Arable Farmer-led Group: climate change evidence

1 Context and Structure

1.1 Composition of the Arable Sector

1.1.1 Definition

Data on farms that specialise in cropping, and data on the total arable land in Scotland, are both important to understanding the overall Scottish arable sector. Arable land is defined here as land used for crops, fallow and set aside land. Around 10% of Scotland's total agricultural area in 2019 was arable land.

Unless otherwise stated, data in this chapter are from the June Agricultural Census, Total Income from Farming (TIFF), and Farm Business Survey (FBS), further detail in Annex B.

Farms where more than two-thirds of output comes from arable are categorised as 'specialist cereal', 'general cropping' and 'horticulture' farms. Specialist cereal farms make more than two-thirds of their output from cereals and oilseeds. General cropping farms make more than two thirds of output from crops. Horticulture farms make more than two-thirds of their output from fruit, vegetables, flowers, nursery stock and mushrooms. A glossary and definitions of these categories and other terms can be found in Annex A.

1.1.2 Composition of the Arable Sector

In 2019, around 550,000 hectares were used to grow cereals, crops, fruit and vegetables^[2] in Scotland, accounting for around 12%^[3] of the total arable land in the UK and around 10% of Scotland's total agricultural area. Large areas of Scotland have limited arable growing conditions. These are usually hilly or rocky lands that are more suitable for livestock. In 2019, 86% of the total agricultural land area in Scotland was designated as Less Favourable Areas (LFA)^[4]. Most of Scotland's arable land, 80% in 2019, was on non-LFA land.

Further details on the distribution of arable land use by crop in 2019 in both Scotland and the UK as a whole, are included in Table B1 in Annex B.

Collectively, Scottish farmers produced around 4.7 million tonnes of arable produce. Barley varieties accounted for the majority (nearly 2 million tonnes or 41%), with wheat and potato varieties accounting for much of the rest – 20% and 25% respectively.

In terms of value, the combined output was around £1.1 billion, accounting for a third of Scotland's total agricultural output by value. Around £250 million of the output was attributable to potatoes, and barley accounted for an additional £250 million.

Production and destinations of arable produce vary with demand and supply. The area, yield and quality of crops can vary due to land suitability, environmental conditions, pests and diseases. Not all arable produce is intended for or fit for human consumption.

1.1.3 Outputs and Value – Cereals and oilseed rape

In 2019, Scottish farmers produced around 3.2 million tonnes of cereals and oilseed rape, a 22% increase on 2018 and the highest year for cereal production since 2015.

The rise in production was due to an increase in average yields, largely due to improved weather conditions in 2019, with 2018 being a poor year for both yield and production. The total area of cereals and oilseed rape sown remain fairly stable, increasing by 2%. Around 462,000 hectares in total were used to grow cereals and oilseeds in 2019.

As shown in Table 1, barley is the main cereal crop grown in Scotland, most of which is spring barley. Around 291,000 hectares of barley were planted in 2019, making up 63% of the total area used to grow cereals and oilseeds.

Table 1: Area, yield and production estimates for the 2018 and 2019 Scottish harvest

	2018			2019
Crop	Area	Yield	Production	Area	Yield	Production
	(000 ha)	(t/ha)	(000 t)	000 ha)	(t/ha)	(000 t)
Wheat	100	6.8	681	107	8.7	937
Oats	32	5.5	176	32	5.9	189
Total Barley	288	5.7	1,656	291	6.7	1,943
of which:
Winter Barley	38	7.1	268	49	8.2	399
Spring Barley	250	5.5	1,388	242	6.4	1,544
Total Cereals	420	6.0	2,512	430	7.1	3,069
Oilseed Rape	33	3.9	126	32	3.9	124

Source: Cereal and oilseed rape harvest: final estimates - 2019 - gov.scot (www.gov.scot)

Cereals have a strong association with the whisky industry. The major markets for Scottish cereals are malting (44% of all cereals in 2019), animal feed (35%) and milling (8%). Around 53% of barley production in 2019 was sold for use in the malting industry. 33% of Scottish wheat production was also sold for malting.

In 2019, the combined output of Scottish cereals was around £409 million, the equivalent to 12% of Scottish agriculture's total output by value. Barley varieties accounted for the lion's share (£250 million or 61%) with wheat accounting for a further third (£107 million). The output from oilseed rape in the same year was around £39 million.

In 2019 the market value of cereals produced for feed and other purposes (including sales to animal feed manufacturers, feed and seed retained on farm of origin or sold farm-to-farm) was estimated at £142 million, around 35% of the combined value of output above.

1.1.4 Outputs and Value – Potatoes and other crops

In 2019, around 28,500 hectares were used to grow potato varieties – both seed (planting) and ware (eating). This increased 4% on 2018, but was 2% below the ten-year average. Both seed and ware potatoes increased in area.

In 2019, total output from Scottish potatoes was around £250 million, 22% of arable and 7% of Scottish agricultural output by value. Seed potatoes accounted for £155 million of this.

Other crops, grown in smaller quantities, include triticale, rye, peas and beans for combining and crops for stock feeding. They account for a further 26,000 hectares of which around 19,000 were to grow vegetables for stock-feeding. These crops, which also include oilseed rape, contributed around £76 million, 7% of arable or 2% of total Scottish agricultural output.

1.1.5 Outputs and Value – Horticulture

In 2019, the area used to grow vegetables intended for human consumption (excluding potatoes) remained fairly steady at around 19,000 hectares, a 1% decrease from the previous year but remaining above the ten-year average.

From 2018 to 2019, the total soft fruit growing areas decreased by 1% to around 2,000 hectares. However, it remains higher than the average over the past 10 years. Strawberries are the most popular grown fruit, followed by blackcurrants and raspberries. Most fruit (around 73%) is grown under cover in either glasshouses or walk-in plastic structures (Poly-tunnels), allowing for a much longer growing season.

In 2019, the total output from Scottish horticulture was around £346 million, the equivalent to 31% of arable output and 10% of Scottish agriculture's total output by value. Most of this came from vegetables (£164 million or 48%) and fruit (£144 million or 42%). Flowers and nursery stock accounted for a further £37 million (11% of horticulture output).

1.1.6 Scottish Arable Farms

11,500	22%	550,000
Number of holdings with arable land	Percentage of all Scottish holdings with arable land	Area of Arable Land

Of Scotland's 51,000 holdings, 22% had arable land in 2019. The majority of arable land is accounted for by specialist cereal (5% of holdings and 30% of arable land) and general cropping holdings (3% of holdings and 30% of arable land). Of all holdings, a further 1% were specialist horticulture (2% of arable land).

Most of the arable land and arable holdings in Scotland are in the South East and North East. Table 2 below provides the figures for specialist cropping and specialist cereal farms. Full details are included in Tables B2 & B3 in Annex B.

Table 2. Number of specialist cropping, cereal or arable holdings by region, 2019

NUTS2	Specialist General Cropping Holdings		Specialist Cereal Holdings		All Holdings with Arable Land
	Holdings	Arable Area (ha)	Holdings	Arable Area (ha)	Holdings	Arable Area (ha)
North East Scotland	260	24,900	900	55,200	2,720	148,600
Eastern Scotland	910	107,000	790	59,100	2,880	227,300
Southern Scotland	120	17,900	310	32,500	2,220	101,000
Highlands & Islands	350	16,200	340	17,000	3,570	68,700
West Central Scotland	10	400	20	1,200	150	3,300
Scotland	1,650	166,300	2,360	165,000	11,520	548,900

Source: June Agricultural Census 2020, via RESAS Agricultural Analysis Unit

1.1.7 Holding Size

In 2019, 61% of arable farms were between 10 and 200 hectares. Smaller or larger holdings are less common. Of specialist cereal holdings, 12% were larger than 200 hectares and covered around 73,000 hectares, or 44% of total cereal area. In general cropping, 23% of holdings were larger than 200 hectares and covered around 92,000 hectares, or 55% of the general cropping area. In contrast, the majority of horticulture (78%) farms were under 10 hectares in size. Full details are in Table B4-6 in Annex B.

1.1.8 Workforce

Different crops have different labour requirements. Specialist cereal holdings rely on a mix of occupiers and spouses, accounting for 53% of the workforce, and employees, for 39%. On general cropping holdings 44% of labour is from occupiers and spouses and 45% from hired employees. Horticulture is more reliant on hired labour, which makes up 21% of the workforce while 67% are casual or seasonal staff. Full details are in Annex B in Table B7-9.

1.2 Profitability and Turnover

1.2.1 Estimated Farm Business Incomes and Profit

Farm Business Income (FBI) statistics are estimated from a sample of nearly 500 farms with a standard output (the average monetary value of the agricultural output at farm-gate price) over €25,000. The FBS does not collect information on non-supported sectors, which include farms predominantly engaged in horticulture, pigs, poultry and some fruit production. A large number of part-time and small Scottish farms with low output are also not included^[5].

Farms with more than two thirds of output from crops are categorised by the FBS as Cereals or General Cropping. A glossary and definitions of these and other terms is in Annex A.

Table 3 shows FBI by upper and lower performance bands, with and without support payments. FBI is used to show the profit a farm makes. FBI figures measure profitability from agricultural activity and includes income from non-agricultural activities using farm resources. For example, tourism, renewables or processing and sale of farm products. There are wide variations in performance across farm types.

In 2018-19, the average FBI in Scotland was around £38,700. Excluding support payments, this falls to around -£4,700, suggesting support plays an important role for many farms.

On average, General Cropping and Cereal farms show higher profitability. General Cropping farms are most profitable with average FBI of around £132,100, falling to £91,800 excluding support. Cereal farms had an average FBI of around £64,100 or £30,900 excluding support.

Table 3. Farm business income by performance band – arable farms

Farm type	Lower 25%		Average		Upper 25%
	Including Support	Excluding Support	Including Support	Excluding Support	Including Support	Excluding Support
Cereals	-£800	-£26,900	£64,100	£30,900	£188,600	£134,800
General Cropping	£27,800	-£3,200	£132,100	£91,800	£294,300	£245,000
All Farms	-£15,500	-£53,800	£38,700	-£4,700	£159,800	£100,800

Source: Farm Business Survey 2018/2019

The figure below shows profitability by farm type, represented by the proportion of farms with income from farming greater than zero (i.e. agricultural output is greater than input). Around 80% or more of Cereal, General Cropping or Mixed farms were profitable with support payments and in comparison to farming sectors engaged primarily in cattle and sheep this drops relatively little when support payments are removed.

Scottish Government analysis shows that across all farm types, 28% of farm businesses turn a profit without support, and 72% turn a profit when support is included.

Table 4 shows the average total input, amount received from support payments and grants and output for arable farm types. Economic efficiency is calculated as a ratio of outputs to inputs. The average General Cropping farm had the highest economic efficiency in 2018-19, of around 144%. Cereal farms were on average more economically efficient than the average farm, with efficiency around 136%.

Table 4. Farm output and input – arable farms

Farm type	Output	Input	Support payments and grants	Diversification Margin	Economic efficiency*
Cereals	£208,600	£188,300	£33,200	£10,700	136%
General Cropping	£429,000	£346,200	£40,200	£9,000	144%
All Farms	£190,000	£199,300	£43,400	£4,600	124%

* Including support payments and diversification. Source: Farm Business Survey 2018/2019

1.2.2 Diversification

Data on diversification and investment in renewable energies on arable farms in Scotland is scarce. The Farm Structure Survey 2016 found that across all farming around 9% of farms made more than 50% of their turnover from diversified activities and 16% made more than 10%. As shown in Table 5, more cereal (12%) and general cropping (14%) farms were making 10-50% of their turnover from diversified activities, although fewer were making more than 50%.

Table 5: Proportion of turnover from other gainful activities, by farm type, 2016

Farm Type	Proportion of turnover from other gainful activities
	0-10%	>10-50%	More than 50%
	% of holdings	% of holdings	% of holdings
Cereals	82%	12%	6%
General Cropping	80%	14%	6%
Horticulture	70%	11%	19%
All Farms	84%	7%	9%

* Including support payments and diversification. Source: Farm Business Survey 2018/2019

The Farmers' Intention Survey 2018, summarised by SRUC in their October 2019 briefing, revealed that over 50% of (Scottish) farmers (from all sectors) plan no changes to the levels of agri-environmental provision on their holding in the succeeding five years, while between approximately 14% and 27% of farmers plan to increase provision of "public goods" through increased agri-environmental, forestry, small-scale woodland and renewable energy production.

Of those who did signal intentions to increase these activities, identification of a successor,

status as a new entrant, tenure, gender and land type were the most significant characteristics of those intending to increase public good activities. Lower productivity

of land appears to be a factor which positively influences the decision of farmers to increase

the level of forestry and small-scale woodland on their farm or holding.

The figure below shows the overall intentions of the farmers, crofters and smallholders surveyed to change the level of activities on their farm or holding that may enhance 'public good' provision in the next five years (2018-2023). Over 50% of respondents planned no changes to the level of each of the activities and for many the question was not applicable as they currently don't engage in that activity. The type of public good provision that most respondents planned to increase is agri-environmental activity, at 27%.

1.3 Future Trends

1.3.1 Impacts of Brexit

In late 2020, the Anderson Centre produced a report for Scottish Government, assessing the impacts on Scottish agriculture of a UK-EU Free-Trade Agreement (FTA) and a No-Deal Brexit.

Overall, the modelled impacts of an FTA were projected to result in relatively small changes in Scottish agricultural output over the longer term. This is becausemost agricultural trade, with the exception of seed potatoes, can continue effectively tariff-free and quota-free. Indeed, the modelling suggests that increased demand from the rest of the UK could actually increase Scottish agricultural output in some cases.

Specifically for wheat and barley (the cereals covered within the model), output by value were projected to remain unchanged overall but with a larger shared consumed domestically and less exported overseas. It should be noted that this modelling is not suitable for capturing the initial disruption being experienced by individual businesses in the early stages of the deal.

Trade between the UK and EU, however, is no longer frictionless with new non-tariff measures (NTM) – additional certifications, enhanced border checks, etc. – now in place. As a result, the costs of such trade are set to increase. For wheat and barley these costs are projected to be minimal (around 0.1% ad-valorem equivalent (AVE) on average) owing to the channels used (Bulk shipments rather than Ro-Ro) and the industry being largely accustomed to trading across non-EU markets already. Where problems could arise are on shipments of inputs and time delays when disease pressure is at its peak.

1.3.2 Changing Dietary Demands

According to a 2018 report by Food Standards Scotland^[6], Scottish households generally eat too many calorie-dense foods, and do not eat enough fruit, vegetables, oil-rich fish, and fibre. For example, the average intake of fruit and vegetables between 2001 and 2015 was 3.2 portions on average (257g per day) – this should increase to 5 portions a day (402g). Inequalities exist as well: 'most deprived' areas consumed on average 2.5 portions, while 'least deprived' consumed 3.9 portions.^[7]

Table 6. Average expenditure on veg, fruit, potatoes, and bread per person per week, 2018-19

Category	Scotland		UK
	Purchase	Expenditure	Purchase	Expenditure
Bread	672g	£1.36	521g	£1.18
Potatoes*	621g	£1.41	620g	£1.27
Fruit and vegetables*	2,030g	£4.62	2,245g	£5.29
of which:
Vegetables*	1,045g	£2.32	1,139g	£2.60
Fruit*	985g	£2.30	1,106g	£2.69
Food and Non-Alcoholic Drinks	..	£28.85	..	£28.32

* Fresh and/or processed. Source: Family Food, DEFRA, October 2020

DEFRA's Family Food datasets, based partly on ONS' Living Costs and Food Survey, show UK and Scottish household purchases and expenditure on food and drink. The latest release, with data up to 2018/2019, shows the average volume of fresh and processed fruit and vegetables purchased has remained fairly stable, though below UK levels. In 2018/19, Scottish households purchased 2,030g of fresh/processed fruit and vegetables per person per week (290g/day) compared to 2,245g for UK households (321g/day).

The proportion of total food and drink expenditure spent on bread and potatoes has seen a similar broad downward trend since 2001. In 2018/2019, 9.7% of total UK food and drink expenditure was spent on bread and potatoes, a similar proportion to that seen in since 2001 (8.7% for Scottish households). Fruit and vegetable expenditure as a proportion of total food and drink expenditure has increased for both UK and Scottish households.

A number of key reports have discussed changes to red meat consumption. The UK Climate Assembly^[8] – a citizens' assembly on climate change – discussed their preferred future for food, farming and land use on the path to net zero in the UK. This included 20-40% voluntary and education driven reductions in red meat and dairy consumption.

The Climate Change Committee^[9] have also formally modelled these reductions in their 6^th Carbon Budget report in order to determine their pathways for the UK, including Scotland, to reach net-zero by 2050.

Their advice also highlights three key changes required to reduce agricultural emissions:

i. diet change with their main pathway to net-zero assuming a 20% reduction in UK consumption of red meat by 2030, rising to 35% by 2050;

ii. low-carbon farming practices;

iii. productivity measures to improve crop yields and reduce stocking rates.

The sectoral pathway for Scottish agriculture in the CCC report requires an emissions reduction of 23% by 2030 and the CCC state changes in farming practices, woodland planting and reductions in livestock numbers are all required to achieve net zero.

Such changes in Scottish diets may not directly impact cereal production, but could indirectly affect the arable sector via reduced demand for animal feed: a large proportion of Scottish-produced feed grains are destined for the Scottish red meat sector, of which the majority of outputs are destined for the rest of the UK.^[10]