Rural Economy Strategy 2017–2021: Towards Sustainable Farming

Rural Economy Strategy 2017-2021

Towards Sustainable Farming

Department of Economic Development, Tourism, Sport and Culture

Department of the Environment

R.19/2017

Department of Economic Development, Tourism, Sport and Culture Cyril Le Marquand House

The Parade

St. Helier , JE4 8UL

Department of the Environment Environment Division,

Howard Davis Farm,

Trinity , JE3 5JP

States of Jersey 2017

This publication may be reused free of charge in any format or medium provided that it is reused accurately and not used in a misleading context. The material must be acknowledged as States of Jersey and the title of the publication specified.

This document is also available on the States of Jersey website www.gov.je Email : environmentenquiries@gov.je

Published by the Environment Department, Howard Davis Farm, Trinity Printed on 100% recycled paper from renewable resources.

Executive Summary viii

European / International Links and Issues 2

2 GOVERNMENT STRATEGIC AIMS 30 Multi-Lateral Environmental Agreement (MEA) Commitments 30

3 BUDGET DEPENDENT POLICIES 84 Rural Initiative Scheme (RIS) 84

4 NATURAL ENVIRONMENT 92 Coastal National Park (CNP) 92

5 OUTSOURCED ACTIVITIES 105 Protected Designation of Origin (PDO) and Certification Trademark 105

Appendices

AppendixI: MultilateralEnvironmentalAgreementsand Conventions122

List of Policies

Policy SF 1 Protocol 3 2

Policy GSA 20 Tackling agricultural diffuse pollution (a) (EDTSC, Health, DFI

69

& DoE)

Policy GSA 21 Tackling agricultural diffuse pollution (b) (EDTSC, HSSD*, DFI

70

& DoE)

Policy GSA 22 *Soil Nutrient Calculator (DoE) 73 Policy GSA 23 *Soil and Land classification (DoE) 74 Policy GSA 24 *Agricultural Research and Development (EDTSC & DoE) 76 Policy GSA 25 *Alternative Crops (EDTSC & DoE) 78 Policy GSA 26 Alternative and Precision Farming Equipment (DoE) 79 Policy GSA 27 *Skills Development (EDTSC & DoE) 81 Policy BDP 1 Rural Initiative Scheme (RIS) (EDTSC) 84 Policy BDP 2 Countryside Enhancement Scheme (CES) (DoE) 85 Policy BDP 3 Jersey Biodiversity Centre (DoE) 86 Policy BDP 4 Agricultural Loans (EDTSC) 87 Policy BDP 5 *Charges for Services (DoE) 89 Policy NE 1 Coastal National Park (CNP) (DoE) 92 Policy NE 2 Biodiversity Monitoring & Evidence based policy making (DoE) 96 Policy NE 3 Revision of the Biodiversity Strategy (DoE) 99 Policy NE 4 Access to the Countryside (DoE) 100 Policy NE 5 Ecosystem Services (EDTSC & DoE) 102

Policy OA 1 Protected Designation of Origin (PDO) and Certification Trademark

106 (EDTSC & DoE)

Policy OA 2 Benefits of Local Food Production (EDTSC & DoE) 111 Policy OA 3 *Organic Farming Action Plan (DoE) 116

Policy OA 4 *Jersey Farming Conference and Paris Salon International de

117 L'Agriculture (SIA) (EDTSC & DoE)

Policy OA 5 Processing Infrastructure (EDTSC & DoE) 119

List of Tables

Table 1 GVA (in real terms) of Jersey's agricultural sector 2006-2015 xv Table 2 Total number of people in Jersey in agricultural employment

xv 2011-2015

Table 3 Fruit and vegetable exports (£M) between 2011-2015 xv Table 4 Area/vergée of Jersey Royal Potato production between 2011-2015 xvi Table 5 Export of daffodil flowers between 2011-2015 xvi Table 6 Export of plug plants between 2012-2015 xvi Table 7 Fruit and Vegetables grown area/vg between 2011-2015 xvii Table 8 Milk Sales and Cattle Figures 2011-2015 xviii

Table 9 AggregateAgriculturalAccounts:Current price production and income

xxvii accounts for the United Kingdom

Table 10 Indicators xxvii Table 11 Jersey Total Income From Farming (Current Price ) xxix Table 12 Rural Support Scheme agreed budget 42 Table 13 Future Estimated Cattle Health testing Costs 60 Table 14 Multilateral Environmental Agreements and Conventions 122

List of Figures

Figure 1 Value of Export Arable Crops 2005-2015 (£ million in 2015 prices) xvii Figure 2 PCN counts 2002-2016. 24 Figure 3 Potato Cyst Nematode: cultural control methods are very important 25 Figure 4 European Plant Protection Organisation logo 26 Figure 5 Beef cattle - Agricultural diversity is important 54 Figure6Research-Solanumsysimbriifoliumwasintroducedtoindustryafter

77 Department of the Environment research

Figure 7 Precision agriculture may rapidly contribute to water quality 80 Figure 8 Alternative crops 80

Figure 9 Offshore reefs are also given protection under the Coastal National

93 Park

Figure 10 Coastal National Park 93 Figure 11 Our natural environment adds value and wellbeing 94

Figure12JerseyhoststheonlypopulationoftheAgileFrog(Ranadalmatina)

98 in the British Isles

Figure 13 The Grass Snake (Natrix natrix) - a jewel in local biodiversity 98 Figure 14 Protected Designation of Origin official logo 107 Figure 15 Genuine Jersey logo 110

Executive Summary

Executive Summary

The Jersey countryside is a unique place. The iconic Jersey' cow and the Jersey Royal potato play a critical role in Island life, historically, culturally and economically both at the domestic level and internationally. Agriculture provides Islanderswith a senseofplace',with productsexportedworld-wideensuringthat Jersey,thehomeoftheseworldclassbrands,hasahighprofileintheinternational communityencouraginginwardinvestment,tourism,addingvaluetoJerseyproducts and effectively helping put Jersey on the map'.

However, the Jersey countryside is not just about agriculture; parts of Jersey's coastand countrysideare consideredto be of nationaland internationalimportance for landscape and environmental quality, with St Ouen's Bay, the north coast and the Island's off-shore reefs falling within the Island's National Park boundary and rightly afforded the highest level of protection against development.

Our inward investment offering is proudly targeted at people who value quality of life; unspoilt beaches with an agrarian hinterland and recognisable character, unique,world-classviewsandscenery,cleanandpureseaairarejustasimportant hooks as the proximity to international business centres, and point to a relaxed lifestyle in a tranquil and secure location where the best bits of our rural environment are generating a value and are protected. There is much to celebrate.

Since the economic crisis in 2008/9, the GVA performance in the agricultural sector in Jersey has been in decline in real terms. More recently, the percentage change in GVA between 2011 and 2015 has been variable, demonstrating in part the volatility of agricultural markets and the weather dependency of the sector. However, whilst 2015 saw a recovery to 92.4% of the 2013 baseline, this is still below levels seen in the 2006 – 2010 RES period. This at a time when, similar to UK farmers, the profitability of the sector as a whole is to a large extent subsidy dependant. Such trends show that serious efforts need to be made to address the economic sustainability of Jersey agriculture and to improve productivity.

The good news is that collaboration between the Government, farmers and other rural stakeholdersis working really well. There is a genuine desire to push through current and future challenges and seize future opportunities as they arise as a team, promoting and demonstrating that sustainability lies at the heart of the Island's rural economy, benefiting both locals and visitors alike.

The new RES will focus on providing measures that consolidate economic growth through encouraging all farms to be export ready'. This will be achieved by maintaining key infrastructure such as the continued provision of an abattoir and reducingandremovingbarrierstogreaterproductivitythroughlinkageswithanew EnterpriseStrategy. Therewillalsobeinvestmentintoresearchanddevelopment in alternative crops with high value, but reduced environmental impact which break pest lifecycles and the provision of targeted professional advice to promote skills development. The RES will protect the agricultural land bank and promote

collaboration in the food chain through new initiatives such as Farm Jersey' – an expansion of the Jersey Export Group and defend the Intellectual Property associated with Jersey brands.

The RES will encourage market focused, high value food production through the introduction of a new Rural Support Scheme, which incentivises economic and environmental sustainability, through an integrated approach to farming. This will providecustomerandconsumerwithqualityassuranceandreducestoaminimum, theenvironmentalimpactoffarminginJerseythroughpromotingprecisionfarming and the provision of business coaching and training. Our aspiration is that by 2019, Jerseycouldbetheworld'sfirstjurisdictiontohaveallfarmersLEAFMarqueglobal accredited.

Jersey agriculture is relatively intensive due to the limited land base. As such it is important that Jersey's rural policies also address the issue of environmental sustainability, in order to prevent the erosion of those things that make the countryside special and to protect the non-renewable resources upon which the agricultural industry and society depends.

Our traditional rural industries are part of the Island's DNA. It is important not to simply view the value of agriculture to Jersey in purely economic terms. Many public goods and services can be delivered by agriculture beyond food production; withthisinmindanecosystemservicesassessmentwillbeundertakentodetermine the true value and benefits of the environment for use in evidence based policy-making decisions, including how better to reward farmers for the public goodsand servicesthattheydo and theyarecapableof providing.Theassessment will identify and quantify Jersey's natural capital' and ecosystem services, identify the providers, which in many cases are, or could be farmers and the beneficiaries of these services and opportunities for enhancement of these public goods.

Examples of public goods enhancement will include the protection and stewardship of natural resources through, for example, the delivery of those elements within the Water Management Plan that deal with agricultural diffuse pollution, encouraging the provision of measures to achieve a 10-15% reduction target in the use of nitrogen based fertiliser, greater food security, physical and intellectual access to the countryside, supporting the Coastal National Park Management Plan and the implementation of the Countryside Access Strategy for Jersey and the maintenance of a landscape, which to a large degree makes the Island recognisable as Jersey. The Rural Economy Strategy does not discount the fact that the profile of environmental issues and environmental awareness continues to grow in the minds of the public, consumers, retailers, politicians and the industry alike and as a result, have become economic issues as well.

The new RES will help ensure that Jersey avoids replicating the problems faced by agriculture in the UK and other EU countries where the EU Common Agricultural Policy (CAP) has to a largeextent maintained dependence on subsidy, which masks inefficiency and reduces the need for businesses to be market focused. It has

inflated land prices, caused biodiversity damage and declining soil and water quality, through the environmental loading of pesticides and agricultural inputs as well as exacerbating pest and disease issues.

Currently, the contribution of agriculture as a proportion of GVA is 1.2%. The total number of people engaged in agricultural employment fell from 1,947 in 2011 to 1,510 in 2015, a fall of 22%. Full time employees fell from 669 to 525 (22% reduction),parttimeemployeesfellfrom205to120(41%reduction)whilstseasonal staff fell from 1,073 to 865 (19% reduction).

The area/vg of Jersey Royal potato production fell from 18,048 vergées in 2011 to 15,907 vergées in 2015, a reduction of 11%. However, this is still 26% higher than the low of 2007 which saw only 12,721 vergéesplanted. Althoughthe potato volume (k tonnes) only fell by 4%, the value (£M) of the exported crop fell by 11% over the same5yearperiod,showingareductioninthegrosspriceachievedpertonnefrom £997/t to £929/t. Potatoes still accounted for 95% of the value of all exported produce, up from 93% in 2011.

Milk sales increased from 12.7m litres in 2011 to 13.9m litres in 2015, an increase of 9% despite the number of milking animals falling from 2,890 to 2,807 (3% reduction) over the period. The increase in production alongside a decrease in head of milkers is due to the effects of the importation of international Jersey semen/genetics in 2008 which is now having a major positive impact on performance.

There is little doubt that cost-led internal and export markets will continue to be dynamic,unpredictableandchallengingplacestodobusinessforlocalfarmersand growers. It is therefore imperative that businesses continue to look for efficiencies, manage economic risk and grow their businesses on the basis of best practice, in order to build in business resilience and make sure Jersey agriculture is export ready'. In addition, the impacts of Brexit are difficult to quantify, however, agriculture and fisheries are a key Brexit work stream, and a sub-group within Government has been established to lead consultation with key stakeholders within the rural economy to ensure that relevant matters are considered in the Brexit dialogue and in discussions between Jersey and the UK.

A mid-term review will provide a good opportunity to assess: the effectiveness of the strategy and progress against policy aims and objectives; allow Government and industry to take stock of the impact and opportunities presented by the outcomes of Brexit negotiations, to consider any recommendations that result from the planned Economic Affairs Scrutiny Panel review; and whether it is necessary to undertake a full economic impact assessment at that point.

Introduction

Introduction

Introduction

What is the Rural Economy Strategy (RES)?

The Rural Economy Strategy (RES) is a five-year strategy. It is designed to grow the rural economy in line with the objectives of the States Strategic Plan whilst safeguarding Jersey's countryside, its character and the environment. The RES recognisesthateconomicsustainabilityoftheruralsectoralsodependson providing positive environmental and social benefits.

Why review the Rural Economy Strategy (RES)?

The current RES ended on 31 December 2015 but was extended at the Minister's request whilst the Medium Term Financial Plan was finalised. Regular reviews of the strategy help ensure that the changing needs and requirements of the Island's rural economy are reflected and accommodated in line with market and political changes. This document builds on the 2011-2015 RES to ensure that the changing requirements of the Island's rural economy are addressed, whilst the wider societal requirementsrelatingtotheactivitiesandinfluenceofruralbusinessesarereflected and accommodated.

Ruralbusinessesneedalong-termstrategytoenablefutureplanning.Clearsignals are needed from the Government of Jersey in terms of the amount, type and duration of support that rural businesses may expect. Strategic change is not immediate and takes time to prepare for and bed in'. Businesses cannot plan for the future if it is thought that government policies are short-term and likely to change.

The RES 2017-2021is a jointstrategybetweenthe Departmentof the Environment andtheDepartmentforEconomicDevelopment,Tourism,SportandCulture,which reflects the thematic nature of the rural portfolioand was informed by an extensive consultationprocesswith a wide varietyof stakeholders.Consequently, the strategy is by necessity a broad ranging document. It sets a framework for decision making and outlines areas for review as well as new policies that are consistent with, or complementary to, other related existing States policies or strategic documents and which are referenced within the document.

As a precursor to the development of the strategy, a service redesign process was undertaken within the Environmental Management and Rural Economy Directorate as part of the Public Sector Reform programme. This was done to ensure that statutory functions were clearly defined, that strategic priorities and synergies across Departments were identified and strengthened and opportunities to restructure teams and budgets were implemented; this document is structured to reflect this order. The redesign process, which was concluded in 2015, identified where delivery could be streamlined and resulted in a 20% staff reduction across the Directorate. There has been a year on year reduction in staff and Directorate budgets totalling £1.7m from 2009-2016 demonstrating that more is being done with less in terms of Departmental overheads.

The RES will be delivered within the Departmental budget limits which have been allocated within the Medium Term Financial Plan until 2019. Consequently, no funding can be guaranteed beyond 2019. As the RES is a five year strategy, it is effectively a live' document and it will be necessary to conduct a mid-term review in order to further assess the impact of Brexit, Scrutiny Panel recommendations, considertheneedforfurthereconomicadviceandallocateanappropriatefunding package for 2020 and 2021.

Althoughtherearesomeuncertainties,itiscriticalthatthenewRESisimplemented at the earliest opportunity in order to provide rural businesses with the necessary clarity around the provision and nature of the financial support package open to them. This is essential for effective business planning and to enable the implementation of policies to deal with urgent environmental priorities such as water quality and pest and disease control. Ministers and officers are confident that the new RES is progressive, does not conflict with other States policies and sets the right direction of travel for the next five years. The Government and the ruralsectorhaveagreedtosetoffonajourneytogetherbyproposingatransitionary path to a more economically efficient and therefore environmentally efficient outcomefortheruraleconomy.TheRES2017-2021strikesagoodbalancebetween the needs of the rural sector, government and the people of Jersey.

Key Sector Analysis

Key Sector Analysis

Key Trends 2011 – 2015(1) GVA

The GVA of the agricultural sector in real terms is illustrated in Table 1(2). A more favourable climate prior to the economic crisis in 2008/9 saw better GVA

performance in the sector but since then agriculture in Jersey has seen a GVA decline. 2015 saw a recovery to 92.4%, but this was still below levels seen in the 2006 – 2010 RES period.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 111.1 114.5 119.8 126.0 108.5 91.8 89.2 100.0 83.3 92.4

Table 1 GVA (in real terms) of Jersey's agricultural sector 2006-2015

(Values based on 2013 reference value of 100).

Farm Labour

The total number of people engaged in agricultural employment fell from 1,947 in 2011 to 1,510 in 2015, a fall of 22%. Full time employees fell from 669 to 525 (22% reduction),parttimeemployeesfellfrom205to120(41%reduction)whilstseasonal staff fell from 1073 to 865 (19% reduction).

2011 2012 2013 2014 2015

Total 1947 1660 1663 1582 1510 Table2TotalnumberofpeopleinJerseyinagriculturalemployment2011-2015 Total Agricultural Exports

Fruit and vegetable exports fell by 11% over the period 2011 – 2015.

2011 2012 2013 2014 2015

£ M 32.8 28.9 29.2 31.0 29.2

Table 3 Fruit and vegetable exports (£M) between 2011-2015

1. 2016 statistics not yet available
2. Taken from Measuring Jersey's Economy GVA and GDP 2015 https://www.gov.je/news/2016/pages/GVAandGDP2015

Potato Production and Exports

The area/vg of Jersey Royal potato production fell from 18,048 vergées in 2011 to 15,907 vergées in 2015, a reduction of 11%, however this is still 26% higher than the low of 2007 which saw only 12,721 vergées planted.

Table 4 Area/vergée of Jersey Royal Potato production between 2011-2015

Although the potato volume (k tonnes) only fell by 4%, the value (£M) of the exported crop fell by 11% over the same 5 year period, a reduction in the gross price achieved per tonne from £997/t to £929/t. Potatoes still accounted for 95% of the value of all exported produce, up from 93% in 2011.

Narcissus Flowers

Export of daffodil flowers rose from £0.7m in 2011 to £1.2m in 2015, an increase of 47%, with flowers being exported to the UK, Holland and the U.S.A.

2011 2012 2013 2014 2015 £M 0.7 0.6 0.9 1.0 1.2

Table 5 Export of daffodil flowers between 2011-2015

Plug Plants

Export of plug plants were first recorded in 2012, the year before the loss of Low Value Consignment Relief (LVCR) which, as can be seen by export values below, had a major impact on the sector with two businesses ceasing to trade since then.

2011 2012 2013 2014 2015 £M N/R 23.4 11.5 11.8 8.4

Table 6 Export of plug plants between 2012-2015

Other Fruit and Vegetables

Theareaofotherfruitandvegetablesgrownhasremainedrelativelyconstantwith a slight reduction of 4% over the period in view.

2011 2012 2013 2014 2015 Area/vg 2269 2096 1992 2174 2171

Table 7 Fruit and Vegetables grown area/vg between 2011-2015

Protected Crops

Glasshousetomatoproductioncontinuedtodeclinefrom48,148m2in2011to17,571 m2 in 2015, a reduction of 64%. Likewise bedding plant production has fallen by 61%.

Cereal production

Cereal production, primarily for animal feed use, has decreased from 1,633 vergées to 924 vergées, a reduction of 43%. Barley is down 33%, oats down 79%, wheat down 82% and cereals grown for straw down 31%.

Figure 1 Value of Export Arable Crops 2005-2015 (£ million in 2015 prices)

Livestock and dairy

Milk sales increased from 12.7m litres in 2011 to 13.9m litres in 2015, an increase of 9% despite the number of milking animals falling from 2,890 to 2,807 (3% reduction) over the period. The increase in production alongside a decrease in head of milkers is due to the effects of the importation of international Jersey semen/genetics in 2008 which is now having a major impact on performance.

Table 8 Milk Sales and Cattle Figures 2011-2015 Laying hens

The number of laying hens has seen an increase of 45% from 18,882 to 27,431 between 2011 and 2015.

Sheep

Head of sheep has increased by 4% to 1015.

Arable - Key Sector Analysis

The arable sector remains dominated by the Jersey Royal Potato which accounts for 95% of the value of all fruit and vegetable exports or 70% of all crop exports if mailorderandplugplantsaretakenintoaccount.Theplugplantmailordersector is the second major crop exporter, accounting for £8.4m (21%) of the total export value.

BecomingmorenoticeableistheincreasedmechanisationinJerseyRoyalproduction as growers shift to nematicide control products that prohibit hand planting. Also,

with product limitations identified by the Audax report(3)and in response to the ActionforCleanerWaterGroupandWaterManagementPlanguidelines,reductions

in fertiliser rates and precise placement techniques are being explored which may also necessitate automatic planting, reducing hand planting on flatter land. On some major potato holdings, automatic planting has risen from 0 to 10% of total area in two or three years.

Thereisnodoubtthathandplantingofchittedpotatoseedispreferabletocurrent automatic methods which damages shoots, delays maturity and reduces yields. However, the increasing cost of labour, staff availability (being dependant on domestic population policy and the impact of Brexit) and retention issues, the minimum wage and the price pressure within the UK market place will all be having impacts on choices around automatic vs. hand planting of potato crops.

The gross price per tonne of export crop has fallen from £997/tonne in 2011 to £929/tonne in 2015. Additionally adverse cold, wet weather at key points early in the years has seriously impacted on the sale of Jersey Royals in the UK and these impacts are likely to escalate if climate change continues as predicted.

The Jersey Royal is also facing increased competition from early potato varieties grown in the Mediterranean region where cost comparison, quality, flavour, appearance, shelf life and supply have all dramatically improved.

Whilst the area of production has fallen in recent years there is still competition between growers and marketing groups for good quality land as crop rotation becomes more important due the rise in Potato Cyst Nematode (PCN) population levels. PCN is a major crop pest capable of causing significant crop damage and economic injury.

3. The Audax Report highlights pesticides less suitable for use in some local situations – report available from the Department of the Environment

Growing Jersey Royals on category 3 and 4 land (high PCN populations) has never been advised, but as more and more land falls into these categories and out of the lowercategories,some growershave no choice. IncreasingPCN populationscoupled withareductionintherangeofprotectiveproductsmeansgrowersarelookingfor lowercategorylandandtryingarangeofmeasurestoreducethelevelofinfestation (see Figure 2 PCN counts 1999-2015).

Brexit is a major uncertainty and could have significant consequences for the Jersey Royal potato, as presently it is protected from imitation within the EU under the Protected Food Name (PFN) Scheme and was awarded a Protected Designation of Origin (PDO) in 1996. The UK does not currently have any comparable legislation in place although there is some suggestion that it is being developed. So, once the UK leaves the EU the protection given under the PFN Scheme will fall away unless a reciprocal arrangement between the UK and EU is put in place. Such an arrangement would also have to be capable of applying to Jersey with its consent in order for the Island to be included in that new relationship.

However, the words and logo 'Jersey Royal(s)' have been protected by a trademark in the UK and Jersey since early 2000 and this should give the Jersey Royal protection within the UK but not in the EU. Application for a trademark within the EU to strengthen this protection may be required if there is no comparable legislation in the UK or if reciprocal agreement between the UK and the EU is not reached.

Afterpotatoes,(whichaccountfor88%oftheareaofarablecrops),thenextmajor crops are cabbage (1.7%) and top fruit (1.5%). There is an argument that Jersey needs to diversify into other crops to spread the risk should serious production or marketing problems arise in the Jersey Royal potato sector: this is one of the reasons why an alternative crops policy is essential.

In light of this, the increase in area planted to top fruit as demand for cider and spiritsincreasesshouldbe seen as positivebut some potatoand dairy commentators see top fruit (along with commercial liveries) as non-agricultural competition for land that should be restricted, reserving land for the traditional potato and dairy sectors.

The area of land under organic production has fallen and this is being addressed through increased financial support and the implementation of the Organic Action Plan which sets out a number of measures to raise awareness of the benefits of organic growing and of increased co-operation within the sector to promote organic produce.

Dairy - Key Sector Analysis

The Jersey cow, which economically produces commercial quantities of high quality milk and is known for its attractiveness and docility, has been developed by generationsofJerseyfarmersandexportedthroughouttheworldtherebypromoting the name and reputation of its Island home.

This iconic brown cow has also had a major influenceon the characterof the Island's countryside aswellascontributingtothequalityoflifeoftheIsland'spopulation.

The Government believes the most cost effective way of ensuring the Jersey cow remains in its island home, continues to act as an international ambassador for Jersey and has a positive influence on its countryside, is to ensure the dairy industry has an efficient, profitable and sustainable future.

Much has been achieved in the dairy industryover the last decade since the Jersey Milk Marketing Board (JMMB) formulated its Road Map to Recovery' in 2005 including:

ThesaleoftheFiveOaksDairyandtheconstructionofanewefficientpurpose built dairy at Howard Davis Farm TheimportationofinternationalJerseybullsementoimprovefarmefficiency and the quality and output of the Island's dairy herd Theimplementationanddevelopmentofamilklicencingschemetobringmilk output in line with market demand

The development of a high value export market for dairy products with a provenance based on the quality and reputation of the Jersey cow in her

Island home'.

Investment in new and upgraded machinery to widen market opportunities and significantly reduce manufacturing costs

The reduction of the industry's historical debt levels so reducing repayment and financing costs

ThesesuccessfuldevelopmentshaveenabledtheJMMBanditstradingarm,Jersey Dairy,toimprovetheirannualfinancialpositionfromsignificantlossestoamodest level of profitability. If this trend continues, a critical debate will need to centre on what is the right level of profitability to be retained in Jersey Dairy for reinvestment versus improving the milk price to producers, where benchmarking shows levels of profitability are low.

Individual dairy farms have undertaken significant developments but recognise that there are still challenges to be overcome, such as the need to improve farm profitability and to satisfy the local and international market standards and milk qualityrequirementsnecessaryforincreasedproductshelflifeandqualityretention.

Farm profitability stubbornly remains below the industry target of an average EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) of 20% of turnover, which is seen as the point where the industry is considered economically sustainable. However, milk yield per cow has increased from an annual average of 4300 litres per cow (prior to import of international bull semen in 2008) to 5000 litres in 2016, with the top performing herds already approaching 6000 litres per cow. Dairyfarmershaveinvestedinbullsemenwhichwillcontinuetodrivefuture yield increases and have retained the resultant replacement young stock with the expectation that the JMMB's international markets will increase to require this extra milk output capacity.

In addition, dairy farmers are now following upgraded Rules of Supply' to Jersey Dairy to ensure producers meet international food assurance standards and are ready for international regulatory inspections.

Unfortunately, at a time when the Island's dairy farms are wishing to increase milk output to improve their profitability, these developments have coincided with a downturn in international markets and the world milk price.

In 1955, a year after the establishment of the Milk Marketing Scheme (Approval) (Jersey) Act 1954, which established the Jersey Milk Marketing Board (JMMB), there were 1,009 milk producers in Jersey with an average of 6 cows per herd. Each cow produced an average of 2,125 litres of milk per year and total milk deliveries per annum to the JMMB amounted to 11.96 million litres. In 2016, the number of milk producersinJerseyhasfallento21dairyfarms(20supplyingmilktotheJMMBand one retailing dairy products direct to the Island consumer) with the average herd size having risen to 134 cows with each cow producing an average of 5,000 litres per year and total milk deliveries per annum to the JMMB amounting to 13.89 million litres.

In December 2006, Promar International produced a report A sustainable dairy industry in Jersey' which examined the milk industry in Jersey and recommended theformationofaFarmerControlledBusiness(FCB).In2007,theEconomicAffairs Scrutiny Sub- Panel report Review of the Dairy Industry' recommended that a producer co-operative should be formed to replace the existing structure of the JerseyDairyandtheJMMB'.Theserecommendationsaredifficulttoconsideruntil the industry's Road Map to Recovery' has been completed but this is now nearing completion.

The structural changes detailed above, together with increasing market complexity and Jersey Dairy's development of an international market dimension, highlights the need for the JMMB to review the Milk Marketing Scheme (Jersey) Act 1954 to determine whether the current statutory framework is the most appropriate structure to promote a successful dairy sector going forward.

The Rural Economy Strategy Vision 2017 and beyond

The Rural Economy Strategy Vision 2017 and beyond

The Rural Economy Strategy Vision 2017 and beyond

The rural economy, in particular the agricultural industry, occupies approximately 68% of the land surface area of Jersey and as such has a fundamental influence on the landscape, wildlife, environment and water resources of the Island. It is imperative that the Government of Jersey produces a strategic vision for the rural sectorthatensuresstabilityandcertainty,ascalledforintheGovernment'sVision Strategy. This vision must recognise its economic, environmental and social importance whilst encouraging rural businesses to plan and develop efficient profitable businesses, managed under good practice guidelines and operated within known and probably reducing levels of States financial aid.

The future vision of Jersey's rural economy is one of sustainable,diversebusinesses, less reliant on financial aid, self-supporting and innovative. Professional, efficient enterprises with identified business objectives and risk assessments managed under good practice guidelines based on market focused returns.

Rural businesses must recognise that their future should not be based on a low wage economy and subsidy, and that future investment programmes are required to train staff, develop apprenticeships, increase labour efficiency and improve technical performance, in turn attracting local residents to a career in the rural sector.

The vision is of an industry that embraces its responsibility in the care of our resources and works with Government to support the wider strategic needs of Jersey, in particular as regards food, water security and the quality of the environment.

Sustainability of the Rural Economy

Sustainability of the Rural Economy

Thesustainabledevelopmentoftheruraleconomycannotbeconsideredinisolation fromotherareasoftheIsland'seconomy.Weneedtoensurethatruralpolicyhelps Jersey's farmers compete in local markets, in traditional export markets and in developing new global markets. It is also important to: protect local land-based skillsandtoproducecropswhichmeetcustomerneeds;respondtocallsforaclear policyonfoodsecurity;reducetheenvironmentalcostofagricultureintheIsland; and ensure the look and feel of Jersey maximises our tourism offering and opportunities so as to encourage inward investment.

The 'big idea' in the Fischler(4)reforms that brought in the Single Payment in the EUin2005wastheconceptof"decoupling".Thismeantthatsupportwasnolonger

linked to agricultural production but was simply based on the area farmed. It was designed to make the Common Agricultural Policy (CAP)(5) more compatible with

WorldTradeOrganization(WTO)(6) commitments,andtoallowfarmers'production decisions to be based on market influences. This was also the policy direction taken

in Jersey, albeit earlier than the EU, with the introduction of the Single Area Payment (SAP). Under the latest round of CAP reform, however, the process of decoupling has taken a step back, with coupled support across the EU increasing.

In spite of farm policy across the EU pushing for greater market focus, farm incomes across the region are under increasing pressure; uncertainty over the CAP, lower output prices and a drop in farm incomes are having a major impact on UK agriculture as is the prospect of Brexit.

The pound has fallen against the euro and the dollar compared to pre-referendum levels. Theweakerpoundincreasescompetitivenessinexportmarketsandshould allow domestic values to rise. On the other hand, it pushes up import costs resulting in increases in input prices and production costs.

4. Franz Fischler was the European Union's Commissioner for Agriculture, Rural DevelopmentandFisheries(1995–2004)whoundertookthe2003reformofthe Common Agricultural Policy
5. http://ec.europa.eu/agriculture/cap-history_en
6. https://www.wto.org

DEFRA's latest figures for farm profitability, Total Income From Farming(7), was published on 1 December 2016 and shows that farm performance in the UK declined

by 29% between 2014 and 2015.

Table 9 Aggregate Agricultural Accounts: Current price production and income accounts for the United Kingdom

7. Source: Total Incoming From Farming in the United Kingdom Second Estimate for 2015, 1 December 2016

When comparing Table 10 (UK figures) with Table 11 (Jersey figures), Jersey agriculture is much more volatile as the subsidy as percentage of profit* varies considerably by 26.8% (2011) to 1302.7% (2012).In Jersey, SAP returns show a 75% reduction in profitability from 2011-2015. 2015 did see a slight increase in profitability for the industry as a whole, up from 2.1% to 2.4%, though there was a division between the dairy and other sectors with the dairy sector seeing a marginally better improvement in performance (% profit on turnover up to 6.2% from 5.4%) and though the other sectors saw profitability increase from 1.3% to 1.7% this was in part due to the increase in the amount of subsidy received which accounted for 101% of the profit (but was down from 109% in 2014).

Consequently, any future policy decision on the desirability and deliverability of subsidy to agriculture will have a significant impact on the future of farming in Jersey and its economic, environmental and social contribution to the Island as a whole.

Table 11 is based on businesses claiming SAP and Quality Milk Payment (QMP) and in 2015 these accounted for 78% of the agricultural area in the Island.

In 2014, agriculture represented 1% of the Jersey economy by Gross Value Added (GVA) which represents a total income of £40m. Most of this income is derived from exporting produce, with the vast majority destined for the UK. There is also some limited export of live cattle to the EU (predominantly to the UK) and this is seen as a potential growth market for some livestock producers.

The majority of the total value of Jersey's agricultural sector came from potato production (approximately £29M) and almost all of this produce is exported to the

UK.Accordingtotheavailabledata,JerseyDairy(8) exportsareworthapproximately £3.4M per annum with 71% going to the UK and 29% to the Far East.

Exports of bulbs and flowers were worth £1.6M in 2015 and are mostly exported to the UK, the remainder is exported outside of the EU. The export value of non-potato vegetable production in 2015 was £1.5M, almost all to the UK. Subsidies

provided to the local rural economy are listed in Table 11(9).

8. http://www.jerseydairy.com
9. Taken from Jersey's Agricultural Statistics 2015 https://www.gov.je/government/pages/statesreports.aspx?reportid=2356