3 March 2000

All-Wales co-op: Doubts whether idea will work

By Robert Davies

CO-OPERATION is a buzzword in Wales and producers are about to find out if en masse they believe it can work for them; not everybody is convinced.

About 22,000 Welsh livestock producers will soon receive a prospectus inviting them to invest in an all-Wales livestock marketing co-operative.

The projects supporters include the National Assembly for Wales, the Welsh Development Agency, the Meat and Livestock Commission, Welsh Lamb and Beef Promotions, farming unions, Welsh YFCs and individual farmers.

But the whole concept is strongly opposed by livestock auctioneers. Some abattoir operators are also less than enthusiastic about the idea of having to procure stock from a powerful co-operative demanding quality and continuity premiums.

Farmers who remember the failure of other co-operative livestock marketing ventures are, to say the least, extremely wary about putting their money into another one. Others who backed the idea until a feasibility study was published have lost interest because the report was hostile towards investment in downstream processing.

"We strongly advise caution because to get involved in any substantial way involves big costs, and profits are not as large as some farmers believe," said Martin Palmer, director of MLC Industry Strategy, one of the two companies that carried out the study.

High risks

Producers tended to overlook the costs and high risks involved in the abattoir and meat processing sector, and the level of management expertise required to generate even modest profits.

However, while the report insisted that setting up a co-op would not provide a quick fix or panacea for the industrys problems, it did suggest that a strong, professionally managed co-operative, with loyal members committed to improving product quality, would get better trading terms.

This promise of medium and long term benefits kept the main backers on board. The WDA Food Directorate, which financed the feasibility study, agreed to underwrite the cost of further work on a business plan and the preparation of a prospectus. This is expected to ask farmers to invest a minimum of £235.

Fans of the idea claim that a successful co-op could exploit efforts by Welsh Lamb and Beef Promotions to develop a brand image of fully traceable meat naturally produced from the "green, green grass of Wales".

When Welsh producers were first asked for their views on the creation of a new co-operative only 1000, or 4.5%, replied that they would like further information. The feasibility study suggested that at least that number would have to join to bring any of the marketing benefits the survey identified.

Overdraft needed

Even then the co-op would need to tap into available grants and arrange a £1m overdraft facility to cope with seasonal throughput variations.

The enthusiasm of core supporters is undiminished. But the fact that setting up a co-op would not bring any immediate improvement in market prices, and that early significant involvement in process beyond the farm gate is not on the cards, combine to reduce the chances of recruiting enough farmer investors to make it viable. Only time will tell.

Will producers back co-operation or simply back off? A survey of 22,000 producers will find out.