Welcome everybody to the fifth meeting of 2015 of the rural affairs climate change and environment committee. Before we move to the first item on the agenda, remind everyone present to switch off mobile phones as they may affect the broadcasting system. Some people may be using tablets, etc, for the purposes of the meeting. That's the only reason for having them on. We have no apologies today. Agenda item 1 is a decision on taking business in private. First item is for members to consider whether to consider agenda item 4, consideration of responses from local authorities on the disposal of assets in private. I invite members to agree. Are we agreed? Thank you very much. Agenda item 2 is the dairy industry. The second agenda item is for the committee to take evidence on the dairy industry from stakeholders. We have two panels this morning, the first of which is comprised of representatives of major retailers. We will have more tomorrow. The members will have the background papers. I say good morning to our panel who have come to fairly short notice to us. Thank you very much for that. It is very helpful. Ewan MacDonald Russell, who is the Scottish Affairs Advisor for Morrison, Andrew Loftus, the Agriculture Manager for Morrison and Chris Brown, the Sustainable Business Director of ASDA. Good morning to you. A two-part question about prices at the beginning is to kick off. What farm gate prices do you pay for your milk? Do you pay this to all farmers or just to those in a select group or pool? Does anyone want to start? Sorry, is it automatically? Very good. ASDA is supplied by Arla. The farm is cooperative. They supply us with all of our liquid milk, cream and cheese. The current price that Arla are paying is £24.87 per litre for a standard litre of milk, which, for the committee's information, is 3.3 per cent protein, 4 per cent fat. That being a standard, about 30-40 per cent of their producers, I understand, are in exceedence of that, and some of them will be because of the composition of their milk receiving a price of nearly £27. I would emphasise that that's the price that Arla pay and Arla decide to pay. I understand that. That's quite helpful. What about Morrison's? Under a similar structure to ASDA, I don't know if you're aware that there are 10 major multiple retailers as defined by the grocery's coded eudicator. As I understand it, four of those operate a lined pool where they have a cost of production model, and six do not, like ASDA. Morrison's are in the six. We don't have an aligned pool, so the price we set is set by us applying dairy companies. In our case, those dairy companies are Arla, a farmer and cooperative, and the price would be the same price that ASDA farmers get, as Chris has just explained, and the remainder are from DC. The point really is that we negotiate a price with those companies for pasteurised, standardised, bottled milk delivered to our depots around the country, and it's up to them to set the price, the farm gate price that the farmer receives. So you're saying that in terms of the selection of the pool or the group from which this comes, that it would be Arla who would select who they provide you with milk from? Broadly, yes. Since price volatility is a problem for dairy farmers, can the supermarket say what their farm gate prices have been over the past few years? I don't think that we see what our farm gate prices is. We could certainly say what our processes have been. Our relationship with Arla is going back nearly 10 years now, so we've been fairly consistent. I don't know if it'd be any assistance, Chair, but I have got a handout which shows that Arla farm gate price and the retail price. That would be very helpful, yes. That would be of any assistance, so I have a few thoughts and apologies if someone wishes to go. It shows the way that we've tried to be consistent in supplying our customers with a very consistent price so that they can budget in these economic and straightened times, at the same time recognise that global trade has had an impact on the prices, I think. Sorry, you'll have to share all you need to get some photocopies, and the way that the markets, the global markets, have fluctuated in that time. We've got some evidence of this, but that's a helpful addition. I have to say that we're in a position that we're trying to get to the bottom of what is a complex matter, and every aid of this sort helps considerably, because it clears up some of the questions about how you are pricing and what you're selling at. That's another matter that will come to in a minute. Are there any members who wanted to ask anything about the table that we've just seen? Mike Russell. How often do you negotiate or renegotiate your arrangement with your processor supplier? The as-to-all contract continues until the middle and end of next year. How often do you renegotiate it? Roughly every three years. Every three years. So, when you say that it's the processor's price rather than your price, if the processor were paying a price that was too high for what you wanted to do, then you would choose another processor. It's part of negotiation between business all the time. It's what their costs are, how costs change. We had conversations about how we managed the situation last year when the milk price was up at 34 pence. I just want to push a little on this, because I think clarity is really important on this. Both of you have said that it is the processor's price, not the price you set, but the reality is, and I think this is an escape, which is a commercial reality, if the processor was setting a price that you didn't want to pay, you would, by the normal contractual process, choose another processor. We're sorry, Andrew. In terms of the price question on the period, so our previous deal, which just ended, or legally ends at the end of this month, but we have renegotiated and announced the result of that, was a five-year deal with Arla and Deycrest, and we've now about to commence a new three-year deal with Arla and Deycrest, so three years sounds about industry norm. In terms of answering your question, in terms of the renegatiation where we rewarded our milk contract to Arla and DC, we specifically negotiated on processing efficiency, and one of the reasons Arla was successful was that it has a major investment in what we believe to be the world's best bottling facility in Buckinghamshire, and also their distribution costs, and we compartmentalised milk price because it's being market-driven, it is fairly common across the processes and was not a focus of our negotiations, so we awarded our liquid milk contract on the basis of, say, their processing and distribution costs almost entirely. Those are the key things for us. Yeah, but those are costs, you know. So, I mean, the point, this is not rocket science, and I'm not trying to trip you up, I'm just making a point which I think we need to understand at the very beginning.  In those circumstances, you are an influence on the price because if the price was too high, you would choose somebody else to provide it to you. Well, you could make that argument. However, I don't think it's going out by the result of this tendering process because we actually increase the amount of liquid milk that we are buying from Arla, and if you look at the milk price league tables, they're quite near the top of that league table, so that wasn't the deciding factor on your logic would have gone for the one near the bottom of the league table, and we didn't. Sorry, with respect, that's not the case. I'm not purporting to give you a model to run your own business. What I'm saying is, when you say this is a decision for the processors, it is actually part of the mix of decisions by which you decide which processor gets the contract. That must be true. I think what's worth saying is that there are a number of decisions. Is pricing relevant to that? Of course pricing is relevant to that, but it is not the decisive factor, and it's also worth recognising that the price that farmers are getting is to a large degree based on these global market fluctuations, which as an individual retailer, we'd have a fairly finite ability to impact upon. There are massive market forces which are significantly more relevant on pricing, and as Andrew I think explained quite well, there are other fairly important factors on picking the right processor, and that comes back to, say, manufacturing capacity distribution and so forth. Is pricing relevant? Absolutely. Is it one of several factors? Absolutely. I'm not trying to do anything other than indicate you play a role in what the price is paid to farmers. I'm not saying anything other than that, but you have to accept you play a role in that. If we accept that, I mean, the global markets are global in nature these days. I can demonstrate that. I know. I'm not disputing that. And just to qualify it further, the UK is, I think, 3% of global production, and Morrison's is 3% of UK production. So if there is an influence on the global milk price by golly, it's a small one. No, I dispute that. I think you are a determinant in the price of milk, because you have to be. You're buying it. You're part of the process, but no matter, this seems too difficult to be accepted, but that is, I think, indisputably the case. You are a player in this. We've been interested in transparency for, oh, sorry, Dave Thompson's got it short. Thank you very much, convener. Just really a linked issue just to follow on a little bit from that. Very interesting exchange between Mr Russell and yourselves. In recent times, not that long ago, the retailers were taking about 5% in relation to the milk, and papers that we saw last week indicated that your cut, your share, whatever you want to call it, had increased to 35%. Why do you think that has happened? In terms of profit margins, I would be astonished. We're certainly nowhere near that sort of figure that you're coming up with. I think if you look at the public accounts that we do have, it indicates that the gross margin on kind of the dairy sector is something in the region of 20%. The net margin, which is significantly more relevant, is about 2% across both grocery and indeed across pretty much all the stuff in a supermarket. That's the margin we're working to now. Specifically on milk, it's worth noting that our kind of own brand Scottish milk in stores is one that we've kept 4.139 at the moment. We've actually not depressed that price significantly. We have on our tertiary brand, but not on the own brand Scottish milk, and that's partly because I think there is important to reflect that milk is a premium product. While we face quite significant pressure from competitors and indeed from customers to reduce that price, as you've addressed, if we start pushing the price of milk all the way straight through the floor, that's not necessarily great for the sector either. It's quite a challenging balancing act for us. We have reduced milk price to a degree. That milk price reduction has come from our own profit margin. It certainly has had no impact whatsoever on the farm gate price. Retail and farm gate prices on this are decoupled at the moment and I'm hopeful it remains so. Are you saying that the retailer's share hasn't increased in comparison to the producers in particular and the producers? Is it not true that the share of the profit, if you like, of producers and processors has gone down significantly and your share has actually increased in recent years? When we talk about producers, obviously there's huge differences in the cost of production between individual farms and everything we talk about there is an average, an average of quite significant extremes, but just to reiterate Ewan's point, I mean, from our annual accounts, with a bit of mathematics, you can calculate our gross margin relatively easily on our goods. I went around all of our teams yesterday in terms of liquid milk, cheese, dairy and butter and had a discussion around the gross margins they're able to achieve. I can categorically assure this committee that they are slightly under the average gross margins for Morrison's retailer as a group. So the question of us profiteering or making more, the trend is downwards, we're making less than we were. Stats which Dave Thompson quoted from were from Dairy Co from 1996 to January 2011 and it shows an increasing margin from a very low amount, as he said, to a much higher amount, a marginally, very marginally less, actually, in price at the top end, but considerably less for the processor and also somewhat less for the producer. So is Dairy Co wrong? They do sound like rather historic data, chair. Given the fluctuations, one of the problems in all of this is cheese is a matured product and cheese was made last year at 30p. We now need to sell it. If we devalued it to the current liquid milk price or the current farm gate milk price, then the stocks would collapse in value. So we need to maintain the price that we pay for that product to enable those stocks to be cleared at the price that they were produced at. Thank you. Just to remind you, I'm not a chair, I'm actually the convener term that we use in Scotland. If you care to use that, it would be helpful. Thanks for that answer, because we're digging into this with lots of different people, because we're trying to find out about the transparency of the whole matter. Farmers and customers each have a particular issue here, because we know what customers are being offered by some supermarkets. In the milk supply chain, we need to ensure that this transparency continues. Now, there was a voluntary code set up for the producers and the processors. Do you think that the supermarkets should be included in that, because it's increased the transparency at that level? Do you think that supermarkets should be part of that transparency exercise in the voluntary code? It's built up some trust. Convener, we already have a code that we have to abide by, including an adjudicator. I understand that you'll be talking to shortly. How does it articulate with the code for producers and processors? There was no connection. That was distinctly a code between those two groups of people. I'm not sure how you'd be able to extend it up the supply chain. Well, that's what we're trying to explore. No proposals have been presented to me showing how that could operate. Have Morrison's of you? I agree with what Chris said. The two codes are quite distinct and operate in different fields. We don't have a direct relationship. On beef, pork and lamb, we buy direct from UK farmers for our own abattoirs. Because we buy from our own abattoirs, we are covered by that code in a relationship with the farmers, because we, as a supermarket, have the direct interface. It's an indirect relationship, but it's a different arrangement that exists for dairy, indeed. I thought that we'd best ask you that. Thinking about resilience and efficiency, Sarah Boyack is going to ask you a question. One of the things that we've been made aware of through representations from a couple of the supermarket chains is that they work with farms and they've been attempting to support them to make them more resilient and more efficient, which is obviously a great thing from the farmer's perspective. I wonder what you think about those initiatives. The kind of things that they covered were things like help with vets, visits, access to professionally facilitated workshops on low-cost energy. Yes, we have those types of groups, too. We've titled them up as Pathfinder groups, which focus on a variety of technical issues. It's facilitated by independent consultants and the agenda is set by the farmers. It's not something that we organise. We re-support and deliver and participate in. We also have a next-generation group for younger dairy farmers to address their issues as well. Similarly, I hold in my hand here and I can distribute copies or you can download it free of charge to any dairy farmer from our website. It's an in-depth report into feeding the modern dairy herd and all the different feeding options available, supplements, et cetera, to dairy farmers. This is expert advice we have produced with our supply chain group working with Arla, but I really think we make it available to any dairy farmer in the UK to download. This is the, I think, over 10 reports of this nature we've produced, really helping to increase the level of expertise of those farmers who are at the cutting edge, if I can put it that way, of their industry. Absolutely. I think the other big initiative that we'd like to mention of that nature is working first with first milk and then under our new contract with DC, we'll be looking at mechanisms that will enable farmers to hedge. I have a supplement here, which I'm more than happy to supply after the meeting or whatever, explaining how the increasingly global nature of the dairy industry is only going to lead to more volatility in the future. We've seen some unprecedented spikes. It may yet go down further, and my estimate, though I can't see the future, is when it comes back it will come back strongly quickly and maybe even to unprecedented levels of milk price in the future. But what I'm describing is an increased volatility across all markets. The only solution that we know that works in this more volatile world market is a market-based solution based around hedging. Now, I'm not proposing that farmers can beat the markets by doing clever hedges. What I am proposing is that farmers working through their processes and maybe even directly with us can place hedges so that they can smooth out the volatility, so that they can achieve the long-term average price. Being an efficient producer doesn't really help you manage volatility. What manages volatility, for most small businesses, is a strong balance sheet. Now, they don't all have that luxury. So, if you can hedge and you get a more even long-term average price, then one of the disincentives to invest in your dairy business is hopefully taken away. So, we think there's a role for hedging in the future of the dairy industry at a producer level. Will that work for smaller farmers? It should work for any farmer, to be honest, because the more he participates, the more liquid those markets become in terms of, I don't mean liquid milk, I mean more easily traded, and any farmer would be able to hedge in much the same way as you can hedge your power bill at the moment, or your mortgage. You can choose to let it float if that's the way you want to operate, or you can choose to lock in. I foresee a future for the dairy industry where farmers can make that decision individually to let their milk price float or to lock in. What about the low-carbon aspects? We had a Scottish Retail Consortium presentation just last month, which was about all the supermarkets' retailing end in terms of reducing your carbon footprint. What about your work with suppliers? I think it's the longest established individual dairy farm carbon footprint dataset, so it goes back nearly seven years now. The relationship between productivity and carbon is quite clear. The more efficient producers have the lower carbon footprint. The problem is some of the outliers, so people who have quite a high herd carbon footprint because they've got a very good herd, and people who want to buy pedigree stock from them will maintain larger numbers of heffers and bulls for sale. Unfortunately, that creates challenges and interpretation, but the trends are quite clear in terms of overall relationships. We believe that farmers are part of a stronger farmer co-operative, which is one of the reasons why we went with Arla is their best hedge against the future. There are two big options. One is finding together as a co-operative, the other is individually hedging. They're both legitimate ways of managing risk, and we need to encourage all the ways possible of managing risk. On your point about carbon, we've worked extensively with the beef improvement group and the SRUC—not least at our own farm at Dumfries House down in Ayrshire—on feed conversion efficiency. Most of this work has been advanced in the beef field to date, but it would equally apply to the dairy field, and we need to get better at applying to the dairy field. Different cattle genetics, different diets yield different feed conversion efficiency in terms of turning intake of feed into, in our studies case, beef, but also milk. We're finding quite significant differences between different groups within similar populations of cattle of the same breed of the same age. We can get differences of up to 20 per cent to the amount of feed required to produce the same amount of output. That equates almost exactly to carbon output too, so through better breeding, through better feeding, there is an ability to reduce the emissions from the bovine population of this country significantly, and it's an area where we need to concentrate our efforts, its feed conversion efficiency, across the national herd. Now that you trade off, we saw something in the press about island farmers who are producing milk. How do you trade off the distance? I think your new big processing plant, you said it was in Aylesbury. How do you trade off the carbon impacts there versus the low-carbon terms of production on an island? There is a trade-off, as you say. A more efficient plant is in itself more efficient, because it bottles every bottle for a lower carbon footprint. However, you've got to offset the transport distance. I'm sure we could get figures for that for you, but I don't have them to hand at the moment. However, in terms of your point about the highlands and islands, one of our major suppliers of cheese is Lactalis McClellan. They're based in Strann Rai, in one of Mr Ferguson's constituency. The plant there, which is supplied by all of the South West of Scotland, produces more than half of the cheese that we sell in the whole of Morrison's UK-wide. It is a huge contributor to our cheese sales and is a major category for us, and that's drawing from the area that you refer to. How do you measure the impact of the resilience and efficiency advice that you've given farmers? If you measure it, can you give us some idea of what that's showing? We see quite clear trends in terms of decline in carbon footprint. If I just use that as a proxy for efficiency, as productivity has risen, I think to be fair, a lot of it was driven less by our attention to carbon footprint, but the increased cost of artificial fertiliser, nitrogenous fertiliser. However, we've done a review report. If that would be helpful to the committee, I'll send that and it'll show you quite clearly where some of the results that we've been able to achieve. That's very helpful. Scottish produce, Mike Russell? Yes. You mentioned first milk in passing. I just want to push an issue that came from our evidence session last week and expand on it a little. Quite clearly, first milk doesn't have any liquid knock contracts with either of you, but first milk does produce a variety of products, one of which is produced in my own constituency in Camelton, Mullip, Contire, Chedder. I think by common consent, first milk's been pretty poor at pushing that product, but the supermarket's been pretty poor at selling it as well. Now, the success of the dairy farm industry in my constituency is dependent upon the success of the Camelton Creamery. Camelton Creamery needs substantial additional investment to make it truly competitive, but the Mullip, Contire product is a premium product that can sell well and when pushed in supermarkets can be extremely attractive. But if you look at the cheese market, the butter market, the yoghurt market, those markets are dominated in Scotland by products that are not made in Scotland. How can you play a more influential and more direct role in ensuring the health of the Scottish dairy industry? Because if you don't do that, if you aren't promoting products made in Scotland, then you are not deliberately, of course, but accidentally contributing to the decline of the Scottish dairy industry. We have a dedicated Scottish sourcing team whose job it is to put Scottish products onto the shelves, and that doesn't need to be an enormous nationwide quantity. We can do it by one product, by one store. The facility is there available to do that. I would say it's one of the things we want to have happen. We need to have innovation, we need to have new products to meet the continually changing demand of the customer. We've also tied in with Scotland Food and Drink, Scottish Food and Drink. We have an academy, Supplier Academy, which we ran last in 2013. We had six new dairy suppliers on that, and their average sales to date have been increased by 300%. So, right, when we get the right products in the right place for the right customers, then the sales are there. That's one of the things we're committed to doing. What is your best selling cheese in Scotland, cheddar? It will be mild cheddar across the country that's mild cheddar, but we produce— But not manufactured in Scotland? Yeah, it's produced at the Lockerby site, the Arla Lockerby site, which not only produces that, but it also, in the same way that Andrew talks about, uses 50 million litres of Scottish milk to produce cheddar to go into England. What's your best selling butter? Well, you do have some very large brands. Learpack is an incredibly strong brand with a great customer reputation, but one of the fastest growing lines, for example, is the new Graeum spreadable butter, which we're stopping. So, you are sighted on the need to increase those products? We will put the products in the line. At the end of the day, I was the milk buyer over one stage. I had some great products, which unfortunately nobody bought. It still rankles that bubble gum flavoured milk didn't win. Well, I don't think we're producing in Campbellton, but it's a thought. Andrew? Well, you will not talk a little bit about the Scottish lines that we're introducing with our new deal with Graeums, but the premise of your question has been not selling enough Scottish product. All of our cheddar, except a very small bit of mild cheddar, which is made in Wales, all of our cheddars come from our single biggest cheese contract, which is Bactalis McClelland. With the exception of the small volume that comes from Wales, all of our cheddars across the UK and a great deal of our other territory or cheeses are all made in Stranraer, in Scotland, from Scottish milk. Scotland has a waders proportionate share of our cheese sales relative to its size in the UK. It's producing more than half of all the cheese that we sell, despite having what, 10 per cent of the population, you'll know better than me. Equally, under our Arla contract, all the liquid milk that's sold here is from Scottish dairies as well. In addition to that, we've just done a deal with Graeums, which you and I can give a bit more flavour of. So absolutely to pick up on that first deal on liquid milk. As part of our tendering process, obviously we renewed Arla and Dairy Quest, but we took tenders from nine main companies, one of which was Graeums. I know you heard from Robert Graeum last week. If you've looked at the small print you'll see in today's Scotsman and Herald that we've announced that Graeums will be supplying their own brand milk and butter throughout our Scottish estate, they'll be supplying one of their own brand milks throughout our entire UK estate, about 500 stores or so. So that's a recognition that when a Scottish company puts a really good proposition together where they've got the right support mechanisms in place and the right branding and demand for the product, that absolutely we can see a demand for it. And I think Mr Russell's absolutely right. I would also like to reassure him that Mull of Kintyre cheddar is sold in Morrison stores. I checked it at our South Giles store yesterday afternoon to be certain, so we stock that throughout it. We also stock Campbelltown in our deli section as well alongside Locrian cheese, Lockerby and Orkney cheddars as well as the kind of specialist Scottish lines. In terms of butter, the majority of our Scottish stalls have Rowan Glen butter, we also take the Rowan Glen yogurt as well which is Newton's Stuart I believe that's manufactured, and as Andrew's explained, most of our cheddar throughout the UK comes from Scotland. In Scotland specifically we brand our mild and mature cheddar as Scottish mild and Scottish mature cheddar because we recognise in Scotland that there is a demand and recognition of that product. That doesn't yet exist beyond Scotland in a way that it does in other lines. Obviously we see Scottish beef, we are, and this Morrison's Isle looks like Murrayfield on a busy day with the amount of salt isles we put on our beef section. We don't see the same demand and desire in those areas yet. That's again something that the industry probably needs to look at and I know that James Withers spoke quite effectively about that last week to you. Graham Day in a supplementary first of all. Yes, if I may convener, just in the interest of balance, we're exploring with you gentlemen today what you do to promote Scottish dairy products. Are there any barriers that you encounter to successfully or better promoting Scottish dairy products and please feel free to be candid with us? Well I think, and James Withers has already been mentioned, I think being able to plug into innovation and again I'm applying broad brush strokes here but because of the level of self-sufficiency which the UK was left with in the introduction of quotas through the European Union we've never had quite the same impetus that other major dairy exporting countries have had to do different things with milk and I think that's one of the things where we see a crying need, what else can we add value to milk by and I think we do need to be slightly bold and it can't just be around region and origin which I get is important but also it only goes so far. Ultimately we didn't if you can remember the bio health drinks which came out we really weren't part of that when that came around within the British and Scottish and UK industry and I think we just need to see a greater development push and strategic vision about doing that. Point, I mean innovation in processing for some new and growing sectors, children's yogurts, dairy based desserts etc most of that innovation is coming from overseas companies often with overseas produced product it'll be great for the UK industry to have the confidence to invest in and innovate in that way. Now confidence is difficult when we talk about the volatility levels that we've had I mean you see the Irish have a very ambitious strategy I see the NFU put forward an ambitious strategy for growing the dairy production in the UK particularly in England and they've had it thrown back in their face which I feel very sorry for them as though as though the small increase in UK production that they advocated was somehow responsible for the price collapse we've seen it's just not it's a global phenomenon prices have collapsed across the world it's nothing to do with the NFU encouraging greater production so we do need confidence so we need a national strategy for dairy and we need that investment but how on earth do you do that and we've had such a seesaw in prices so that's the big inhibitor okay thank you and if I may move on to my question can you know do you gentlemen think that promotional initiatives such as year of food and drink work do you buy into these sort of promotional initiatives and if so what will you specifically be doing in 2015 as part a year of food and drink and where might say Scottish cheese fit within that in terms of years of food and drink we've certainly always are in conversation with the Scottish Government on this we have a very good relationship with the food and drink team as specific areas we tend to look at the product lines and things that we're particularly committed to we've got a good area on I know that certainly as we've kind of mentioned once or twice red meat beef and lamb because we work directly with farmers we manufacture in Scotland that's an area that we're quite able to get behind but that's you have to be absolutely straightforward it aligns of our interests we're very happy to promote Scotland and promote Scottish products when they're strong but other areas which are are less relevant are probably going to be less of focus in terms of our our approach it's also certainly from our perspective from Morrison's we tend to look on our our kind of scale approach to most issues as UK wide that's the the market we work in so that's why when we talk about sort of milk and cheese we'll say we're 100% British we're 80% British on cheese 100% British on liquid milk because that's the the scale level we're working in and we're happy to work on a Scottish level but sometimes it's a case of you know reconciling at a quite a central team in Yorkshire with you know what exactly Scotland wants to do that certainly at every new year we're looking at and we're looking to do more in. Well the genetic advertising is always always interesting topics I think generally has a good record it raises awareness we're happy to support it we're 100% Scottish cheese 100% Scottish milk and Scottish cream so anything which drives the customer's appreciation for the quality of those products and hence improve sales will be something that we are interested in supporting. And if I mean what sort of feed-in do you have to initiative such as these do you have any sort of input to at all? Well to be fair it's food and drinks strategy so we have close relations with them and hope that our views are taken account of but ultimately if you want to challenge their strategy I suggest you get Mr Withers back. I'm looking to suggest that the point I'm trying to make is does the retail sector have any input into suggesting initiatives at any stage and would you welcome such an opportunity? So from our perspective and our relationships both of the government's food and drink team and it's less relevant for us we're not members of Scotland's food and drink at the moment although I believe others are but we certainly have as I say opportunities on a regular basis to meet with people from the food and drink team we meet at least annually if not more often with Mr Lockhead to be honest and he's always very robust on talking about Scotland and what's there and really keen to listen to our views to help promote Scottish produce and I think that that's a very good relationship we have there. We're very fortunate with that I would say. Thank you. And good morning everybody. Just a couple of lines regarding more of the dairy products rather than the milk itself, cheeses and yoghurt just wondering for yourselves as supermarkets how you determine which products get prominent shelf space what is the criteria for that? In principle it's the products which people want to buy we can't afford to have any passengers on the shelves and the chiller area in a retail store is one of the busiest high sales densities that we have so every product which is on there is having to justify itself at a very high level. I mean it as a sort of practice that sort of commercial pressure if you like is common across the retail sector so my answer wouldn't differ from Chris's answer that. Okay therefore just following up on that we've heard that some supermarkets request payment for prominent shelf space and even payments to actually tender even before they know that they've got the contracts that's obviously very difficult or would be very difficult for small producers is this something either of yourself the supermarkets do or have done? So there's no listing fees at all for the Scottish products coming in only through the regional team so the small medium-sized enterprises who are supplying those products they do not have listing fees. Is this perhaps evidence from the past from yourselves or? No we've never charged listing fees for those products. Never charged listing fees and for those products. Okay for those products and right to tender is just maybe something slightly different? No. No. So taking a step back two thirds of the cheese we sell is under our own brand okay so that's Morrison's packaging as I said majority made in Scotland so one third is branded and it depends on those brands there are big robust brands who deliberately invest in that brand so it has high consumer recognition and they bring with them when they ask us to list them a package of support to help us sell that product to help get its name more widely recognised. Now if we're talking about the very small speciality cheeses of which some of the island products you've mentioned that wouldn't apply to those very small brands where they're part of a regional or national offering from relatively small companies but as the companies get bigger they deliberately want to invest in their brand and they do an range of things to invest in that brand to help us sell it for them to increase consumer recognition of that brand. And part of that range would be actually paying to have shelf space and paying to have it or and or? I don't know I can get you a categorical answer on that. Certainly at the smaller end of the S&E's that Chris refers to it wouldn't apply for the bigger brands I don't know the detail but I can get it for you. Okay that would be helpful if you could tell us. A supplementary from Graham Day. Yes just to help informer this process I'm wondering if there have been any sort of changing pattern and demand over the last three four years with these difficult economic times that we're in are you seeing your customers moving to the cheaper type of cheeses or is the more niche market holding up? Certainly when the chedders were hitting seven pounds of kilo there was price resistance it was very subtle because actually what we detected was an increase in the spreadable cheeses you know the little pots that the sales of those rose and when we sort of dig slightly deeper into it it's because the customer recognised there'd been no waste you know that bit of hard clingwrap cheese at the back of the fridge wouldn't be encountered because they can scrape everything out. The market moves in very say very clever, disafined ways and in this instance the customers have moved to those products before we did and may then have to or then we responded by increasing the range of those products. It's certainly worth acknowledging though in a broader sense that we've seen you know price sensitivity being incredibly important to customers in recent years and certainly the kind of way the grocery market has changed is absolutely astonishing and a sort of pace of change is phenomenal and certainly up our response has been to respond by by lowering prices across the board we think that's the right approach. We're seeing that you know it's become very very competitive on retail prices amongst retailers and as we're also very competitive on price as well so it's there is a wider story there about people looking around people being more sensitive looking perhaps at shopping at different grocers trying to find the right approach so I would be I don't have a specific data set I'd be very surprised if the dairy sector was immune to that with all caveats about premium products. The only thing I'd add is not really related necessarily to price and the economic environment but they've seen a huge growth in as Chris said spreadable cheese products which often have less specific origin if I can put it that way some of the branded products and also salad cheeses very fashionable and often imported the fetters etc so there may be a UK type salad cheeses that could be developed and that is a niche that is probably underexploited at the moment certainly a growth area. Okay thank you. Just very quickly you've been it's probably worth noting that Scotland trades in dairy products relative to other parts of the UK. Okay okay thank you and you're finished Jim yeah right. We've been on to the grocery code adjudicator Angus McDonald's. Thank you sir. The grocery code adjudicator has already been mentioned this morning albeit briefly. Now the panel will be aware that the effort committee at Westminster published recommended changes to the remit of the GCA as recently as the 20th of January including that the government should consider how the remit can be extended to incorporate suppliers throughout the supply chain. Also that the GCA should be able to accept complaints from indirect as well as direct suppliers and that the adjudicator should have the power to launch proactive investigations as well as to respond to complaints and also I believe the issue of a issuing fines has also been suggested. Has the establishment of the groceries code adjudicator had any impact on your operations since the post was created in June 2013 and if there is to be a change to the remit of the GCA as it seems likely how would that affect your operation and how you source dairy products including liquid milk. So in terms of change of operation then everybody who comes under its remit has to be trained every year records kept and reported upon and we now have chief compliance officers and similarly other retailers who are governed under the code do so there's a complete structure of how that is complied with the code is complied with. I have to confess I struggle I don't know how people are going to be I know people have suggested that remit is extended I'm not quite sure how that would operate given the fragmented nature of the industry I think Andrew's already presented the numbers even as does milk is less than five percent of total Scottish milk production it doesn't cover the code doesn't cover caterers public procurement may I say wouldn't come under it so there are still lots of other players in the milk market who would come under its remit and I'm not quite sure how any extension would be able to thoroughly operate and the costs may yet be quite large because they are borne by those who are covered by the code. Chris has made a lot of valid points so we we too have a specific title but personally looks after our relationship with the code ensures internal compliance and it's not me and welcome to speak to him I'm sure but I think often people stretch out for the the groceries code adjudicator as a way of looking for a solution to what we all see is a is a big problem in the dairy industry right now they're scratching around for what we can do with stakeholders as politicians. I've already said that really my belief is that to have stronger cooperatives yes and also abilities for farmers to hedge forward to protect themselves and volatility is the right way forward if the grocery code adjudicators role is strengthened in some way how far up the chain do they go and are you seriously suggesting the interfere in the price negotiations maybe the structure of the contract at some point but the price negotiation is a private area and nobody can regulate that to the extent that I think people want so I'm in favour of market-based solutions to remove volatility I can't see the best will in the world the adjudicator stretching into its tentacles into all those areas where you think it might be able to produce a solution I don't think it can. Okay thanks well we'll obviously have the opportunity to explore that further we'll see adjudicator tomorrow thank you. Moving on to wider fields Claudia Beamish right thank you convener good morning I'd like to turn our minds towards the interventions that you would like to see or particular action taken by Scottish or UK government or at the EU level to address current issues in the dairy sector there's obviously been discussion about the intervention price for milk and I we're all aware that that's a complex issue in relation to what that price actually relates to but any comments on that would be valued by the committee and also any anything about any planning problems that you perceive as as the industry at any level facing for investment in processing promoting export opportunities or whatever so at any level of government really let's not miss out local authority either one aspect if I may and Andrew's already quite rightly raised the issue of volatility and fully enough the I'm sure if the committee is aware but the global dairy trade auction last night jumped by 9% and whole milk powder jumped by nearly 20% so I think as government intervention has been withdrawn and we all hope that the commission is right and we have a soft landing in the milk market this year and when quotas are abolished I suspect that that might not be the case and that we are facing into increased volatility I think there are things which can be done at the taxation level I'm certainly inclined to support those that suggest that income is smoothed though there are longer period it's very difficult for farmers to manage their tax affairs on a on a two-year smoothing and maybe a five-year smoothing would enable them to be able to adapt to the changes and fluctuations in the marketplace so it's a very broad question I think the point about HMRC tax smoothing is a very good one come back to hedging that would also help in that regard the EU intervention level as I understand it does still theoretically exist but not till we get down to something like 17p so approximately don't quote me that's my understanding as well yeah so you know in in the I mean thank god we're not there yet and I really hope we never get to those sort of levels so you know the era of massive EU level intervention in the dairy markets you know it feels like it's coming to a close that EU simply can't afford that those sorts of measures anymore so I reiterate we need to look at market based mechanisms from the management of risk I'll think more on your question and think if I can think of anything else rather to contribute or we will do in but never does as a very small final point on planning and local authorities we don't obviously speak specifically about the challenges that dairy producers face but I can assure you we find the planning regime to be astonishingly complex to work with at times from a wider retail perspective is that particularly related to Scottish local authorities or to local authorities in general I won't comment on that well it's all right you know because we might well have the same view thank you very much gentlemen that's been most helpful to us you were amongst the first to volunteer to come along here and enlighten us about your view on these things as we investigate this further I've no doubt we may come back and ask you some other questions but if you're open to that we'd be pleased and of course you've offered to give us bits and pieces of extra detail just now that have arisen during the previous session so thank you very much witnesses we're going to suspend now for five minutes before our second panel comes in thank you start again just now so we hear our second panel as part of our consideration of the dairy industry this morning and introduce the themselves frequent visitors here welcome to Richard Lochhead cabinet secretary for rural affairs food and environment and Frank Strang deputy director food drink and rural communities division of the Scottish government did you want to say something first of all or are you just happy for us to ask you some questions is that an invitation convener I'm glad to be here I'm happy to say a few words at the beginning I would like to perhaps just set the scene slightly so thank you for the opportunity and firstly allow me as cabinet secretary to congratulate the committee on instigating this inquiry into milk prices in the dairy sector we all know it's sectors facing some challenges at the moment and it's good to to air some of those issues and challenges at this time global production has been high due to both investment in good weather and we know that demand for importers has also been particularly weak and much weaker than expected particularly in certain markets such as china so many of the issues facing the dairy sector in scotland and beyond at the moment are clearly influenced by those global sectors however in scotland i've spent a lot of efforts and the government spent a lot of resources in the last couple of years putting together our ambition 2025 proposals which came out of our dairy review that we carried out a year or two ago so whilst i recognise there are some domestic issues that certainly you're looking at as a committee quite rightly and there are global issues that perhaps we've limited influence over but we certainly have to be aware of i think it's important that the scottish government says on the record that we feel very optimistic about the long-term future of the dairy sector in scotland and it's really important whilst we address some of those short term and medium term issues which are very serious issues and we're taking action to help address those that we don't take our eye off the ball in terms of our current strategy to realise the long term benefits that are there for scotland's economy and the dairy sector in this country so i guess it's a twin prong approach at the moment trying to help address some of those short term challenges but not being distracted from our longer term strategy because this is a sector which is highly skilled makes fantastic products and has a big future i am at the moment working on a number of measures i perhaps just touched upon a couple of those it is my intention to publish a plan in the foreseeable future i had thought about doing it before this committee appearance however given that we have a parliamentary inquiry into milk prices in the dairy sector i thought perhaps given i want to understand what you feel perhaps are some of the solutions for moving forward and given that there's a number of proposals we're still working on at government level that i'll just wait a few more days before we publish that plan but i'm happy to discuss individual proposals that are within that today and to give you some quick examples some of the exciting initiatives in the pipeline include the development of a scottish dairy brand which will be launched at the inuga food fair in october that i think is going to be an exciting development to the dairy sector in scotland we're also at the moment taking some active steps to encourage investment to new processing capacity enhancing the volume and diversity of what scotland's got to offer in the dairy sector we're also using the range of levers we do have available to spread best practice in the dairy farming community and finally we are looking at tailored well co-ordinated support to first milk in particular to allow it to make the necessary adjustments to thrive in the more short to medium term as well that's just some examples of some of the issues we're working on at the moment i will bring all of them and others together and also reflect on what your committee says and publish a plan in the next couple of weeks which will hopefully communicate exactly what's happening to the wider dairy community in the country thank you cabinet secretary we've covered to some extent the global factors which you mentioned at the beginning of your remarks and the influence of global factors on the market but we can see for example from supermarket evidence that there's a very small impact that even large supermarkets in the UK have on the overall price and fluctuations that occur so when we're talking about that focusing on scotland what kinds of influences does this world market have on the product that we can make in our small way well that question very much gets the heart of where i think the future dairy strategy should be heading in scotland because it's certainly the case that we clearly are not immune to global factors as i outline in my opening remarks i know that you've heard from many witnesses and they are chewing over the long term projected growth is substantial across the world for dairy produce so that means the commodity prices will no doubt rise in the years ahead however commodity prices are volatile as we're experiencing just now and because our dairy production in this country is exposed to commodity prices therefore it has an impact on the prices that farmers receive for their produce so clearly my view in terms of securing a better future for dairy in this country is to be more sheltered from the volatility of global commodity prices but also at the same time take advantage of the fact that demand for dairy produce is expected to substantially grow across the world which of course brings major export opportunities for scotland at the moment clearly our reliance on liquid milk and the fact that much of our produce goes into commodity markets because it's not capturing added value on each markets brings that impact of the global prices on scottish producers so the dairy strategy we have in scotland with the ambition 2025 is clearly to add value to the primary product and to capture new markets and these new markets tend to be more valuable than some of our domestic liquid milk markets so we shouldn't have all our eggs in one basket forgive the pun we have to not just have liquid milk we have to add value to the primary product and capture some high value markets and that will help shelter us in this country from some of these global factors it's interesting we've got comparative figures compiled by dairy UK from defra scottish government welsh and northern irish governments which show farm business income for dairy products from 2006 to 2013 and in scotland the figures tend to be lower than those for england indeed there's been a rise you could say in england it's been greater than the rise there's been in scotland there's fluctuations we can see in it but there seems to be a particular crisis at the moment in the last couple of years for scotland well i guess that just reiterated some of the points i was just making perhaps my previous answer to you which is that scotland's perhaps too exposed to the commodity markets and you know we do have plants in this country which are sending a proportion of its produce to premium markets but far too much of its output to the commodity markets and therefore if that's more of the case in scotland that is in the rest of the UK then clearly that's going to be reflected in these statistics fine i think it's well worth having some of these in the record because it kind of points up the problems that we're facing particularly. Jim Hume wants to ask a question now. Thank you and good morning cabinet secretary you mentioned that you know there was a weak demand from china but there is still growth in the china market i believe there's figures that in the word last week was there's still a 2 growth albeit that a little less than the 10 growth when it was higher but growth nonetheless and if you look to new zealand there's been a tremendous growth in the dairy industry there all mainly focused at southeast asia including china now obviously new zealand's quite a small place quite some distance from from china and i think the last last notes that i saw it's worth about 8 billion pounds or 16 billion new zealand dollars the dairy industry to new zealand so i wonder with that in mind what do you think the opportunities are here what do we need to change regards in dairy farming so that we can you know perhaps meet that and and become more resilient to the dairy industry again in terms of the dairy review we carried out a couple of years ago and now we have the dairy growth board which is chaired by paul grants of macaïs jams and that was because we wanted him to transfer his experience and expertise from his very successful company that's made massive inroads into export markets to the dairy sector and clearly other countries are ahead of the game in that regard and you've mentioned quite rightly new zealand now new zealand is not scotland it has devoted a huge focus to dairy in the last few years and really swung its production patterns round from other sectors to dairy and focused on the chinese markets and clearly that appears to be paying dividends for new zealand so it's focused very much on export markets and the growing export markets in terms of chinese scotland is needing to catch up and again we i believe are beginning to put into place the building blocks to try and get similar success for scotland so you know paul grant in particular i don't know if he's giving evidence to the committee if not it would have been worthwhile hearing from paul grants he's steeped in dairy issues just now which for a for a jam man he's you know suddenly becoming an expert in dairy so he is looking at all these opportunities for scotland to really make its mark in international markets for dairy exports okay sorry i just add to that i mean i think that one thing to remember is dairy is part of a successful scotland food and drink generally sector and with a with a great reputation and i'm thinking of 11 months ago we launched an export plan for food and drink for scotland and we've got newly appointed experts in market in japan in canada another priority markets around the world so they will be as a priority looking at dairy and we have those people in place and the other thing to say is the other important strand is showcasing to overseas buyers what we are able to do so the the cabinet sector alluded to a scotland brand to be launched in october in anuga they'll be preceded by a showcasing scotland event when we get overseas buyers to come here and again we shall be prioritising dairy in the things that we do okay thank you very much i wonder i just the subject of new zealand came up and i just wonder if the cabinet secretary agreed with me that we're not entirely comparing like we'd like if we compare the scotland dairy industry with new zealand's and i partly think that i mean we will never catch up with new zealand if i don't like that phrase particularly but given the fact that new zealand has a climate that means they don't have to house their dairy cows for six months of the year many of them aren't housed at all you know on a cost reduction basis alone we're not doing ourselves any favours in making that comparisons i'm sure there are lessons to be learned from the new zealand dairy sector but i wonder if you'd agree with me that we don't just want to be trying to copy everything that's done in new zealand because the fact is of milk production are very different i do agree with alec ferguson i do agree with you and i was careful to say scotland is not new zealand when i was referring to jim james question and clearly there are upsides and downsides to all these strategies and i don't think the picture in new zealand is all rosy and there are environmental considerations to be taken to account with the intense focus on one sector in new zealand at the moment in particular some people tell me so i think we have to have a balanced approach in scotland's not new zealand so we're starting from a completely different place and our industry's different uh feel accept that um robert graham said to us that you know whilst talking about exports is interesting we have to win as in football the home game first uh and with that in view uh mic russell wants to talk about uh some matters to do with first milk that are important here cabinet secretary i was interested in what you said about the action plan you you presaged that in the meeting we had with you had with contire and butte farmers two weeks ago in terms of the action plan i think my own constituents will be looking for two things one is a series of actions that will guarantee the future of the creamery in cambleton and i'll come on to that in a moment but the second one is a medium term plan medium to long term plan that will give the producers a reason for staying in the business and i think all of the actions will be judged by those two criteria within my own constituency things that will give a continuity to activity and also ensure that there's a continuity to what they're trying to do i wonder if the scolish government has thought any further about what it can do to secure the dairy industry in the remote parts of scotland and particularly in contire and in butte and in aron which must be seen as the most marginal parts of the scolish dairy industry and therefore the most vulnerable to the price fluctuations that are taking place i'm sure mr russell will welcome the fact that when i was at the european council the week before last i ensured that the uk raised the dairy issue during the council ministers debate on the russian food import ban and one issue i managed to get raised at council was the specific impact that the current issues are having on island communities in scotland so they're actually mentioned at the council at scotland's request and in terms of cambleton in the moth contire i believe that cambleton have a really bright future i think it's got a lot going for us and that's why the scolish government is keen to work with first milk on the future of the cambleton creamery as a committee will be aware i've been involved in this issue for several years working with the company and we have made grants available that can be called down for modernising and adapting the plant for the future and we continue to make those offers to the company and there's some good conversations taking place at the moment between first milk and scottish government over the the future of cambleton and the upgrade that's required there but it's quite correct to say there are of course additional challenges for the dairy sector on our islands and i think there's one or two answers to your question firstly there's the fact that we have a fantastic marketing opportunity for island and more rural communities but it's a moth contire whether it's but and that can help us target niche markets and for instance moth contire cheddar is a top quality premium product and we can use the image and the reputation of rural scotland and our island communities to help sell that into overseas markets and i think that's a big opportunities and i'm told that you can get three times the return for a packet of cheese being sold overseas than what you can get in our supermarkets here in this country three times therefore there's a fantastic opportunity for cambleton to find niche markets overseas in terms of day to day support from the government well we do take into account the additional pressures facing our more rural and island communities in terms of primary production that's reflected in some of our support mechanisms through the the common agricultural policy particularly ELFAS and our wider rural development programme clearly has some schemes within there to to help our island and more rural communities i am aware there are some issues that michael russell has raised in relation to transport costs and other costs i am feeding them in to the current review of ferry fares that the government's carrying out so while i'm not in the position to see where that will go i think it's important that that's part of that debate moving forward and again you know i open i remain open to any other ideas the committee may have can i can i just press you on some of those points because i think they are important i mean you're absolutely right about the premium on moth contire cheddar 5000 pounds a tonne from moth contire cheddar as opposed to something around 3000 perhaps even less a tonne for what might call bog standard cheddar but the figures are pretty stark in terms of the quantity last year only 240 tons of moth contire cheddar were exported and that's out of a production of the creamery of 3200 tons so that's less than 10% well under 10% goes into that premium product another 1200 tons of moth contire cheddar may have been produced but the creamery lost a substantial sum of money now there appeared to be eight areas in which action could be taken some of which would help the wider first milk community and some of which would work help rural scott in particular very briefly if i might just to touch very briefly on these because they're important the first one is the investment in the creamery you indicate that you know discussions are continuing i know that first milk regarded as crucial although those discussions come to a satisfactory conclusion so that they have started on the investment and they can continue with it secondly frank mentioned the in-market export resource there is a need for a dedicated in-market export resource for dairy products particularly in north america even for a short period of time sdi has been very helpful but there's need for more there is need for a very big marketing push and i'm very pleased to hear about the scottish a scottish brand that needs to tie together brands such as moth contire and others and not stand in their place keeping producers in the market is absolutely essential and if you know particularly in bute as we heard last week where any producer who leaves the market would increase the transport cost for others so anything can be done in transportation other costs with urgency to keep the producers in the market examination there was a meeting in mull of contire two weeks ago about possible long term solutions i think first milk will be open to partnership arrangements and of course the orcony solution is an interesting one in terms of the participation of local authority or hie in upgrading the premises and perhaps operating them in a different way there are legacy pension liabilities that first milk carries which it carries on from a the former milk marketing board is they're not massive but they might be the opportunity for a cash injection the company of those could be taken elsewhere there are issues about the size of first milk and whether it needs to work more accurately more more constructively with other and larger producers and finally you will be familiar with the Irish investment in research and development in the last 10 days where there's been a very substantial investment in research and development in the dairy industry looking around the Scottish industry with the exception of the work that SRUC has done there doesn't seem to be any substantial research and development or new product development and we heard about that this morning from the retail sector that all the innovation in product in the dairy sector is coming from outside outside the UK those are all possible areas where there could be some action taken and I just wonder if you will consider those as part of some of the issues for the dairy plan well there's a number of useful points made there and I'm aware of some of them and not all of them so we'll take those issues away in relation to first milk's future some may be appropriate for Scottish Government intervention some may not be quite as appropriate for Scottish Government intervention so clearly we'd have to consider each one in its merits a couple of quick comments firstly I think you've highlighted the opportunity for the Campbellton Creamery in particular to capture more export markets and we have made an offer to first milk to lend advice and expertise in order to access new markets overseas I've already spoken to the chief executive of Scottish Development International about giving an extra focus in international markets to dairy products and we also have to be conscious of course that we have a fantastic company which is innovative ambitious and exactly what we want to see in Scotland in the form of Graeums and they are making a success for domestic market so ironically some companies may take the view that you have to export to be successful whereas Graeums are showing you can be very successful in the domestic market so we have to do both and we have examples of how both can be successful so clearly for any dairy company to be really successful they have to make a success of the home market but also capture new export markets I would suggest so I think there's lots of opportunities for first milk there and in some of the issues you've mentioned we're already pursuing I've given a couple of examples I'd also say the dairy growth board would be the ideal vehicle for taking forward one or two ideas particularly the research and development aspect and for them to look into that and that's partly their role because research and development will be key to the growth of the dairy sector in Scotland in the years ahead so I think again Paul Grant's a chair of the dairy growth board would be really helpful for either members on an individual basis because Paul Grant's very familiar with the situation at first milk or in terms of the context of the committee to speak to the dairy growth board and Paul Grant about some of those issues Graeum Day has got a supplementary in that and Dave Thomson has as well so I think this one fits in Thank you very much and good morning Cabinet Secretary just picking up on the reference there to Graeums and this work that they're doing domestically last week Robert Graeum expressed some frustration at the fact that 85 per cent of the spreadable butter that's sold in Scotland is imported I think from Denmark I think he highlighted that in an area that we should be looking to do something about we also heard earlier today from Morrison's that there's a growth in salad cheeses and they're all that demand has been satisfied from outside Scotland what can we do to tap into the the butter market and our salad cheese is an area that we should be looking to encourage expansion into so that we're meeting that need domestically well let's be frank here it is pretty unacceptable that if you go into our retailers in Scotland you find the biggest selling yogurt is produced outside of Scotland the biggest butter sold is produced outside of Scotland and the best selling cheeses are produced outside of Scotland as well I would find it surprising if you went into Italy or France or perhaps Denmark or some other countries in the world and found a similar situation where the major retailers in those countries were selling foreign products as our number one sellers I am fed up with going into Scottish retailers and seeing foreign cheeses emblazoned in front of your eyes at the end of aisle promotions so we need more of that energy and activity from our retailers to display you know loyalty towards our homegrown producers in this country as retailers in other countries show to their homegrown producers there have of course been examples of great progress from our retailers in Scotland sourcing more Scottish produce but I think when it comes to dairy products in particular there are other product products as well we could perhaps have more effort from our retailers to promote homegrown produce in their Scottish stores we hope that our products are going to be in stores the rest of the UK and Graham's is a fantastic example that is expanding into others UK stores we're not expecting Scottish produce to be the best sellers in other UK stores but in Scottish stores I think there's an expectation that extra special effort would be possible by our retailers to get us to a position where hopefully some years down the line because the products have got to be available in the first place that the best selling butter in Scotland is a Scottish butter the best selling cheese in Scotland is a Scottish cheese and the best selling yogurts in Scotland are Scottish yogurts and I think that's possible because we've got the companies who could develop those products and get them onto the marketplace but we need the retailers to hopefully give a bit more effort to ensuring their best sellers in Scotland are from Scotland just as in other countries the best sellers quite often not always but quite often are from their own countries so I think the retailers have a quite a lot of influence here and hopefully we can work with the retailers in times ahead to get more Scottish produce onto Scottish shelves okay Dave Thompson and then Jim Hume thank you convener of the morning cabinet secretary just a point it's not directly in your your gift to you know give us an answer to this in the sense I've been able to take any direct action on it but there are two witnesses earlier on this morning from asda and morrisons both mentioned smoothing in terms of the tax regime and indicated that farmers would benefit from a five-year smoothing rather than a two-year smoothing which I presume is you know the period over which they have to to pay tax and this would help cash flow because obviously one of the big issues and the big problems here is to do with the fluctuations in price and so on and I would imagine that processors could probably benefit from a longer smoothing term as well now these are obviously HMRC matters it's the UK government but I just wonder if you would consider the comments they made this morning and consider maybe writing to the chancellor you know to advocate some kind of increased period for smoothing to help these businesses that are in a very volatile market to deal with their their prices over a longer period clearly in terms of some short term help for the sector that is one idea that's been put to the Scottish government and we have opened up a dialogue with the HMRC to convey our views that that should be looked at and I'll take on board your request that we perhaps follow up in writing to to UK ministers I did I'm sure we'd or here David Cameron the prime minister in his limited references to the various sector issues at the moment actually addressed that particular points that would appear that UK government are alert to it and hopefully considering it at the current time and of course I would urge them to be very sympathetic to that request. Jim Hume, thank you very much cabinet secretary it was more back to the point you were making to Graham Day about supermarkets doing more themselves to promote Scottish produce but we did here from as does the Morrison that you know some brands of butter is the public that are going in there that are what in those specific brands and I'm trying not to mention them here today but we can't shame the brands if they're doing very well in other countries but just going back to New Zealand which does have a brand of butter that sells very well here and of course lamb as well sells very well here sometimes not that it should but there the Gaxley was government that actually puts quite a lot of focus and funds I should say into marketing not just in their own area but abroad so therefore I just wonder if we got that balance right as a government by perhaps we should be focusing more on helping with the marketing in our own area and abroad well I can answer that question in the general sense in that with the food policy in Scotland we have made significant inroads over the last few years so the sales of Scottish brands across UK retailers not just Scottish has increased by around a third since 2007 and that's worth tens of millions of pounds to the Scottish food sector and most sectors will have benefited from that in some shape or form in terms of the Scottish brands clearly I am keen about what more we can do in this country to have more of a Scottish brand and we've already mentioned the fact that we're developing a Scottish dairy brand but all our products should benefit from coming under the umbrella of the Scottish food brand and we are working on some ideas about how we can take that to next level clearly we have to cooperate with all our levy bodies we've got several of them and we have begun to work closer together over the last few years and under the scotland food and drink umbrella so how we can make more of that opportunity of working together to develop a single brand overseas in particular a Scottish brand so that we don't just get a premium for our whisky our premium for our beef or salmon and perhaps some other products but we get a premium for the fact that all products that go into the international marketplace if they're Scottish and meet the quality standards they benefit from the Scottish brand so I think there are some opportunities there we're working at at the moment. Okay, thank you. Dave Thomson on a point to do. May I just very briefly I suppose just to say I'm conscious of the comment about the home game really matters but I think just to come back to the export plans as an example of resources going into promotion it's a really good model of collaboration in that it's about four and a bit million pounds of plan the export plan of which the government's putting in the vast majority but for the first time the sectors put their hands in their own pockets and it's a really good partnership developing on that and so we want to work on that model thinking of the UK market next so we're building on that model. That's good. Dave and then thank you again convener again we heard this morning cabinet secretary that certain producers bigger producers if they want to get their product into the supermarkets will actually put forward when negotiations are taking place in relation to price and so on a package of promotion of their products now this is obviously okay for larger producers who have got the cash to do that and that's maybe why you you see these shelf end promotions and all the rest of it they're actually funded by these larger producers so if we're going to increase the market share of the smaller ones who by definition aren't going to have the resources to to do that and to compete with that I just wonder if there's if you've given any consideration or will give some consideration to how support to the smaller producers when the brands could be provided otherwise given the nature of business and so on the larger producers are going to strike the best deal with the supermarkets and continue to hog the best places on on the shelves. We do have grants which assist companies in marketing I will double check as to whether exactly the kind of in store promotions you're speaking about qualify for the current grant systems it's a good I don't know the answer to that so I have to check that but you know we we have gone out of a way to give grants on marketing so I'll just double check I think it's a wider question I think the wider question is what has been refreshing in the last few years is our big retailers and in Scotland we have big retailers it's not always a case in European countries but in Scotland we're different because we've big retailers and we have seen some of them adopt policies to support local and that is good and I think consumers want to see that the evidence is leaving pay more for that so that's going the right direction more local sourcing but when it comes to in store promotions I do ask myself if the retailers accept there's a case for more local then of course they have it within their power to take a decision to promote more local and not necessarily rely on the suppliers paying the fees for end of aisle promotions the retailers could take a decision that the right thing to do in their stores in any one particular country is to give a bit of extra effort to promoting produce from that country in which the store is based and that's what happens in many countries and it's beginning to happen in Scotland but I think it's happening a lot more so yes in one hand we I think you know need to look at what supports available for suppliers to fund in store promotions but in other hand the retailers already to a certain extent promote local produce but there's a lot more of that then the supplier wouldn't have to pay for it Angus MacDonald okay that's a good morning cabinet secretary morning Mr Strang if I could perhaps touch on a ring fencing of milk quotas in in certain areas my colleague Mike Russell earlier referred to one of the areas currently a ring fence for milk quotas which is the is classed as the southern aisles which includes duragia aran bute great cumbria little cumbria the contired peninsula south of terbert and part of the cowl peninsula and I believe ornish also covered by ring fencing except the island of stronsie now ring fencing of quotas was clearly introduced in 1984 for good reasons and some areas of the islands have already been relieved of ring fencing for for some time so if if god forbid but but if for whatever reason producers in the southern aisles found their processors unable to take their milk would the government consider lifting ring fencing arrangements for the southern aisles and if necessary the orkney islands well I'd have to consider all the ramifications of going down that road clearly in terms of the quota system at european level that's been phased out so I'd have to understand the interaction between the ring fencing of quotan islands with the quota systems being phased out I think it does raise a good question in terms of the original motivation of ring fencing of quotas to protect islands and therefore the quota systems been phased out by default that's less relevant that measure therefore are there measures we should be looking at to give a bit of protection to island communities in terms of dairy production so I don't have a ready answer to that it's not something that's any stakeholder has raised with me so far from memory so I would have to take that away and consider it's okay okay thank you um the grocery code a judicator at creyham day I just want to cabinet secretary how you view the remit of the grocery code a judicator as it currently stands whether you feel the remit and the powers are fit for purpose in relation to the dairy industry and if not how would you wish to see these changed well it's good news that along last we have the judicator in place because the governments with the much cross party support and parliament lobbied the UK government to set it up in the first place for many many years and it took a long time to get the judicator we have now the the judicator in place and I heard a little bit of the evidence given to you by the retailers earlier on the difference it's making to their operations so it's slightly early days but I do think there are some areas I have some sympathy with the recommendations of the house of commons committee looked into this just in the last few weeks and made some recommendations so I have some sympathy for those recommendations I have sympathy for perhaps giving the regular that the judicator the right to be more proactive in terms of her investigations and also to perhaps take referrals from indirect sources for investigations as opposed to direct supplier affected it could be another organisation giving the referral for investigation so I do think these should be seriously looked at and I'd be sympathetic for expanding our powers in that regard I'm actually due to hopefully meet the judicator in the next few weeks and dairy will be on the agenda so I'm requesting to meet her and I'll be keen to have her feedback about her experience so far in the job there were of course some original concerns when the judicator was set up about perhaps the lack of penalties and clout the judicator has so that still remains a live issue should she have more powers in terms of enforcement and penalties and I guess the final part of the debate is should her powers be extended beyond retailers to other parts of the supply chain again I don't think we should rule that out but I do have some sympathy for some of the comments you hear from the retailers which is you know the commercial world is a very complex web and the judicator I guess to some extent has to be focused on what she's doing to make a difference so it'd be a bit low if suddenly you know expanding powers and not understanding what the unintended consequences are so I'm sympathetic to looking at how that could operate in other parts of the supply chain not just the retailers the code but clearly it could become so unfocused that you know it doesn't have any impact if we do that so I'd have to understand that better okay thank you to that Jim Mu. Thanks very much convener just on the grocery code the judicator we very much welcomed it of course it was part of the Lib Dem manifesto not that I want to get too too political but just to bring you up to date slightly Westminster just yesterday events cable laid powers down that the grocery code a judicator can actually find up to 1% of the turnover of specific supermarkets I wonder if that was something that the cabinet secretary welcomed in his colleagues would perhaps support oh yes clearly I support the judicator having penalties there's also debate as to whether 1% is the right figure but it's a start and I would say of course given the current climate and financial issues facing our large retailers I'm sure that will make them think twice but not behaving appropriately given that 1% of turnover these days is perhaps having more of an impact than what might have been a few years ago because of the tight margins that the retailers are now experiencing compared to before okay thanks I'm thinking about the voluntary code that's existed between producers and processors are you content with the way that this voluntary code is working in Scotland and whether you think changes to the code would help the current climate faced by the dairy industry in Scotland well I think it is quite challenging to understand to what extent the current issues being faced by the dairy sector in Scotland relate to the voluntary code being weaker otherwise because quite clearly as we discussed before there's there's European wide factors there's global factors and irrespective of what the voluntary code had been like these factors still be there so we can't say there's exact correlation between the weakness or otherwise of the code and what's happening just now clearly Alec Ferguson is one of your committee members sitting there much more expert in these issues than I am because he carried out the review of the voluntary code and I think Alec Ferguson made some valid points in his own report in that the voluntary code has had some positive impact and I clearly have some comments from Alec in his recommendations about how we could perhaps investigate other ways of tightening up some aspects of the code or extending it I think very much it's not always just for ministers to sit back and lay down the law in terms of voluntary code there's dialogue taking place between the farming unions and the processors and I think of what's important it's what emerges in these dialogues and then ministers can reflect upon that one issue I have raised in the past is should we be thinking about the retailers using the code in terms of who they give their contracts to so if players in the industry are not signed up to the codes should that be taken into account by the retailers I've not got a fixed view on that I think it's something that's worthy of debate because quite clearly there are some companies that argue that the code is not appropriate for them it's a voluntary code it's not a statute based code so I think we have to think carefully about going down that road but I think there are some debates to be had there and no doubt these debates will happen amongst the various stakeholders as they speak to each other and I reserve the right of course as minister to intervene in the future if we do feel there is a case for doing something differently would you agree that it seems to build up some more trust as a result of having the voluntary code between processors and producers well I think certainly the case that the producers are more empowered than what they were before through the voluntary code again that raises some debates as to some of the companies perhaps think that the the power given to the co-ops has put them at a disadvantage particularly given the current climate and dairy sector where the producers are able to have notice and the companies perhaps feel they can't react quickly enough to changing international prices so there's a whole range of factors in it that have to be considered but I do think that the primary producers have been more empowered by the voluntary codes we asked the supermarkets earlier you know if they thought that they should be included as retailers into the voluntary code and one of them suggested of course that there's a grocery code already and they didn't think it was particularly appropriate do you think that the extending the voluntary code to the actual retailers would be a good thing well what I think is that there are some issues with the retailers and the dairy sector and I think the first thing to do is identify those issues and then work out what's the best way of dealing with those issues is it the groceries code is a voluntary code what's the best way but I think there's some issues that we should perhaps draw out and maybe the committee is doing that as part of your deliberations so at the moment for instance it's quite murky to understand how all the contracts work within the dairy sector and the retailers so we can see tweets or comment from some of the retailers about the good deals they're giving the primary producers but of course it then transpires that only applies to some of the primary producers and some of the dairy farmers and those that are not in contracts are not within the supermarket pool don't get those prices and so it's all quite murky and I would like to see more of a light shined on those arrangements so we all understand not just what applies to milk but what applies to cheese and yogurts and the other products and not what just applies to those farmers who are in a select pool of suppliers to the retailer but also the retailers buying spot market milk and milk from wider commodity markets so what conditions apply to those suppliers in those markets so I think there's a case for shining more of a light on that and I think we have to give some thought as to whether it's the the grocery adjudicator or whether it's voluntary codes that perhaps shines that light. Mike Russell. You may have missed the evidence from Morrison's announcement that started this morning but there were considerable pains to say that they didn't set the price of milk it was done by processors and essentially they were far more interested in things like distribution costs than the actual price of milk. From what you're saying I think you're indicating you don't necessarily believe that that's the case that there are issues about the attitude of supermarkets towards the primary producers which require to be resolved. Well I think if we want fairness across the supply chain there are retailers of clearly doing very good things with some of their suppliers and I don't deny that for a second but if it transpires that's only a small proportion of their suppliers by definition it doesn't apply to the rest of their suppliers and therefore those standards those standards that are perhaps being met you know if it's in the public interest or the interests of fairness that all milk producers are getting a good deal and the retailers paying attention to the deal that all suppliers are getting then that will get us a better place. To be entirely accurate what they were saying this morning was that the price of milk was a matter for the processor not for themselves. I find that a surprising remark I found it surprising and this morning I still find it surprising presumably you would see a connection obviously between what the supermarkets are selling milk at and the price that the producers are getting. Well this takes us into a very interesting debate because it is a commercial world in which we live and quite clearly the retailer buys their milk off the processor or whoever and not necessarily direct to the producer albeit there are arrangements to make sure the producer gets a good price with some of the specific arrangements that some retailers have but saying that in other walks of life in the commercial world in this day and age we are not just looking at the immediate relationship between one part of the supply chain we're looking at the whole supply chain so in other words the ethical thing to do these days more than ever before is to look at the conditions of the workers for instance that you're contracting to but then you take it beyond that and ask your contractor to make sure that the subcontractors getting in good conditions as well and it goes right down the supply chain so the ethics of the modern day commercial world is not just between the retailer and the processor but we should be looking at right down this whole supply chain. Claudia Beamish Thank you convener, good morning cabinet secretary, good morning to you as well Mr Strang. I'd like us to explore a bit about the producer organisation model because in some member states as you'll know cabinet secretary these have been formed by dairy farmers and the EFRA report states that the UK government believes that forming a producer organisation could give dairy farmers and I quote again greater clout in the marketplace and I note from our information that we've received in relation to the dairy industry and the concerns that everyone has that the Scottish Government had an action plan in 2012 and that it was a five point dairy action plan and that the fifth one which I'll read out just to remind and for the record sought to ensure that the Scottish agricultural organisation society commonly known as SOAS have sufficient resources to accelerate their existing work on producer organisations and cooperatives and I wonder if you have any comments on either how that's going forward or whether you see that as a way forward bearing in mind the comments that were made to us last week by Robert Graham about some small producers as well but whether this would perhaps correct the balance in some way. What we said a couple of years ago and what we continue to say which is a key feature of the debate about empowering primary producers is that we want to support producers working together and ultimately it's up to the producers themselves how they want to work together and we said as you quite rightly point out in our policy that we will support farmers that want to form producer organisations, POs and I think I remember we made some resource available for that and I think there's a new association that started in south west scotland and therefore it's very much in the hands of the producers to what extent they want to work together but clearly to empower the primary producer the more they do work together via cooperatives or producer organisations then they have the potential to get a better deal so it's something we support and will help facilitate but it's ultimately up to the producers to what extent they want to work together and what form that takes because clearly under European legislation producer organisations have some red tape and bureaucracy and you know legal status and perhaps that's not appropriate for some farmers. Right and could I just connect that I hope seamlessly with a point that was made earlier by Morrison's this morning in evidence that we heard about the suggestion that that would be it might be a way forward for farmers for dairy farmers to be hedging for prices and that that might help them in the future which was something that I was quite surprised by and I wonder whether you've got any comment on that particularly in view of the fact that small producers one would think would hardly have the time to get into the hedge fund sort of area of world markets I found it quite an odd suggestion but that's just my own perspective on it. Well clearly one of the advantages of our producer organisation from the producer's point of view is that they have representatives working on their behalf because they're working together and they'll jointly employ people to do what's best for the members of the producer organisation so that's clearly an option. There's other issues I think that if a risen is part of the debate over the last few weeks to do with planning for the future that dairy farmers are being encouraged to do because clearly I think I saw some evidence you received as a committee from I think it's a levy paying body dairy co in the last week or two that who I think the representative said to you that global trends for dairy prices show that every two and a half years there's a you know a peak in a trough or whatever and therefore farmers can look at the last 10 years and look at the fact this does happen and therefore when they're doing their plans they can anticipate that there's potential for a downturn in prices every couple of years or whatever the the time scale may be so I think farmers yes have to plan for the future and understand the cyclical markets they're in whether hedge funds is the argument the answer to that I don't know but there's certainly a principle there about planning for the future. Graham day just a point cabinet secretary if we were to go down the producer organisation route would the Scottish government and its agencies oversee that directly because I'm just thinking of the example some years ago where the producer organisations in the soft fruit sector were overseen by the RPA on behalf of DEFRA and you're well aware of the difficulties that arose from that. Yes I thought you might mention the soft fruit sector you wouldn't represent Angus by any chance would you? Well that's all laid down in European legislation producer organisations and how they're governed and monitored and as you said before the RPA have a role formally on behalf of the member state of the UK in relation to producer organisations so I can't specifically answer the question as to whether that would change in terms of whether the Scottish government has a greater role however it's laid down in European legislation so I expect it to be a similar arrangement. The only thing I was going to add thank you is learning the best we can from what's happening right now and to mention the work with producers done by the SAOS right now which you alluded to in terms of First Milk and Campbell Town what is the issue around Campbell Town there are lots of different actions could be taken there but including with the producers so getting the producers together in the Campbell Town context and learning from that I think it's really important that we that we work with SAOS to learn the lessons from what's happening right now and one of them will be about how producers can work together better. Okay yep yeah it's interesting that I hope my figures are right but I think pig farmers in Scotland that are consider certainly the majority of them I thought it was 90 but I was down corrected if I'm wrong are involved with a producer organisation and and I wonder why that hasn't developed in the dairy industry and what you know what's holding that back specifically in dairy it's just I float the question. Well you're right in that the pig sector are very highly organised and they cooperate very closely and they're very successful at doing that especially over the last year or two where things have improved quite a lot for the pig sector. Historically why is that not the case in the dairy sector it's a good question it's clearly a different sector therefore it's different dynamics at work and primary producers in the dairy sector will go off and have a contract with a different processor and sometimes it might be quite difficult to keep them all together so it's just that it's just a different profile to the sector. All I was going to say is a lot this is culture ultimately for a sector and I guess one of the key issues for us is that everybody has a bit in this story as to how we how we promote improve things and we are in the new SRDP going to have new advisory services, new knowledge transfer and we've got a whole farm review and we said we're going to prioritise dairy within whole farm reviews but we can do as much of that as we want if we can encourage the farming community to come forward and the more we can do working with the NFUS to encourage take-up of advisory services and the cultural chains that's required. I want to go back really to where the cabinet secretary first started in your opening remarks because nobody we've spoken to disagrees with what you said that the long-term prospects for dairy industry are positive and good and we need to keep focused on that I think through this period of time. James Withers told us that we need to invest in processing which accords with your view quite rightly that we need to add value to the basic product. First Milk argued that Scotland is light on dairy processing, Graham Jack from Willow Wiseman said we don't have enough processing capacity and behind all that Graham Robert Graham said in written evidence that one of the problems he's come up against and a particular barrier to the investment that company is trying to make it comes through the planning process and my question is really I mean I'm sure you do agree that we could use more processing capacity but I just wonder what you feel about the barriers to that investment that people put to us last week and also what the Scottish Government do maybe through the planning process to try to to fast-track any investment that is is likely to come into the country. Well there's two issues firstly there's the issue that Graham's raised with you and secondly there's how do we attract more investment into Scotland for processing capacity. Clearly when we have a company like Graham's which is a family-owned company based in Scotland ambitious for Scotland and doing what they do extremely well I would hope that we can all rally around companies like that in this country and support them of course there's a planning system in place and that has to be adhered to but in terms of policy I'm sure our local authorities Scottish Government you know it's important we take into account the economic benefits of supporting companies like Graham which are owned here and which are expanding and doing well and have big plans. So I can't comment on to what extent Scottish Government would intervene in a planning issue such as what's happening in Stirling just now with Graham's. I can only put it into the context of wanting to support indigenous companies expanding particularly in the area at the moment that it's very important we do that. And yes clearly if companies do want to invest in Scotland and establish processing plants the Scottish Government would be very very keen to work with such companies to support such companies and ensure that we're bringing everyone else around the table including the planning authorities and our enterprise agencies to try and make those projects happen and happen as quickly as possible. So while we're very keen to expedite the process where possible and that's something we'd encourage clearly in the hands of local authorities but there's a case just now in Peterhead where they're seeking to rebuild the pelagic factory that burnt down a few weeks ago and just as all the agencies are getting together there around the table to say let's get this rebuilt as soon as possible so we can keep people in jobs and keep the macro process in Peterhead that's a major economic player in the area. I would hope that similar attitudes would be adopted if that's for a new build in Scotland or inward investment coming into the country. Can I just continue that a little bit? Thank you very much for that response. You mentioned the possible development of the Scottish Dairy brand also in your opening remarks and I wonder if you see the development of that brand as a magnet for investment and if that is the case who is out there sort of using that magnet if I can put it that way to attract investment into processing facilities in the country? Well we should be optimistic there are some signs that some companies are looking at Scotland's potential inward investment opportunities for dairy so that's a healthy sign it should give us confidence. Clearly I can't sit here as minister and say they're definitely going to happen or give you a timescale but we are beginning conversations with some companies that do appear interested in Scotland and you're quite right that the the brand plays a big role in that. Scotland is seen as a good place to invest particularly in the food sector you know we're as well documented as we've discussed in the committee many times there are food and drink industries doing well and we have a premium brand in the international marketplace and that that can pay dividends so that's certainly helping attract companies to consider Scotland as a potential investment location and that also applies to dairy which is good news. Thanks very much convener it's really just to follow on that issue about branding and marketing it's obviously an issue in terms of exports and we got submission from the NFUS calling for immediate and direct support for marketing and branding of Scottish dairy products we also had it from retailers as well the Scottish Retail Consortium and the Cooperative Food both of them advocated the benefits that would come from clearer branding and clearer marketing and it was also suggested that public procurement could play an important role in terms of brand development so we're really going to want to focus on that term of public procurement it's something we've debated a lot in the Parliament it's a huge market any thoughts the cabinet secretary has on how you could do more to promote public procurement that would use Scottish dairy produce and the extent in which the brand would help us there it's a good question about how we use the brand in terms of public procurement and I will certainly give that a lot more thought but at the moment what we are doing is we are increasing our public procurement for Scottish produce and that includes dairy I mean virtual or liquid milk as you can imagine from Scotland and over half of our other dairy products are Scottish and I'd like to see that rise it's a lot better than what it was before but it's a lot better than what's happening in retailers where it's a lot less than half of our dairy products are Scottish so we are working on that and I do think there's opportunities for us to do a lot more and we are thinking actively about that to give you some confidence and as you know we have adopted the food charter or at least formulated the food chapter which has so far been adopted by for instance the Commonwealth Games and the Ryder Cup particularly successful Ryder Cup also successfully could the games and we are now considering how to extend the food charter across the public sector across Scotland so not just the public sector private sector as well and I think the food charter gives us a great platform for for that that brand promotion so there's a wee bit more thinking being done at the moment about that so I don't have our exact details for you but yes just to agree with you it's a lot of potential there and if we were to get all the public sector in Scotland and hopefully the private sector signed up to the food charter that would make a huge difference to local sourcing including to the dairy sector and can I extend that to talk a bit about catering industry more generally because those big events public procurement is important but a lot of it will be private procurement company subcontracting we've got a very big event catering industry from the private side would have probably be hugely important that any particular issues that you're following up there to encourage private catering industry to source Scottish and particularly thinking about some of the premium branding issues we've talked about earlier you know salad cheese you know when that was explained to me I thought that's what I buy so it's some of the terminology it's actually thinking what people are wanting so those products are not necessarily available in Scotland so that again links back into how do you promote more processing opportunities and then make sure you've got a buy up for it yes and I was actually discussing it with officials this morning because I fund something called sourcing for success whereby we are trying to work with companies to source their ingredients this is more the manufacturing sector we source their ingredients from Scotland because ironically we have some major food manufacturing companies in Scotland and some of us go round their factories and sometimes go round and you ask them where they get their onions from or where they get their other raw materials before they're ready meals produced and often they would be open to taking a lot more of that from Scotland in their own doorstep but are not doing it so we've got a sourcing for success initiative and we're looking at continuing that because we've had that going for the last couple of years and I think in terms of the catering companies the food charter at the Ryder Cup for instance influenced the catering companies and the food service companies in terms of what they're sourcing from Scotland so that's why I think there's a lot of untaught potential there 50% of the food we eat comes from the food service companies so people think most of the food we get is from retailers the supermarkets but 50% of what we eat is a country comes from the food service sector I also want to just give a big advert for Ontario run by Peter Bruce who is a former chef who started his own company in 2008 in north east Scotland if I recall he in over that short space of time has built up his turnover to 46 million pounds he's now one of the biggest food service companies supplying the offshore industry in Scotland and he told me that he despite being told he couldn't afford to do it he now sources 70% of the food he serves in Scotland from Scotland so it's local produce mainly north east companies and I met some of the companies when I visited his premises a few weeks ago in Aberdeen local food suppliers they are supplying a food service company who are now one of the biggest in Scotland and who've got a 46 million pound turnover built up over just since 2008 when he started the company so that is a sort of food service company it shows it can be done and is exactly aligned with Scotland's food policy and you know he's a great entrepreneur and you know we must support companies like that so he's showing the way it can be done yeah I think proving that it works and showing other people how it works hugely important can I just sneak in a question about organic food because we're on procurement that's one of the key objectives in food for life and we had a very good event here in the parment last night that we were all at have you been monitoring the impact of change in terms of volatility on organic produce in terms of dairy and how that's faring in what's a really uncertain market it's a good question I've not aware of any recent statistics I've had on well I have in milk wider dairy I would have to investigate but the price I understand has been paid for organic milk I was told as recently as last night the food for life event is 40 pence per litre compared to 23, 22, 20 or some cases of 26 pence in the conventional milk market so there's clearly a good premium there for organic milk at 40 pence and therefore there's an opportunity for some milk producers who wish to convert organic there because they'll get 40 pence at current prices compared to what they're getting so it's a good issue to highlight I confess I'm not completely up to date with other dairy products and I'll have to investigate that it'd be really helpful to get a just a brief note on both the the product side but also milk thank you very much just to say really great for that question the first question about the food service because with all the focus on retail if you look at numbers the food service is so important the public sector is really important so that's really good to raise that issue I think from our point of view then and the issues there and certainly about the transparency of where food servicing sources that's much harder to gain in amongst so we are very interested in a couple of things to say on that when we do showcasing Scotland activity I alluded to earlier on we're not just interested in overseas buyers of retail we're really interested in in food service and actually in this year of food and drink we're interested in the tourism catering world very much and the only thing I would say is we are working in the public sector with the local authorities that assist their catering people particularly thinking about august as the year of the month theme is delicious dairy so what can we do around schools and dairy in august so I take it that the country of origin labelling issue you know crops up whether it comes through supermarkets and restaurants from caterers and all the rest of it and that that would obviously be a part of our means to actually alert the customer to where the product comes from yes and it's part of our becoming a good food nation policy which has been developed just now the next stage of our national food policy clearly there's an emphasis on serving good food as well as people buying good food and clearly we need good labelling for that to happen and there are a couple of issues I guess to mention quickly firstly we have been saying to UK government for a long time now to extend what's happening in Europe to dairy produce so whereas the labelling regulations have extended to other different types of meats and other products they've not been extended to dairy yet I think that's nix in the pipeline and we're urging Europe to extend the labelling requirements to dairy produce so that's something hopefully it'll move forward shortly. Secondly of course the Smith commission recommended that the UK government should work with the Scottish government to promote a made in Scotland label or at least the country of origin labelling legislation should apply to Scotland and give us the ability to have a made in Scotland label or whatever we choose to call it so country of origin labelling is very very important as well and if we are very keen for the UK government to act as quickly as possible on that recommendation to work with the Scottish government to give us the right for country of origin labelling. Thank you and that's helpful for us just from the overall view of food consumption. Dave Thompson's got a short supplementary on this. Yeah thank you convener it's just a very short point you know there are lots of schools in places like that where they have breakfast clubs because some children come to school without breakfast and it's not good for their ability to learn if they come to school in an empty stomach and I just wonder if we couldn't be looking at providing a mid-morning flavored milk yogurt break for kids you know which would help the kids it would give them a bit more nutrition in the middle of the morning I remember well when I was at school a long time ago the milk the daily milk that we that we got sometimes it was good and sometimes it wasn't so good and sometimes it was better it varied but we could make it very attractive as I say we could have flavored milk we could have yogurts and things and give this to the children mid-morning and I'm sure it would help them physically and mentally and it would help the industry as well but not bubble gum flavored milk given as there's a comment earlier on today which I heard in the monitor about it not being very popular well I'm you know clearly anything we can do to encourage our children to enjoy healthy daily produce is something that I would be keen to investigate I would just say two things firstly we are actively looking at part of the plan that we will publish about how to publicise the health benefits of dairy more so we're looking at some initiatives on that at the moment that's more of a generic promotion in Scotland there's been a a belief that for some time that we've not been publicising the health benefits of dairy enough so it seems now is an opportune time to look at that so that's one aspect the second aspect as I mentioned earlier on the refreshing of Scotland's food policy becoming good food nation and one of the reasons why I'm keen to refresh it is I want children's food policy to be at the heart of it so we're going to be doing a lot of work on a children's food policy so your comment is very relevant to a children's food policy so whilst I don't have a quick answer to how easy it would be to do that in our schools that would require quickly other ministers to be involved in those discussions I can assure you that the children's food policy is going to be very prominent within our new national food policy so there'll be lots of room and scope for those debates I just feel that if you introduce young stars to good quality foods at a young age then they're much more likely to enjoy these foods for the the rest of their days you know the rest of their lives so it's a and it's something where you know we you know the government can't have an input so I welcome your comments and look forward to hearing how you propose to take us forward thanks that's a very interesting suggestion I hope some of the press are picking this up you know return the milk to the schools well there we are that's a historic issue to discuss we've got a question about EU action at the moment I think to round this up from Angus McDonald you mentioned earlier cabinet secretary that he'd asked the UK to raise the issue with the European council and also the council of ministers clearly if you can keep the committee updated on discussions taking place in Europe that would be appreciated there have been suggestions that an increase in the intervention price for milk would be a good short term measure to ease the pressure on Scottish dairy farmers do you think that's a realistic short term solution given that the intervention price is currently 17 pence per litre which can go as low as 15 pence per litre when currency exchange rate fluctuations are taken into account well the view I took at the recent council of ministers was that Europe should have an open mind about raising the intervention price and that the commission should be asked to analyse what the impact would be and look at the case for doing it so keeping an open mind and because I don't know if it would make a material difference but I was very keen for the commission to take away from the council a commitment to look at it and look at it you know as I said analyse what the consequences would be it was it was very clear the UK government did not support that position so you know we're not the member state and I put the position to the to the UK and other member states raised it with the commission at the council of ministers the the commissioner likewise was quite clearly not that keen to look at it too seriously at this stage he was focused on extending storage aid and of course other issues we were asking to be addressed was opening up new markets for exports around the world so these sort of initiatives seem to be in the mix I think the intervention price clearly wasn't getting a lot of support from the commission or indeed the UK government for that matter so I don't think it's completely ruled out in terms of where this will go but clearly there was no urgency in terms of looking at the intervention price in Europe so I do support as you can imagine the other measures that I've been taking storage aid is playing a role hopefully and it gives an option for taking some produce off the market in Europe but it's we're being flooded with dairy produce because of the Russian import ban and less demand for China and elsewhere so that is available and clearly new markets is always welcome because we want to upper exports in this country as well so that's in terms of that's where that debate reach within Europe okay thank you I should say that the my my feeling was the commissioner feels that this is a temporary downturn and he appears to be of the view that there'll be an upturn to be fair to the commissioner I noticed a newsletter from one of the the traders this morning which Frank helpedfully acquired for me and as of well the 3rd of February it's dated and it says that the price for whispery milk powder has just increased by 18 percent over the last two weeks and the trader's view is that there is now more than a glimmer of light that global and EU prices have bottomed out so there's some tentative signs there that perhaps there's a slight upturn coming in prices I don't know how much to read into this clearly we have to closely pay attention to this but at least it's going the right direction and not continuing in the wrong direction so we can perhaps take a little bit of comfort from the the traders view of things today thanks very much for that the more we understand about the dairy industry the less we understand about the dairy industry but we are benefiting tomorrow from speaking to the grocery code adjudicator and some slightly more reluctant retail majors that are coming in to speak to us but I'm glad to say that many of them are coming we have one other short item just now which is about public body's consent memorandum and then we're going to private but I'd like to thank the witnesses just now we're no doubt going to get some more notes from you on certain of the points that were raised during this so thank you cabinet secretary thank you so we move on to the public body's consent memorandum third agenda item today considers the scottish government memorandum relating to the public body's abolition of advisory committees on pesticides order 2015 draft this is the uk instrument and the scottish parliament must give its consent to the order i refer members to the paper and invite members to decide whether the committee agrees to recommend to the parliament and that the draft motion as set out in the public body consent memorandum is approved are we agreed we are agreed thank you very much we now move into private pointing out that as i say next tomorrow we'll be dealing with the grocery code adjudicator and other major retailers and we'll now clear the public gallery and move into private thank you