Chairman’s Statement

John Hutcheson

With the cost of food and general inflation still rising, together with a declining UK workforce, running any business, let alone a rural-based one, has seldom been so challenging.

The timing of input purchases, coupled with the decision to sell produce spot or forward has greatly affected the profitability of many of our businesses this year. Our co-ops continue to have an important role in smoothing out this volatility. Machinery rings drive efficiencies in all sectors, while dedicated marketing groups with shorter supply chains help deliver price stability.

Profitability in agriculture remains historically low. In 1972, an arable grower spent 45 - 50% of the sale value of wheat on costs to getting it to store; today we are spending 55 - 60% to do the same. The story is similar across most sectors, with smaller margins, fewer farmers and larger units. Coupled with land use change driven by environmental policy, the energy crisis and climate emergency, this means that a collective producer voice has never been so important.

The burden imposed on our businesses by required sustainability improvements, whether as part of government policy or customer requirements, can be mitigated by having farmer involvement at strategic level through all stages of the audit process. SAOS’s subsidiary business, FIA, which now delivers assurance services for both QMS and SQC, is focused on making sure that standards are deliverable and reasonable at farm level, so that producers can concentrate on what they do best, while benefitting from the advantages that quality assurance can deliver.

Scottish Government’s development of new Agricultural Policy is slowly gaining some structure and SAOS continues to feed into this process through the Agriculture Reform Implementation Oversight Board (ARIOB), and providing evidence to the Rural Affairs and Islands Committee at the Scottish Parliament in March this year. With new heads at NFUS, SF&D, and at the top of Scottish Government, building and maintaining working relationships with ministers and civil servants continues. This is one that SAOS does particularly well, ensuring that our growers and co-op members are effectively represented at policy-making level.

Bob Yuill and the ScotEID team in Huntly, including new General Manager, Scott McDowell, continue to design, develop, and deliver a livestock tracing scheme that has gained respect nationally for its track record of delivery. All credit to the Huntly team for this, and particularly to Bob, for his unique insight and problem solving that has driven this project over the years.

SmartRural, now under George Noble’s stewardship, has secured funding to ramp up its work connecting rural businesses together, and we expect this part of SAOS’s business to develop strongly over the next few years. As a coop, ownership, control and value of the data gathered is retained by the farmer members who generate it, quite unique in the digital world.

SAOS has been involved in numerous other projects over the last year in areas including supply chain development, co-op governance and training as well as helping collaborative groups get specific projects off the ground. Carbon reduction and sustainability are common recurring themes work. I would like to thank the team at SAOS for the versatility and commitment they show when tackling each new job.

As SAOS continues to grow and develop, its governance structure needs to reflect the fact that there are various pillars of the business which require a degree of autonomy but are still able to deliver synergy benefits across the whole business. I believe we now have in place a structure that will serve SAOS well during the next phase of its development. I would like to thank Tim and the rest of the Board for this, and for all their efforts over the last year.