Scottish Government

3.8. Organic arable sector

Demand for organic grain continues to rise in the UK, and in response farmers have increased production. Consequently, organic arable production grew by over 9% from 44,413 ha in April 2003 to 48,494 ha in April 2004 and by a further 7% to 52,234 ha in January 2005 (Defra 2005). Currently, 3% of Scotland's fully certified organic land, or 9,363 ha, is recorded as being under arable production.

The 2004 harvest produced nearly 15,000 tonnes of assorted arable crops (see figure 3.9.) a third of which was retained for home use. Oats accounted for over a third of Scotland's arable production at 5,000 tonnes. It is estimated that 1,300 tonnes were retained by the producers mainly for use as feed. In addition to the oats, approximately 7,500 tonnes of arable crops were grown for animal feed, a large percentage of which was retained for home use ¹⁹.

It is clear that Scottish arable production is focussed on the production of feed, which in conjunction with the data presented in sections 3.1 and 3.2 highlights the importance of livestock in the Scottish organic supply network.

Source: OML Project ¹⁹

In addition to animal feed, 1,300 tonnes of milling wheat and 750 tonnes of malting barley was also produced in 2004.

3.8.1. Survey results - volumes and markets

The survey elicited 77 responses from producers who are involved in arable production, growing an average of two different crops. The most commonly grown crops are oats and feed barley. For the year July 2004 to June 2005 the respondents account for a total of 11,192 tonnes of assorted arable crops (see figure 3.10.). Of this total, nearly 10,000 tonnes is organic grain, with the remainder being made up of beans and pulses.

Table 3.7. Number of producers involved in arable production - By crop type

Feed wheat and feed barley accounts for nearly 47% of the respondents predicted production, 2,729 tonnes and 2,507 tonnes respectively. Respondents predicted that a further 2,559 tonnes of oats would be produced in harvest 2005.

3.8.2. Organic arable seeds

Of the 77 producers from the sample engaged in arable production, 68 provided details of what variety of seed they use and where it was sourced, accounting for 78% of the reported total arable production.

In total, 68 different seed varieties were grown. Feed wheat and feed barley production is the most diverse with producers growing 12 and 13 different varieties respectively. Relatively, oats showed the lowest level of diversity with 69% of the respondents growing the same variety - Firth.

Figure 3.11. illustrates that the majority of the respondent's production is grown from home saved seeds. As a percentage of production, home saved seeds account for 55%, seeds sourced from merchants in Scotland 33% and seeds sourced from England 12%. Only one producer sourced seeds from outside of the UK, representing less than 0.3% of total arable production.

3.8.3. Market outlets

It is apparent that producers are increasingly retaining arable crops to feed their own livestock. The survey suggests that 50% is now being retained for home use, which is an increase from 32% ¹⁹ in the previous year. Of the 77 producers from the, only 31 provided information regarding their market outlets when the crops were not retained for home use, accounting for 3,315 tonnes of arable crops. Table 3.8. illustrates which market outlets were used by the respondents.

Table 3.8. Percentage of arable producers using different market outlets - by crop category

Figure 3.12. illustrates the percentage of the total reported arable production (all crop categories) marketed through different channels. It is clear that the majority of production is destined to become animal feed with 31% going to feed merchants and a further 16% being sold direct to other producers for use as feed. In addition, 14% is sold to 'other' merchants, at least half of which is used as feed and 7% is grown under contract, also for feed.

Only 23% of arable production is definitely grown for human consumption. The vast majority of this consists of oats but a small percentage is malting barley destined for breweries. The remaining 9% of the arable production is delivered to seed merchants.

Once the arable products are delivered to the various merchants, it is unclear where they are marketed as both merchants and processors were reluctant to divulge marketing strategies and policies. However, a certain amount of information regarding the value of the market for organic bread, biscuits, cereals and brewing was collected.

In total, 7 processors involved in the processing of grain responded to the survey and they produced £7,539,937 worth of goods. Bakery products accounted for 3%, milling a further 4% and biscuits 93% of the total value. No information regarding the amount (tonnes) or origin of grain used in production was provided.

The majority (54%) of these products are sold through the multiple retailers, with a further 33% going to wholesalers. From wholesalers, the products are likely to go on to other multiple and independent retailers. Exports account for nearly 11% of the value highlighting the international demand for Scottish shortbread and oatcakes. Direct sales account for less than 0.5% of the final value with farmers markets being the most popular direct sales method.

As with the other sectors, little detail regarding the source of raw ingredients was provided making it very difficult to comment on the penetration of Scottish arable products into this market. However, from the telephone interview survey it is clear that sourcing enough Scottish grain is a problem, with the vast majority of grain coming from England and the EU with a small amount coming from as far away as South America. However, the Organic Market Link project ¹⁹ recently reported that Mornflake have launched a new product called 'Oats to go' using only Scottish oats.

The organic alcohol sector is continuing to develop with some areas developing more strongly than others. Only one Scottish brewery responded to the survey. They are now supplying only one wholesaler with their organic beer after unsuccessfully marketing three of their beers through one of the multiple retailers.

The majority of the ingredients used in the production of organic ales are grown outside of Scotland. The UK organic hop supply is a long way short of demand, so organic hops are imported from the EU or New Zealand. In some cases brewers have to apply for derogations to use non-organic hops, as they cannot get supplies of the organically grown varieties that they need for their flavour. The malting barley that is grown in Scotland has to be transported to Warminster in England for malting. Subsequently, it gets mixed in with organic malting barley grown elsewhere in the UK making it impossible for Scottish brewers to be sure they are using Scottish ingredients in their produce.

3.8.4. Market penetration

It is clear that animal feed production dominates Scotland's arable production. Based on the SAC predictions for livestock production for 2005 and the survey results, it has been calculated that Scotland's organic livestock consume approximately 13,000 tonnes of arable crops per year. This is considerably more than the 8,700 tonnes of arable crops grown in Scotland for animal feed resulting in a shortfall of over 4,000 tonnes. Therefore, current production has potential to meet approximately two thirds of demand resulting in a market penetration of 66%.

However, due to a lack of facilities in Scotland, a large percentage of the grain sold to English merchants is transported to England for processing into feed. Without physically following the grain through this process, it is very nearly impossible to discover whether Scottish organic grain is returned to Scotland for use. Therefore, bearing in mind that approximately a third of organic animal feed is retained for home use and approximately 30% of the feed wheat and 70% of the feed barley is traded directly with other producers, market penetration for arable crops used as livestock feed currently stands at approximately 50%.

Whilst market penetration figures for livestock feed and arable seeds provide an insight into the organic agricultural inputs sector, they will not form part of the overall market penetration figure for Scotland. This is because the Scottish Executive target that this project is concerned with relates only to Scottish consumer demand for organic products, which can be sourced in Scotland.

Arable crops grown for human consumption are traded on a UK basis and whilst some processors source Scottish grain wherever possible, it is clear that the infrastructure is not in place to make this happen. Subsequently, whilst it is feasible that domestic production could meet as much as 70% of domestic demand, it is not known if this is happening in Scotland. An estimate based on the processor survey would put penetration as low as 30%.

It is clear that if the market penetration level of indigenous organic arable products is to increase for both animal feed and human consumption infrastructural developments are necessary.

3.8.5. Summary

• Scotland's organic arable sector is dominated by the production of livestock feed accounting for more than 50% of arable production;
• Market penetration for arable crops used as livestock feed currently stands at approximately 50%;
• Market penetration for arable crops used for human consumption is estimated to be as low as 30%.