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NFU Scotland meets with Mundell over price downturn

NFU Scotland has met with high-level Scottish politicians at Westminster today (Monday 7 September) seeking support for measures to address the recent downturn in prices across all agricultural commodities.

Over recent months, many farmers across Scotland and the UK have been put under immense financial pressure due to extreme volatility in key markets. Paired with the adverse weather over the summer months, this has forced many Scottish farmers to question their future viability.

Eight members of the Union’s Board of Directors joined NFU Scotland staff at Westminster for meetings with the main political parties.

The delegation met with Secretary of State for Scotland, David Mundell MP; Alistair Carmichael MP; Calum Kerr MP and other MPs from the delegated SNP ‘rural group’.

The Union representatives stressed to politicians the critical extent of the price crisis which is impacting across all the sectors, and presented a seven-point action plan that the Union would like the UK government to urgently address.

One key concern was the need for the UK Government’s to fulfil its promise to a review of the budget allocation of Pillar 1 support across the devolved administrations, to address the so-called convergence dividend issue.

Other points raised with the MPs were:

  • Recognise the supply chain is not working and that urgent measures are required to address the immediate farming crisis across all sectors
  • Along with devolved administrations, present a united UK position on the actions needed to tackle the current crisis following the emergency Agriculture Council meeting taking place today (7 September) in Brussels
  • Deliver clearer rules on country of origin labelling along with better, more consistent promotion of British food
  • Refine its public procurement food policy
  • Commit to an extension of the powers of the Groceries Code Adjudicator
  • Work with the devolved administrations to ensure that all direct CAP payments are delivered to farmers in time for the traditional December payment window

Jonnie Hall, NFU Scotland’s Director of Policy commented: “The farming industry is resilient and is accustomed to volatility in the global marketplace. However, this prolonged dip in prices across the agricultural commodities, compounded by poor weather over the summer months and the newly-reformed CAP, has resulted in many farmers questioning whether they will have a future in farming.

“We welcome the fact that so many of the new crop of Scottish MPs have visited farms and met NFUS at agricultural shows this summer. They understand that all sectors are facing a difficult time and want to work with the industry to help.

“A change of attitude is required by governments and the supply chain. Scottish Government needs to stop burdening the industry with unnecessary rules and costs. Both Holyrood and Westminster should be working harder to open up markets for what we produce and allowing us to compete with the rest of the world. Retailers and all those companies that buy the food produced on Scottish farms should sign up to a domestic sourcing commitment and a transparent price.

“At our meetings today with MPs and the Scotland Office, we stressed the need to honour past Ministers’ commitments to review UK CAP budget allocations. The UK Government’s decision to ignore Europe’s aims for convergence has left Scotland languishing with some of the lowest area payment rates in Europe and denied the Scottish farming sectors vital funding.

“That would have not only assisted primary producers but the many ancillary industries it supports.

“We were promised that this would be corrected once CAP was implemented. Now is the time for the UK Government to deliver on its promise.

“This is a critical time for Scottish and UK farming, but with a fundamental shift in approach from governments and the wider food chain, we remain convinced that there can be a bright future for the farming industry.”

Stranraer waterfront regeneration is both viable and offers value for money

An independent report on a key element of the Stranraer waterfront regeneration scheme has said it is both viable and offers value for money.

However, the review also found that there could have been better communication and clarity on the slipway and boat hoist project.

The scheme has already been subject to an internal investigation.

It came after councillors raised concerns that "incorrect or erroneous information" had been provided to them.

That investigation concluded there had been no "illegality or maladministration" in the handling of the scheme.

The project was put on hold and an external report commissioned.

In his newly-published findings John Fraser, of consultants Gareloch,, said the process of revising the project could have been better.

He pointed to errors in update reports and hard-to-understand diagrams, and suggested there was, perhaps, insufficient clarity in some submissions to committee.

Nonetheless, Mr Fraser said the slipway and hoist project was viable in that it would be able to accommodate everything from canoes to 30-ton vessels, and represented value for money having come in £400,000 below the originally agreed budget.

He added that, provided it was well managed, it would benefit the regeneration of Stranraer waterfront.

North sea industry anticipates £2 billion cost improvement by 2016

Oil & Gas UK’s Economic Report published today (9 September 2015) reveals the impact of the challenging business environment on the offshore oil and gas industry and provides the first signs that the sector’s efforts to restore international competitiveness are starting to take effect.

The annual report, published by the UK oil and gas industry’s leading trade association, finds that the sector has been particularly challenged by the drop in commodity prices due to production decline and the sharply rising cost base, but that concerted action by the industry to improve efficiency across the sector is leading to an estimated 22 per cent – over £2 billion – reduction in the cost of operating existing assets by the end of 2016. Supported by the first annual production increase for 15 years, the unit cost of operating UK oil and gas assets will also improve.

Mike Tholen, Oil & Gas UK’s economic director, detailed the improvements: “Strong investment in asset integrity over the last four years, coupled with measures being taken to improve the efficiency of assets offshore, have resulted in better output from many existing fields and we expect the rate of decline in production from those fields to slow significantly over the next two years. Taken together with the start-up of the sizeable Golden Eagle field, the Government’s provisional data show that production in the first half of 2015 was 3 per cent higher than the same period in 2014, an indication that over this year, we are likely to see annual production increase.”

The industry has been focused on bringing costs down and improving efficiency for the past year and a half and Oil & Gas UK last week launched its industry task force to step up the pace of change.

Mr Tholen continued: “We are now seeing companies’ commitment to improving cost and efficiency reflected in industry performance. We anticipate that by the end of 2016, companies will have reduced the cost of operating their existing assets by 22 per cent (over £2 billion). Whilst the improvement will be offset to some extent by £1.1 billion of operating expenditure relating to new fields brought onstream in the intervening period, these new developments are vital for the future of our industry, in terms of both oil and gas production as well as the commercial opportunities they bring for the supply chain.”

This more positive production outlook will help to reduce the average operating cost per boe for across all fields from an estimated £17.80 in 2014 to £17 this year and by a further £2-3/boe to around £15/boe by the end of 2016. The 15 per cent reduction from 2014 to 2016 almost reverses the last three years of increases.

Deirdre Michie, Oil & Gas UK’s chief executive, said: “This great industry of ours is facing very challenging times. Last year, more was spent than was earned from production, a situation which has been exacerbated by the continued fall in commodity prices. This is not sustainable and investors are hard-pressed to commit investment here because of cash constraints. Exploration for new resources has fallen to its lowest level since the 1970s and with so few new projects gaining approval, capital investment is expected to drop from £14.8 billion (2014) by £2-4 billion in each of the next three years.

“Difficult decisions have had to be made across the industry. We estimate that employment supported by the sector has contracted by 15 per cent since the start of 2014 to 375,000 jobs. It is likely that capacity may have to be reduced still further in order for the business to weather the downturn. The Scottish Government’s Energy Jobs Task Force and New Anglia Local Enterprise Partnership are active in supporting affected businesses and employees.

“The industry is under a lot of pressure and it is now widely recognised that a transformation in the way business is done is required if the UK sector is to become more resilient and competitive in a world of sustained lower oil prices. The challenges are being tackled head on – even before the oil price fall, industry’s attention was focused on improving our cost competitiveness whilst upholding the safety of the workforce.”

The constructive tripartite approach to maximising economic recovery of the UK’s oil and gas by HM Treasury, industry and the new regulator, the Oil and Gas Authority, is crucial to supporting the industry’s transformation to a more attractive investment opportunity.

Deirdre Michie continued: “I am confident that we have turned a corner with improvements in cost and efficiency. However, a continued low oil price will inevitably cause companies to reflect on the long-term viability of their assets. Retaining infrastructure and delaying decommissioning will be essential to prolong production from existing fields and promote future new developments.

“The Government’s restructuring of the tax regime to provide a more fiscally competitive proposi-tion and its funding of seismic surveys to open up new areas for exploration are steps in the right direction but with lower commodity prices expected over a prolonged period, it is now time to con-sider further lightening of the tax burden to help drive maximum economic recovery of our oil and gas.”

Deirdre Michie concluded: “Over 43 billion boe have been produced to date from the UKCS and almost half again remains to be extracted. Maximising the recovery of our oil and gas resource will strengthen the country’s energy security, boost tax revenues, exports and the balance of payments as well as sustain high value activity and jobs in our world-class supply chain.

“This industry is embracing change. It is taking bold and purposeful action, for example through the Oil & Gas UK coordinated Efficiency Task Force’s pan-industry initiatives, to emerge leaner, fitter and with a competitive and efficient cost base that will ensure a positive and sustainable future.”

Record year for salmon production

Aquaculture revenues now worth £1.86 billion.

Production of Scottish farmed salmon has leapt to its highest ever level, statistics published today have revealed.

According to the Scottish Fish Farm Production Survey 2014 report, 179,022 tonnes of farmed Atlantic salmon was produced in 2014. That is the highest level of production ever recorded in Scotland, and an increase of almost 10 per cent on the previous year. Rainbow trout, halibut and brown/sea trout production also increased.

The survey also reveals an increase in the number of people working across all Scottish fin fish production, from 1,625 in 2013 to 1,796 in 2014, an increase of 10 per cent. The estimated farmgate value of all fin fish was £733.4 million last year, an increase of 6.2 per cent compared to the previous 12 months.

Environment Minister Aileen McLeod said:

“This record year of 179,022 tonnes of Atlantic salmon production is great news for Scotland and reaffirms our global position amongst the leading producer nations. Salmon is a key part of our economy providing employment and investment, particularly in some of our most remote, coastal communities.

“Salmon is Scotland’s number one food export and is highly valued across the world for its exceptional quality and provenance. These figures reflect the great and growing demand at home and abroad for delicious and healthy fish and shellfish produced in Scotland’s clear and pristine waters to the highest standards of best practice, welfare and food hygiene.

“Aquaculture revenue in Scotland is now estimated to be worth £1.86 billion annually to the economy, an increase of £110 million year-on-year, and supports over 8,300 jobs. If industry’s sustainable growth targets, supported by the Scottish Government, are met this value will rise to well over £2 billion a year and support 10,000 jobs across Scotland by 2020.”

Helping farmers through 'a tough time'

Rural Affairs Secretary comments on latest farm debt statistics.

Commenting on the latest results from the 2015 Survey of Bank Advances to Scottish Agriculture, which show farm debt levels continue to rise in Scotland, Cabinet Secretary for Rural Affairs, Food and the Environment Richard Lochhead said:
“There is no doubt that farmers are going through a tough time at the moment due to volatile market conditions compounded by the recent poor weather conditions. However, these statistics – which show that banks are still lending to farmers - suggest their continuing confidence in this sector.
“Ministers are redoubling their efforts to help our farmers get through the current challenges to brighter times. For example, the Scottish Government is working flat out to be able to start making Common Agricultural Policy (CAP) payments before the end of this year, and will keep the industry updated on the likely timescale given the implications for their cash flows.  I am also pressing my UK colleagues to agree urgently a new Fair Framework for Farming, to help farmers secure a better deal from supermarkets and the food industry which collectively sell almost £197 billion worth of food and drink every year.”