Sustainability in Agriculture, Food and Health Case studies

Transcription

1 EUROPEAN COMMISSION DIRECTORATE-GENERAL JRC JOINT RESEARCH CENTRE Institute for Prospective Technological Studies (Seville) Sustainability in Agriculture, Food and Health Case studies 9. Red Tractor Rev 09/01/07 DG JRC/IPTS

2 Preface: "Case studies: A detailed report for each case study, including data sources, data sets, discussion of findings and results with regards to the above objectives." "Objectives: to assess the benefits and costs of quality assurance and certification schemes for farmers, processors, retailers and consumers; to analyse the effects of quality assurance and certification schemes on European farmers with special focus on small-scale farmers; to analyse the contribution of quality assurance and certification schemes to the development of rural areas." Each case study assesses the benefits and costs of quality assurance and certification schemes along the food supply-chain from farmers to consumers. In the section on farmers particular attention is paid to the effects on small-scale farmers. The contribution of quality assurance and certification schemes to the development of rural areas is included in the case studies at various points and an in-depth discussion of this aspect is conducted in the "Final Report". The following case studies have been conducted by ETEPS AISBL and JRC-IPTS: 1. Baena, olive oil, Spain 2. Boerenkaas, cheese, the Netherlands 3. Comté, cheese, France 4. Dehesa de Extremadura, cured ham, Spain 5. EurepGAP, fruit & vegetable, Europe 6. Label Rouge, chicken, France 7. Neuland, pork, Germany 8. Parmigiano Reggiano, cheese, Italy 9. Red Tractor, potatoes, United Kingdom Legal notice The orientation and content of this report cannot be taken as indicating the position of the European Commission or its services. The European Commission retains the copyright to this publication. Reproduction is authorised, except for commercial purposes, provided the source is acknowledged. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of the information in this report. European Communities, 2006

3 ECONOMIC ANALYSIS OF FOOD QUALITY ASSURANCE SCHEMES THE RED TRACTOR SCHEME Dr Marian Garcia 9 January 2007 Final Report

4 Table of Contents 1 INTRODUCTION Purpose of the Study Research Methodology 2 2 THE RED TRACTOR SCHEME Organisation and General Objectives of the Red Tractor Scheme The Red Tractor Standards Accreditation and Certification 5 3 THE ASSURED PRODUCE SCHEME Organisation and General Objectives of the Assured Produce Scheme Implications of APS Standards APS Inspection and Certification 12 4 THE UK POTATO SECTOR Potato Production Potato Consumption and Trade 18 5 RESULTS OF PRIMARY RESEARCH Potato Growers Perspective Potato Packers Perspective Wholesalers Perspective Potato Processors Perspective Retailers Perspective 30 6 CONCLUSIONS 33 ii

5 List of Tables Table 1. Penetration of the Red Tractor Scheme, Table 2. APS penetration, by sector (2005) 8 Table 3. Comparison of APS potato registered area ( 000ha) and Defra statistics, Table 4. Assessment checklist for generic protocol audit of an APS producer 10 Table 5. APS membership and inspection costs 12 Table 6. APS Top 10 Non-Conformance Frequency, List of Figures Figure 1. Farm assurance schemes accreditation and certification 6 Figure 2. Registered potato area and total potato production in GB, Figure 3. Registered potato growers, area per grower and yields, Figure 4. Numbers-size distribution of potato growers, Figure 5. Potato production and average price, Figure 6. Potato planted areas by market sector 17 Figure 7. Per capita fresh and processed potato consumption in GB, Figure 8. Retail and food service potato consumption in GB, Figure 9. Potato supply chain 20 Figure 10. Imports and Exports of Processed Potato, iii

6 Introduction Purpose of the Study The development of quality assurance schemes in the UK has been driven largely by the retail sector in collaboration with farm industry representatives (but without the direct involvement of the government) in response to a change in the regulatory framework (the 1990 Food Safety Act), and to restore consumer confidence in the wake of high-profile food scares. This change in the regulatory framework forced retailers to draw up codes of practice, covering all aspects of crop management, issue them to their suppliers and monitor compliance. Third party private auditing bodies and quality assurance schemes have been created to fulfil the role on behalf of the retailers (Henson and Northen, 1998), particularly given the failure of public controls and the lack of credibility of the UK government regarding management of food safety (Northen, 2001). In addition, retailers are able to use their strict certification requirements as a marketing tool to consumers concerned about food safety and worker welfare issues. In the case of the fresh produce and potato industry (focus of this case study), the response was the development of an industry-led generic farm assurance scheme for domestic fresh produce and potato crops - the Assured Produce Scheme (APS), in APS promotes safe and environmentally responsible production of fruit, vegetables and salads through the use of Integrated Crop Management (ICM). This philosophy recognises the need for crop production to be both economically and environmentally sustainable. It involves producing crops to specified standards and annual, independent verification of these standards. The scheme assesses production standards from plough to farm gate. All major UK supermarkets now require all fresh produce to come from suppliers who are members of APS and a genuine and visible quality and safety culture is essential for companies who supply the multiples. For many suppliers this has been difficult to establish, particularly when improvements in safety and quality systems have had to come from greater efficiency and better operating practices. Moreover, for small firms, the challenges have been greater because the cost implications of improved quality control may not be scale-neutral. In addition to the above industry response, there is a plethora of private quality assurance schemes run by individual retail groups, using adherence to APS as only one of the many entry requirements, particularly in the case of imports, which are not covered by APS. These additional requirements introduced by retailers own schemes relate mainly to agrienvironmental issues rather than food safety issues. Such assurance scheme divergence and convergence has presented challenges for retailers, producers and APS alike. Using a metaphor by Professor Payne, former APS chairman, to describe the current position of APS in today s UK fresh produce market-place: APS provides the railway track on which UK retailers run their own trains, in other words, APS provides benchmark standards to which a few retailers add their own additional requirements in order to differentiate their products from the competition (Payne, 2004). Following the recommendations from the Policy Commission on the Future of Food and Farming (2002) that saw farm assurance schemes as a potential valuable way of communicating value to consumers, assurance schemes in the UK were rationalised in 2004 behind the Red Tractor mark. APS is a Red Tractor scheme which also includes five other sectors of agricultural production: beef and lamb, combinable crops, dairy, pork and poultry. 1

7 Farm assurance scheme and the Red Tractor logo aim to be seen as the benchmark for UK fresh food by the whole food chain, and consumers in particular. This case study is part of the JRC-IPTS project Economic Analysis of Food Quality Assurance Schemes 1 aimed at studying food supply chain dynamics and quality certification. The project aims to provide an analysis of potential policy options for a European-wide framework for the development of quality assurance (QA) and certification schemes managed within an integrated supply chain. As part of the research activities undertaken in the project, a number of case studies representing different assurance schemes in Europe were selected in close consultation with DG Research in order to provide in-depth economic analysis on the role of assurance schemes, the scope of potential costs and benefits associated with assurance schemes, with special focus on small-scale producers, and the contribution of assurance schemes to the development of rural areas. For the UK, potatoes were selected as the target commodity for the study. The potato sector is covered by APS which, as indicated, is a Red Tractor scheme; hence the case study will illustrate the interrelation between the umbrella scheme (the Red Tractor) and a sectorspecific scheme (APS). Moreover, potatoes carry lower risks of foodborne illness compared to high risk sectors like meat and would in principle attract lower regulatory attention. APS has a high level of penetration in the potato sector with over 1,900 members in 2005, representing 71% of total potato acreage in the UK (> 97,000 ha). APS membership is seen as a pre-requisite for UK potato producers if they wish to market their crops to the UK food retailers and large processors. It is, therefore, not surprising that APS has attracted a substantial membership base over the years among fresh produce and potato producers, as approximately 80% of all fresh produce (including imported crops) is sold through the major food retailers. Research Methodology A two-stage approach was developed for this case study. At the outset, a review of previous studies in the public domain and analysis of existing evidence (secondary data) was carried out. The next step involved qualitative research in the form of semi-structured interviews with representatives of the key stakeholders in the potato industry, namely assurance providers, growers, packers, wholesalers, processors and retailers 2. The objective of these interviews was to establish the key issues associated with farm assurance in general and APS in particular, the nature of the costs incurred and the benefits received to date, the potential for improvements in the future and the contribution of farm assurance schemes to the development of rural areas. A total of 20 interviews were conducted between September and November, A list of companies/individuals interviewed is presented in Appendix 1 2

8 The Red Tractor Scheme Organisation and General Objectives of the Red Tractor Scheme The idea of a Red Tractor scheme emerged in October 1999 following research into consumer attitudes. It revealed that shoppers wanted reassurance that farmers and growers would produce food that met a set of agreed standards of good agricultural practice with independent inspectors checking everything from animal movements to housing, feed, animal health and welfare, and the way they treat the environment. They also wanted an easily recognisable symbol that would give them total confidence in the food they were buying. Assured Food Standards (AFS) is the independent organisation set up in 2000 to manage the Red Tractor mark. From 2000 to 2004, AFS acted as an umbrella body coordinating the work of a number different farm assurance schemes. It was responsible for maintaining consistency and equivalence between the schemes that provided eligibility for product to carry the Red Tractor logo. AFS also operated a system of licensing and controls to ensure that the logo is only carried on by food that meets the required standards. AFS was originally owned by seven assurance schemes, the National Farmers Union (NFU) and the Meat and Livestock Commission (MLC). During late 2003 and early 2004, AFS was reorganised following the recommendations from the Policy Commission on the Future of Food and Farming (2002) that saw assurance schemes as a potential valuable way of communicating value to consumers. It recommended that current schemes be rationalised behind the Red Tractor mark with changes both to the structure of AFS as well as to the ownership of farm assurance schemes. The new AFS is owned by food chain bodies, including the NFU, the Ulster farmers' Union, MLC, Dairy UK and the British Retail Consortium (BRC). Observers include DEFRA and the Food & Drink Federation. AFS represents a broad spectrum of individual farm assurance schemes; some are whollyowned subsidiaries of AFS, while others enjoy separate yet equivalent status. AFS schemes: Assured Combinable Crops Scheme (ACCS) Assured Produce Scheme (APS) Assured Chicken Production (ACP) Assured British Pigs (ABP) National Dairy Farm Assured Scheme (NDFAS) Assured British Meat (ABM) Other schemes: Farm Assured Welsh Livestock (FAWL) Northern Ireland Farm Quality Assurance Scheme (NIFQAS) Quality Meat Scotland (QMS) Genesis Quality Assurance (GQA) Soil Association Farm Assured (SAFA) 3

9 The role of the reorganised AFS is to manage the standards underpinning assurance on behalf of the whole chain, license and monitor the use of the Red Tractor logo, and develop equivalence agreements with other standards in the UK and abroad (i.e., EUREPGAP for horticultural products). Since April 2005 the scheme has a new logo featuring the words Assured Food Standards replacing British Farm Standards. The national flag device has been introduced into the logo to indicate the provenance of the food. Farm assurance schemes in the UK show high levels of penetration given their long-standing history in some sectors (Table 1). There are currently over 70,000 Red Tractor farmers in the UK, and most sell their produce to one of 350 Red Tractor processors and packers licensed to use the Red Tractor on their packaging. The Assured British Pig (ABP) scheme covers approximately 90% of all pig production in the UK and the Assured British Meat (ABM) scheme accounts for about 45% of beef and lamb producers in England and Wales, including most of the big producers and thereby about 65-70% of the slaughtered stock. The poultry and dairy industries in the UK are highly integrated with all major companies in the Assured Chicken Production (ACP) scheme and the National Dairy Farm Assured Scheme (NDFAS), respectively. In horticulture, participation in the Assured Produce scheme (APS) varies with the crop, from a minimum of two thirds of the fruit crop to 95% of the UK salad crop. The Assured Combinable Crops Scheme (ACCS) covers around 80% of the cereal and oilseed crop. Table 1. Penetration of the Red Tractor Scheme, 2005 Sector Pigs Cattle Poultry Dairy Fresh produce Cereals and oilseeds Source: AFS Uptake c 90% of producers c 45% of producers c 65-70% of production All major companies All major companies Fruit 67% of hectares Potatoes 74% Salads 95% Vegetables 81% 80% of crop The Red Tractor Standards The Red Tractor standards correspond as a minimum to regulatory requirements in the UK with some of the individual farm assurance schemes imposing ly higher requirements on members, as in the case of APS regarding the use of pesticides and fertilisers. The main objective of AFS is that farm assurance schemes and the Red Tractor logo should be seen as the benchmark for UK fresh food by the whole food chain and consumers in particular. AFS is committed to a gradual increase in standards to match consumer 4

10 expectations at a pace of change that 80% of producers can achieve. It describes this level as one to which all producers in a particular sector should be able to aspire. However, this raises a key question in the development of farm assurance schemes: should farm assurance schemes move beyond the legal and official guidance provided by the government by setting more stringent (environmental) standards? This debate is at the heart of the development of farm assurance schemes in the UK and in assessing their effectiveness. AFS sees the Red Tractor scheme as a baseline scheme and as such have an implicit inclusive approach, aiming at majority participation and an increase in standards across all producers. However, the value of schemes that do little more than repeat basic legal provisions by focusing primarily on enhancing compliance may be of questionable value to the food sector. However, baseline schemes can still provide considerable value added. The mere fact that inspectors visit farms helps to ensure that the legal standards are met where otherwise they might not be, and arguably the independent inspectors used in farm audits of AFS scheme standards visit considerably more frequently than government inspectors otherwise would. Furthermore the standards cover the whole chain of food production, not just the farm level: they cross-reference with feed schemes, haulier schemes, and abattoir standards. They also help farmers to effectively demonstrate compliance with legal requirements (Fearne and Walters, 2004). Moreover, the fact that farm assurance schemes in the UK show high levels of penetration indicates that a very substantial majority of UK producers are adopting production practices that are consistent with, or operate to higher standards than, the Red Tractor scheme and the individual farm assurance schemes. Robust regulation and inspection of standards helps to ensure that standards are fully implemented. All Red Tractor schemes now operate to the International Standard Organisation s ISO Guide 65 (European standard EN 45011). This means that the certification bodies must be independent from the organisations and activities that they inspect; that inspectors are properly qualified, experienced and competent; that documented inspection procedures are used; and that inspectors from the UK Accreditation Service (UKAS) supervise the inspectors work (see below). Accreditation and Certification Assurance provided by suppliers as to the quality and provenance of their product has no great merit unless independently verified and certified. Hence all credible assurance schemes need to be backed by a reliable framework of accreditation and certification. The United Kingdom Accreditation Service (UKAS) is the sole accreditation body recognised by UK Government to assess and accredit the competence, integrity and impartiality of independent evaluation by certification and inspection bodies. Once accredited these evaluating bodies are monitored annually and re-assessed every four years. When certification bodies are assessed by UKAS against the requirements of the accreditation standard, the main areas investigated include the following: the stated aims of the scheme; whether the scheme was capable of delivering the stated aims; 5

11 whether relevant interested parties had been given the opportunity of contributing to the scheme; the balance of interests represented in the scheme structure ; the stakeholders in the scheme; whether the scheme incorporated the basic legislative requirements; whether the scheme owners had considered recognised best practice and, where relevant, that it was incorporated into the scheme; if best practice had been considered but not incorporated, the rationale for omitting it; how the certification body was proposing to deliver the scheme if this was not prescribed by the scheme. UKAS is recognised internationally through European and world-wide multilateral recognition agreements, licensed to use accreditation marks featuring the Royal Crown and to sub-license the use of these marks to UKAS accredited organisations. The existence of a world-wide accreditation system responsible for the independent evaluation of certification and inspection bodies used by farm assurance schemes provides assurance to customers that the evaluators of the assessment process have been judged against rigorous standards and found to be worthy of the trust placed in them. The use of UKAS accredited certification and inspection bodies by scheme providers therefore provides endorsement at the top of the hierarchy that third party evaluation to a given standard is assured and that equivalence at this level is available in the majority of the industrialised countries. Figure 1 shows the interaction between accreditation, certification and assessment/inspection in relation to farm assurance certification schemes. Those who operate farm assurance schemes are responsible for setting the specific standards applied in their scheme and are encouraged to encompass the whole supply chain. The standards are then licensed to various certification bodies that inspect and certify against those standards. The standards themselves are kept under review by that scheme s Technical Advisory Committee (TAC), which has the task of effecting improvements considered desirable and which the industry is able to assimilate. The role of the TAC is therefore crucial in maintaining the acceptability of the product to the purchaser and in ensuring flexibility and adaptation in the face of new knowledge over time. Figure 1. Farm assurance schemes accreditation and certification 6

12 Scheme Technical Advisory Committee (Specific Sector) Standard Owner Develops standards and procedures UKAS (Initial accreditation and annual surveillance report) Certification Body (CB) Accredited by UKAS to EN Manages certification against the standards and procedures Assessors/Inspectors Employed by CB FARMS Farm Assured Produce 7

13 The Assured Produce Scheme Organisation and General Objectives of the Assured Produce Scheme The Assured Produce Scheme (APS) is a Red Tractor scheme. It is one of the earlier schemes, implemented in 1997 from a retailer-grower partnership (the 'NFU-Retailer ICM Partnership') that began in It reflects a long-standing and close relationship covering all parts of the industry and is able to respond quickly to changes in consumer demand. APS covers all types of fresh produce and potato crops grown in the UK. APS promotes safe and environmentally responsible production of fruit, vegetables and salads through the use of Integrated Crop Management (ICM). This philosophy recognises the need for crop production to be both economically and environmentally sustainable. APS involves producing crops to specified standards and annual, independent verification of these standards. The scheme assesses production standards from plough to farm gate. The extended traceability chain of custody from farm-gate to the point of purchase is covered by a further assurance standard, the Technical Standard, managed by the British Retail Consortium (BRC, 2003). The scheme s main driver remains the grower-retailer relationship which is regarded as the most immediate means of identifying consumer concerns. The scheme is directed by an independently chaired management board that includes two directors representing the retail sector and two representing the crop production sector. The scheme possesses an effective Technical Advisory Committee (TAC) responsible for updating the generic standards. The scheme, however, would benefit from the addition of consumer representation to its governing board to ensure better consumer input into a sector of considerable consumer interest. APS is also working very closely with the UK Food Standards Agency (AFS) as part of the FSA action plan to minimise pesticide residues in food 3. Further collaboration is expected in the future regarding microbiological contamination. While APS membership is voluntary; the fact that all UK multiple retailers and many UK processors will primarily source and market UK-grown fresh produce and potatoes from APS growers makes it often seen as a pre-requisite for market access. In 2005, there were about 3,200 members representing around 75% of total fresh produce and potato acreage in the UK (>22,000 hectares) and about 1billion farm gate value (Tables 2). Table 2. APS penetration, by sector (2005) Crop (Top Ten) No. of Certificates Hectares Potatoes ,218 Top Fruit 276 7,770 Cabbage 272 6,667 Cauliflower 247 9,213 Strawberry 239 2,260 Onions (bulb) 189 8,867 Peas (processed) ,185 Broccoli 187 7,853 Carrots 175 9,

14 Cane Fruit Source: Assured Produce In the case of the potato sector (focus of this case study), APS has developed a strong grower membership base since its inception in 1997 (Table 3). The sector has 1,900 members, representing 71% of total potato acreage in the UK (> 97,000 ha) (Table 2). APS membership is seen as a pre-requisite for UK potato producers if they wish to market their crops to the UK food retailers and large processors. Table Comparison of APS potato registered area ( 000ha) and Defra statistics, Year Year Year Year Year Year Year Year Year APS 76,184 95, , , ,981 96,843 98,024 97,218 94,220 DEFRA 165, , , , , , , ,000 n.a. APS as % of DEFRA 46% 58% 59% 66% 64% 67% 66% 71% - Source: Assured Produce The original concept of APS, at least in the eyes of producers, was to establish a common set of production standards that would enable APS members to market their product to all multiple retailers, with no further proliferation of quality assurance audits (Payne, 2004). However, this has proved to be a challenging or even impossible objective to achieve. Tesco, for instance, although becoming a member of APS and playing an active part in the continuing development of the scheme, for commercial reasons have continued Nature s Choice assurance. Some other retailers have developed additional requirements for their producers, beyond the benchmark standards that APS has developed (e.g., environmental standards LEAF Marque). In addition, in the desire to level the playing field for production standards for imported fresh produce, several of the UK multiple retailers have supported the implementation of the international fresh produce assurance scheme, EUREP (European Retailer Protocol). EUREP developed their own generic protocol for fresh produce based on standards similar to those developed by AP. As the establishment of EUREP could have created further divergence in UK fresh produce assurance, in 2002 the APS decided to benchmark its standards to those of EUREP. As a consequence of the benchmarking, all growers who successfully become members of the APS automatically receive EUREP membership as well. The converse does not apply. Implications of APS Standards APS standards are set out in a generic protocol, plus 44 crop specific protocols, one per type of fruit or vegetable 4. Standards are based on ICM which is codified in a crop decision matrix aiming at maximum protection for the consumer, the environment, the crop and the operator. APS works closely with LEAF (Linking the Environment and 4 For the latest Crop Specific Protocols ( ): 9

15 Farmer) on the development of its environmental standards 5. Crop protocols are revised annually by the crop authors while TAC revises the generic standards and proposes changes to the Board. The aim is to transfer the latest technology to the sector as speedily as possible so that UK growers can keep their use of pesticides and fertilisers to the minimum necessary for a healthy crop and, where possible, use alternative controls. The scheme regards this objective as one which is particularly important for the consumer. Consumer research commissioned by the FSA indicated that most consumers would prefer pesticide residues in food to be reduced below current safe levels (Food Standards Agency, 2005). The protocols consist of two types of standards (Table 4): Critical Failure Point (CFPs) (so-called "must" standards): covering areas such as food safety. These standards must be complied with for full APS membership. Strongly recommended (so-called "should" standards): these standards are verified during APS assessments and their compliance forms part of the certification decision. Depending on the protocol, between 90% and 100% of the should standards are expected to be complied with. The total number of generic checklist questions faced by all APS growers have been subdivided into subject groups where the questions address: (i) food safety issues that are related to pesticide use; (ii) other food safety topics (e.g. microbiological hazard); (iii) agri-environment (e.g. preventing pollution); or (iv) other topics (e.g. worker welfare) (Table 4). As the APS was originally established to underpin the due diligence requirement on food safety, a substantial number of the checklist questions, faced by growers at their annual audit, address food safety issues (at present, 72% of the CFPs relate to food safety and best practice in pesticide use). However, with ICM as one of APS main objectives, and as continuous improvement has been an important objective of the scheme, questions relevant to crop protection strategies and agri-environmental issues are also important components of the audit. Amongst the strongly recommended areas of the audit, rather than the CFPs, a higher proportion of the checklist questions deal with agri-environment issues (60%). To be successful an assessment requires a score of 100% for CFPs (food safety and health & safety requirements) and 90% or above in response to the other checklist questions. The crop specific protocols also include questions regarding good practice, which are verified during the assessment process and form part of the certification decision. Table 4. Category Assessment checklist for generic protocol audit of an APS producer No. of Food Safety- Food Agrienvironment Other Questions Pesticide Safety 5 The LEAF Marque Standard introduces some additional agri-environment criteria to those currently present in APS standards, particularly in the context of CFPs. The LEAF Marque has become a requirement for some UK retailers (e.g. Waitrose) and APS and LEAF have sought to minimise the additional assurance burden on producers by agreeing to concurrent audits of the two Scheme standards. 10

16 Others CFP % pass Total Source: Assured Produce APS uses a HACCP approach to identify critical control points (CCPs) for each stage of crop production and encourages members to produce a documented HACCP for their local circumstances. The standards require detailed information on each crop and field regarding the use of pesticide (i.e., dose, weather, operator protection, machinery and training). Some small producers have criticised these requirements as too bureaucratic, but the scheme believes that they are important for the strict controls on pesticide usage now expected by consumers. There are no specific aspects relating to food quality other than requirements for general best practice production standards. Physical and organoleptic quality at point of sale are addressed through product specifications agreed between the grower/packer and the purchaser (general requirements are referenced in Section 5 of the Generic Crop Protocol under Variety Selection ). Key aspects of environmental management are covered in both the generic and crop specific protocols in line with ICM principles and good horticultural practice including: Crop rotation and soil management Pollution control and waste management Energy efficiency Conservation issues Water APS ensures that all key inputs are recorded (e.g., fertilisers, pesticides) and that registered product is traceable back to the registered grower and (generally) back to specific fields (the chain of custody from plough to plate is addressed by the BRC Technical Standard at packhouse and beyond). However, there are still some assurance gaps that need to be addressed including transport between farmgate and packhouse and crops sold in fields to contractors. The fact that APS membership covers 75% of total UK fresh produce and potato acreage indicates that a very substantial majority of UK growers are adopting production practices that are consistent with, or operate to higher standards than, the APS generic and crop-specific protocols (Payne, 2004). However, the potential contribution of APS to help raise standards, to improve the observance by growers of regulatory requirements and Codes of Practice (COPs), to improve traceability, and to increase consumer confidence on food safety seems not to be realised by most growers interviewed in this study (see Chapter 6). 11

17 APS Inspection and Certification An applicant grower must complete the membership application form and pay an annual fee depending on crop type and acreage (Table 5). When growers apply to become a member of the APS, they can select their certification body from the list of companies currently approved to audit the APS standards. Generic and relevant crop-specific protocols are provided. The grower receives full independent assessment within 6 weeks of application. If the grower passes the assessment they are listed on the membership database as a full member. Assessment failure results in suspension of membership (within 1 week) until nonconformances are rectified. Registration is cancelled if the grower does not rectify the nonconformances (and provide additional documentary evidence of rectification) within 6 months of assessment. The scheme is regarded as expensive by some growers, particularly for its operating and record administration requirements. However, retailers would probably require these even without the scheme. The scheme helps to avoid specific retail checks and duplication, which would otherwise occur and increase costs. However, as indicated, APS provides benchmark standards to which some retailers add their own additional requirements in order to differentiate their products from the competition. Hence, additional costs would be incurred by growers in order to comply with various private quality assurance schemes. Table 5. APS membership and inspection costs 0-25ha 26-75ha ha > 150ha N.B. CMi Certification fees There are currently four certification bodies licensed to audit APS standards: CMi, EFSIS- FABBL, National Britannia and PAI. These bodies are accredited to a number of different assurance schemes and can therefore offer a matrix of assessments to meet the needs of individual businesses, which are completed in a single visit. In 2001, APS standards were fully accredited to the European EN45011 standard (General Requirements for Bodies Operating Product Certification Systems) by the United Kingdom Accreditation Service (UKAS). Individual assessors have to have a minimum of an HNC (Higher National Certificate), formal HACCP and food hygiene training, formal pesticide and fertiliser application training (BASIS & FACTs accreditation), formal auditor training and 3 years industry experience is required. Assessors do not generally make unannounced and random visits. They tend to rely on an annual visit to members holdings, when they undertake a detailed check of the extensive on-farm record requirements to ensure that APS standards are being met. The scheme uses traceability of produce from the retail point back to a member s holding as an important method of assessing overall effectiveness. APS assesses production standards from plough to farm gate. The scheme relies on BRC Technical Standards for packing and processing once produce leaves the farm. Some retailers 12

18 use own third-party audits (e.g. Tesco Nature s Choice). They provide the retailer with a method of fine tuning existing scheme standards. Table 6 shows the top ten non-conformances between Feb 2005 and February The highest scoring non-conformances at 21% relate to health and safety and workers welfare requirements (Section 12 of the Generic Crop Protocol) with some of the standards recently introduced. The second most common single non-conformance was against standard (sprayer testing) at 5.59%. As for HACCP approach to identify CCPs (standard 2.8.1) which has been criticised as too bureaucratic by small producers, there has been a reduction in non-conformances over time. In year 3 of implementation ( ), HACCP was the highest non-conformance at about 60% falling to under 20% in year 4 ( ) and representing 2.86% of APS total nonconformances in year 9 ( ). 13

19 Table 6. APS Top 10 Non-Conformance Frequency, Rank Standard Number (NEW) Standard Description Visitor personal safety to be communicated to all visitors Tractor mounted/drawn or self propelled sprayers should be registered with NRoSO Named representative for worker welfare and regular meetings with workers (NEW) Company visitor hygiene procedures should be communicated to all visitors (NEW) Purchased inorganic fertilisers used within the last 12 months should be accompanied by evidence of their chemical content Number of incidents % of APS total nonconformances Adequate levels of trained first aid personnel Hazard Analysis to identify critical control points Copies of documents as listed in standard should be held Written energy policy Analysis by suitable laboratory for microbial, chemical and mineral pollutants Source: APS

20 The UK Potato Sector Potato Production Since 1960, registered potato planted area has declined from 280,000 to 116,000 ha (Figure 2). However, gross production over the same period has remained steady at just over 6 million tonnes. Production fluctuates annually depending on weather conditions. Particularly low yields occurred in when there was a severe drought. Other droughts since then have been offset by the increased use of irrigation. Areas were regulated by quotas until 1996, and have since then followed free-market economics. Figure 2. Registered potato area and total potato production in GB, Source: British Potato Council (2006) Potato grower numbers have declined from 76,825 in 1960 to 3,064 in 2005 (Figure 3). Until 1996, the system of quotas discouraged movement out of potato cropping, and registration limits were smaller. In 1997, the British Potato Council 6 (BPC) was formed and the quota system ended. This led to an accelerated consolidation of potato growers. Area planted per grower (red line) averaged 3.65 ha in It is now more than ten times that, at 38.1 ha. Yields per ha (green line) have also been rising steadily, and in a more or less linear fashion since 1960, with main crop gross yield around 47 tonnes/ha, as against 22.6 tonnes/ha in These changes reflect improved agronomy and crop management. It is because of the increased per ha yields that production has remained relatively constant in spite of the 41% reduction in planted area (see Figure 2). 6 The British Potato Council (BPC) is a Non-departmental Public Body (NDPB) whose operations are funded by statutory levies, paid by producers and trade purchasers of potatoes. BPC main functions are to fund research and development, transfer technology, collect and disseminate market information, and to advertise and promote potatoes at home and in export markets. 15

21 Figure 3. Registered potato growers, area per grower and yields, Source: British Potato Council (2006) Figure 4 shows the percentage of potato producers by area against the percentage of potato producers by number for three comparison years (1996, 2001, and 2005). This shows that in spite of the large absolute change in areas planted and numbers of growers over this time, the underlying structure of the potato industry remains very consistent. As a rule of thumb in the potato industry, we can say that the top 10% of potato growers account for over 40% of the planted area, and the top 60% for over 90% of the area. Conversely, the smallest 40% of potato growers account for less than 10% of the planted area. Figure 4. Numbers-size distribution of potato growers, Source: British Potato Council (2006) 16

22 Figure 5 shows annual average potato prices, adjusted to 2005 basis by the retail price index from 1995 onwards. Prior to 1994, price comparisons are influenced by market regulation through the former Potato Marketing Board, and do not reflect current behaviour. High production years over the period shown are associated with lower prices and vice versa. Potato prices are noticeably weaker in years where potato production exceeds 6 million tons. There is also a longer-term trend for declining prices in real terms. There may be an underlying tendency for price fluctuations to be decreasing. Both these tendencies may be a result of the increasing areas grown under contract (see Figure 6). Figure 5. Potato production and average price, Source: British Potato Council (2006) The fresh potato sector for bags and chipping comprised 20% of area planted in 2005 (Figure 6). Pre-pack accounted for 41%, processing for 27%, and seed for 12%. Between 2004 and 2005 there was a net increase in pre-pack area, and decrease in processing area, but two years data does not constitute a trend, especially as the changes were small. Contracted crops comprised 48% of the ware area (i.e. excluding seed), a increase on 44% noted in 2004, and consistent with the general perception that areas are increasingly grown under contract. Figure 6. Potato planted areas by market sector 17

23 Source: British Potato Council (2006) Potato Consumption and Trade Total raw equivalent 7 per capita consumption of potatoes has remained more or less constant over the last 15 years (Figure 7). However, there have been changes in eating habits, with a substantial move from fresh to processed potatoes up to From 2001 the trend has been relatively flat. Processed potato usage is primarily as frozen chips, but also as crisps and other products. Fresh consumption includes both potatoes prepared in the home, and ware trade to the food service industry. Figure 7. Per capita fresh and processed potato consumption in GB, Source: British Potato Council (2006) Total retail sales of fresh potatoes and potato products have declined slightly over the last 15 years, whilst food service sales have increased by nearly 30%. Overall potato consumption has shown a slight increase, although this is driven more by the move to eat more processed 7 Data is presented as raw equivalent data, hence fluctuations are due to different efficiencies in use from year to year as a result in seasonal variations in dry matter and other quality aspects. 18

24 products (Figure 8) than by absolute increase in potatoes eaten on the plate: Processed products require more raw potatoes to achieve a given portion size. 19

25 Figure 8. Retail and food service potato consumption in GB, Source: British Potato Council (2006) Figure 9 depicts the main dimensions of the potato supply chain. Total consumption is around 6 million tonnes, similar to total GB supply. However, the supply includes about 18% waste and 7% seed supply, so net GB supply is around 4.5 million tonnes. Processed products are the main import, totalling 1.3 million tonnes raw equivalent, with some fresh imports for processing. Fresh ware imports and exports are nearly in balance, with a slight surplus on imports. The fresh and processed potato supply chains are currently numerically similar. Figure 9. Potato supply chain Source: British Potato Council (2006) 20

26 Figure 10. Imports and Exports of Processed Potato, ,000 Volume, raw equivalent ('000s tons) 1,800 1,600 1,400 1,200 1, New Ware Processed Seed Exports June of year shown to May of following year Source: British Potato Council (2006) 21

27 Results of Primary Research This section of the report presents the key findings from semi-structured interviews with key stakeholders at each point of the potato supply chain, namely, growers, packers, wholesalers, processors and retailers 8. Interviews took place between September and November A set of structured interview guides, one for each stakeholder group, were prepared and used to capture views of key informants 9 Make more explicit the potato focus Potato Growers Perspective All potato growers interviewed in this study were APS members. As indicated, APS has a high level of penetration in the horticultural sector in general, and the potato sector in particular with over 1,900 members in 2005, representing 71% of total potato acreage in the UK (> 97,000 ha) (Tables 1 and 2). In addition, most growers interviewed also comply with other private quality assurance schemes such as Tesco s Nature s Choice, LEAF Marque, Pepsico scheme (Walker crisps) and Higgins scheme (KP crisps). When APS was first introduced there was a perception among some producers that the scheme would confer product differentiation and thereby yield a marketing advantage to producers. However, as participation has become more widespread and membership an entry market requirement to major buyers the expectation of a financial incentive has somehow lost its force. Potato growers indicated market access as the main reason for joining APS and other retailers quality assurance schemes, either for fear of not being able to sell their potatoes or to give them more options for selling their potatoes. Supermarkets would not accept my produce otherwise. Our customers told us bluntly that they would not buy our potatoes unless we have them assured. Hence, we had to do it to stay in business. I was driven by my buyers, mainly Tesco and Safeway In order to continue supplying my potatoes to supermarkets, mainly Tesco and Sainsbury, I had to do it If we didn t, we wouldn t had been able supply our potatoes to anyone. We just had to do it These responses together with the views from other 40+ potato growers contacted informally during the study reveal that potato growers in the UK would not be able to supply non-assured crops to the mainstream potato supply chain. Only growers producing potatoes for their own farm shop sales or for specific niche markets where customers may put more emphasis on certain quality attributes (i.e., organic) compared to farm assurance may be able to market non-assured potatoes. However, the volume and value of this trade is extremely marginal. 8 A list of organisations and individuals interviewed is presented in Appendix 1 9 See Appendixes 2, 3 and 4 for a summary of the individual interviews with potato growers, packers and wholesales, respectively. 22

28 Hence, we could conclude that farm assured potatoes are the mainstream production in the UK with only a marginal potato production outside APS mostly destined to potato seed production, organic production or potatoes sold at producers farm shops. All potato growers indicated to have joined APS after the first or second year of implementation. Since its inception, APS has developed a strong grower membership base in the potato sector (Table 3). APS membership is seen as a pre-requisite for UK potato producers if they wish to market their crops to the UK food retailers and large processors. It is, therefore, not surprising that APS has attracted a substantial membership base over the years, as approximately 80% of all fresh produce (including imported crops) is sold through the major food retailers. Benefits of APS to growers All potato growers indicated market access as the major benefit for joining the scheme. APS membership is voluntary; however most major potato buyers will only purchased assured potatoes so it is often seen as a pre-requisite for market access. We have been able to sell our potatoes Market access have been secured and sustained Continued supply of potatoes to supermarkets; otherwise, failure to assure our potatoes would have meant no more supply Unlimited access to supermarkets A second benefit which some potato growers considered as minor is the improvement of business management and general field operations. This is a by-product of farm assurance that has received little attention in the past but is attracting growing interest, as proponents of farm assurance look for more positive incentives for adoption, particularly given the absent of financial incentives. However, the fact that APS membership covers 71% of the UK potato production acreage shows that a very substantial majority of UK growers are adopting production practices that are consistent with, or operate to higher standards than, the APS generic and crop-specific protocols (Payne, 2004). However, the potential contribution of APS to help raise standards, to improve the observance by potato growers of regulatory requirements and Codes of Practice, to improve traceability, and to increase consumer confidence on food safety seems not to be realised by most potato growers. Membership of assured produce scheme has brought marginal improvements to my farm Some improvements have been made in our operations as a result of membership to this scheme The final benefit reported by some potato growers is that APS membership helps them to demonstrate to their customers (and consumers) that they comply with legal requirements to produce safe food following standards of good agricultural practices. It provides warranty and due diligence allowing the supply chain to operate efficiently. There is a view that vertical relationships in the potato supply chain have somehow strengthened as a result of APS. The scheme focuses potato growers more towards their customers and consumers. The close 23

29 partnership covering all part of the industry enables the potato industry to respond quickly to changes in consumer demands. Our customers are confident in what they buy. They are sure of the production system. They trust that there are no illegal chemicals or concentrations of any form of chemicals in our potatoes Our buyers easily ascertain the quality of our production systems Our customers have confidence in our production methods and chemical use Because we supply them assured potatoes, they are able to market our potatoes anywhere Despite the perceived benefits of APS to both growers and other actors in the supply chain, interviewed potato growers felt that consumers that buy foods with the Red Tractor logo do not go to the detailed standards to determine what they mean. In their views, most consumers do not notice the Red Tractor logo at all or interpret it to mean that food has been produced in the UK. The general view among most interviewed stakeholders is that a clearer communication strategy of the Red Tractor standards is needed so that the final consumer understands what is buying, and this would play an important role is promoting sustainability. While retailers require us to produce and supply assured potatoes, consumers do not know anything about assured produce Our consumers are not sufficiently aware of assured potatoes. They have not come to understand this fully Cost of farm assurance Potato growers indicated record keeping and increased administration work associated with the scheme as costs. A medium scale potato grower reported record keeping and administration as extremely, taking up to 20% of 3 people s time in a season. Four other respondents qualified paper work as quite ranging from one week s person to 10% of seasonal work time of one person. In monetary terms, these costs range from 200 to 2,500. One large scale grower, however, viewed record keeping as not very, and equivalent to a single day s work of one person, which when compared to other business costs is in. This would suggest that record keeping and administration costs tend to be proportionally higher for small-scale potato growers than for larger growers. Small potato producers are less likely to have their records computerised so all field operations such as spraying records will be done manually resulting in increased paper work and time spent. The second ranked cost is the annual inspection cost which includes audit fees and associated preparatory activities. Three growers - one medium scale and two small scale producers - ranked annual audit costs together with record keeping and administration as quite. They reported inspection costs ranging from 400 to 1,000 which included actual audit fees and costs incurred in preparation for the audit. Certification firms have standard annual audit fees which differ according to the acreage. For instance, CMI Certification Company charges 185 for hectares of 0 to 25ha, 230 for hectares of 26ha to 75ha, 280 for hectares of 76ha to 150ha and 330 for hectares of over 150ha. 24