surpassed $100 bn. It all makes for impressive reading – but how can the UK beef and lamb sector establish itself as a major supplier?

Undoubtedly the building blocks are already in place. China is the world’s second largest importer and, importantly in these troubled times for Europe, is the EU’s biggest trade partner.

Encouragingly, China is also is the largest producer and consumer of agricultural products. It had population of 1.34bn in 2010, yet the rural population is falling, from 74 per cent in 1990 to 54 per cent in 2009. Urbanisation is expected to reach 70 per cent by 2035. Meat consumption is also on the rise. In 1960, it stood at 3.8kg/capita, but had risen to 49.2 kg/capita by 2000, with beef at 4.8kg/capita and sheep meat 2.9kg/capita.

A growing gap between consumption and domestic supply with per capita meat consumption projections predicted to reach 92.6kg/capita by 2030 makes for tantalising reading for exporters. With UK beef and lamb exports up year-on-year since we were allowed to export again in 2006, surely the statistics suggest it’s simply a question of taking full advantage of supply and demand ratios?

Not quite. Market access is both a lengthy and complex process. The legacy of BSE continues to present a challenge and processing standards in the UK in relation to handling 5th quarter also need to be addressed. EBLEX continues to work hard in paving the way to develop market access, but it’s not going to happen overnight. We are currently looking at a number of these issues to promote carcase utilisation and 5th quarter markets, as well as services and support for exporters, and currently have a delegation in China looking at developing opportunities. The latest visit follows EBLEX’s presence earlier the year at the China International Meat Industry Exhibition (CIMIE) in Beijing, a platform for exhibitors to promote their brands and export markets.

So the work is underway and although there is still much to do, the potential long term rewards for UK beef and lamb producers could be immense. As the Chinese proverb says though, ‘A single day of sub-zero temperature is not enough to create three feet of ice’ – ‘Great things cannot be accomplished in a short period of time’.

  • Further information on China’s economic rise, the Eurozone crisis and what it means for East and West can be read by clicking here.

Thursday, 3 November 2011

EBLEX conference 2011 – from Big Bang to secure future

EBLEX’s annual conference has become a major date in the calendar for producers, processors, agricultural journalists, trade associations and EBLEX staff to mix and discuss issues affecting all aspects of the industry, and this year’s event didn’t disappoint.

Around 170 delegates attended this week’s event at Kenilworth’s Chesford Grange Hotel which provided the platform for lively presentations, debate and culminated with calls for an industry action plan to tackle future challenges from EBLEX chairman John Cross.

Undoubtedly one of the highlights with the audience was the entertaining and enlightening presentation on red meat and health from guest speaker and Meat Advisory Panel member (and former EBLEX board member) Prof Robert Pickard.

Bringing the house down with a series of one-liners, including “You will never see a cave painting of a vegetarian”, he made a number of serious, valid and well-measured points about the nutritional value of red meat. We’re all aware of the ongoing challenges driven by industry detractors surrounding the image of the industry. Somewhat surprisingly starting with the Big Bang, Prof Pickard commented on red meat’s crucial role in a balanced diet, its positive contribution to the environment and the fact that climate change isn’t a new phenomenon.

Delegates heard about the outlook and global prospects for the beef and lamb from EBLEX sector director Nick Allen and head of trade development Peter Hardwick, while marketing activity in France was outlined by RĂ©mi Fourrier, EBLEX export manager for that country. Nick added that Halal needs to come off the "too difficult" list. He said it is important to the industry, EBLEX is taking it seriously and other people in the industry need to as well.

Unsurprisingly, ongoing domestic economic uncertainty and Eurozone difficulties prompted concern, which was touched on by John Cross in his closing comments. Importantly he stressed that businesses in the red meat industry that survived these volatile times would be those who were fastest and most willing to adapt to change and invest in a global market vision, although significant disease outbreak remained a major Achilles heel for the sector.

His closing rallying call left the conference in no doubt what would play a major role in the sector’s future success. He called for an accurate, high-speed data-base for sheep and beef sectors, capturing assurance status to put the industry on an equal - or better – footing than competitors. As he rightly said “No one else is going to grant us a secure future”.

EBLEX’s press release on the annual conference can be viewed by clicking here.

All the conference presentations are available on the EBLEX website and can be viewed by clicking here.