Bioethanol trade deal threatens UK wheat growers' key market

Cutting some of the red tape and delays in exports to Europe along with the reopening of the seed tattie trade might be good news. However, on the US front, it’s becoming clear that although we managed to dodge the bullet on chlorinated chicken and hormone-raised beef, it looks like the arable sector got a right kick in the sensitive regions with the settlement on bioethanol.

It wasn’t an area which attracted huge publicity or media attention – possibly because few in the press are aware either of what it is or what it’s used for. Rather than recognising its primary use as a companion fuel for blending with petrol, Sky News probably took the prize for stating that it was used in making beer (I know some of the big commercial players in the brewing industry produce some pretty rough stuff but…)

Certainly, from the cropping sector’s point of view, the deal didn’t look to be historic in a good way. And it didn’t take long for the fact that deal was likely to see the closure of the UK’s two big bioethanol plants to be pointed out – with a joint statement released by the two major players, Ensus and Vivergo, stating the move was likely to totally kill off any domestic bioethanol production.

Losing a dependable market

This, they claimed, was an outcome which would leave more than two million tonnes of UK wheat looking for a new home – and hundreds of growers facing the prospect of losing a dependable market and being forced to sell their grain at lower prices.

The zero-tariff quota of 1.4 billion litres on American imports which was agreed in the deal coincidentally matches the UK’s current bioethanol market – and far exceeds any previous exports from ‘Trumpton’ into the country.

Warning of the loss of sovereign capability, the owners of the two plants told the UK Government that the difference in regulatory requirements gives a huge advantage to imported bioethanol and, without some sort of rethink on the tariffs and how the current stringent regulatory regime is handled, it was inevitable the continued operation of the plants would become uneconomic.

“It’s not the facilities that are unviable, the problem is how British officials apply rules and regulations that undermine their competitiveness,” they stated in what might well be a familiar-sounding claim to farmers.

“Without urgent government action, the UK’s bioethanol industry will simply vanish leaving the country dependent on imported ethanol – while also losing significant domestic production of both carbon dioxide and high protein animal feed.” (The latter being a by-product of the bioethanol production process which is widely used in the manufacture of animal feeds.)

Chequered history

But while the picture being painted was a pretty grim one for growers in the north of England who supplied the plants, production of bioethanol in the UK has had a fairly chequered history, with a continual tendency to stop/start production which was dependent on the price of oil – and just how keen the UK Government was to back the EU’s renewable fuels directive.

First set up in 2008 to answer the call for the 5% inclusion of renewables in road transport fuels, the plants cut production – and facilities were even temporarily mothballed – when Westminster was slow to adopt the E10 grade which required that level to be raised to 10%.

While the two plants probably have the capacity to handle two million tonnes of wheat a year given the right economic signals, the trade has put the current usage figure at closer to 60,000 tonnes a month – an annual intake of closer to three-quarter of a million tonnes rather than two million.

Regardless of this, at a time when there are scant signs of anything to pick up the grain trade market which looks to be dying on its feet, the threat certainly can’t be viewed as anything other than yet more bad news in an already bearish market, with collapse of the buffer which the plants provided to stem the movement of English wheat into Scotland likely to dunt the Scottish premium when prices for both old and new crops seem to be stuck in the ever-deepening doldrums.

In other news, it looks like the Scottish Government’s Agriculture and Rural Economy (ARE) Directorate has signed off a seven-year contract worth up to £95m to ‘update and enhance’ its much-maligned IT services.

‘Not fit for purpose’

As just about everyone will be aware, the capabilities of the current computer system have been on the receiving end of considerable criticism in recent times – and have been frequently accused of being ‘not fit for purpose’ and for playing a major role in delaying the introduction of new policy measures.

The news comes in the wake of claims that an average of £20m a year was being paid out to companies to advise and administer agricultural support – and spending on this since 2016 was reported to have run up a staggering bill of over £200m.

The official announcement of the new contract said it was aimed at ‘delivering reliable and accessible services while embracing technology advances, increasing the flexibility and agility of systems to navigate the next generation of policy changes’.

The contract has been awarded to Version 1, an international management consulting and software company which also has involvement in cloud computing and furthering the development of artificial intelligence.

Replacing two longstanding, support and maintenance contract arrangements, it was pointed out the award of the contract went through the full public procurement process ‘to ensure good value for money for the public purse’.

Nick Downes, chief digital and data officer at ARE Digital and Data Division, said the changes would involve the effective use of digital and data technologies to directly support farmers and crofters, to protect and enhance the rural environment, while delivering sustainable economic growth in agriculture and trade. “Farmers, crofters and rural communities are front and centre of our services, and Version 1 clearly showed expertise in understanding the detailed business rules and mechanics needed in delivering solutions that can achieve that.”

Horror show

While we’ve probably all hopefully finished our annual dealings with the Scottish Government’s IT system for another year, anyone with a reasonably long memory will be aware that right from the get-go its introduction proved to be a bit of a horror show – for the farming community and for the Scottish Government itself.

And I vividly remember the look on the then cabinet secretary with responsibility for the sector, Richard Lochhead, when the assembled farming press let him know that, despite the assurances he had been getting from his IT department, the system wasn’t doing what it should.

Such was the debacle in those early years that a ‘pay-day loan’ system had to be introduced in order to get money out to farmers on time.

Over the years, the system has been adapted and while many would argue it is still far from perfect, we’ve all become accustomed to the format and its idiosyncrasies.

But, almost 10 years on, Brexit and an ever-increasing focus on policy changes which look set to have a far greater focus on climate change and biodiversity issues have once again highlighted the wheezing nature of what now looks like an antiquated computer system.

And no matter how many calls there are to keep things simple, when details of our new policy approach are finally revealed, it will undoubtedly be just as complex as the ones we already endure – and the necessity to assimilate the new metrics needed to deliver the desired policy outcomes look to be well beyond the capabilities of the current system.

The farming industry has also moved on massively since the last major IT re-vamp. Technologies such as satellite guidance services able to not only guide but also record every centimetre we plough, sow, spray and harvest are now almost ubiquitous – as is the use of electronic ID tags in sheep (and, so we’re promised after 25 years of discussions, soon for cattle as well), and the enormous amount of data which could be harvested from these sources could surely reduce the need for some of the form-filling and inspections which can seriously disrupt our work flows.

A truly smart system for the future would harness all these technologies to reduce some of the burden and the fears which go along with the current bureaucratic approach.

We might hope – but I guess we’d settle for a smooth transition without any major hiccups.