THE ARLA UK 360 PROGRAMME A farming approach that benefits everyone

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1 A farming approach that benefits everyone ECONOMIC RESILIENCE & REINVESTMENT START

2 Everyday farmers face a balancing act between protecting the environment, caring for their animals and keeping dairy affordable to all. With almost one in four dairy farms across England and Wales closing their gates for good in the last decade 1, it s a sizeable challenge and with an increasing average age of dairy farmers, the future could be looking uncertain. However, this challenge is also driving a positive sustainable change in dairy farming. The most successful dairy farmers today are those modernising traditional farming methods and many of them are members of the farmerowned cooperative Arla Foods. The support of UK retailers has been instrumental in helping Arla s farmer owners get this far. Facilitating shared learning, encouraging trial and financial support has been vital for change to take place. However, with a new Agriculture Bill for a post-brexit world placing both demands and providing opportunity to support change for farmers, and in the face of a UK dairy deficit of 16 per cent 2, there has never been a better time to review how we drive the future of dairy farming. In less than 15 years from now, it is estimated we will be more than nine billion people on the planet and, with an ever-growing population in a UK which today only sources 60 per cent of its food locally 3, finding a way to provide everybody with a healthy, nutritious diet without exhausting natural resources is one of the biggest challenges we face. In dairy farming, as with most industries, there is more that can be done to increase the sustainability of the food we produce. The policy and economic pressures already mentioned, coupled with new technologies and ongoing financial support from retailers provide both the opportunity and the impetus to take these individual pockets of best practice and consider how together we can continue to develop our sector. Since the beginning of 2018, 79 of Arla s UK farmer owners with different farming methods have been trialling a new set of standards which form the new Arla UK 360 programme. The response has been hugely positive. Taking the best in animal health and welfare, people development, environmental and natural resources, community engagement and economic resilience and reinvestment, these farmers have piloted a new holistic approach to farming. We believe that collectively, with continued support from retailers and foodservice companies, the Arla UK 360 programme will become the new leading standard for farmers in the UK. What is different about this programme is that not only does it bring together today s best practice current standards, it also establishes a platform to partner with retailers and foodservice companies to take forward R&D projects and wider innovation which will lead the dairy agenda of the future. From grazing and recycling of farm waste, to exploring how artificial intelligence can benefit animal care. The areas identified and detailed in this report are those we believe should be the highest priorities for today and tomorrow. This isn t a one touch programme though. Our aspiration is that it will evolve to become an ongoing platform for development. Arla UK 360 will enable Arla Foods, its UK farmer owners, its retail and foodservice partners and the wider industry to collaborate, innovate and create meaningful, sustained, evolution in the dairy sector. The challenge, of course, is delivering a scheme like this without impacting the affordability of milk. Anyone can set out a vision, anyone can laydown idealised standards, anyone can judge farmers, but the practicalities of balancing the needs of animals, the environment, farmers and consumers has to be recognised for a sustainable dairy sector. That s why the retailer and foodservice partners that are already supporting Arla to drive better farm assurance standards are so important. Their further commitment to support the Arla UK 360 programme will be essential in enabling an increasing number of farmers to participate and ensuring widespread adoption of the standard. Without their support, a programme as ambitious and forward thinking as Arla UK 360 simply couldn t happen and so, on behalf of our 2,400 UK Arla farmers owners, I d like to thank them for their ongoing help and support. Graham Wilkinson Head of Agriculture at Arla Foods UK and strategic lead for the Arla UK 360 programme The most successful dairy farmers today are those modernising traditional farming methods and many of them are members of the farmer-owned cooperative Arla Foods.

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4 Animal health and welfare is vital to the success of a farm and its long term profitability Animal health and welfare is vital to the success of a farm and its long-term profitability. It s also one of the biggest concerns to farmers who want their cows to be well and happy, not just because they care, but because it makes financial sense and will lead to a profitable farm. On average, dairy farms in the UK have around 150 dairy cows 4 and technology is used by many farmers to monitor and measure the wellbeing of each cow. All of Arla s 11,200 farmer owners across Europe adhere to Arla s Arlagården programme, which mandates the care for animals which must be given in order to be an Arla farmer. However, with continued advances in technology and innovation comes the opportunity to continually drive forward change, and with animal welfare always being front of mind for Arla s farmer owners, the appetite to continue to drive the best standards remains a priority. The Arla UK 360 programme will see UK farmer owners supported by retailers and foodservice companies to deliver leading animal welfare standards. Farming differs; on every farm, in every region, with every farmer, so our programme in the UK seeks to respect these differences by taking an animal outcome approach, recognising that farmers are the experts when it comes to caring for animals. By providing outcome-based measures, our owners can tailor their own farming methods in the best way for them, while delivering the same outcomes that are key indicators of animal health and welfare. Our animal outcome measures include areas such as cow comfort, animal handling, preventing and managing illness, milk quality parameters and external training for on-farm workers which are verified by independent unannounced audits. On average, dairy farms in the UK have around 150 dairy cows

5 PEOPLE The future of farming in the UK is dependent on the people working within it. However, in the Agriculture in the United Kingdom 2017 report, the Government noted that in the UK around a third of all agriculture holdings were owned or managed by people over the typical retirement age of 65 years, while the proportion in the hands of young people aged less than 35 years was around three per cent 5. The people working in our sector are hugely important to ensuring farms can run effectively and efficiently. And this matters: Arla and its farmer owners directly and indirectly support more than 119,000 jobs in the UK 6. Arla believes there is more it, and its farmer owners, can do to open the gates to farming for a new generation, and to do so it must professionalise people management in the sector. As well as ensuring succession planning is in place across Arla UK 360 farms, all farmer owners participating in the programme will be trained on HR management, including key legal requirements, and will have learned about the best ways to have an engaged and stable workforce. Arla farmers on the programme will also make the time to help people better understand the industry and the employment opportunities it brings. Our industry and the jobs within it are very diverse and largely unknown. From roles in bioscience, animal nutrition, emerging technology maintenance and management, and environmentalism, there s a host of opportunity. Arla UK believes the industry must get better at promoting these opportunities to be better able to meet the future needs of dairy farming. A smaller farm on the programme will show this through engagement with local agricultural colleges and schools, while larger farms will be considering apprenticeships and graduate programmes. Arla and its farmer owners directly and indirectly support more than 119,000 jobs in the UK

6 At Arla, we take the issue of the environment very seriously across all areas of our business ENVIRONMENT & NATURAL RESOURCES At Arla, we take the issue of the environment very seriously across all areas of our business. We have worked hard over decades to ensure we are as responsible and sustainable as possible. As the global population rises relentlessly and the demand for nutritious food becomes increasingly important, we continue to do so. The farmers across the UK and Europe who own our business are already working hard to reduce the impact on their own individual farms and have already reduced their carbon footprint by 23 per cent compared to 1990 well on their way to achieving the 30 per cent target set for completion by The measures in the Arla UK 360 programme will require participating Arla farmer owners in the UK to consider specific measures to reduce their farm s impact on the environment and take steps to reduce the impact on natural resources wherever possible. The measures will help deliver Arla Foods Good Growth 2020 strategy which takes a company-wide approach to improving performance across sustainable farming, climate change, water and energy and zero waste. Specific measures for the programme include: Participation in carbon footprint assessments and monitoring; A commitment to evaluate alternative energy sources (e.g. AD, solar, wind etc) and either have deployed or have included them as part of their farm s capital investment plan. The farm must also review latest developed technologies at least every 24 months; and A plan to maintain and enhance soil quality over a five-year period, sampling regularly and optimising nutrient balance. To continue to drive sustainability in our sector, we also need to tackle some of the biggest environmental challenges around ammonia reduction, water consumption and soil management. Individually many of our farmer owners focus on this but, collectively, we believe more can be done. This is why collecting and understanding on farm data in these areas is a key part of the Arla UK 360 R&D focus detailed later in this report.

7 Ensuring farming is recognised as a force for good within local communities is vitally important for the long-term prosperity of UK farming. Many Arla farmer owners already have good links with their local communities, but there is also a need for younger generations to better understand where food comes from and how it is made. Through the Arla UK 360 programme, participating farmer owners in the UK will commit to a minimum two consumer education initiatives a year. Examples of events include Open Farm Sunday, school visits, retailer store visits and agriculture show events. Imagine the difference if all dairy farmers participated in two community education events a year! But community involvement for the programme covers a wider base as well. In participating in the programme our farmer owners are committing to seeking local employees for all jobs first. This standard does not require that local employees are taken on if they aren t the best candidate, but does serve to ensure that the opportunity is always offered to the local community. Through the Arla UK 360 programme, participating farmer owners in the UK will commit to a minimum two consumer education initiatives a year. COMMUNITY

8 THE ARLA UK 360 PROGRAMME A volatile global market, unpredictable weather conditions and ever-changing costs of farming inputs means the business of dairy farming will always be precarious, a factor which has been made clear through the closure of around one in four farms across Britain in the last decade. We repeatedly see that the businesses best able to manage price volatility are those which actively take steps to build resilience in their business. All farmers participating in the Arla UK 360 programme will take this approach through a three-year business plan with investment areas identified. In addition, they will be active participants in Arla Food UK s R500 programme established in The R500 programme facilitates farmer to farmer support to share best practice and experience, to help future proof their farms and increase resilience. The programme is shaped by evidence from across Arla farms which has demonstrated that overall on-farm profitability can be enhanced when farmers are better informed with data and able to adjust to market changes. ECONOMIC RESILIENCE & REINVESTMENT

9 In addition to the deliverables in the core Arla UK 360 programme, Arla farmer owners in the programme will work with the retailers and foodservice companies that support it to research, trial, evaluate, solve and incorporate some of the key challenges and opportunities currently present in the dairy sector. R&D TO LEAD THE DAIRY AGENDA Already, Arla and its farmer owners have identified five areas which it will be seeking to explore in 2019.

10 THE ARLA UK 360 PROGRAMME Breeding calves with purpose To graze or not to graze? Raising a male calf that will not have the opportunity to enter the dairy herd or go on to be a productive beef animal, is not something that farmers want to do. It s a futile exercise, unfair on the animal and unaffordable for farmers. Over the last decade there has been a fundamental shift in the volume of beef sourced from UK dairy herds, with dairy bred beef now representing over 55 per cent of all UK beef consumed, a 10 per cent increase in the last decade. However, there is more that we can do. Most consumers will tell you that for cows to be well looked after they have to graze and many choose to support this by buying Organic or Free Range milk. However, while around 90 per cent of Arla cows in the UK are grazed, most farmers will tell you that animal welfare is not down to grazing but about the care each animal is given and that some housed systems have the highest welfare levels in the industry. There is no strong academic or scientific evidence to support either claim. As part of the Arla UK 360 programme, the export and shooting of healthy calves is not permitted. We are also working with this group to explore how we can ensure that any male calves born have the potential to be reared for beef through a sustainable integrated system in partnership with the beef industry. Arla s UK farmer owners continue to work in partnership with customers and the wider agricultural industry on a number of cross-sector initiatives, to maximise the potential of male calves, working to ensure that there is no need to shoot a healthy calf on farm. Reducing waste on farm Reducing waste is a constant theme throughout the Arla UK 360 programme, whether that s water, feed or energy. We ll continue that theme reviewing areas of particular concern to owners and the retailers and foodservice companies that partner with the programme to find more ways to recycle and reuse on-farm waste wherever possible. Arla and its farmer owners strongly believe that farm development should never come at the cost of animal or environmental welfare. In 2019, Arla will explore opportunities to partner with an academic body and customer to consider the evidence. What benefits does grazing bring? And can these benefits ever be fully replicated or bettered in a housed system? The happy cow measure Technology is already changing farming, but the continued evolution of technology combined with animal behavioural principles means we could be on the precipice of being able to truly measure the well-being and happiness of a cow. Cow Fitbits already enable farmers to track changes in behaviour but what if these measures could be combined with a more common standard on subjective measures such as cow mobility and body condition, as well as interpret behaviours which signal a dissatisfaction for cows. With the advances in artificial intelligence combined with Arla s current data programme Arlagården Plus, we believe this could be possible to develop. Working with animal behavioural, data and artificial intelligence experts, Arla UK and its farmer owners believe it will be possible to create a measure to truly determine the happiness of a cow. Data driven leadership The agriculture industry has been slow to appreciate the benefits of data in driving sustainable decision-making processes. For the dairy industry, not knowing the full aggregated picture of what is happening on farms across the UK has left the industry exposed to speculative criticism. How much water is used on average to produce one litre of milk? In the main, does dairy farming help or hinder biodiversity? What is the impact of dairy farming across the UK on soil quality? How can you measure ammonia emissions to determine the best ways to reduce them? Arla UK 360 will work alongside Arla s Arlagården Plus data programme to further enhance our understanding of the current status quo on dairy farms across UK. While the internet will inform you of many studies under isolated conditions that argue these questions both ways, we aim to aggregate the farm footprint working with our farmers to deliver the ongoing insight needed to drive the dairy agenda forward in the years to come.

11 I have 200 cows who produce two million litres of milk a year. Ensuring that they are happy and healthy is my absolute priority. The industry has been waiting for a scheme like this for some time. Farmers are keen to be recognised for the high standards they deliver because they are passionate about what they do and the dairy that is produced. The most important aspect of this initiative, is that it s farmer led. Farmers have set the standards and the agenda in terms of what is key when thinking about how we futureproof our industry. Being farmer-led is a great message for retailers as well, as we re raising standards and quality in a cost effective way and helping to build consumer trust in dairy products and farming. For me, taking part in the pilot scheme for Arla 360 was essential mostly because I know that what we do is already of a very high standard. The likes of animal welfare and community engagement is part and parcel of life on my farm. I have 200 cows who produce two million litres of milk a year. Ensuring that they are happy and healthy is my absolute priority. They can go between the fields and the barn throughout the day and have access to the milking parlour 24 hours a day, so they can choose when they want to be milked. We ve focused on team development over the recent months. As part of the Arla 360 programme, you re encouraged to really understand the DNA of your business and look for areas of development. We ve always been keen on training because it s something we enjoy doing, and now we re planning on doing even more of it. I ve spent more time with my team as a result of this programme and have been able to identify areas of interest that will benefit the farm. Jonny Burridge Arla Farmer Owner

12 References: 1 ADHB Dairy producer numbers: www. dairy.ahdb.org.uk, 2 HMRC, 3 DEFRA Food Statistics in your pocket Global and UK supply, 4 ADHB farming data: Average herd size, 5 Agriculture in the UK 2017: Produced by: Department for Environment, Food and Rural Affairs Department of Agriculture, Environment and Rural Affairs (Northern Ireland) Welsh Assembly Government, The Department for Rural Affairs and Heritage The Scottish Government, Rural and Environment Science and Analytical Services, 6 Report: Arla Foods and its impact in the UK 2017