30 November 2001

UK chain must be efficient

By John Burns

South-west correspondent

SHORTENING and improving the efficiency of the UK food chain must be given top priority if West Country farming is to prosper, according to several speakers at the NFUs Out of the Ashes conference at the Bath and West Showground, Somerset.

UK dairy farms are the biggest in the EU and operate relatively efficiently and UK consumers pay more for milk than their Dutch counterparts. Yet UK milk producers get 15-20% less for their milk than Dutch farmers, said Gerard van Empel, managing director of Rabo International Advisory Services, part of the Rabobank Group.

This was nothing to do with currency – it was due to the relative inefficiency of the UK food chain, he added. "Consumers pay a price, then everyone takes off their costs and whats left goes to the farmer. Thats how the food chain works. You have to get it more efficient rather than asking consumers to pay more," he said.

Mr van Empel said successful co-ops had to be based on economic principles. Members had to accept risk and liability, and their individual voting power had to reflect their individual investment. But the principal goal had to be securing the optimum price for all members whilst retaining enough capital for growth.

Adequate capitalisation based on turnover volume was essential. Capital should not be scarce, considering the enormous asset value in agriculture, he suggested.

There was much scope to improve operational efficiency in Britain, he added. In the UK many factories were in the wrong place or too small and milk was "carted all over the place".

NFU vice-president Michael Paske said farmers and growers were the weakest link in the chain. He stressed the need to remove all unnecessary costs from that chain.

"Im totally fed up with the number of people living off our backs. Its time we did something to eliminate the links that cost us money and only deal with people who add value to our products."

Somerset farmer Derek Mead, a long time advocate of large vertically integrated farmer-owned co-ops and a harsh critic of the NFUs "cosy" relationship with supermarkets, asked Mr Paske when the NFU was going to implement what it talked about.

"Mine are not weasel words," replied Mr Paske. "Somehow weve got to work together."

Lord Haskins, chairman of Northern Foods and Express Dairies and an adviser to the government, said he was very keen to see farmers entering primary processing. "We shouldnt have middle people in primary processing such as milk or meat. In Europe and North America farmers are already in that."

Lord Haskins said his preferred approach was to give tax incentives to co-operation. "The government has to create an environment where investors get incentives."

&#8226 Apart from the obvious seasonality effect, our October milk price table shows few changes from the previous month, with most buyers agreeing to a price freeze during the autumn negotiations.

However, some companies have said they will review prices monthly, so further changes before the next major discussions in the spring cannot be ruled out.

So far, only Bodfari has dropped its standard litre price – by 0.55p to 19.75p/litre for every day collection – following downward revisions in its butterfat and protein payments.

But Southern Co-operative Dairies has increased those payments, boosting its standard litre by 0.4p/litre to 19.86p/ltre.

Glanbia has reduced its Lockerbie transport charges by £2/collection in an attempt to redress the balance between every day and every-other-day collection. This raises its standard litre price, net of seasonality, by 0.27p to 19.77p/litre for daily collection, just 0.3p behind the EODC price. &#42