John Scott (Ayr) (Con): I declare an interest as a sheep farmer and as someone who is directly affected by these proposals. I, too, congratulate Liam McArthur on securing this debate on sheep EID. We should remember at the outset that the alternative to EID is manual recording. However, we are where we are, and the derogations that were sought in the 1990s in relation to tagging, which I helped to negotiate, have now been lost to the UK. However, that was not because Scottish farm recording was found wanting on inspection.
As things stand, the Government is committed to the introduction of electronic sheep identification if it is possible, while 9,000 farmers—led by the Teviotdale Farmers Club, NFU Scotland and The Scottish Farmer—are opposed to it. The minister will concede that that represents significant opposition.
Implementing regulation 21/2004 will give rise to significant challenges for the sheep sector. Among those challenges will be the maintaining of individual identities within large flocks, and the identification and recording of individual sheep in extensive systems. Concerns have arisen to do with tag losses, training and workability on farms, and also to do with the cost relative to the profitability of sheep production. Much of the cost will fall on the primary producer, with the benefits, such as they are, being secured by others—at the very time when the Government acknowledges the problems that face a diminishing sheep industry.
Many farmers and farmers' wives have told me that they will either reduce or completely disperse their flocks if individual recording is introduced. If the minister is to proceed with this project, she will have to make it work, and quickly, or she will face further huge reductions in Scottish sheep-breeding numbers.
In the first instance, if sheep EID is to be introduced, it must work and be able to replace a paper system that everyone dreads. In favour of EID is the fact that paper-based systems that are manually inputted always have an error rate of 10 per cent, and the longer the paper trail, the larger the error becomes. EID, on the other hand, gives more than 95 per cent accuracy on each reading in trials and, if batches are read twice, the accuracy rate rises to 99.9 per cent, which is statistically significant enough for animal disease traceability purposes.
If EID is to be introduced, that must be done at a reasonable cost. It would be pointless to tag breeding ewes or ewe lambs at birth that will not leave the holding until they are five years old or older. Identifying how and where costs can be minimised and made affordable, and where the benefits to the industry can be maximised, is a prerequisite, assuming that EID can be made to work in the first place.
The minister has pledged financial support for the introduction of EID. That money must, at least in part, go towards the establishment of critical control points where readings can be taken to keep producer costs to a minimum. Those will be at markets, abattoirs and larger farms that report their own and, perhaps, others' movements and on docksides. They will also be provided by hauliers and approved agents. Government support must go towards further developing the technology to levels at which producers' fears are allayed and costs are acceptable. Unless and until that is the case, the proposal will encounter only hostility from sheep producers. Derogations must therefore be sought in line with the NFUS proposals and, to be acceptable, they must remove or reduce to a minimum on-farm scanning and recording costs.
If introduced, EID must work easily and effectively, and adequate training will need to be provided. Problems associated with different types of tags, the incompatibility of systems and data transfer will need to be overcome. I understand that the SAOS believes that, in time, the system can be made to work. However, today, the ball is in the minister's court. She must persuade producers not only that EID can be made to work but that it can be made to work in producers' best interests. Outright hostility to EID proposals as they stand remain, so a lot of work still needs to be done for that to be overcome. I look forward to the minister outlining in her closing remarks how she intends to achieve that.
Jamie McGrigor (Highlands and Islands) (Con): I refer to my agricultural interest, which appears in the register of members' interests.
I thank Liam McArthur and all those who have been campaigning to ensure that the issue has remained at the forefront of politicians' minds. They include the Scottish Crofting Foundation, the NFUS and the National Sheep Association in Scotland; people such as George Milne, and Sybil and John Macpherson, from my native Argyll and Bute; and The Scottish Farmer newspaper. They are all fighting hard for our sheep industry.
As my colleague John Scott said, EID offers no real benefit in relation to traceability in Scotland. We in Scotland need to be able to move sheep on a batch basis through markets and between farms, and a tag that includes the UK herd number should be sufficient. The current system is simple, efficient and—crucially—cost effective. The whole concept of EID for sheep is a classic example of how a one-size-fits-all policy can be disastrous for particular European Union member states, and of the real lack of understanding in the EU about the nature of the sheep flock in the UK and Scotland, which will be more affected by these plans than the flock of any other state.
Indeed, 16 EU member states will not have to introduce EID, as their national flocks comprise fewer than 600,000 sheep. Given the rate at which we are losing sheep from Scotland's hills, the number of states that will not have to introduce EID could soon rise to 17. It is hardly surprising that many of those 16 states are voting for compulsory EID, as it helps their sheep industries by putting extra constraints on ours.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD): Will the member give way?
Jamie McGrigor: I cannot.
The extra costs that farmers and crofters will face are significant. As we have heard today, the set-up costs are estimated at £1,000 to £2,000 per farmer, with the cost of tagging one sheep put at £3. That is an extra £3,000 per year for a farmer who has 1,000 sheep, at a time when there is real financial pressure on sheep farmers and when everyone is rightly concerned about the serious decline in sheep numbers. My biggest concern is that EID will simply increase the rate of decline.
I point out to members that the microchip in the proposed tag does not contain the same number as the tag itself, and therefore information from the reader has to be transferred to a computer to ensure that the different numbers coincide with the actual number on the tag. If members find that confusing, they should consider how many items do not register on a supermarket reader when they are doing their shopping. What happens when a sheep does not register? Should we just call for the manager? What happens when the tag falls off? How can a lost tag be traced? We have no objection to EID as a voluntary scheme for those who like it, but most of those are small farmers, whereas many Scottish flocks consist of hundreds—if not thousands—of sheep. The scheme is simply not practical for Scotland.
A constituent of mine from Sutherland, Mrs Gow, who has been a sheep farmer for 45 years, wrote to me earlier this year to say that electronic tagging would bring "death to the industry". She warned that, if the measure goes ahead,
"I will certainly get rid of my sheep and most likely the shepherd as well"—
although I do not think that she means to kill the shepherd.
Many other farmers have the same intentions. Mrs Gow is right. This year, the NFUS carried out a detailed survey of sheep producers and found that 73 per cent would reduce their flock if EID and individual recording were introduced. One in three of those who said they would reduce their numbers said that they might get rid of their flock altogether. That is the stark and frightening reality of the situation.
Jamie Stone: Does Jamie McGrigor agree that, as well as leaving sheep farming, people might leave remote parts of the Highlands altogether? School rolls would fall, and the small, marginal
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communities that he and I represent would decline. Electronic identification would be a fatal blow for fragile communities.
Jamie McGrigor: I agree. This is not just about sheep. It is about people.
We are looking for ways to keep Scotland's sheep on Scotland's hills for food and environmental reasons, and we have seen a light at the end of the tunnel for the sheep industry. Let us not blow it out now. Even at this late stage, ministers must put pressure on ministers at the Department for Environment, Food and Rural Affairs to raise the issue again in Europe as a matter of extreme urgency. The future of our sheep sector and the people and communities that depend on it is at stake. We look to the minister.
John Lamont (Roxburgh and Berwickshire) (Con): I, too, congratulate Liam McArthur on securing this important debate. Last week, Mr McArthur and I had the opportunity to meet many
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of the sheep that will be affected by the proposals as we crossed the southern upland way during the Poppyscotland hearts and heroes challenge. I was certainly reminded of the importance of sheep to the Borders' rural economy.
The compulsory electronic identification of sheep has been raised with me a number of times by representatives of my local NFU and individual farmers in my Borders constituency. As members have pointed out, the proposals will be costly and impractical for the farmers who will be forced to comply with them.
We should recognise that there is cross-party support in the UK for the view that the EU proposals should be voluntary at most and certainly not compulsory. With nearly 33 million sheep—and 90,000 producers—the UK accounts for one third of the entire EU sheep flock; Scotland has more than 7 million sheep and the nation's sheep farming sector is worth an estimated £150 million to the economy. As a result, the industry plays a vital role in maintaining the landscape and economy of Scotland's hills and uplands.
We should acknowledge the pressures that the industry has faced in recent years. In the past 12 months alone, sheep numbers in Scotland have dropped by 368,000 and, in the past nine years, there has been a 24.5 per cent decline in the number of breeding ewes. With that backdrop, it is clear to me that the regulations make no sense and might actually decimate the sheep industry, devastating the environment and the rural economy.
The additional costs that are involved in the scheme, coupled with the recording requirements, will force many producers out of business while having absolutely no cost benefit. Indeed, much of the cost will fall on the farmers, with the benefits being delivered further down the chain to the markets and processors. Farmers throughout Britain will be expected to cover 92 per cent of the estimated £65 million costs, while markets and collection centres will contribute 5 per cent and slaughterhouses 3 per cent.
The NFU has expressed concern about the standard of the current equipment, which a number of members have mentioned; the available training; and the scheme's workability on farms, which will be a particular challenge to maintaining individual identities within large flocks. Some of those concerns will be resolved as the technology develops and as volume production reduces costs, but some concerns about the regulations are so fundamental that it is hard to see how they can be overcome.
I will not repeat what other members have said, but I would be grateful if the minister would respond to the following points. First, like Liam
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McArthur and other members, I am interested in finding out what discussions the Scottish Government has had with the UK Government and other member states as they attempt to persuade their politicians of the dangers of the regulations. Secondly—perhaps more important—I understand from correspondence with the Scottish Government that the intention is to introduce the regulations in a negative instrument. Does the Government intend to impose the regulations? If not, can the minister explain the Government's strategy in that respect?
Again, I thank Liam McArthur for securing this important debate, which has provided a useful opportunity for us to air the concerns of sheep farmers throughout Scotland.
The Scottish Parliament, Wednesday 1 April 2009
John Scott (Ayr) (Con): I declare an interest as a farmer and as a grower of crops—mainly grassland and heather for animal consumption. I, too, congratulate Rob Gibson on lodging his wide-ranging motion at a time when food production is climbing to the top of the political agenda. Were it not for the recession, it would be the issue of the decade.
The food that is produced—or the lack of it—will be an issue long after the recession has been sorted out, as the world's population is to grow
from 6 billion today to more than 9 billion by 2050. The worldwide landmasses that are capable of food production decrease annually because climate change is creating deserts and producing sea-level rises, so this is an appropriate time to discuss the issue.
It is certain that future generations will not forgive us if we leave them not only a bankrupt country, but a country that has again lost its strategic ability to feed itself. UK self-sufficiency in food production is at its lowest level for decades.
It is important that all progress and all science are considered in plant breeding. As members would expect, Conservatives welcome SCRI's production of purple-pigmented potatoes and applaud the Sárvári Research Trust, which is based at Bangor University, on its sterling and hugely important work on blight-resistant potatoes. We, too, applaud the SAC's green pig project to produce home-grown legumes and reduce reliance on imported soya meal. We also commend all the other developmental work that Rob Gibson mentioned.
However, we must ask ourselves whether we are doing enough to address the problems that we are likely to face in achieving sufficient quantities of food for livestock and human consumption in the future. Are we doing enough to persuade Scotland's world-class and world-leading scientific plant development community to remain here?
The elephant in the room is, of course, genetically modified food, which Rob Gibson and Rhoda Grant mentioned. Given the changing circumstances that I have outlined, the time has come to face up to impending global food shortages. The debate must be had—and it must be based on science and not emotion—about how our generation proposes to leave the world a better place than we found it.
The luxury of full bellies in Europe for the past 25 years has dulled the Government's need and ability to take long-term strategic and pragmatic decisions about research into food production and other matters. The current recession and currency weakness are a wake-up call. Alarm bells must start to ring soon in Governments in the UK, where self-sufficiency in food production has dropped from 78 per cent in 1996 to 57 per cent today. The Rural Affairs and Environment Committee received evidence from the Farm Animal Welfare Council that
"U.K. self-sufficiency in pig meat has fallen from 84% in 1998, to an all time low of 50% in 2006"
and heard evidence this morning that the figure has fallen further since then.
We support conventional plant breeding and development in all its forms. We do so,
notwithstanding the questions that were raised in an article in the New Scientist of 9 February 2009 on the development of Canola, a herbicide-resistant variety of oilseed rape, which relies on a single-gene mutation rather than a two-gene mutation but which is nonetheless conventionally bred. We now have to look further, towards the horizon. We must debate, discuss and decide on all and every sort of scientific approach to crop development and not limit ourselves to a purely conventional approach.
I welcome the motion in Rob Gibson's name, and I commend him for stimulating this discussion tonight.
Speech on the Common Agricultural Policy Health Check
The Scottish Parliament, 21st January 2009
John Scott (Ayr) (Con): I declare an interest as a farmer and as a member of NFU Scotland. I welcome this timeous debate on the CAP health check. At this time of year we must reflect on last year, and—more important—we must look to the future.
We believe that the CAP health check has been largely beneficial for Scotland. We welcome the confirmation that milk quotas will end by 2015, which will—notwithstanding the current pricing difficulties—free up our dairy industry. We also welcome the ending of set-aside, which will free up our cereals sector, but we need to find imaginative ways to preserve the environmental gains that have been made on that land over the past two years.
We welcome the freedom for Scotland to decide how best to proceed with the beef calf scheme, and we welcome the move towards a more level European Union playing field in relation to modulation. The threat of cuts in support payments to our largest and most efficient producers has sensibly been resisted, as has—for the time being—a move from the historical rate to flat-rate payments for the single farm payment.
We will support the Labour Party amendment, specifically because we believe that—as Jamie McGrigor has so eloquently pointed out—there must in the future be a bull hire scheme or an equivalent scheme. We have reservations about the Liberal amendment, because it is a bit out of date. We acknowledge that there were serious problems with access to the SRDP, but the situation is now improving. In reality, the situation has moved on—
The Government has committed to a review of the SRDP, so we now need to engage in constructive debate rather than repeat out-of-date criticisms. We will therefore abstain on the Liberal Democrat amendment. We are, regrettably, also unable to support Robin Harper's amendment. [Interruption.] I am sorry, but I cannot take an intervention—I am lacking in time rather than not wishing to do so.
With regard to our own amendment, we must—as the minister said—make certain that future support goes to those who are actively farming or crofting their land. Support payments should no longer be made to those who carry little or no stock, or to those whose land is left lying fallow or uncultivated. Stock levels should at least match the historical levels that existed prior to the introduction of quotas in the 1990s.
Most farmers would be able, by using records such as farm accounts or census figures, to demonstrate the traditional or historical carrying capacity of their land in 1990, for example. That could provide, with sensible variation around the figures, a baseline production figure to return to—or at least to work towards—over, for example, a five-year period. I hope that members will recognise that the thrust of my speech is about returning to maximising food production from our farms and crofts, and doing so as quickly as possible.
Almost 15 months ago, I gave a speech at Ingliston to the National Sheep Association, in which I urged sheep farmers not to go out of production because I believed that there was a bright future for lamb and mutton production. Today, that prediction is coming to pass, and there are better returns from the marketplace. It breaks my heart to note how many farmers and livestock producers have gone out of business in the past 18 months, at the very time when the market was turning and about to become more profitable. That has come about because—notwithstanding the financial crisis that has rightly grabbed the headlines in the past year—self-sufficiency in food production in the United Kingdom has fallen from 78 per cent to 57 per cent in the past 12 years and prices are beginning to rise as food commodity shortages materialise.
The UK economy, which that is overly dependent on selling financial services, has ignored the fact that we have lost much of our energy, manufacturing and food-producing capability. Those trends already threaten our national security. We in Scotland can do something about our reduced food-producing capability, particularly in relation to the matter of today's debate. I urge the minister to take steps to address the strategic shortfall about which he spoke so eloquently at the Oxford farming conference.
Scottish Conservatives believe that in the national interest, the Government must reprioritise the objectives of the SRDP to return to food production while—if possible—protecting recent environmental gains. Until recent times, the first public benefit from land was food production. We must return to that concept, as we cannot afford to lose any more farmers and crofters from our fields and farms.
The wake-up call has been the three major reports over the summer from the Royal Society of Edinburgh, the Scottish Agricultural College and NFU Scotland. It is time for the Scottish Government, the UK Government and the EU to wake up and smell the coffee and once again to focus on food production. Here in Scotland, we must stop families leaving the land, because history has shown that when that happens they never return and the animal husbandry and countryside skills base, which has been acquired through generations of toil and passed from one generation to the next, is lost for ever. Stopping families and their stock leaving their farms and crofts can and will only be achieved by returning food production to profitability. In my view, foodscarcity will eventually restore food production to profitability; indeed, that is already happening.
In the meantime, our Government must refocus the SRDP on sustaining families and our food-producing land, because without farming and crofting families on the land we can have neither food production nor environmental enhancement. I welcome the minister's positives comments on that earlier today. Now is the time to refocus the SRDP in that way. I call on the Government to do that before it is too late and we lose still more of our food-producing capability from Scotland.
JOHN SCOTT MSP - SPEECH TO THE SCOTTISH RURAL PROPERTY & BUSINESS ASSOCIATION (SRPBA)
11th November 2008
“We live in changing times and who would have thought a year ago how much the world would have changed in the last year.
“Who would have thought RBS and HBOS would have had to be bailed out by government? Who would have thought credit and mortgages would be so hard to access? Who would have thought wheat and barley prices would be so low given last years prices?
“Here in Ayrshire the recent milk price auction in Northern Ireland, which knocked 7p per litre off future milk contracts, has sent shock waves through the industry, and introduced further uncertainty into milk production and fertiliser prices remain stubbornly high despite the falling price of oil.
“So as ever the one thing that is certain is that we face an uncertain future. Rest assured that this time next year, the year past will have thrown up its own set of unpredictable problems and perhaps we should no longer be constantly surprised.
“For me however, and perhaps it is a function of age, the speed of change and the need to adapt almost instantaneously to changed and changing circumstances is both challenging and exciting, but I am far from pessimistic about our future, and this is why.
“During the Second World War, the UK was almost starved out of it by German U-boats because we couldn’t feed ourselves. The Fifties, Sixties, Seventies and early Eighties saw food production in the UK and Europe dramatically increase. As the population of Europe expanded, government’s were determined that European nations should not go hungry.
“Farmers across Europe responded magnificently to the calls to increase productions and output, and by the mid Eighties we had butter mountains, milk lakes, wine lakes and an over supplied market for almost the last twenty years.
“Indeed the twenty years of plenty we have recently enjoyed is almost Biblical, as once again the spectre of food scarcity and food shortages appear. There are three reasons for this new perception.
“The first is the prediction that the world population will rise from 6.5 billion today to 9.5 billion by 2050.
“The second is the realisation that climate change and global warming is now a fact of life which we have to accept, with 250 acres of land lost per year to desertification.
“The third fundamental is the price of oil which at $150 a barrel was and still is taking land out of food production and substituting it with bio fuel production.
For example, 90% of all new cars registered in Brazil now run on Ethanol and this is a growing world wide trend.
“In addition, UK self sufficiency in terms of food production has fallen from 78% in 1996 to 57% today and we are again vulnerable to, and dependent on, world markets for much of our food.
“The credit crunch and the impending UK recession has seen the pound fall against the dollar and, as oil and some food commodities are paid in dollars, production costs and input costs are going to remain high.
“So, ladies and gentlemen, taking this overview we can take the view that the proverbial glass is half full or half empty.
“My belief is that it is half full, and an opportunity is emerging for UK farmers to once again play a bigger role in feeding our own population and we all have a part to play in that.
“Firstly, government at EU, UK and Scottish Parliament levels must once again encourage farmers to increase food production as our level of self sufficiency in food production continues to fall. Government and consumers alike must again be reminded that the first public benefit of land is food production, not tourism or environmental enhancement – not that I am against enhanced biodiversity or creating and sustaining managed landscapes to support our unique Scottish tourism product - but we have to remember food production is the first fundamental land use and has been since man first walked the earth.
“However a barrier to increased food production is the purchasing methods of the supermarkets, which on one hand are driving UK production down and on the other are causing and presiding over food price inflation anywhere between 10% and 30% in the last year alone.
“Primary producers as evidenced by the SAC report ‘Farming’s Retreat from the Hills’, and the report of the Royal Society of Edinburgh, as well as the agricultural census figures, all confirm that many primary producers cannot make an adequate living and that Scottish agricultural output is reducing dramatically, while consumers are also paying more than they can afford.
“So a supermarket regulator must be put in place, to ensure fair prices for consumers and a fair return for supermarkets and primary producers alike.
“In addition government must continue to support our farmers and food producers. LFA payments and the Single Farm Payment must in future be linked to active farming, as well as supporting enhanced biodiversity, and certainly until a better level of UK self sufficiency in food production is achieved.
“Farming and crofting in our most remote and fragile areas too must be better supported than in the past, but not at the expense of taking money essentially from the South of Scotland LFASS payments or through modulation and transferring money to the North and West of Scotland. Instead lifeline payments, under Article 18 and Article 20, which take account of latitude, remoteness and elevation must be invoked.
“Pillar II of the Rural Development Fund must be increased to realistic levels and lifted from the current position where Scotland receives only £7 / ha/ year of utilised agricultural land per year, while the UK as a whole received £12 / ha / year, Ireland £54 / ha / year and Austria receives a staggering £122 / ha / year.
“Our government in Scotland and the UK government in Europe must press to have this anomaly resolved. Unless and until this is sorted out, Scottish farmers will continue to compete with one hand tied behind their backs.
“A whole shopping list exists of things to be done which must be addressed to better support long term food production in Scotland. This includes better funding for a new entrants scheme, a more flexible planning system in rural areas to allow more affordable homes to be built and a balanced land use policy.
“The government’s desire to build 35,000 new homes per year and increase forestation from 17% cover to 25% by 2050, as well as providing more and greater access, as well as supporting renewable energy projects through wind farms, all compete with farming and food production in land use terms.
“Whereas over 10 years ago the view was, almost, do anything with land except produce food, now the view must once again become that food production is the first essential and from that perspective everything else must take second place.
“A new land use strategy consultation is underway and it is imperative that this study starts to put a renewed emphasis on food production if we in Scotland are to play our part in feeding a daily more hungry world.
“Red tape and regulation, also a barrier to food production, must be freed up, with electronic tagging resisted, or made to work at economic levels.
“Further transport restrictions must be resisted with derogations being sought if need be for our most remote areas.
“So these are matters government can address, but individual farmers and landowners will again need to develop an ever greater resilience to see us through until more favourable market conditions materialise.
“Given the current problems the prize is still to be in business in five years time, and as always it will be those who show the greatest flexibility, those who are most market aware, who will survive these challenging times.
“Diversification as ever will be part of the answer, for example into the local food market, and a greater emphasis has to be placed on cooperation and shortening food supply chains, and we couldn’t find a better example of this on our own doorstep than the Girvan Early Growers.
So in conclusion ladies and gentlemen, notwithstanding the currently unique set of problems we face (and I haven’t even mentioned bluetongue), I do believe there is a positive future ahead for farming and food production.”
Speech by John Scott MSP,
Shadow Cabinet Secretary for Rural Affairs & the Environment
Members debate on supermarkets, The Scottish Parliament, 14th May 2008
“Supermarkets have been hugely successful in respect of shareholder value and have made available to the Scottish public an unsurpassed range of good quality and well-presented food products, of which previous generations could only have dreamed. Supermarkets are here to stay and, to be fair, if we did not have them we would probably be trying to invent them. However, their success has come at a cost, particularly to town centres, many of which have as a result lost their bustling local food shops and their character.
“A cost has also been borne by food producers. Their margins have been squeezed so much that many livestock farmers have moved out of farming and, sadly, many more are considering doing so. For that reason, our party has long supported the introduction of an ombudsman, which cannot happen soon enough.
“As I said, we live in changing times. It is regrettable that food security, high oil prices, global warming and a growing world population all, for different reasons, contribute to driving up the price of food. Higher fuel costs and peak oil suggest that more food will need to be produced and consumed locally. It may become socially unacceptable to fly out-of-season vegetables half way round the world as a result of the need to conserve oil supplies for future generations and because of peak oil.
“Farmers markets have taken the lead by reintroducing seasonality into shopping patterns. In-season produce may be all that consumers can afford in the future if oil rises further in price, so I believe that a renewed opportunity exists for farmers markets, for farm shops and for all local food retailers to further develop their businesses.
“In Scotland, that means developing better food and drink supply chains. It also means more co-operation between individual food producers and it means taking the specialist advice of organisations such as the Scottish Agricultural Organisation Society Ltd on how best to achieve those aims by, for example, creating distribution hubs and funding new routes to market. That will also give local food, which is by definition often less processed and has less salt and fewer fats added, the opportunity to be used in supporting the healthy eating agenda. The encouragement of more public procurement of locally produced fresh food will benefit the environment, people's health and the primary producers of food. "Buy local, eat local" should be the order of the day.
“The new ombudsman, when it is in place, must ensure fairer returns from the marketplace for fruit producers. Scottish Conservatives look forward to the creation of a new and extended grocery supply code of practice, as well as to the end of abuses of power, such as the demand for lump-sum payments and enforced promotional costs.”