Rural Affairs Secretary Richard Lochhead Speech

I am delighted to return to the Royal Highland Show today for the QMS Breakfast.

This is the premier agricultural show in these islands and its popularity with both rural and urban Scots continues to flourish.

It's the perfect showcase for the fabulous range of products that our farmers supply all year round.

The QMS breakfast always kicks of proceedings with a bang. And it's always a treat for me to start the show this way, sharing a delicious wholesome Scottish breakfast with friends.

And as we enjoy Scotland's larder, this morning gives me the opportunity to reflect on where our fantastic industry stands today and what the future holds.

A future which has great promise for Scottish agriculture, particularly given the increasing demand world-wide for high quality food.

Challenges

The sun may be shining today but we remind ourselves that no great future comes without its challenges. And what a year it's been since we last met at the Show.

The extreme weather. High input prices and volatile markets. Hall's of Broxburn. Horsemeat: all significant challenges for the industry.

But meeting such challenges is how we show our mettle. The buzz around this room shows that.

Our farmers have a fantastic track record of meeting adversity head on. The response to the extreme weather was a perfect example of different sectors working together, under real pressure, for the common good.

Resilience Scotland

In many parts of the country the heavy snowfalls created havoc, and I saw the appalling conditions in South-West Scotland at first-hand.

I left with a sense of real pride at the exceptional collective response from farmers, government, local agencies and communities. The impact was felt far and wide.

So I was determined to do what I could to help those in need, and I hope the £6 million weather aid package we put in place will provide a valuable helping-hand.

In many ways, Scotland is fortunate in that our size enables us to respond swiftly and effectively to situations and need. That's a real strength.

Not all challenges are from nature and some are man-made, and I'm delighted to see Brian Pack here this morning who is helping us respond to your pleas to reduce the paper burden of farming – the red tape.

I am delighted that Brian and his team will have a base in the Highland Hall throughout the Show to gather more views.

I would encourage people to stop by and contribute to the debate.

Your Government in Scotland listens to you and I believe our Team Scotland approach to farming and food is paying dividends.

But we need everyone to play their part.

CAP Reform

Other challenges originate elsewhere. Contrast our relationship in Scotland with where the UK Government stands on the eve of the critical CAP negotiations.

A much needed helping-hand from the next CAP is what Scottish agriculture needs.

As we stand on the eve of next week's crucial European Council, the UK Government still has the opportunity to secure a deal that works for Scotland

And maintaining livestock numbers in Scotland is essential to maintaining a red meat industry.

That's why getting a good deal on coupled support is crucial.

Brian Pack in his previous role said Scotland needed the option of 15% coupled support and most livestock producers I speak to tend to agree.

Indeed, the latest livestock figures endorse this.

In 2011, 7895 livestock producers received support for 432,000 calves, but in 2012 the figures were down to 7,401 farmers claiming for 402,000 calves.

So it's simply not good enough for Owen Paterson to start at wanting no coupling despite Scotland's views and only moving to reluctantly supporting 5% when he realises he is fighting a losing battle with other states.

I've sent Owen details of the Scottish calf scheme and the decline of livestock numbers since 2005, to help his understanding of its importance to Scotland.

That decline needs to be reversed. That is why we need the UK Government to argue hard for the same level of support as other countries and what Scotland's is seeking.

But we keep hearing different messages from them on this, and I'm worried that they still don't grasp how important coupled support is to Scotland.

David Heath, the Farming Minister, wrote to the Scottish Beef Cattle Association saying he would support coupled support, and said as much at the NFUS AGM earlier this year.

But only a few weeks ago he told a packed conference that 'coupled payments had no place in future Agriculture'. And only last week, Owen Paterson told the Scottish Parliament's Rural Affairs Committee that subsidising production leads to unwanted products.

Well if he thinks there is no market for more scotch beef he is badly misinformed! The world-wide demand for our prime beef is phenomenal!

We need to produce for these markets and help that happen until the market delivers the right returns – not just for the sake of the primary producer but the whole supply chain.

In these final stages of the negotiations we need the UK Government to go in hard so that we have the right to use the same amount of coupled support as those countries that didn't decouple back in 2005.

We need equivalent coupled support so we can reverse the decline in Scotland's breeding sectors and ensure enough prime stock to fuel our exports boom.

I don't believe the UK Government will argue in the best interests of Scotland's farmers.

Owen Paterson has raised the issue of sugar quotas in the Council of Ministers more often than Scotland's livestock sector, or any livestock sector.

Last time, I checked beef and lamb was more important to Scotland than sugar.

And I hear the UK work streams on food security keep omitting meat from their lengthy papers!

It's little wonder I am worried that his approach may put at risk Scotland's farming future.

Every industry needs to attract new blood, fresh ideas and an injection of youth.

Agriculture is no different – we must attract the next generation of livestock farmers in order to sustain a future.

I'm fully committed to giving new entrants the backing they deserve. We've taken steps, together, to make this happen, such as the establishment of the New Entrants Panel and the Forestry Commission starter farms.

New Entrant support

But I'm committed to doing more.

So today I'm pleased to announce the award of an extra £5.9m of Rural Priorities funding to support 74 new entrants and young farmer businesses.

This much needed boost will support those who need it most, and help with a range of capital projects such as new sheds, storage and building modernisations.

As well as this, we are also making available a new agricultural tenancy at Balrobert Farm, next to the Bull Stud at Knocknagael.

Once upgraded, the unit will be allocated to a New Entrant to livestock farming.

Through support measures like this I am confident that the stewardship of our rural areas will be in safe hands for years to come although I appreciate there is much more to do.

CAP Budget

I am proud to support those farmers in shaping their future.

But we need the UK Government to recognise this and make sure the final CAP agreement gets the eligibility requirements right and that the National Reserve meets our needs and is properly funded.

Every other member state is doing all it can to get the best deal for their farmers. Scotland's farmers should not miss out.

And we shouldn't be missing out on hundreds of millions of pounds of CAP support but it appears we will.

The CAP budget will play a critical role in the future of the red meat sector in Scotland.

Very shortly I will sit down with Owen Paterson to agree how the UK CAP will be allocated.

You may have seen Conservative MP Anne McIntosh's outrageous comments in the press claiming that Scotland already gets more than its fair share from the current budget.

She is the Chair of the influential Environment Select Committee in the House of Commons. That's worrying.

Scotland deserves a fair and equitable split under both Pillars and I have not met one single farmer or crofter in Scotland who would disagree with that.

If the UK Government steps up to the plate then we may have the tools to deliver the type of support Scottish agriculture requires. But I am also keen to support the industry in other ways.

Red Meat

QMS estimate that the Scotch premium is worth an extra £17-19m per year to beef and lamb producers.

That's why back in February we provided an extra £1m to QMS to increase their market presence and seek to develop new markets, both home and abroad.

It's vital that we retain that premium and the competitive edge we have over our competitors.

And if we can rise to the low carbon farming challenge, I believe that would further cement our place as the world's leading beef brand.

Red Meat Levy

So QMS continue to do an excellent job promoting the brand.

But think about how much more could be done if all the levy money paid by our producers was available to QMS.

That's £1.4m per annum, currently lost from Scotland's red meat sector.

No one should dispute that levy money for animals raised in Scotland must stay in Scotland.

No one, except those who benefit from the current flawed arrangements.

I have challenged UK Ministers on this issue many times. And earlier this month I gave Owen Paterson a challenge.

When he comes to the show tomorrow I want him to finally do the right thing and distribute levy income according to place of origin.

Let me be clear: this is not about political-points scoring. This is about fairness. Fairness to our hard working producers who do not see the full fruits of their labour.

Exports

Labour that should present increased opportunities. Opportunities to target those lucrative markets. But, like many things, our opportunities in those markets are at the behest of others with different priorities.

Priorities that do not target those countries around the world like Japan that along with Jim McLaren I visited last November – a country crying out for Scotch beef and lamb.

We need to get in there quickly, as the French, Italians, and Irish have.

Their Governments' have secured a toehold in Japan, and there is no reason why the UK Government cannot do the same. But I was told by the UK Consul in Japan it's not a UK priority.

However, it's no good opening new markets if we do not have the additional product available to capture market share.

Matching demand with future supply is the key challenge facing our red meat industry.

Livestock Prices

Cattle and pig prices are at record levels, with sheep prices not far behind. At retail level while volumes are down red meat prices are also on the up.

But the real issue is what is happening to your profitability as input costs also continue to climb.

The scarcity of well finished stock is creating real pressure on margins throughout the supply chain.

Our processors are a vital part of the supply chain infrastructure and I am acutely aware of the difficult commercial environment they operate in.

As you know, scarcity of stock has had other consequences, like when the more unscrupulous manufacturers in Europe turned to substitution and fraud.

Horsemeat Scandal

Fortunately the horse meat scandal made consumers more conscious of the origin of the meat they buy.

That was a godsend which we should grasp with both hands.

I've already commissioned two reports – one from James Withers looking at the approach to provenance on supermarket shelves, and one from Ray Jones on the opportunities created by the headlines about horse meat.

Post Horse Meat

The supermarket audit work will provide a snapshot of the use of the Scotch brand right across red meat lines carried by all the major retailers.

Wouldn't it be wonderful if our retailers threwheir full support behind the scotch label and worked with us to maximise the demand for top quality red meat.

Customers want quality red meat. Scotland matches all their expectations.

There is a fantastic opportunity now for supermarkets to put their money where their mouth is by giving a long term commitment to Scotland's food and drink.

Both Ray and James' reports will be on my desk by the end of this month. I'm confident that they will offer a fresh perspective for the future.

These reports will help shape how the Scottish Government, QMS and the supply chain work together to support the scotch label.

There can be little doubt in this room that with the right support the red meat sector in Scotland has a bright future.

In my opening remarks I mentioned the future.

With ever growing demand for beef, lamb and pork at local, national and international level the Scottish supply chain can look forward with real confidence.

The future too for the Highland Show, Scottish agriculture and indeed Scotland as a nation holds great promise.

Constitutional seminar

Tomorrow morning, as you may have heard, I will outline why next year's referendum will offer our farming, food and wider rural communities fresh opportunities and a new, brighter future.

A rural Scotland full of ambition and opportunity.

I hope many of you can join me.

Friends, it has been a hard year. A year of many challenges. But working together, we have shared our resources and our ideas. We have shaped our destiny.

The future gives us great hope. Yes, there are challenges, not least of which is the negotiation of the CAP.

But what a future we will have. New entrants bringing vibrancy to farming. New markets opening up for us. And new opportunities at home with an emphasis on provenance and quality.

There is a lot to be excited about for Scottish farming, and for Scotland.

Thank you for listening and enjoy the Show.