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FMD Review (Scotland) 2007

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Chapter 2
Scottish Trade, Livestock and Meat Industries

KEY FINDINGS

2.1 The analyses of the industry structure, animal movements into, out of and within Scotland and the trade patterns for red meat and meat products provides an overview of the Scottish industry and indicates that:

  • GB remains a single epidemiological unit with the potential for rapid spread of FMD through the extensive movements of livestock especially sheep;
  • the food supply chain in GB relies on unrestricted movements of animals and their products;
  • Scottish sales of both livestock and products to the domestic market in England and Wales are economically more significant than exports;
  • in terms of primary products and further processing Scotland is an integral part of the UK economy;
  • the current arrangements with respect to lamb processing reflects an efficient market response to the economics of food processing;
  • apart from producers, the remainder of those involved in the GB food supply chain often operate integrated systems with centralised processing and packaging and dispatch from a single centralised distribution centre.

2.2 Based on these findings the option of separate regional status for Scotland in the event of an FMD outbreak must be evaluated with considerable caution. The potential impact of regionalisation could be detrimental to Scotland in a number of ways:

  • due to slaughtering and processing capacity in Scotland the gains could be limited in practice as a proportion of Scottish animals (especially sheep) are moved either as store animals or for slaughter in England or Wales each year. Sheep and cattle are also moved to Scotland for slaughter;
  • further processing of a proportion of Scottish primary produce occurs elsewhere in the UK which means that it might still be affected by an English export ban. In that case the market effect would still extend to Scottish producers even if Scotland was permitted to export;
  • retail supply problems could occur in Scotland due to the structure of the long supply chains which in the event of an English export ban could lead to problems even if the raw materials had originated in Scotland.

2.3 An analysis of the seasonal and spatial livestock movements provides invaluable information which can be deployed pre-outbreak to ensure risk based and proportionate measures are implemented in the event of an FMD outbreak.

INTRODUCTION

2.4 One of the key aspects in responding to FMD and other major livestock disease outbreaks is knowledge and understanding of:

  • the structure of Scottish livestock industries;
  • the livestock movements that take place as part of the normal operations of the industry;
  • the risks for disease transmission associated with the organisational structure and movement of the industry;
  • the potential economic impact of the disease and its control.

2.5 In order to explore these issues a number of studies were commissioned by the Scottish Government as part of this review. The objectives of the studies were:

  • to collate and analyse data and information from a diverse range of sources and to describe the livestock and meat industry structure and operations in Scotland;
  • to provide an accurate analysis and representation of livestock movements within each livestock sector in Scotland using data from animal movement tracing systems and expert knowledge;
  • to carry out analyses that identify geographical, temporal and sectoral risk areas in terms of disease transmission of imposing and lifting livestock movements controls respectively (discussed in Chapter 5);
  • to carry out analyses that identify the economic impact of the movement restrictions associated with the FMD outbreak of 2007.

2.6 As a result of the commissioned work a number of separate reports have been produced. Relevant information from each is included in this review where appropriate and Appendix 4 contains specific details extracted from the reports. Each of the commissioned reports will provide detailed and comprehensive information on specific topics of relevance to the development and implementation of future FMD strategies. The reports also act as reference documents for the future and if updated regularly would become a valuable source of information to enable FMD control strategies to be based on the best scientific and economic information.

2.7 The different analyses are focused on FMD but will serve as useful background for livestock disease control policy development and implementation for a range of diseases currently faced by industry and government.

STRUCTURE OF SCOTTISH LIVESTOCK AND MEAT INDUSTRIES

Introduction

2.8 The Scottish Agricultural College report "The Structure of the Scottish Livestock Industry" ( SAC report 2008) describes the size of the livestock sector along with detail on individual sectors, and how they link to the wider supply chain. The report describes the capacity within Scotland to slaughter, cut and process livestock and livestock products, together with an assessment of the extent to which the industry is dependent on capacity and trade with the rest of the UK.

2.9 A report on seasonality of movements and spatial distribution of sheep, cattle and pigs in Scotland was produced by the Centre of Excellence in Epidemiology, Population Health and Infectious Disease Control ( EPIC report 2008). Both reports provide details of livestock movements into, out of and within Scotland. Changing patterns in the industry over time are noted.

Livestock industry

2.10 The SAC report demonstrates the importance of livestock to the Scottish agricultural sector where it contributed 53% of the total output which was worth £1.916 billion in 2006. Nearly a third of the livestock output came from finished cattle, finished sheep and pigs in 2006 with dairy products generating a further £245 million. See Appendix 4.1 for further details.

2.11 The SAC report describes the distribution of the main farm types within each parish across Scotland. A detailed map is in Appendix 4.2. Cattle and sheep production dominates in the Highlands and Islands with dairying dominating in the South West. Many of the farms in the North East are mixed and will often have crops and livestock. Many of the livestock finishers are located in the North East. This information is valuable in determining risk of disease and potential spread as well as the likely impact of controls.

2.12 Scottish livestock numbers are shown in the table below which also shows the changes in numbers between 1997 and 2007. Full details of the livestock numbers and the trends within the cattle, sheep and pig industries are contained in the SAC and EPIC reports.

Table 1
Scottish livestock numbers for selected years 1997 to 2007

1997

2001

2004

2007

Breeding Dairy Cows

216,800

195,950

194,540

197,970

Breeding Beef Cows

513,750

489,070

492,870

471,610

Breeding Ewes

3,810,350

3,277,170

3,179,430

2,916,680

Breeding Pigs

69,650

61,270

48,830

40,150

Total cattle

2,078,900

1,905,320

1,949,730

1,897,180

Total sheep

9,563,190

8,109,890

7,982,300

7,490,700

Total pigs

644,890

596,460

469,700

456,750

Source: SAC (2008). Structure of the Scottish Livestock Industry.

2.13 Data on spatial distributions of the three major livestock species in Scotland were derived from June 2007 Agriculture Census of Scotland by EPIC. This was mapped as the live animal densities calculated at a parish level. The density maps for each species produced by EPIC are at Appendix 4.3 to 4.6. This information is valuable as it enables the potential impact of FMD to be assessed as well as assessing the possible spread and identifying risk areas.

Structure of the meat industry

2.14 The SAC report provides details of the location of cutting plants and slaughterhouses in Scotland. This was derived from the list of approved slaughterhouses, farm slaughter facilities, game handling establishments and cutting plants available on the Food Standards Agency website. There are 38 slaughterhouses in Scotland with eight located on the Scottish Islands. All but three of the slaughterhouses are licensed to slaughter cattle with 29 licensed to slaughter sheep. 24 are registered to slaughter pigs but in reality the majority of pigs are slaughtered in very few units. There are 83 registered cutting plants located throughout Scotland. Details on the throughput of the slaughterhouses were not available in the report due to confidentiality restrictions. This information would be most useful in the FMD context to Scottish Government in order to provide information on haulage distances, drivers' hours, impact of single pickups and reliance on imported livestock.

THE SUPPLY CHAIN FOR MEAT AND MEAT PRODUCTS IN GB

2.15 Modern supply chains are complex involving producers, processors, wholesalers and retailers throughout the UK. The supply chains move thousands of products around the country on a just-in-time basis which requires extensive organisation and planning to be successful. Any disruption to the supply chains such as the implementation of a national movement ban or controls on the movements of products between different parts of the UK can rapidly cause major problems with deliveries to retail outlets.

Detail on trade flows in the red meat sector

2.16 A report by DTZ on Scottish Primary Food and Drink Processed in Scotland ( DTZ 2007) provides more detail on the supply chains for beef, lamb, pig meat and milk. The table below summarises information on the extent to which individual livestock sectors are dependent on processing outside Scotland.

Table 2
Percentage of livestock processed in abattoirs in and outside Scotland

Livestock Sector

% sent to abattoirs
in Scotland

% to abattoirs
outside Scotland

Beef Cattle

95%

5%

Lamb

45%

55%

Pigs

85%

15%


Source: DTZ. Scottish Primary Food and Drink Processed in Scotland (Scottish Government 2007).

http://www.scotland.gov.uk/Publications/2007/08/29111522/0

Beef

2.17 Between July 2006 and June 2007 a total of 488,268 clean cattle were slaughtered in Scottish slaughterhouses. In addition at least 10% or 46,801 beef animals slaughtered in Scotland originated from England and Wales of which 51% originated direct from farms and 47% arrived via markets ( SAC 2008). Of the Scottish beef slaughtered in England and Wales all came from the mainland and 73% moved direct from farm to slaughterhouse and 22% were sold via markets.

2.18 Low levels of mature cows and bulls were slaughtered in Scotland as few processors in Scotland will accept cull cattle with the result they are exported live for slaughter with re-importation of products in some cases. Scottish abattoirs slaughter almost all cattle reared in Scotland. The small number exported is more than outweighed by imports from the rest of UK and Ireland. Whilst significant investment in processing facilities in Scotland has taken place much Scottish-slaughtered beef is still further processed outside Scotland.

Figure 1
Processing of beef cattle

Figure 1

Source: DTZ. Scottish Primary Food and Drink Processed in Scotland (Scottish Government 2007).
http://www.scotland.gov.uk/Publications/2007/08/29111522/5

Lamb

2.19 A total of 1,409,260 clean sheep were slaughtered in Scotland between July 2006 and June 2007 ( SAC 2008). The level of Scottish produce processed in Scotland is medium with Scottish abattoirs slaughtering around 45% of Scottish lamb. There is a significant outflow to England and Wales. This is partly due to lack of capacity but is also linked to economies of scale and the proximity to the consumer who is mainly in England. The trade is dominated by a small number of players. Further processing of Scottish-slaughtered lamb is limited with little economic incentive for further processing, except alongside other Scottish meats. The DTZ report explains that there are good reasons for the level of processing not being high in the lamb sectors which is largely due to economies of scale that cannot be gained in Scotland. The current situation is an efficient market response to the economics of food processing.

2.20 Between July 2006 and June 2007 84% of the sheep slaughtered in mainland Scotland originated from the mainland with 15% coming from England and Wales. Some Scottish producers import English lamb to maintain their throughput close to capacity during the season. The SAC report also highlights the low levels of ewes and rams slaughtered in Scotland. The majority of mature sheep are slaughtered in England and Wales as there is a large ethnic market for mature sheep in England.

Figure 2
Processing of Lamb

Figure 2

Source: DTZ. Scottish Primary Food and Drink Processed in Scotland (Scottish Government 2007).
http://www.scotland.gov.uk/Publications/2007/08/29111522/5

Pigs

2.21 A total of 735,718 clean pigs were slaughtered in Scotland between July 2006 and June 2007 ( SAC 2008). For pigs, the level of Scottish produce processed in Scotland is high. Dominance of a single abattoir/processor means that little Scottish pig meat is available for other processors, limiting their ability to grow Scottish branded products. Cull sows are slaughtered at one of two specialised premises in England.

Figure 3
Processing of Pigs

Figure 3

Source: DTZ. Scottish Primary Food and Drink Processed in Scotland (Scottish Government 2007).
http://www.scotland.gov.uk/Publications/2007/08/29111522/5

Dairy

2.22 Scotland is self-sufficient in liquid milk and all of it is processed in Scotland. There is a threat of continuing decline in the number of producers. There is a concentration of dairying in the South West of Scotland. This proximity to the English border means that there is much movement of agricultural outputs between Scotland and England. There is a lack of differentiated and high-value niche cheese products that rely specifically on Scottish milk.

Scottish processed meats

2.23 The Quality Meat Scotland ( QMS) report "The Scottish Red Meat Industry Profile (2006)" ( QMS 2007) indicated that the turnover of the primary processing sector in Scotland was around £725 million in 2006. The report indicates that in 2006 the most important market place for Scottish red meat was England and Wales. Almost two-thirds of beef, 45% of sheep meat and three-quarters of the pig meat leaving Scottish primary processors is sold into the UK market outside Scotland.

Table 3
Distribution of Scottish red meat sales in 2006

Commodity

Scotland

Rest of UK

Exports

Beef

£168m

£320m

£12m

Sheep Meat

£29m

£40m

£20m

Pig Meat

£34m

£100m

neg

Total

£231

£460m

£32m

Source: QMS (2007). The Scottish Red Meat Industry Profile (2006).
http://www.qmscotland.co.uk/analysis/info/documents.php?year=2007&month=all

2.24 Interestingly although Scottish consumers eat more beef than their English and Welsh counterparts, approximately 70% of Scottish beef production, by value, is sold outside Scotland. The DTZ report concluded that "The broad picture is of total primary produce sales of £3billion, of which 26% are sold to the Scottish processing sector, 24% sold directly to Scottish households and 18% to other primary producers. A further 26% go to non-domestic purchasers, reflecting the fact that Scotland is an integral part of the UK economy".

Market outlets for Scottish products

2.25 The QMS report (2007) identifies the importance of the multiple retailers which along with the independent retailers account for 76% of beef products, 77% of sheep products and 84% of pig meat products. The details are shown in the table below:

Table 4
Distribution of Scottish red meat sales by market outlet in 2006

Outlet

Beef

Sheep Meat

Pig meat

Multiple retailers

57%

62%

69%

Independent retailers

19%

15%

15%

Retail wholesalers

8%

16%

10%

Food Processors

11%

3%

1%

Food Services

4%

3%

5%

Source: QMS (2007). The Scottish Red Meat Industry Profile (2006).
http://www.qmscotland.co.uk/analysis/info/documents.php?year=2007&month=all

2.26 In most cases the multiple retailers will source the vast majority of their meat and meat preparations from UK farmers. Centralised processing and packaging is common. This can mean for example that 10 to 20% of the beef and lamb imported into Scotland may originate from Scotland but pass through intermediaries throughout England and Wales which are located from Kent to South Wales and Cornwall to Yorkshire. The multiple retailers will often have a single main distribution centre which can be based anywhere in GB. Products from the centralised packaging units may move to the distribution centre in one of the GB countries for subsequent dispatch throughout the UK and for export.

2.27 During FMD in 2007 the retailers were just about able to withstand the delays in supply but if the ban on movements to slaughter had lasted for more than 1 week in total they may have needed to look for alternative supplies. In the event of Scotland being regionalised at the border it is likely with the volume of trade and the number of movements involved that any certification and audit trail would be impossible to operate and some companies would choose not to send products into Scotland.

LIVESTOCK MOVEMENTS

Introduction

2.28 Livestock movements into, out of and within Scotland are analysed in detail in the EPIC and SAC reports. The two reports complement each other and draw on information from the various animal movement tracing systems. Both reports provide an analysis and breakdown of livestock movements using a combination of tables, graphs and maps to demonstrate the spatial, temporal and sectoral types of movements.

2.29 The information provided can be used to answer three questions in the event of an FMD outbreak:

  • What are the movements, into, out of and within Scotland?
  • When do they occur?
  • What happens if they are stopped based on seasonality, numbers and destinations?

Livestock movements

2.30 The EPIC report describes seasonal patterns of livestock movements in Scotland from 2003 to 2007. The spatial distribution of livestock in Scotland as available from the June 2007 Agriculture Census of Scotland is also described. The report provides a consistent representation of seasonal variations in livestock movements onto and off the four Scottish Island archipelagos from and to the rest of Scotland, and cross-border between Scotland and England and Wales.

2.31 Details of monthly movements of livestock out of and on to each of the 891 parishes in Scotland from July 2006 to June 2007 are contained in the EPIC report. Movements are also categorised by origin and destination e.g. farm to slaughterhouse, farm to market to slaughterhouse etc. A full list of movement categories is shown in Table 1 of the EPIC report. Numerous tables, graphs and maps are provided which illustrate the various categories of livestock movements which are not for slaughter within, into and out of Scotland. (Appendix 4.7 to 4.9). Similar tables are provided for the movement of animals to slaughterhouses. Detailed information of movements into and out of the Scottish Islands is also provided (Appendix 4.10 to 4.11). In some cases not only are the numbers of livestock moved recorded but also the number of batches which would be useful information when trying to assess the impact of movement controls on drivers' hours.

2.32 To give some indications of the extent of sheep movements Table 5 provides an overall summary of the numbers of live sheep and those for slaughter moved from Scotland to the rest of GB and vice versa. The origins of the sheep, whether on mainland Scotland, the Islands or the rest of GB is indicated. The destination of live sheep movements from the rest of GB to Scotland is also indicated. The table does not include the movements of live sheep within mainland Scotland and the Islands which are not for slaughter within one month.

Table 5

Numbers of Sheep movements July 2006 to June 2007

Movement type

Mainland

Inner Hebrides

Orkney

Shetland

W. Isles

GB
crossborder

No and origin of live Scottish sheep movements to rest of GB

1,009,285

14,231

7,724

159

5,305

No and destination of live sheep movements from the rest of GB to Scotland

123,710

27

83

6

6

No and origin of Scottish sheep slaughtered in rest of GB

961,079

5,657

308

1,648

481

No and origin of sheep slaughtered in mainland Scotland

1,169,807

7,306

7,935

4,070

186

205,447

Source: SAC (2008). Structure of the Scottish Livestock Industry.

2.33 During the same period the SAC report indicates there were 2,387,855 movements of live sheep (those not ending up for slaughter within the month) onto Scottish parishes from within Scotland. The importance of cross border movements is reflected in the one million live sheep moved into England and Wales which highlights how important the store lamb trade is to Scottish producers.

2.34 The impact of the movement restrictions was greatest in the sheep sector with its reliance on export markets and the peak time for store sales. Data from the EPIC report indicates that the majority of sales occur during the September to November period and that a proportion of the store animals are moved to England and Wales for finishing.

2.35 To give some indication of the extent of beef cattle movements Table 6 provides an overall summary of the numbers of live beef cattle and those for slaughter moved from Scotland to the rest of GB and vice versa. The origins of the beef cattle whether on mainland Scotland, the Islands or the rest of GB is indicated. The destination of live beef cattle movements from the rest of GB to Scotland is also indicated.

Table 6
Beef Cattle movements July 2006 to June 2007

Movement type

Mainland

Inner Hebrides

Orkney

Shetland

W. Isles

GBcrossborder

No and origin of live Scottish beef cattle movements to rest of GB

27,187

407

124

20

9

No and destination of live Scottish beef cattle movements from the rest of GB to Scotland

35,415

207

37

4

1

No and origin of Scottish beef cattle slaughtered in rest of GB

11,758

13

36

5

3

No and origin of beef cattle slaughtered in mainland Scotland

420,557

3,948

3,726

145

134

46,801

Source: SAC (2008). Structure of the Scottish Livestock Industry.

2.36 The impact of movement restrictions in the beef sector was limited due to the relative speed with which movements to slaughter were permitted. The movement of cull cattle was most affected due to the greater reliance on the export market. In the case of store cattle movement restrictions caused delays and market throughput was reduced due to closure of the auction markets.

Dairy cattle movements July 2006 to June 2007

2.37 There were only 7,357 live dairy cattle movements from Scotland to the rest of GB but 38,561 dairy cattle moved across the border into Scotland. In terms of slaughter nearly 6,000 Scottish dairy cattle were slaughtered in England and Wales with 5,393 dairy cattle originating from the rest of GB slaughtered in Scotland.

Pig movements July 2006 to June 2007

2.38 Only 2,287 live pig movements occurred from the rest of GB onto Scottish pig farms although 123,468 pigs were moved from Scotland to farms in England and Wales. This has implications for the pig industry for finishing if cross border movement restrictions were implemented. The Scottish pig industry is self contained with only 538 pigs coming from the rest of GB to Scotland for slaughter and 42,464 Scottish pigs slaughtered in England and Wales most of which are cull sows.

2.39 The impact of the movement restrictions on the pig industry would be limited to the breeding and finishing sectors. Movements to slaughter were permitted relatively quickly although there appeared to be action by the multiple retailers to source pig meat from overseas in the first week due to lack of information over when movements to slaughter would restart. Farm to farm movements are important with over 829,843 live movements off Scottish parishes. This reflects the structure of the pig industry with the movement of young pigs from breeding units to finishing units. Cull sows were a problem as the majority would normally be slaughtered in England for the export market which did not exist until the export ban on meat was lifted.

ECONOMIC IMPACT OF THE 2007 FMD OUTBREAK

2.40 A separate report was commissioned to assess the economic impact of the 2007 FMD outbreak (Economic Report 2008). The objective of this review, however, is not to comment on the costs of the outbreak but to identify the factors which contribute to the economic impact and to make recommendations on the way in which the impact could be minimised in the event of a future FMD outbreak.

2.41 The control measures introduced to prevent the potential spread of FMD impose additional economic burdens on the livestock sector and on allied parts of the agri-food supply chain. These result from:

  • the export ban imposed on susceptible animals and their products which are considered to be risk;
  • domestic restrictions on movements;
  • additional control measures to prevent the spread of disease.

2.42 The additional burdens resulting from these control measures fall into three categories as follows:

  • market effects due to disruption of the demand and supply balance largely due to the diversion of supply to the domestic market as a result of the export ban;
  • withholding costs which arise from the retention of livestock beyond their intended movement off-site and the consequent value changes along with the additional management and feed costs;
  • enhanced biosecurity costs due to the disinfection requirements for vehicles, and higher costs of haulage with the single pickup requirements.

2.43 Losses can also be identified beyond the farm level at auction marts, at slaughterhouses and in the haulage industry and can also fall into the three categories listed above.

2.44 The Economic Report concludes that any action which lowered the withholding costs or reduced the losses from handling livestock would reduce the magnitude and pattern of impacts. An absence of the national movement ban would have avoided most of the withholding costs but was not acceptable as it could have resulted in disease spread. A more rapid relaxation of the movement ban would have lowered withholding costs. It is estimated in the Economic Report that lifting all restrictions a week earlier or allowing multiple pickups a week earlier could have had an impact in reducing the costs.

2.45 The Economic Report considers that one option would be to treat the Scottish Islands as separate from the mainland, such that movements within and from Islands could have been exempted from movement restrictions. This would have avoided withholding costs over the course of the total period considered. Taking this approach would require confidence in the tracing of movements and surveillance on the Islands which with the information available in the reports from EPIC is more feasible now than it was in 2007. Based on the comprehensive information now available on movements into, out of and within the Scottish parishes it may also be possible in future to consider exempting other areas of Scotland such as the Scottish Highlands from the prolonged movement restrictions.

2.46 The main effects were due to the export ban and if this could be avoided the market effects would be much less. To achieve this Scotland would have needed to be treated differently from England and Wales. However, the Economic Report highlights three main reasons why considering this approach should be treated with caution and why measures to avoid costs in a future outbreak would be better focused on flexibility in movement restrictions rather than on achieving separate regional status for Scotland:

  • "due to local capacity constraints at specific times of year a proportion of Scottish animals - most notably sheep are slaughtered in England and Wales and the gains would be limited in practice;
  • even if disruption to the export of primary produce could be avoided, a proportion of Scottish primary produce undergoes some form of further processing elsewhere in the UK. This means that it might still be caught by an English export ban and therefore the market effect would still extend to Scottish producers;
  • due to the configuration of supply-chains, an English export ban might lead to retail supply problems in Scotland - even if the raw materials had originated in Scotland".

2.47 The Economic Report concludes that "fuller consideration of the costs and benefits of alternative control strategies would require further information on current supply-chain configurations and net cross-border trade flows of primary, intermediate and final processed products, probably within a formal modeling framework rather than the partial and static analysis presented in the paper".