Briefing on Agricultural Topics

Briefing on Agricultural Topics

1.Department Plan

2.Food Matters Strategy

DED Food and Drink Sector Offer

Food Park

3.Shop Local and the Multiplier Effect

4.Meat Prices and the operation of the Meat Plant

5.Agricultural Development Scheme

6.EU and Implications of BREXIT

7.UNESCO Biosphere

Appendix 1 - Government Catering Services – Local Food Procurement

Appendix 2 – Isle of Man Meats 3 Year Strategic Plan (27 Oct 2015)

Appendix 3 – Livestock Pricing by Isle of Man Meats (10 Sep 2015)

1.Department Plan

In the DEFA Business Plan 2015-18[1]there are number of points which specifically relate to agriculture:

In ‘Our Aims’ it says:

• To grow the Manx food industry to grow profits, substitute imports and gain profitableexports.

In ‘Government and Departmental Priorities’ the Department has identified where it will contribute to Government’s Strategic Objectives set out in the mid-term report on the Agenda for Change[2] and the Economic Strategy Vision 2020[3]. With respect to Agriculture the two specific priorities are:

• Deliver the objectives in the Food Matters Strategy
• Deliver more value through the Agricultural Development Scheme

The department produces Agri-News at least twice a year. This is a great source of information about Agriculture matters.

2.Food Matters Strategy

The 2015-2025 Food Matters Strategy[4] was published in Oct 2014 and in Nov 2014 Tynwald approved[5] a target for growth of 40-70% of a food economy worth an estimated 2% of GDP (estimated at £75million- £20 million of exports - providing 1300 jobs in 2014) to around 3-3.5% of GDP.

This growth would be achieved by increasing exports as well as increasing the local producer market share of the on island retail and food service sectors (worth £170 million and £90 million respectively in 2014). It would be funded from pre-existing sources included DEFA grants and DED’s Financial Assistance Schemes and refocusing around 5% of the CCS to developing food businesses and would focus on three specific strategies:

a)Resilience through increased diversity - encouraging more food businesses and greater range of food products.

b)Competitiveness through improved efficiency and skills - to ensure food businesses are at the cutting edge of technological advances to keep ahead of competitors.

c)Profit through market and customer focus - ensuring that profits are maximised by understanding consumers, having access to appropriate markets and increasing market share through branding and marketing.

In addition to economic growth, including contributing to an improved visitor experience, increasing local food production offers improved ‘food security’ and environmental benefits.

The strategic vision for the industry is:

“Growing a sustainable, profitable and increasingly collaborative food (including seafood and beverages) supply chain, focused on meeting the needs of customers”

This vision will be realised through plans to strengthen the supply chain in order to: increase exports particularly of quality artisan products (primarily to the UK); increase local market share, displacing imports; and assist local businesses with efficiencies designed to ensure they are, and remain, competitive.

The Department outlines its plans for doing this by focusing on three key themes, resilience through increased diversity, competitiveness through improved efficiency and skills and profit through market and customer focus.

There are a number of initiatives now in place, or being worked on, which clearly have a connection to the strategy, these include:

• Appointment of Andrew Lees as Food Business Development Manager[6] in Nov 2015
• Food Matters website[7]:
• Guide to Isle of Man Food & Drink[8]: The number of local food producers highlighted rises from around 50 in 2009 to over 100 in this the 5th edition of this guide published in 2015. It also includes lists of regular farmers markets and supermarkets, guides to eating out and local food related events and experiences.
• Quality Assurance and Awards – Alongside the Taste Quality Assured[9], independently assessed gold and silver quality assurance awards,for eateries a new ‘Harvest’ Isle of Man accreditation, introduced in 2015, is available if criteria regarding use of knowledge of local produce are met. 10 establishments are currently accredited. In 2016, 12 businesses were awarded a Great Taste Award[10].
• Food & Drink Festival[11] – First held in 2009 it attracted 7,000 visitors in 2016 it was 10,000. It includes the Isle of Man and Student Chef of the Year events. There is a featured visit package offered via visit IOM.com
• Agriculture and Fisheries Grant Scheme[12] – Introduced in 2016, this replaced three previous schemes, in providing discretionary grant aid to businesses to support and encourage economic growth and diversification of the local economy specifically targeting primary food products and added-value processing of locally harvested foodstuffs.
• 2016 Consumer Food & Drink Survey[13]
• Traceability & Disease Control – Sheep & Goat tagging introduced in late 2015; Through work including the cattle passport scheme (part of Online Services) in 2016 Manx cattle have been certified TB free, after six year qualification period, reducing the need for testing on Island and increasing the appeal of product for export[14].
• Food Provenance Scheme[15] - DEFA are currently running a survey in relation to designs for a food provenance label. ‘The label will be used to indicate produce is grown, reared, caught and/or processed in the Isle of Man and/or contains mostly Manx ingredients.’

DED Food and Drink Sector Offer

Moving on from Vision 2020 document which sets out how the ‘Distinctive local food and drink’ market could be developed; on the ‘Where you Can’ website Food and Drink[16] is listed as a sub sector of Manufacturing, this makes it less prominent than for example the Creative Industries sector, unless you go looking it is invisible.

The narrative on the page seems to be targeted at attracting new business to the Island missing the opportunity to also provide information, or signposting, relevant to local businesses seeking development support. There is only one link to a DEFA webpage and the fact that the DEFA Food Business Development Manager’s contact details do not appear prominently seems to be a missed opportunity.

Food Park

Online I was only able to find a link to an out of date leaflet. Is this facility still open for business?

• Phase 1 Approval – Tynwald Mar 2012[17]
• Phase 1B Approval – Tynwald May 2012[18]
• Phase 2 Approval – Tynwald Apr 2013[19]
• Phase 3 Approval – Tynwald Jun 2014[20]

3.Shop Local and the Multiplier Effect

Item 27 on the Tynwald Order Paper in January is linked to this topic.

By way of background in response to a question in Tynwald in Jul 2015[21] about introducing a campaign to encourage the purchase of Manx produce the Chief Minister said:

Madam President, this is a matter which I am sure all Hon. Members would feel strongly that we should support; however, as a mature and responsible Government we must act within the confines of our trading relationship with the European Union, which limits our ability to directly promote the purchase of local goods or Manx agricultural goods or to prefer local suppliers of the same, by reason only of the fact of their Manx origins, for goods or agricultural products.

However then he went on to say:

Government obviously has a role to play in supporting our local food producers and in 2014 the Council of Ministers approved a new sustainable food procurement policy that allows additional social, economic, environmental and quality considerations to be included in the tender specification. This may positively influence the proportion of local produce purchased by Government.

In the Food Matters Strategy DEFA highlighted the following research:

The Multiplier Effect

Research in 22 local authorities in NE England demonstrated that £1 spent with a local business is worth £1.83 to the local economy versus 58p with a non-local business.(New Economics Foundation 2008)

This Minister for Economic Development reaffirmed the Government’s commitment to ‘highlight to all Departments the potential value of buying from local businesses both for the local economy and the associated Government income’ in his response to a question in Keys in May 2016[22]. He went on to say:

At the same time, there are requirements upon Government to maintain open, transparent and fair procurement processes to ensure best value for the taxpayer. I am pleased to say that I am informed that local suppliers win the large majority of Government contracts.

Later in the question it was noted, as an example, that the Villa Marina did not sell any local brewery products.

A similar message was shared by the Treasury Minister in response to a question in 2010[23]. She said

I think that the underlying message that the Hon. Member is really wanting to emphasise is that there are benefits to the local economy of buying Manx. I think that that is something that we have all wanted to endorse and promote over a long time. I am more than happy that we should work with the Department of Economic Development to ensure that that message is relayed to the general public.

However she had explained that the calculation of any multiplier was complex

The value of a multiplier critically depends on how much of the income generated by additional spending in the economy is retained and re-spent, so as to provide for income for other on-Island entities and individuals.

In small, open economies such as our own, where much of what we consume is imported, it is clearly the case that the multiplier effects generally will be relatively small. For particular sectors, the multiplier will be greater where purchasers of materials and other business-to-business transactions are between Island companies – in other words, when more of the supply chain is on-Island.

Similarly, it benefits the local economy, if the company profits are also retained, either for local distribution or for local reinvestment. Indeed, it is in respect of profit distribution where there could potentially be a difference in the economic impact for a Manx-owned business, relative to a company owned off-Island.

Every circumstance will be different. There is no single multiplier effect for the Isle of Man economy, so it is not feasible to produce a full multiplier benefit analysis that can be generally applied to the issue of domiciled and non-domiciled businesses.

In Oct 2015 this Committee asked the Isle of Man Government Catering Shared Service whether they adopted a buy local policy and they confirmed that the following were main suppliers[24]:

• Robinsons – Potatoes, 50% vegetables, tomatoes
• Greeba Mushrooms
• GreenMann Water
• Ramsey Bakery
• IOM Creameries – Milk, Cream, Butter
• Local Butchers – IOM Meat (currently under review to ensure IOM provenance pathway)
• ManxPac Tea (locally produced teabags)

4.Meat Prices and the operation of the Meat Plant

The Meat plant is owned by Government and is being run, for an interim period, by Miles Macpherson who is overseen by a recently appointed new board of directors[25] and government specialists.

Tynwald approval was given in Mar 2014 to allocate £1.6 million towards a £2.2 millionrestructure and refurbishment at the Meat Plant[26]. It was anticipated that this would extend the working life of the current plant, opened in 1996, by 15 years, improve the facilities to meet new animal welfare standards and Health and Safety at work obligations, make power and water consumption more efficient and allow increased harvesting of by-products[27].By 2014 savings of £1.4million pounds had been made since 2008[28] and alongside the signing of a new 15 year lease DEFA agreed to provide a subvention for a further 4 years on a sliding scale. The subvention arrangement was agreed following the removal of the red meat derogation at the end of 2010[29]. In place since 1982 this agreement with the EU, because it contravened directives regarding free trade,had allowed the Isle of Man to limit imports of red meat so that at least 80% was home produced.[30]

In response to a recent FoI request[31] DEFA have confirmed the followingfinancial information, year on year % change added to assist comparisons with throughput figures:

So although the 2015 throughput was greater than 2014 the result was a substantial increase in the overall loss. This is because the value of sales was lower (due to lower market prices, particularly for cattle where throughput was actually down by 25% ) but the overheads increased by 11%, in excess of the 8% increase in throughput.

In a report into Livestock pricing in the Isle of Man produced in Sep 2015[32] Steve Webster reported that, based on 2014 figures, the abattoir’s fixed costs[33] were £1,754,164 across 2,466 tonnes of meat – approximately £0.71 per kilo. His assertion was that these fixed costs should not vary significantly so if throughput was increased, and the meat plant wasslaughtering all locally produced meat, the fixed cost per kilo would reduce to £0.58 per kilo.He used average carcase weights for cattle 300kg, sheep 18kg and pigs 80kg.

In fact looking at the table above it would seem that the 2015 overheads are far closer to the 2012 and 2013 figures, prior to the refurbishment, and so perhaps the predicted benefits of that work have not been fully realised. In fact if 2014-15 were the years when much of the refurbishment took place the lower overheads may simply relate to a reduction in operation due to shutdown periods during the refurbishment.

In Oct 2015 the then CEO, Mike Owen who had been in post for about a year, presented a 3 year strategy plan[34], aligned to the food matters strategy, to members of the farming community. In it he set out a range of actions and processing targets alongside anticipated subvention levels of £600,000 for 16-17 and 17-18, reducing to £200,000 in 18-19.

DEFA reported that there would be a new commercial board[35], with the skills to run a modern plant, who would be responsible to the pre-existing producer board for delivering this strategic plan.

Part of this plan was in response to Mr Webster’s report. His report sets out how livestock pricing works, the effect of being Island based and of running a small abattoir where economies of scale are not possible. He also sets out the challenges and complexities of the connected matter of equivalence. Very simply this is where Manx farmers would receive the same price for animals slaughtered here as they would if they exported them to the UK for slaughter. But there are many variables and to date no agreement on this point. In fact Mr Webster said:

There is no specific economic reason why Isle of Man livestock producers should now expect equivalence from the abattoir, nor is there any reason why they should be expected to supply livestock to the abattoir, i.e. pricing, supply and demand should be market-driven

In the Q3 2016 Agriculture and Fisheries Sector report to Council of Ministers[36] it was noted that ‘Buyers from England have been offering attractive prices to local producers, which has led to increased interest in exporting cattle.’

The trend for exports, which affects the throughput at the meat plant is shown in these charts. It is clear that to see why the meat plant throughput figures have dropped significantly in 2016.

The increase since 2011 is significant as it relates to the withdrawal of a subsidy paid to farmers on animals slaughtered locally, which again affected throughput at the meat plant.

A report provided in the Dec 2016 Agri news[37] shows the price comparisons between IOM, UK and NI from Sep 2015-16. Both beef (where prices have increased steadily since April 2016 after a very low period since Dec 2014) and particularly lamb prices are lower here than in the UK but pork and particularly milk are higher.

Mr Webster also reported that the cost to Government of the Meat Plant in 2015 was £1,073,693 broken down as follows:

In the report he noted that there were proposals for Government to begin to recover the costs of those services marked (1) in the above table by charging for them. It was this proposal which led this Committee to investigate and report in 2015[38]. The services provided are mandatory if the meat processed is to be certified for sale and farmers were concerned that charges would be passed on to them effectively reducing further the price they were able to achieve for their meat and taking them further away from achieving an equivalence deal. IOM Meats had identified that they would not be able to offer equivalence unless they could add value to sales and part of the aim of the refurbishment work was to allow them to do this

More recently at the end of May 2016 Mr Owen was replaced by Mr Macpherson, an interim manager while a replacement is sought, and the 2015 business plan, having been reviewed, is not now considered good value for money and new options are being investigated for 2017.[39]

Equivalence would appear to remain a live issue alongside the cost to Government of supporting the Meat Plant.

5.Agricultural Development Scheme

The Isle of Man covers 141,440 acres of which just over 70%(down from about 80% in 2003) are utilised for agriculture and supported by the Agricultural Development Scheme. The statistics for the type of land use, total livestock and number and size of holdings from 2003-2016 are published[40]. The number of holdings has declined steadily down from 718 in 2003 to 381 in 2016 (although this is only a 10% reduction in land used as the significant decline has been in holdings under 50 acres). The number of livestock peaked in 2008 primarily due to an increase in sheep. In 2016 there was about 70% of the 2008 numbers of cattle, sheep, poultry and goats but only about 45% of the number of pigs.

The Countryside Care Scheme(CCS)[41]was launched in 2009 and came about following consultation[42] with a body called the Industry Advisory Committee[43] – this body was reformed in 2014 to undertake a similar role in relation to working together with DEFA on options for the future of the scheme.