An ambitious plan to expand the output of Scotland's dairy industry by 50% over the next 10 years, through an export-led market development strategy, was announced yesterday in a Scottish Government report.
Scottish Food and Drink chief executive, James Withers, who was commissioned last November by Cabinet Secretary, Richard Lochhead, to review the dairy industry is upbeat that the target set in his "Ambition 2025" report can be achieved if all sectors of the industry work together in a collaborative manner.
His 19 recommendations, which are supported by NFU Scotland, where he was previously chief executive, include the creation of a new Dairy Industry Growth Board, chaired by an experienced business leader, to oversee the implementation of the plan.
"I believe by 2025 we will see a transformed dairy industry in Scotland," said Mr Withers. "It is one which can significantly grow its output by up to 50% as a direct result of creating new, value added markets."
And he added: "Import substitution is an important priority but the real game-changer will be the development of new export markets. I was optimistic about the prospects for Scotland's dairy sector before I started this review and I am even more so now."
Mr Withers said a lot of work would be required to make it happen and the first step was for all parties concerned, including the Scottish Government, industry bodies, producers and milk processors, to commit to "Ambition 2025".
"Concentration on the doorstep market for liquid milk has stifled innovation and the industry is too reliant on too few customers, with 92% of Scottish dairy products sold on the home market," he says.
The industry has lacked leadership and vision, he argues, with a disproportionate focus on the farm-gate milk price, which was not the real driver of farm profitability.
He points to the huge gap of 11p/litre in production costs between the best 25% and the poorest producers which equates to a difference between a £66,000 profit and £54,000 loss in a one million litre herd.
Producer groups need to become more formalised with an emphasis on price transparency and business planning rather than price negotiation and he proposes the creation of a Scottish Dairy Bureau as a one-stop shop for dairy farmers to get independent advice to improve efficiency.
Mr Withers said it was not too late for Scotland to get its act together to capture a share of the burgeoning world market for dairy products but urgent action was needed as other countries, such as New Zealand, were already out there winning new markets.
Mr Lochhead gave a guarded welcome to the report on a visit yesterday to an East Lothian dairy farm. He said he would study the report in the coming weeks with a view to announcing proposals to support Scotland's dairy sector at AgriScot on November 20.
"There is huge potential for Scotland's dairy industry to become a global leader and we should look to explore any avenue and opportunity open to us," he said.
NFU Scotland milk committee chairman, Gary Mitchell, welcomed the report as "positive and forward-thinking" and said it would have to generate momentum in the industry now if it was to be meaningful in the future.
"More effective collaboration up and down the supply chain will be the key to this review's success," he said. "If all parties share in the vision of growing the market for Scottish dairy produce and jointly share in the risks and benefits, that will give confidence to all parts of the chain to invest in their business for the future."
He acknowledged that dairy farmers would have to continue improving efficiency to remain competitive on the world market.
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