Interview: Mole Valley Farmers’ Keith Ockenden

Keith Ockenden, head of agriculture at Mole Valley Farmers, has helped to quintuple the co-operatives turnover int he past 10 years to about £450m in 2014.

Here he sets out his views on the future of the industry.

You’ve been involved in farm input trading since the age of 16, working your way up through a number of businesses. How has the industry changed over that time?

There’s been a lot of consolidation in the supply chain. At one end there are fewer, more influential manufacturers trying to improve profits through higher prices, while at the other end we have powerful retailers trying to push prices down. Farmers in the middle are being squeezed.

Over the past 15 years consumers have spent more and more on food – and yet the farmers’ share has remained fairly static, indicating that retailers and manufacturers are making big profits at farmers’ expense.

Volatility of raw materials has also had a significant impact on the dynamics of the industry. Global drivers are shaping UK agriculture and the availability of raw materials is a real issue.

Rising global population isn’t going to be dramatic in the UK – it’s going to be in developing countries where we currently source our raw materials. Those people are going to need to use their local materials to produce more food so we’re going to have to rely more on UK supplies.

What are the biggest challenges facing British agriculture?

The way in which we think – understanding future needs, managing and adapting to change. Over the years, I have seen businesses fail because they have not recognised the need to change. A lot of businesses now are changing through necessity. But if you wait until you’re forced to change, then you’ve lost control and decisions are made for the wrong reasons.

A lot of businesses throughout the supply chain have only focused on the bottom line, and didn’t recognise that their customers’ needs were evolving. If you don’t focus on the customer they won’t stay around for long. But if you innovate and differentiate yourself, your customers will keep coming back so your business can grow, make profits, and reinvest.

We’ve lost a generation of farmers over the past couple of decades, and have to encourage fresh blood into the industry. That is happening, but we really need farmers to be profitable. Profit is good for everyone, to invest back into the industry.

Mole Valley Farmers was set up as a co-operative buying group. How do you see that evolving?

We still have strong co-operative principles – our core purpose is to create a competitive environment for core inputs and prevent others from profiteering at the expense of farmers. That’s not to say profit is wrong, not at all. But you need to prevent potential discrimination in the supply chain.

I’m a great believer that we must take more control of the supply chain, by investing in manufacturing, logistics and brands – removing unnecessary costs and going straight to the source, to get products to farmers as efficiently and competitively as we can without compromising quality.

Another important aim is to support improved efficiencies, increased productivity, and enhanced profitability for our farming members. There are still many inefficiencies in farming. We can’t just keep complaining the supply chain is unfair. The farming community have got to look at what they can change and accept that the supply chain isn’t going to change overnight.

How can farmers become more efficient?

Our industry has many examples of great farmers, across all sectors, large and small – it’s really about management and attention to detail. But how many farmers sit down with their management team – their vet, agronomist and nutritionist – and create a business plan? Farmers need to understand their costs of production and their whole business better.

It’s about looking at soil nutrition and seed selection. Rather than buying the cheapest seed, buy the grass the rumen wants to digest. Look at health plans, cow comfort, building design; it’s about really going down into the finer detail and understanding the needs of your land and your livestock. Often the cheapest is not always the best value.

There is also plenty of scope to buy inputs better. We’ve got to become smarter and buy forward to smooth out market volatility and reduce profiteering by companies at busy times of the year.

What about efficiencies in the supply chain?

I’m a great believer in integrated supply chains, as long as there’s fair value for all. When the supply chain works together you can create value for everybody, with good products that the consumer wants, and less waste. I think there is a role for Mole Valley to play here, at some point in the future.

There are some great examples across our industry where supply chains have collaborated successfully, but it frustrates me that it seems to be inconsistent. I question a business the size of Tesco, where last year the CEO was publicly apologising to everyone and promising they were going to do it right. What has really changed?

Some people thought Horsegate was going to be the change we needed. But if all of the promises of sourcing fresh, frozen, and pre-packed meals from UK farmers have been implemented, I am at a loss to understand why the price of beef has dropped by 90p/kg over the past six months. Ultimately, businesses like Tesco have to compete with the low-cost retailers. They’ve got to look after their own business first.

Won’t the groceries code adjudicator help?

A mechanism that ensures fair value for everybody would be great – but realistically, what power will an adjudicator have? My rose-tinted spectacles believe that if supply chains worked closer together, economically viable solutions – without the current boom and bust – can work. But how can the government intervene and not interfere with business democracy? It can’t – it has to be done within the industry.

What lessons can we learn from the European co-operative model?

European co-ops evolved to take produce from plough to plate, giving farmers greater control of the supply chain – and that’s why big UK supermarkets haven’t been as successful in Europe.

Agravis and BAYWA in Germany and Austria are good examples of successful co-ops. They are big farmer-owned businesses with professional senior management. In my view, those models could really bring strength to British agriculture. I think Milk Link and Arla coming together was a good thing – they’re combining scale and adding value with good brands and marketing.

But UK agriculture doesn’t have a good co-operative history. A lot of co-ops have failed because they were run by farmers, not business professionals. Farmers are good at farming, not necessarily at running big businesses – so you need to pay for good people at the top. Again, it’s about value, not cost, and you have to invest in the best people. Take Frontier – it has fantastic people at the top who have created a great business model. Why can’t a co-op do the same?

How can you make the co-operative system work in the UK?

Generally speaking, farmers aren’t experts at adding value and marketing, so I think there is scope for co-operative marketing and integrated supply chains to work in the UK. But as an industry, we’re not good at working together. Farmers see their neighbours as their greatest competitor, and we’ve got to stop that.

When farmers are fragmented the supply chain can divide and conquer. Getting to a point where we combine scale, take control of our efficiency, and market our own produce is a big ask.

Consolidation will continue, and I believe when there are fewer, larger producers, the forward-thinking farmers could combine, creating great products that could be marketed, adding further value and creating stronger brands.

There are great examples across livestock and arable sectors where this already happens extremely successfully. But it has got to be managed in stages. Retailers won’t want to lose control, so first of all we have to sort out our own businesses and ensure they are sustainable.

Then we can work together to create niche markets and add value, while taking more control of the whole supply chain. We have to keep innovating and producing products that consumers actually want, and maybe in the future Mole Valley can play a part in that.

Will the government allow a co-op to hold that sort of power?

A handful of manufacturers and retailers have huge dominance in the market. Why can’t farmers do it too?

We need less talking and more doing, with an acceptance that we can’t change everything but we can change our own businesses and adapt to the environment. A vision without a plan is just a dream. We need to sit down, work together and use all our resources to help us achieve our objectives.

If we can become more efficient, the opportunities on the world market are phenomenal. Yes, we haven’t got the best weather, and the government hampers us with legislative barriers, but if we applied more energy at really looking at the solutions and worked together, we could take on the world.