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Resilience of rural economies to key external drivers

Work Package Rural industries

Research Deliverable 
Resilience of rural economies to key external drivers

Introduction

This policy-oriented research addresses how well Scotland’s rural industries can cope with outside pressures such as: climate change; volatile prices and changes in government policies (e.g. reductions in support for farming from CAP reform or Brexit).  Resilience research can assess how strongly rural industries can resist change but may also assess how capable rural industries are to make changes to their size, configuration or ways of working and to continue to deliver the same goods and services but perhaps in different ways.  The research will define and test new ways of measuring the resilience of key rural industries.  It will use data collected by government and scientists and computer-based research methods to identify sectors and regions where there is limited resilience and explain why this has happened, if it will get worse and what the consequences of such change might be.  The research will allow government to be more certain about how external pressures will affect rural areas and how effective any interventions from government might be.  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 (the nature of much of this work is confidential and used to inform the Scottish Government’s policy deliberations, or to develop analytical approaches for use by RESAS).  In addition to Work Package funds researchers also draw on Policy Advice with Supporting Analysis (JHI) and Policy Advice (SRUC) components of Underpinning funding.

Aim of Research

The aim of this RD is to address how well Scotland’s rural industries (e.g. farming, forestry and tourism) can cope with outside pressures such as price volatility, new trade agreements and changes in government policies. The key drivers for this research are:

  • There are concerns about the long-term viability of some rural businesses due to their lack of profitability.
  • There are concerns about rural poverty and environmental damage that can be caused by poor land management practices. 
  • It is recognised that for all the key pressures on rural industries there will be either more volatility (markets and climate change) or a significant reduction or redistribution of government support (such as direct payments to farmers or Brexit).

Progress

2021 / 2022
2021 / 2022

The RD has improved understanding of rural industry resilience in Scotland through primary data collection, secondary data analysis and modelling.  Non-land-based rural business insights (funded in collaboration with Scottish Enterprise) improve policy understanding of the interconnectedness of rural businesses, reliance on import suppliers and export markets, family labour use and perceptions of Brexit and general business aspirations.  Expertise and metrics for assessing business viability and technical performance (including GHG performance) was developed over the programme and help inform policy and are integrated into other economic models.  New agent based models and barley yield models provide invaluable insights into how the agricultural industry responds to external policy, market and climactic shocks.  Insights on business resilience during the Covid pandemic helped inform officials of ongoing issues in industry and our analytic capabilities helped deliver rapid assessments for officials. 

Researchers utilised new data sources and created new models and analytical approaches that support policy developments.  Researchers were continuously engaged with RESAS analysts and SG policy teams in the development of policy via a variety of channels, informal ad hoc advice, presenting work to SG staff, participating in stakeholder groups, and delivering Underpinning Capacity project via policy call downs and as bidders (often sole bidders) for Contract Research Fund projects.  In addition to using the capability developed in the SRP to respond to requests the MRP staff have been active in shaping how issues are framed and analysed through sharing the SRP research tools and outputs with colleagues to proactively demonstrate where new research based tools and data are salient.  The credibility of MRP researchers has been enhanced over the course of the 2016-22 SRP such that several are now taking lead-PI roles for the next 2022-27 SRP where there is greater emphasis on policy relevant topics.  MRP researchers are recognised as experts on agricultural policy matters and are supporting officials (including across the UK) through advice and analysis and the WP expanded to bring new insights to officials on the wider rural business base and on circular economy opportunities (key themes that have been expanded in the 2022-27 SRP).

 

Highlights

  • Work on business resilience focused on updating our measures of technical efficiency to 2020 and exploit newly delivered data on carbon emissions of farms within the Farm Business Survey.   This work helped inform RESAS on future data needs and analytical approaches with policy recommendations made through written briefings. 
  • We have integrated our work on financial metrics within farming to explore the impacts on viability within farming, in particular we explored recent impacts of EU exit compared to previous periods, finding falls in the financial resilience of a number of sectors. The benefit of a long set time period within the FBS allowed us to derive indicators of resilience and compare them with work conducted across Europe to provide a comparative measure of farming resilience.
  • The spatial barley modelling was completed and concluded that there are risks of overall decreases in yields for a larger proportion of the national crop for an increasingly large area. 
  • Agrometeorological Indicators have been estimated for the whole UK from 1960 to 2098 at a 1km resolution. Outputs have been used in presentations to UK Government and informed Parliament (RAINEC) evidence session.
  • Spatial data sets created have facilitated the development of a new Land Capability research platform (CXC Fellowship). We have improved the evidence base that identifies areas of which are increasingly likely to face challenges due to climate change, particularly in relation to water availability.
  • We have conducted an analysis of the effect of reduction in demand on the beef and dairy production chain. The Rural Industries Supply Chain model responded to changes in price rather than changes in demand so we accessed price data from QMS and assessed the elasticity of beef and dairy prices. The six-year programme has been instrumental in developing our capability and reputation in empirical agent-based modelling for policy analysis, and methodology supporting it, and we are grateful for the opportunity.
2020 / 2021
2020 / 2021

Themes of farm business and food system resilience have been with studies on the effects of COVID-19, BREXIT, policy reform and climate change adaptation all delivering insights to policy and other stakeholder groups, including how they impact on the rural economy.  Work has taken place across a range of scales and sectors with highlights including studies on upland and island farm business resilience, the impacts of livestock disease on profitability and the risks of climate change, the role of physical disadvantage in defining business viability, and the vulnerability of private water supplies to increased incidence of drought. The WP provides analytic frameworks to assess the costs and benefits of evolving policy interventions, and better understanding where resources could be allocated under a new agricultural policy that explicitly looks to embed climate change mitigation and biodiversity improvements at its heart.

 

Highlights

  • Work on business resilience has focused on a spatial element to provide an understanding of resource use efficiency and its link to financial viability and vulnerability.  Comparative work with other regions shows how Scotland performs poorly against similar regional neighbours within the EU. 
  • Beyond the farm sector the 3rd Rural Report examined non land-based business structures, performance, and perceptions – including insights into evaporating confidence as the Covid pandemic unfolded.
  • Commissioned work on driven grouse moors and gamekeepers provided new insights on the socio-economics of grouse shooting and alternative moorland uses, the employment rights of gamekeepers, the extent and intensity of land used for driven grouse, and the impact of muirburn intensity on biodiversity.
  • The UKRI COVID-19: Food and Nutrition Security during and after the COVID-19 Pandemic research examined the rapidly changing short/medium term economic and social consequences of COVID-19 for food security – focusing on availability, access, utilisation, and stability of food supply.
  • Farmer risk perceptions were explored using a large scale survey of Scottish farmers, finding that only around 17% are risk takers and willing to invest in new capital and technologies, the remainder are either risk averse or cautious towards investment
  • Work on the private water supply vulnerability to climate change (CREW) and Cairngorm future snowfall (CXC) used new climate and climate change datasets developed within the WP.
  • The effect of interventions on agricultural productivity were explored, developing cost-benefit ratios for a shortlisted set of interventions.  We found that disease control and prevention, along with targeted educational support for rural skills and entrepreneurship gained very high cost-benefit ratios and were worth exploring further.  A review was conducted of interventions and their effect on farmer behaviour where we found adoption was determined partly by earlier or concurrent choices. This may indicate a need for coordination between policy interventions encouraging the adoption of some practices with those promoting others.
  • WP staff with international peers defined best practice in agent-based model (ABM) design and communication including recommended documentation standards for model development, use and reporting. This ABM expertise is also used in PROTEIN 2.0 (Research Council of Norway), with social simulation of a “post-animal bioeconomy”.
  • WP experts were involved in supporting the ongoing evolution of agricultural policy in Scotland through direct interaction with senior policy officials, including the drafting of conceptual papers, policy advisory notes and the provision of analytical support.
  • Regular agricultural intelligence and analytics on a range of topics relating to the COVID crisis were provided to Scottish Government officials.
  • A review of how land manager behaviours affect management changes in designated protected areas was undertaken with NatureScot.  Amongst others it recommends ways to support greater engagement of land managers and users into the aims of protected areas.
2019 / 2020
2019 / 2020

The programme of research continues to provide analytical support and expert advice on the rural economy, agricultural and land use policy developments that were brought into focus through Brexit and impending no deal exits.  With Brexit sharply in focus the farm business resilience analysis was extended to include a focus on bio-physical disadvantage that can help inform future policy developments. There was horizon scanning identifying opportunities of narrowing the productivity gap in Scottish agriculture and how to improve technical efficiency on farms – with policy aims of improving profitability and reducing environmental footprint of the sector.  Beyond the farm gate, the second rural business report provided new findings on the use of family labour in rural businesses alongside insights on the use of local, national and international markets for inputs and for sales, as well as business confidence and perceptions of Brexit.  Agent-based models were evolved to help explore how beef supply chains may react to external shocks – including Brexit

Highlights

  • Metrics of farm business resilience were extended by examining how land quality, climate and peripherality as explanatory factors.  High levels of difference were found in economic viability and analysis showed a relationship to the biophysical constraints faced by farmers, but also in their attitudes and goals for the business and opportunities for off-farm working.
  • The second ‘Rural Report’ was published reporting findings from second non-land based business survey (1,200 business respondents).  The work reiterated around half of the businesses had links with the farming sector and two thirds of businesses reported links to the land-based sector when forestry and estates were included.  The report highlighted the geographic location of input and output markets for the first time and also reported on the use of family labour and Brexit. The third survey (1,500 business respondents) was completed just as the Covid lockdown was occurring.  
  • Agrometeorological indicators of climate effects were re-estimated using the latest UK datasets to create a unique data set in the UK. This will enhance modelling capabilities, for example of predicting barley yield.
  • An assessment of Scotland’s agricultural productivity compared to other developed countries shows that Scotland performs well in terms of average growth rates, but this varies by period, with the last decade showing a significant slowdown.  Potential for interventions which could improve resource use efficiency and could minimise the variance between businesses were reviewed.
  • The Agent Based Model of supply chains in the beef and dairy system in Scotland was evolved to provide a more solid empirical basis.  Machine learning was used to “mine” datasets to help generate model rules which can generate new insights into complex, whole system, behaviour.
  • Modelling of snow cover and climate change in the Cairngorms. 
  • WP staff are standing members of the (a) EU EIP Agri-Focus Group On-Farm Renewable Energy Production; (b) UK Meteorological Office UKCP18 Non-Government User Group (c) Community and Renewable Energy Scheme panel; and (d) Defra’s rural academic panel.
2018 / 2019
2018 / 2019

Metrics for assessing farm business viability that were developed in previous years were further evolved to make them more robust for market turbulence.  Additionally, analysis was undertaken to assess the dynamics of business viability over time.  Using the Scottish Government’s Farm Business Survey data an assessment of resource use efficiency on farms was completed providing new insights on farm productivity over time. The second Rural Business Survey (co-financed by Scottish Enterprise) was completed, providing new insights into the characteristics, perceptions and performance of 1,200 non-land-based rural business in the North East and South of Scotland.  Using barley yield models developed in previous years spatial simulations of the future potential for barley production under climate change were developed and presented to stakeholders (e.g. RESAS, The Farming Scotland Conference and Scotland’s Plant Health Conference). Agrometeorological indicators (such as length of growing season, number of plant heat-stress days per annum and access period) under climate change were completed using UKCP09 climate change data downscaled from a 25 to a 5 km grid.  The empirical Agent-Based Modelling (ABM) prototype developed in previous years was applied to the analysis of the potential impacts of Brexit as specified by the published FAPRI Brexit scenarios. The ABM input datasets were refined using Cattle Tracing System data from the Animal and Plant Health Agency, and the formalisation of the agent-based decision rules validated with further improvements to the presentation of model outputs to ensure they were more policy oriented.  Researchers undertook several instances of science-policy engagement throughout the year providing information, advice and analysis on a wide range of policy-relevant topics, working with RESAS analysts, Scottish Government policy officials and industry stakeholders.  Such policy support exploits the mix of capabilities developed across the Rural Industries work package, so the policy interaction highlighted are not exclusive to individual Research Deliverables.    Examples of science-policy engagements included: confidential analysis, data and advice on the Less Favoured Area Support Scheme; working with Theme 3 scientists to assess the gender pay gap in rural areas; ensuring Defra policy leads, peers and MPs were aware of Scottish farming characteristics and Brexit challenges; confidential advice on supporting future environment and agricultural policy in Scotland, and; improved dataset for RESAS that assigns holdings from the June Agricultural Census to 10 km national grid cells

Highlights

  • New approaches to assess resource-use and economic efficiency were developed in conjunction with RESAS.  This is helping to inform future agricultural policy opportunities aimed at improving farm level productivity.
  • Businesses resilience metrics were calculated for farm businesses for integration into the ScotFarm model (see RD2.4.2) to facilitate more grounded modelling results of farm level changes from post-Brexit policy.
  • The Rural Business Survey is providing important insights into the wide range of businesses operating in the rural economy.  New insights into rural business characteristics have been provided on a wide variety of topics, such as: use of family labour, business constraints, locality of markets, attitudes to and preparedness for Brexit, training and advice needs, links to the land-based sector, etc.
  • Crop systems and climate change modelling was used to enhance the interpretation of simulated barley production maps and to give a broader overview of the pressures likely to be faced by land-based industries and other rural sectors under climate change scenarios.  This modelling capability was also deployed with the Scotch Whisky Research Institute to look at climate-based risks to future supply and the opportunities to increase production to meet increasing demand.
  • The Agent Based Modelling analyses was peer-reviewed and formed the basis of a research brief for RESAS and other Scottish Government staff. Through interactions with RESAS staff, ABM has been identified as one of the new modelling paradigms of interest to Scottish Government staff for use “in-house”.
  • A wide range of science-policy engagement activities supporting the Scottish Government in its policy decisions and supporting industry stakeholder better understand the policy environment they operate in.
2017 / 2018
2017 / 2018

This year’s farm business viability work included an assessment of wealth and equity within Scottish farming to offer new perspectives on farm business resilience. Furthermore, viability measures were extended to include an assessment of long-term economic resilience and robustness of farming business within Scottish farming.  Livestock, cropping and mixed farming types within the Scottish Government’s Farm Business Survey data were examined to assess resource use efficiency and cost efficiency of farm businesses between 1989 and 2016, drawing out market and policy impacts on performance within these farming sectors. With co-funding from Scottish Enterprise the first (of three) Rural Business Survey was completed with 1,500 non-land-based businesses across Aberdeenshire, Tayside, Dumfries and Galloway and the Borders. The telephone survey provided new insights into the rural, but not land-based, businesses in terms of their structure, performance, Brexit perceptions, employees and their links to the land-based sector. Work on modelling of barley yields across Scotland was used with industry and helped provide insights into future yield potential under climate change scenarios.  Barley yield maps (1994 to 2015) for Scotland were generated for unique combinations of soils and climate, in areas where historically barley has been grown (and for adjacent areas where barley could potentially be grown under a changing climate).  Work on developing an Agent Based Model (ABM) of the beef supply chain saw modelling of several aspects of "agent" behaviour - including behavioural drivers relating to succession, industrialization, leisure farming, and diversification. Using June Agricultural Census, Farm Structural Survey, and Land Capability for Agriculture data, the ABM was populated with over 13,000 Scottish cattle farms, in their spatial context.  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. Such policy support exploits the mix of capabilities developed across the Rural Industries work package, so the policy interaction highlighted are not exclusive to individual Research Deliverables.  Examples of science-policy engagements included: confidential summary of Ecological Focus Area activities; confidential analysis of the redistribution of CAP Pillar I payments under the 2015 CAP reforms; support of the development of the Scottish Government's Rural Economy narrative including helping develop RESAS’ new rural-urban definition of local authorities; providing oral evidence to the British-Irish Parliamentary Assembly Inquiry into the implications of Brexit for the agri-food sector and oral evidence to the Scottish Parliament’s Rural Economy and Connectivity Committee on the Draft Climate Change Plan (RPP3), and; providing insights into the craft brewing sector in Scotland.

Highlights

  • Analysis of the Scottish Government’s Farm Business Surveys data developed new, and more robust ways of assessing business viability and sustainability that can extend beyond agriculture. 
  • Financial data on farms were analysed to improve understanding of resource use efficiency. 
  • Results from the Rural Business Survey reveals that owners of the wider rural business base have similar age profiles to farm businesses, and provided insights into business performance, attitudes to Brexit, labour use.  Uniquely, this survey has also provided novel insights into linkages between the wider rural business base and the land based sector and how changes in the farming sector may run through the wider rural economy.
  • Barley yield maps were generated using the Decision Support for System for Agro-technology Transfer (DSSAT) model and were calibrated using data from Scottish Government funded research in previous programmes along with crop trials data.  The maps were validated with a new dataset derived in collaboration with the Scottish Government’s Agricultural Statistics team from the information they collected as part of the annual estimation of crop yields.  .
  • Empirical Agent Based Model simulated farms over the period 2000-2012 looking to reproduce the qualitative empirical observation of the ‘squeezed middle’; the simultaneous decline in numbers of medium-sized farms and growth in numbers of small and large-scale farms. The model demonstrated that several combinations of drivers among succession, industrialization, leisure farming, and diversification reproduced this effect. Further analysis will use the four FAPRI Brexit scenarios to explore their effect on Scottish beef-dairy farms through to 2030.
  • A wide range of science-policy engagement activities supporting the Scottish Government in its policy decisions and supporting industry stakeholder better understand the policy environment they operate in.
2016 / 2017
2016 / 2017

Farm level financial and biophysical data was analysed over time to improve understanding of, and isolate the influences in variability of business performance. This included linking the data with land-capability for agriculture maps and developing new key performance indicators to measure resilience in the dairy sector. Prototype maps of potential and actual barley yields across Scotland were generated using barley crop simulation models, climate databases, satellite-based estimates of solar radiation, soils maps and databases of their properties and land use maps. 

Different agricultural datasets were integrated to develop a preliminary agent-based model exploring possible mechanisms underlying the decline of medium-sized farms during the last 10-15 years.  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. Such policy support exploits the mix of capabilities developed across the Rural Industries work package, so the policy interaction highlighted are not exclusive to individual Research Deliverables.  Examples of science-policy engagements included a considerable amount of work on an options appraisal for the Areas of Natural Constraint (ANC) scheme to replace the Less Favoured Area Support Scheme (LFASS).  In addition, an assessment of evidence regarding “additional costs” and “income foregone” were undertaken as required by the EU Commission. 

Highlights:

  • The ANC datasets, analyses, maps dashboards were used by Scottish Government officials for internal deliberations, briefings and in the Scottish Government’s stakeholder ANC Development Workshop.
  • The ABM work was submitted to a conference and presented to policy analysts in the Scottish Government to discuss scenarios of interest to explore with later versions of the model.  Discussions on the theoretical underpinnings for a value-chain ABM took place and an international workshop on cross-scale resilience in social-ecological systems was arranged (held early in Year 2).
  • The technical efficiency analysis and new measures of farm business viability were showcased in the 2016 edition of SRUC’s Rural Scotland in Focus
  • Developed the methodology, approach and co-financing for the 2017 – 2020 rural business surveys.

Future Activities

Much of the capability in this RD underpins commissioned research to provide Resas Economic Advice for future Rural Support and is also embedded in follow-up projects in the 2022-27 SRP. The research informs and evolves into JHI and SRUC projects relating to Topics: C3 Land Use; B3 Best Practice; E3 Land Reform and; E1 Rural Industries.

Selected Outputs

Research Deliverable Lead

Dr Gary Polhill

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Professor Andrew Barnes

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