15 March 2002

Unions join up for battle over larger co-ops

By Robert Harris

FARMING unions have launched a drive to help producers build stronger dairy co-operatives.

As concern over milk prices mounts, representatives from the NFU, NFU Scotland, NFU Cymru Wales and the Ulster Farmers Union have joined forces to persuade the government to rethink competition laws. They will meet ministers and Office of Fair Trading representatives in the next few weeks.

The move has been spurred by the recent policy commission report on food and farming which urged competition authorities to consider the wider market context when looking at new or expanding collaborative ventures.

Large co-operatives are actively encouraged in Europe and further afield, but the UK has refused to accept the concept.

Just three years ago, then trade secretary Stephen Byers forced Milk Marque to break up after it was found to be exploiting its monopoly position by competition authorities. The NFU is fighting the decision in the European courts.

"The competition authorities need to take due regard of the international nature of the dairy business," said NFU chief dairy adviser Philip Hudson.

Once a UK business exceeds a 25% market share, it undergoes much greater scrutiny than smaller companies.

Competitors abroad are already well ahead, he added. Scandianvian co-op Arla and New Zealand giant Fonterra buy at least 95% of raw milk in their home countries and are expanding processing interests elsewhere. The UKs biggest co-op, First Milk, has about a 20% share of the raw milk market.

"We need to take away this artificial barrier that constrains growth." Bigger co-ops could restore the balance of power in the supply chain, realise bigger economies of scale and raise more money to fund moves into processing, all of which would benefit farm-gate prices, said Mr Hudson.

First Milk welcomed the move. "We may or may not want to expand," said a spokesman. "Size is not everything, but it is important that farmer organisations can compete on a level playing field."

Many supermarket products come from farmer groups that are not subject to the same regulations as UK businesses, he added. "These artificial commercial constraints are not consistent with a policy that says farmers must survive with less support."

&#8226 The NFU is pushing ministers to apply to Brussels for £51m of agrimoney compensation available in 2002 to offset the effect of the strong £ on dairy farmers incomes. It is the final tranche available to UK farmers and is worth about 0.36p/litre.

However, the Treasury will have to put up most of the cash, something its has not been keen on in the past. &#42