Dan Buglass: Farmers hope for a glass of cheer

Published on Friday 26 June 2009 21:48

MALTING barley is Scotland's most important cereal crop with demand normally in the region of 500,000 tonnes annually.

However, the economics of growing barley are distinctly questionable, according John Picken, the chairman of NFU Scotland's combinable crops committee.

Picken delivered his warning as he spoke yesterday at a seminar during the second day of the Royal Highland Show,

He said: "Following last year's difficult harvest there has been a considerable reduction in the area of winter cereals planted and a corresponding increase of spring barley.

"That will place further strain on the market at a time when demand is likely to slacken."

Picken added: "Then, of course, we have had to cope with vastly increased input costs, especially for fertiliser, fuel and chemicals but we hope the buyers will recognise this and reward us accordingly."

Gavin Hewitt, the chief executive of the Scotch Whisky Association (SWA) did not hold any prospects of higher prices for farmers.

He said: "I wish we had a crystal ball and was able to predict how the market will develop, but a growing dialogue is fundamental to both our industries.

"Exports of whisky have slowed as a result of the recession, but if we look ahead over the next decade then the long-term trends are positive."

He added: "Exports of whisky have been worth in excess of 3.1 billion into over 200 markets. That represents 80 per cent of Scotland's food and drink exports and 25 per cent of the UK's trade in the same commodities. Whisky is an international product."

New markets are emerging with China and India appearing particularly attractive.

Exports of whisky to China just a decade ago were worth 1 million: now the comparable figure is closer to 80 million.

However, the potential, according to Hewitt, is enormous.

He explained: "There is one city in China with a population equivalent to Scotland, but not a single drop of whisky has ever been sold. That is the type of markets we have to seek out."

Cracking the Indian nut may be more difficult. Ten years ago Delhi set an import tariff of 700 per cent.

That has now fallen to 150 per cent, but the SWA still reckons that whisky is "largely unaffordable" to most of that country's one billion consumers.

Poland is another outlet which is proving rewarding with sales rising by 350 per cent since that country became a full member of the EU, there are also major opportunities elsewhere in Eastern Europe where there is a swing away from white spirits.

That sounds positive, but Picken made it clear that farmers who grow malting barley need to have secure contracts – not just for one year, but on a longer-term basis. Some farmers, especially in the more marginal areas, might actually be better off by leaving land fallow.

Farmers, just like most businesses, are simply not prepared to produce and then speculate because they have at last come to realise that they are relatively weak sellers, unless they co-operate and gather market strength.

The SWA, whose members also use around 500,000 tonnes of wheat from Scottish farms, is growing increasingly concerned that the proposals being aired by the Scottish government to impose a minimum price on each unit of alcohol. Pubs are closing at the rate of 35 a week throughout the UK, but Hewitt believes that Holyrood needs to think again before introducing legislation, which in event may be in breach of EU competition regulations.

He said: "Duty accounts for 80 per cent of the price of a bottle of whisky, but if we have new laws specific to Scotland, consumption might well fall by 25 per cent, or more."