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How rural economies can adapt to key external drivers

Work Package 2.4 - Rural industries

Research Deliverable 
2.4.2 How rural economies can adapt to key external drivers
Leading Ideas 
Agriculture
Land and Communities
Rural Economy

Introduction

This research addresses how policy influences recent and anticipated adaptive responses of land based and other rural industries to drivers such as environmental change, market trends and volatility, technology and institutional innovation.  This analysis complements that of RD2.4.1 Resilience of rural economies to key external drivers, but emphasises the importance improving our understanding of how policy facilitates or blocks processes of change.  The research examines processes of innovation uptake, diversification and collaborative action and their role in agricultural household adjustment.  In aggregate, the research characterises the changes for key segments of the agriculture sector (e.g. farms and crofts of different scale and tenure, commodities and supply chains, geographical regions).

Drivers of particular significance are the move of agricultural support away from historic towards regional payments between 2015 and 2019.  This led to significant redistribution of support payments within the industry (and regions), with those farmers that were historically intensive being hardest hit.  Between 2016 and 2020, the farming sector and its ancillary industries will also have been faced with: exchange-rate fluctuations; general and Scottish elections; land reform and agricultural holdings legislation reforms and the outcomes of Brexit or potentially the EU’s 2020 CAP reforms (including enforced changes to payments in the Less Favoured Areas).

The Rural Industries work package provides an opportunity to develop science capability but is also increasingly used to provide capacity for policy-led analysis conducted with RESAS analysts and SG officials. In addition to WP funds researchers also draw on Policy Advice with Supporting Analysis (JHI) and Policy Advice (SRUC) components of Underpinning funding, but the nature of much of this work is confidential and used to inform the Scottish Government’s policy deliberations, or to develop analytical approaches and databases for use by RESAS. 

Aim of Research

The aim of this RD is to improve understanding of recent and anticipated adaptive responses to environmental change, policy drivers and market shifts. This will identify processes of innovation, diversification and collaborative action in agricultural household adjustment and assess future influences on the adaptive capacity of segments of the agriculture sector. 

Progress

2019 / 2020
2019 / 2020

The programme of research continues to provide analytical support and expert advice on agricultural and land use policy developments, brought into greater focus by Brexit and impending no deal exits.  Work on topics such as Areas facing Natural Constraints, Brexit impacts and scenarios and insights into farmer behaviours continued to support the Scottish Government and the wider industry. The data and tools developed continue to underpin our capacity to provide policy-led analysis for Scottish Government policy teams and other clients. 

The integration of land-use and agricultural datasets continue to provide novel and enhanced analytical insights to better understand the farm – policy interface policy. Analysis that supported Scottish Government officials was on varied topics including Areas facing Natural Constraint delimitation, beef system classification and beef finishing times and assessment of driven grouse moors (through commissioned research). Our farm level modelling has evolved to take into consideration management and biophysical constraints to better represent farmer decision making in predicting impacts of policy outcomes. Support to policy, industry and stakeholders on Brexit, and laterally COVID19 were provided.  A number of briefings from the Farmer Intentions Survey (completed in Year 4) were published:  i) farm diversification, ii) new entrants to farming, iii) responses towards risk management tools, iv) Brexit planning and v) public goods.

Highlights

  • Support for Scottish Government policy deliberations through bespoke analysis in response to requests on a range of topics including (a) Capping of Pillar I support payments; (b) Areas facing Natural Constraint; (c) Sectoral impacts of no-deal Brexit; (d) Impacts of Brexit on the Scottish seed potato sector.
  • Expertise on Scottish agriculture, agricultural policy, Brexit and climate change was called upon to provide evidence to the (a) Lord Bew’s independent intra-UK allocations review; (b) the Just Transition Commission; (c) the Rural Economy and Connectivity Committee of the Scottish Parliament on Brexit and the Agriculture (Retained EU Law and Data) (Scotland) Bill, and; (d) the Farming and Food Production Future Policy Group.
  • WP staff are standing members of the (a) the Women in Agriculture Task Force (b) Agriculture and Rural Development Stakeholder Group, (c) the independent Farming for 1.5o panel
  • Engagement with industry and stakeholders on Brexit and the changing policy environment.  This included support for the Highlands and Islands Agricultural Support Group, presentations to Monitor Farms and policy support to the Farm Advisory Service on Brexit issues.
  • Support for Scottish Government officials in response to the Covid pandemic, including on farming calendar, fruit and vegetable sector costings.
  • Provided unique insights to the Scottish beef sector using Cattle Tracing System data, including a classification system of types of production alongside a focus on business size and age of animals at slaughter.
  • ScotFarm model was used to assess post-Brexit policy scenarios in a SNH funded project ‘Preparing the evidence base for post-Brexit agriculture in Scotland’. The study used which looked at 10 different alternative payment scenarios and predicted impacts on dairy, beef, sheep, arable as well as crofts farming systems.
  • Analysis highlighted the the reluctance of farmers to adopt current risk management tools and the need for further development of these tools were highlighted. 
  • Analysis confirmed that new entrants represent important sources of innovation and global engagement for Scottish agriculture but current sources of advice and financial support are more accessible to farm successors than newcomers to the industry. 
  • Analysis of current and intended diversification plans demonstrated that despite constraints of low connectivity speeds Scottish farmers intend to increase their diversification activities, with those already diversified most likely to diversify activities further.
  • Brexit was found to be an obvious farmer concern, and a high level of stasis towards investment was found due to the policy uncertainty around this topic and policy support with the data suggesting a general lack of Brexit preparations
  • Farmers’ willingness to deliver more ‘public goods for public money’ were been explored, including intentions to deliver agro-forestry and woodland.  These show various levels of uptake and policy prescriptions around support regimes were recommended.
  • New insights to Scottish sheep processing were provided through commissioned research examining opportunities and risks under Brexit.

 

2019
2018 / 2019

Science-Policy Engagement

Researchers were engaged in a great deal of science-policy engagement throughout the year providing information, advice and analysis on a wide range of policy-relevant topics with RESAS analysts, Scottish Government policy officials and industry stakeholders Policy support exploits the mix of capabilities developed across the Rural Industries work package so the policy interaction highlighted are not exclusive to individual RDs.  The RD team continue to undertake a wider range of policy-led analysis and knowledge exchange both within the WP.  There was a considerable draw on RD staff time in delivering the Socio-Economic and Biodiversity Impacts of Grouse Moors work for the Scottish Government – providing novel analysis of the extent of Scottish grouse moors and their socio-economic contributions.  In addition there was considerable draw on RD staff time in the delivery of specialist Brexit advice and support for the Scottish Government and several outputs highlight the potential impacts of potential Brexit outcomes (policy support) and a considerable amount of Brexit awareness raising activity was undertaken with industry, stakeholders and politicians (supply-chains).  Work on seasonal migrant labour in agriculture continued, including a film launch in 2018 and SPICe briefings on the subject. The WP provided analysis and analytical support to the Scottish Government on several important policy topics including LFASS and ANCs and continue to offer advice on future agricultural and environmental policy development  for the Scottish Government  

The 2018 Farmer Intentions Survey was completed, following up on a similar survey in 2013. This was a major primary data gathering exercise co-designed with Scottish Government officials to ensure it yielded data that helps addresses policy needs.  About 2,500 farmers, crofters and smallholders engaged in the telephone survey providing information on a wide range of topics, including business performance, decision making, motivations, Brexit, future business plans, global engagement, diversification, seasonal lets, new-entrants, etc.  In addition to being a primary data source that can be used to inform policy making directly the 2018 FIS data, will also help us to better understand how reactive business cohorts are to a range of policy and market signals.  The quantitative survey data analysis is being complemented qualitative analysis that provides more detailed insights into important topics such as smallholders, diversification, gender and new entrants.

The ScotFarm farm level model continues to be evolved to better represent real life decision making of farmers and to provide more nuanced analysis of sustainable land management practices (including assessment of GHG emissions).  The model was linked to the latest FAPRI macro-economic predictions to assess how farms in Scotland may adopt to different trade and direct support scenarios and also to model farmer responses to disease scenarios (e.g. Johne's).  Geospatial Data was exploited in several projects, including combing it with O.S. MasterMap data to identify and characterise driven grouse moors2017 LFASS payments datasets were integrated to assess the implications of payment reductions and options for Areas of Natural Constraint were reconsidered, both informed advice to Ministers.  Working with the Centre of Expertise for Animal Disease (EPIC) cattle movement data supplied by the Animal and Plant Health Agency (APHA) has been used to classify Scotland’s beef farms into more nuanced production system (following those used by QMS) and analysis of technical data and networks based on farm characteristics has been completed.

Highlights:

  • An extensive telephone survey of 2,500 farmers, crofters and smallholders was conducted on a range of topics of interest to the Scottish Government. The 2018 Farmers’ Intentions Survey questionnaire was co-designed with RESAS analysts in conjunction with policy leads.  The first tranche of analysis is ongoing with the initial focus being on New Entrants and Brexit.
  • A range of confidential work was completed for the Scottish Government on issues relating to Common Agricultural Policy support payments relating to Areas facing Natural Constraint (ANC), Less Favoured Areas Support Scheme (LFASS) and capping of payments.
  • Initial analysis of new entrant data from the Farmers Intention Survey found that New Entrants: are a range of ages – more half are over 40; are more likely to be women are better educated, more globally engaged, and more likely to see Brexit as an opportunity; run smaller farms and are less likely to be profitable; are planning for on-farm change within 5 years.
  • Continued analysis of the 2013 Farmer Intentions survey demonstrated that at least 13% of Scotland’s agricultural land is likely to be in non-commercial use, as self-identified by the land managers. Non-commercial farms were reported across the range of scales, reflecting a number of intersecting issues – semi-retirement of older farmers, part-time recreational farming of newcomers, and off-farm employment.  Non-commercial farmers are more likely than commercial farmers to be women.
  • A short film raising awareness of seasonal migrant workers and the issues faced by the horticulture sector was launched at the 2018 Royal Highland Show and SPICe Briefing and SPICe Blog on the subject were published highlighting issues of concern around the (then) newly announced Seasonal Agricultural Workers Scheme.
  • Novel GIS analysis to demonstrate the extent of Scotland’s grouse moors, alongside an assessment of the evidence relating to the socio-economic impacts of grouse moor activities.
  • The ScotFarm model was used to assess farm level impacts of Brexit across the UK administrations in an ESRC funded project “Brexit: How might UK Agriculture Thrive or Survive?” 
  • The Highlands and Islands Agricultural Steering Group funded report on Post Brexit Implications for Agriculture and Associated Land Use in the Highlands and Islands was launched by the Cabinet Secretary for the Rural Economy (Fergus Ewing) to a wide range of stakeholders at an event in Edinburgh. The work extensively drew on RD2.4.2 knowledge and analysis.
  • Using our new classification of beef production systems our analysis has revealed the types of business connections (directly or through markets) within Scotland’s stratified beef herd – with heavy reliance on a small group of very large beef finishers. Metrics on calving intervals, distance travelled, days to slaughter, use of markets, etc. by breed and system have been analysed.
  • Support and evidence relating to Brexit was provided to a wide array of public and private stakeholders beyond the Scottish Government, including: Peers, MPs, MSPs, local authorities, Defra, NCRA, farmers, banks, consultants, wider public (through radio and TV interviews).
2018
2017 / 2018

Researchers were engaged in a great deal of science-policy engagement throughout the year providing information, advice and analysis on a wide range of policy-relevant topics to RESAS analysts, Scottish Government policy officials and industry stakeholders (the example interactions reported here are interchangeable with RD2.4). RD researchers engaged with a wide variety of stakeholder, industry and policy interests regarding Brexit and the potential impacts on Scottish agriculture and rural regions - thereby highlighting some of the risks associated with Brexit and agriculture and generating greater appreciation of the complexities of the challenges ahead.  Early in the year the focus was on completing the analysis of the outcomes of the 2015 CAP reforms.  These analyses were discussed with SG agriculture policy teams, RPID officials, members of the Strategy and Post EU Referendum Hub and was used in a briefing to Ministers. Later in the year most effort was devoted to supporting the deliberation of the Scottish Government’s Agricultural Champions (including directly supporting the Public Value Champion's group), drawing both on the analyses undertaken from Scottish Government but also responding to a series of questions they raised, for example on capping of payments or the role of Pillar 2.

The Scottish Government’s FUTURES geospatial data for 2015 and 2016 was further refined and a variety of data quality issues solved or mitigated.  This enabled the completion of a variety of policy supporting analyses to be completed - with the core datasets being the comparison of current CAP Pillar 1 payments regimes with pre- 2015.  Significant effort was also put into collecting and collating a Pillar 2 (SRDP) payments dataset (including annual recurrent, standard capital and actual capital).  This dataset was integrated with the Pilar 1 and business characterisation datasets to provide a more comprehensive analysis of CAP spend for the 2007-14 period. Working with (EPIC) cattle movement data supplied by APHA were linked with the June Agricultural Census to develop a nuanced classification system of farms and holdings (by type of rearing and finishing of animals), farmer interaction networks based on their livestock sales / purchases and performance characteristics of the beef sector by farm typologies (age, scale, region, full time labour, etc.).  These joined data provide new data analysis opportunities and insights into beef production systems.  Semi-structured interviews of large scale (over 200 ha) and small scale (under 10 ha) landowners were conducted to understand farm business diversification pathways and vulnerabilities to changes, in light of Brexit. 48 landowners were interviewed in two regions identified as hotspot of diversification: Angus and Skye and Lochalsh. Both types of farm businesses are largely not dependent on support payments. The ‘small scale’ interviewees reported that they are too small to either be eligible for support or to justify the high transaction costs to get the particularly low support. The large scale businesses are also less reliant on support due to their economies of scale, as well as and the commercial approach to their production and diversification activities. The ScotFarm model is in a process of constant evolution to make it more nuanced with more "real life" behavioural aspects being built into the model to account for farmer not all being ‘profit maximisers’ and that they adopt new technologies at different rates (crop modelling has been enhanced, with behavioural aspects regarding crop rotations and livestock technologies being built into the model).

Highlights:

  • The WP contributed to a briefing to Ministers on changes to LFASS and the publication of the Greening Review which had been delayed by a series of periods of purdah required by elections and referenda.
  • Continued analysis of the 2013 Farmer Intentions survey improved understanding of on-farm diversification.  Levels of diversification were found to be high in the rural areas north of central Scotland: Argyll, Stirling, Perth and Kinross, Fife, and Angus whilst Lanarkshire and Aberdeenshire have a high concentration of on-farm renewable energy schemes.  The analysis showed that different types of renewable energy technology tend to cluster together with onshore wind schemes frequently found in central and eastern Scotland, hydro developments concentrated in mountainous regions and near the west coast, and solar projects developed in the sunnier east (e.g. Fife, Angus).  Evidence suggests that farm diversification into agri-tourism has taken place in accessible scenic regions and in areas close to population centres and across the west coast and Inner Hebrides, a very high proportion of farmers planned to invest in agri-tourism.
  • Interviews with landowners in diversification hotspots revealed many had plans to mitigate for the possible decline or removal of support post-Brexit, include changing commodity type, and develop collaborative initiatives with neighbouring large-scale land-based businesses.
  • Support was provided to RESAS in the establishment of a new methodology for defining rural local authorities.
  • The ScotFarm model was used to assess potential farm level impacts resulting from Brexit.  As part of this analysis ScotFarm used the trade scenarios developed through the FAPRI-UK project for the UK administrations to test farm level impacts with and without direct support.  The modelling results revealed how vulnerable the beef and sheep sectors are to future trade scenarios, but more importantly the future levels of agricultural support. 
  • Provision of evidence and support for the Scottish Government’s Agricultural Champions in their deliberations on future agricultural support needs in Scotland.
  • The Implications of Brexit for Rural Scotland seminar hosted by SRUC highlighting the challenges for Scottish agriculture that Brexit brings.  A wide range of industry, policy and political stakeholders in attendance.
2017
2016 / 2017

Researchers were engaged in a great deal of science-policy engagement throughout the year providing information, advice and analysis on a wide range of policy-relevant topics to RESAS analysts, Scottish Government policy officials and industry stakeholders (the example interactions reported here are interchangeable with RD2.4).  Researchers were regular contributors to a wide range of policy meetings such as the Agriculture and Rural Development stakeholder meetings, the Cabinet Secretary’s Hill Farming Summit, etc.  Researchers also presented and provided oral and written evidence to the Rural Economy and Connectivity Committee and were involved in a wide variety of special reports to Scottish Government analysts and policy leads on Common Agricultural Policy related matters.  Following the EU referendum,  Less Favoiured Area Support Scheme (LFASS) ‘parachute’ payments (an across the board reduction in rates of payment) were assessed.  ANC, LFASS parachute and Pillar 1 analyses informed deliberations between Scottish Government officials and were used to brief the Cabinet Secretary who ultimately decided in favour of continuing LFASS payments into 2018.

The new FUTURES IT system as source of geospatial farm business data provides an opportunity to revise and rationalise how data on land use, tenure, and management and CAP payments are organised.  The new datasets created have underpinned the policy options appraisals undertaken this year.  Other datasets used in the work package also continue to be updated and developed.  Access to cattle movements data was agreed with APHA through EPIC with the aim to link to the June Agricultural Census to provide greater data insights than stand-alone databases.  ScotFarm, a farm level model that was conceived in the previous Strategic Research Programme, was enhanced through improved crop and grassland modules and the beef model was improved by accounting for different beef production systems (rearers, and finishers).

A major review of key Scottish agricultural sectors, including the sectoral opportunities and challenges was undertaken with industry insights provided by specialist SAC Consultants. Continued analysis of the 2013 Farmer Intentions Survey led to the publication of information notes were completed addressing Female-led Farms, Non-commercial Farms and Hotspots of Diversification. The Diversification note informed the selection of two hotspots (Angus and Lochalsh) for qualitative research into innovation and business trajectories, being undertaken in 2017.

Highlights:

  • A number of bespoke policy analyses were conducted for Scottish Government officials on Pillar I Common Agricultural Policy payments, LFASS and ANC payments. The analysis was  used to brief the Cabinet Secretary.
  • The Female-led Farms information note was cited in the Women in Farming and the Agriculture Sector research project report (commissioned by RESAS in 2016, report launched at the Royal Highland Show 2017). 
  •  Within the 2016 Edition of Rural Scotland in Focus RD2.4.2 researchers published a review of Scottish Agriculture in the Changing Land Management chapter.  This work was presented at the report launch, to the Agriculture and Rural Development Stakeholders Group and to Scottish Government officials.
  • Core work on developing farm modelling and use of allied policy models were developed for a book edited by members of 2.4: Farm Level Modelling: Techniques, Applications and Policy. This contained a number of chapters focused on application to Scottish modelling contexts, including farm level modelling, agent based modelling and supply chain models.
  • Analysis of the Farmer Intentions survey (2013) on female-led farms identified important distinctions from male-led farms. In particular, the farms were men are identified as the primary decision maker are larger than the farms which have women as the primary decision-maker.  This is in part because women are less likely to have inherited the farm they run. Female farmers reported being less dependent on farming for income, and were less likely to receive support payments or to have employees. Female decision makers tend to be more educated, and are more likely to work part-time on the farm. Women are less likely to run their farms for profit.
  • RD researchers produced a revised and enhanced Agricultural Parish map for Scotland.

Future Activities

In years 4 and 5 the work will focus on detailed analysis of the Farmer Intentions survey, qualitative research with current and prospective new entrants to farming and follow up on Scottish Government’s Women in Agriculture report in year 5.  Analysis of the Intentions survey will address the characteristics, access to resources (e.g. advice, subsidies), global engagement, and pathways into farming for new entrants to farming.  This will be augmented by qualitative interviews with successors and new entrants to farming across Scotland.  Analysis of the Farmer Intentions survey will also assess the patterns in recent and planned future farm diversification across Scotland in relation to shocks and stresses (including exit from the EU), in order to identify vulnerabilities and coping strategies (i.e. resilience) of Scottish farms.

Selected Outputs