21 May 1999

On a roll… Second-hand machinery sales continue to attract strong interest. About 700-800 sale-goers attended one such at the retiring A G and J E Coles Southcombe Farm, near Tiverton, Devon, recently. Top bid was £26,300 for a two-year-old MF 185 MB big square baler. A 1985 Mercedes MB Trac 1300 went for £12,200, and this set of Marsk Stig 20ft rolls made £2500. "A very good sale," as auctioneer Stags put it.

Wiseman profits increase by 10%

AS an increasing number of dairy farmers quit the industry because of declining profitability, Robert Wiseman Dairies has announced a rise of 10% in pre-tax profits.

Profit a litre was maintained at 3.1p despite a drop of 5.8% in the average selling price.

The full year results to Apr 3 indicate turnover up 1.8% at £257m and operating profit up 9.9% to £19.8m. Volume sales rose by 8%.

The firms latest expansion involves a £30m millennium dairy to be built south-west of Birmingham. The company has recently taken over Gilmours Dairy in Kilmarnock, and also announced last week that more than 99% of Aberdeen Milk Company members had accepted Wisemans £1m offer for the co-op. This means an average pay-out of £7000 to each of the 118 farmer members.

Chairman, Alan Wiseman, said the results were highly satisfactory. Long-term partnerships had been secured with five big multiples and, despite a competitive market-place, margins continued to improve.

"The most encouraging aspect of the years performance has been the continued progress in profitability of our English-based operations, which now account for 40% of total sales," he said.

Total shareholder dividend for the year increased by 7.9% to 4.35p a share. &#42

NFU says FCBs must expand to be competitive

By Robert Harris

FARMER-CONTROLLED businesses must expand and develop along Continental lines if UK farmers are to prosper in the tough times ahead, warns a new report released by the NFU this week.

Recent moves within the sector show some businesses realise that size does matter. But a survey carried out by the union shows there are several hurdles to overcome to accelerate such growth.

Despite the prospect of cheaper supplies, better access to markets and added value which farmer-controlled businesses offer, the UK trails far behind many other EU states, says the report.

Total turnover of UK FCBs is about 40% of the value of agricultural production, or £6bn. But in six EU member states FCB turnover exceeds agricultural output. In Sweden, it is about 260% of that figure, and about 200% in Ireland and Denmark.

Many UK farmers remain sceptical about FCBs, either because they perceive they have a poor track record or they do not trust them as businesses. Farmer controlled businesses must recognise this, and talk to potential members more to encourage them to collaborate, says the report, Routes to Prosperity for UK Agriculture.

FCBs must improve their internal organisation and their professionalism too, it adds. "This might include engaging non-farmer expertise for key business functions."

Mergers will also be needed if FCBs are to counter the "intense pressure" in the food processing and retailing sectors, says Siôn Roberts, chief economist at the NFU. "To deliver the best results to their members, farmer-controlled businesses must be top notch."

Several UK companies have expanded this year, including United Milk, Countrywide Farmers, United Pig Marketing, Greenvale AP and SCATS.

But Milk Marque remains the only UK FCB in the EU top 30 of agricultural co-ops, with a turnover of about £1.4bn. Elsewhere in the EU, even national borders are no longer a barrier to growth, says the report.

But size is not everything as Milk Marque producers and members of Danish pig co-ops have found out. The key is to generate added value and capture a greater proportion of the economic value through the supply chain, says Mr Roberts.

While the UK horticultural sector is well advanced in this respect, where some 45% of total production is collected, graded, packed and distributed through FCBs, other areas fall way behind some of their Continental counterparts.

The high degree of vertical integration in countries like Sweden and Ireland means they produce more processed products rather than commodities. This is reflected in their high FCB turnover. "They are adding huge amounts of value to achieve these levels," says Mr Roberts.

Many in the trade agree with the NFU findings. Chris Austen, company secretary of United Milk says: "The north European model has a lot to commend it. UK farmers are the most efficient in Europe, yet our milk price is at the bottom of the pile. A disproportionate share is going to the multiple retailer, and this has to be addressed."

He believes milk suppliers should reform into three groups plus Milk Marque. UM, formed from five groups earlier this year, handles 800m litres a year, which could double through further mergers, he says.

Turnover boost at Welsh potato firm – page p24. &#42

Ewe premium at £5.14

FIRST advance of the 1999 ewe premium has been set at £5.14 a head.

That equates to 30% of the full payment forecast for the year of £17.15 a ewe, or k24.133.

The conversion into sterling from euros has been made at the exchange rate in force at the beginning of the marketing year (Jan 1), when the k was worth just over 71p. This rate will also be used for the second advance, but the final amount and balance will be converted using the exchange rate in force at the beginning of January 2000. If the £ weakens by then, producers will receive a higher payment, and vice-versa. &#42

Business growth will protect incomes

Farmer-controlled businesses could give farmers incomes a much-needed boost, but they must persuade more producers to join them first, says a new report………………………page 21

Limiting losses

Better management has helped dairy farmers offset almost half the losses stemming from lower milk prices during the past year………………….page 22

Puffin takes off

A change of tack has boosted fortunes at farmer-owned Puffin Produce; most potatoes are now sold through supermarkets, and turnover has doubled……………………page 24

Calf contract

A scheme which could provide valuable outlets for calves is being launched in Devon; the hope is it will oust imported supplies of manufacturing beef…………………………page 25

Sows in decline

Breeding sow numbers have hit new lows after a further 5% fall in the first three months of this year, but producers will have to wait awhile for prices to return to break-even……………….page 27

Efficient expansion

This week we head north to our new adopted farm, a family partnership covering 1560 acres on four units on the edge of the Yorkshire Dales…………………….page 28

Poor payers

Beef prices have slipped slightly despite the first signs of a predicted shortage, prompting a fresh round of accusations against retailers…………page 35