UK: Malt barely market reform agreed

Malting barley growers have made another attempt to reach agreement with whisky makers on matching supply and demand at a fair price, Business Scotsman commented on December, 02.

Reporting a "helpful meeting" this week with the Scotch Whisky Association - representing distillers, blenders and exporters - Bob Howat, NFU Scotland vice president, said that removal of direct subsidies for farm products had concentrated minds.

That change in common agricultural policy support had given cereal growers a clear message: the market must pay a price that is an incentive to produce.

He went on: "Years of unsustainable prices for malting barley have had an impact, and subsidy reform has brought it to a head this year with a major drop in malting barley plantings, down eight per cent - 140,000 tonnes. That has implications for the whole whisky supply chain."

One implication was that subsidy reform placed a responsibility on the market to pay growers a sustainable price after years of low and erratic returns.

But another was for farmers, requiring them to work more closely with each other and with their customers.

Mr Howat said: "We had a helpful meeting with the Scotch Whisky Association, which followed similar discussions with maltsters. Now it is important to ensure the good communication and encouraging noises translate into sustainable prices and practices for the whole supply chain."

John Picken, chairman of the union's combinable crops committee, accepted that each link in the chain from grower to retailer was under pressure.

He went on: “Retailers pressurise each other, which in turn squeezes the margin for distillers, maltsters and farmers, and the shortage of malting barley this year has been a warning shot for all."

He was optimistic, with reservations: "It makes our market position as growers stronger, but we need to use that to best effect. That means knowing our costs of production, then being open and constructive but resolute, with the market on the price we need. The term 'collaborative supply chain' is thrown about a lot, but if it means working more closely with the supply chain, with each link viewing the other as a partner rather than adversary, then it will help secure our future."

The Scottish Executive proposes to change the way it calculates farm incomes to show more accurately the increasing percentage that comes from diversification and off-farm activities.

The changes, which even if approved after consultation, are unlikely to be in place until 2009, are: Net farm income will be replaced by farm business profit; provision of farm income measures to cover agricultural production and contract work, agri-environment activity, diversification using farm resources, and single farm payments; showing the contribution of these activities to farm business profit; and aligning income measures for farms taking part to the national total income from farming results.

A senior economist with the Executive said: "Our objective is to provide better evidence for policy debate. I can see no major stumbling blocks ... nor should it mean more work."

06 December, 2006