21 May 1999

Farm supply union hits choppy water

CREATING the countrys biggest farmer-owned supply business has proved trickier than first thought.

Plans for a merger between West Midland Farmers, Midland Shires Farmers and AF to form Countrywide Farmers, announced two months ago (Business, Mar 19), have been revised, due to difficulties over AFs conversion from a standalone plc to part becoming of a limited company.

Describing the original plan as ambitious, a statement sent to staff this week said: "The boards have been unable to complete all the necessary steps in time to implement the original plan."

It added that MSF and WMF would continue with the merger, creating a company with almost £200m turnover by July. The boards will then reconsider the original amalgamation.

The AF board has not had second thoughts, maintained managing director Steven Clarke. "The concept is still valid. But we will need to consider the appropriateness and structure once the WMFand 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 FW.

Milkminder men recoup half 98 milk price fall

By Robert Harris

BETTER management helped dairy farmers recover almost half the losses caused by last years fall in ex-farm milk prices, according to latest Axient figures.

In the year to March, the average milk price fell from 20.13p to 19.17p/litre, a 4.8% drop, says information services manager Tim Harper. "The direct effect would have led to a £15,411 loss in milk income for the average herd. However, through management improvements Milkminder clients have recouped 44% of this resulting in a fall in herd margin of only £8568."

With 107 cows, the average Milkminder farm had an extra four cows in milk, boosting herd margin by £3255 (see graph). Milk yield was also up almost 1 litre/day at 22.6 litres, giving clients an additional £1055.

And although yield from forage slipped by 1.19 litres a cow a day which, coupled with the higher milk output, saw concentrate use rise by 15% to 0.31kg/litre over the 12 months and herd margins fall by over £1450, this was outweighed by a 13% drop in the average concentrate price to £109/t, saving almost £3900.

Further falls in feed prices can be expected following Agenda 2000 reforms which have cut cereal support prices, adds Mr Harper.

"The most immediate issue facing milk producers is the continued pressure on their incomes as a result of the continued fall in milk prices. Benchmarking performance against the best performing farms will help farmers to identify key areas where profitability can be improved."

The severity of the downturn in dairy farmers fortunes is highlighted in the latest ADAS Milk Cheque results which show an income cut of more than £51,000 for costed herds in the past two years.

Milk values have fallen almost 25% in that time, by 5.75p/litre, leaving many producers making a loss. Further falls in the milk price, which stood at 19.14p/litre in March, will continue to depress profits for the coming year, says Milk Cheque manager Ian Powell.

"With commodity and support prices based in the weak k, the position for dairy farmers looks bleak. Farmers must take action now to protect their businesses. We are already witnessing a dramatic rationalisation of the industry – if the situation remains unchecked, this is likely to continue apace."

The top 10% of ADAS costed herds achieved a margin over purchased feed for the year to March of £1475 a cow, £372 above the average. This was worth £49,000 a year. Even allowing for the extra cost of quota leasing, it left a net gain of £32,000, he says.

"With quotas assured for the next seven years, feed costs at an all time low and reduced finance charges there is potential for those farmers that act now to take advantage of the opportunities."

Genus hits out at VDCbid rejection

GENUS has slammed the recent move by animal health supplier VDC to avoid its hostile £20.7m bid. The VDC board has recommended a reverse takeover by pet care and feed company Lawrence.

Richard Wood, chief executive of Genus, has written to VDC shareholders strongly advising them not to vote in favour of the move.

He cast doubt on the VDC boards claims that shareholders can share in potential growth of an enlarged group.

The Lawrence deal gave VDC cash away and failed to provide any offer for shares, he added.

If shareholders turn down the Lawrence deal then Genus will succeed in gaining a business which it sees as an ideal fit with its existing cattle breeding and consultancy divisions.

Harmony reigns on EUmilk and OSR

EUROPEAN agriculture ministers have resolved their differences over milk quota and oilseeds and formally adopted the regulations relating to common agricultural policy reform.

At this weeks council meeting in Brussels they agreed to maintain the milk quota regime until 2008, with a review in 2003.

With regard to oilseeds, the European Commission has agreed to link aid during the transitional period to the cereals level.

This means the area payment will be almost k82/t (£54/t) for the 2000/01 marketing year and just over k72/t (£48/t) for 2001/02. The ministers agreed that countries hit by penalties resulting from the overshoot of the maximum guaranteed area, including the UK, should receive a minimum payment of k58.67/t (£33.80/t) in 2000/1 and k63/t in 2001/2.

But the reference yield used to convert tonnage payments to area aid has been retained at 6t/ha (2.43t/acre) CHECK rather than reverting to the cereals yield, lifting payments by about £5/ha (£2/acre).