20 May 1999
Farm supply merger hits choppy water

By FWi staff

PLANS to create the countrys biggest farmer-owned supply business have proved trickier than first thought, it has emerged.

A proposed merger announced two months ago between West Midland Farmers (WMF), Midland Shires Farmers (MSF) and AF to form Countrywide Farmers has been revised.

Those involved in the deal are blaming difficulties over AFs conversion from a standalone plc to becoming part of a limited company.

“The boards have been unable to complete all the necessary steps in time to implement the original plan,” said a statement sent to staff this week.

The statement, which described the original plan as ambitious, said MSF and WMF would continue with the merger, creating a company with almost £200 million turnover by July.

The boards will then reconsider the original amalgamation.

“The concept is still valid,” maintained Steven Clarke, AFs managing director.

“But we will need to consider the appropriateness and structure once the WMF and MSF merger has occurred.”

Even if AF decides not to join, several other farmer-owned companies have expressed an interest in doing so, a source close to the deal told Farmers Weekly.

But the setback could dampen a campaign by the National Farmers Union (NFU) to persuade producers to develop farmer-controlled businesses along continental lines.

Farmers must face up to the challenges of the next millennium and collaborate more closely if they are to prosper in tough times, warns an NFU report released today.

The report, called Routes to Prosperity for UK Agriculture, reveals that farmer-controlled businesses (FCBs) are more common in Europe than in the UK.

The document was launched at an NFU conference today at the National Agricultural Centre, Stoneleigh.

“In the increasingly competitive global marketplace that farmers have to operate, scale is a key way to provide strength in both sourcing supplies and marketing produce, said NFU President Ben Gill.

“This is important for large farms but particularly relevant to the small farm.”

The turnover of FCBs in the UK is equivalent to 40% of total agricultural output – but elsewhere in Europe this figures is much higher.

In Sweden, Ireland and Denmark, FCB turnover is equivalent to some 200% of agricultural output.

The NFU report identifies a number of challenges that need to be met for FCBs to play an important future role in UK farming.

It says FCBs need to continue to amalgamate to provide scale on a level similar to Europe and add value to capture a greater proportion of the retail value of food.

They also need to examine their internal structures and market positioning to gain greater support from farmers and growers.

The publication draws on the findings of an NFU survey which found that farmers greatest motivation for joining FCBs was greater access to markets and adding value to their products.

But sceptical producers feared losing control of the way in which their products were marketed if they joined an existing FCB which was too small to provide security.

Mr Gill concluded: “The FCB sector is already responding to the challenges facing it and we will continue to put forward to our members the positive advantages which FCBs can offer.”

  • Farmer-run business must grow – NFU, FWi, today (20 May, 1999)