Change ways to boost prices

BRITISH FARMERS must change their ways if they want better prices, according to Wim van Diepenbeek, an advisor with the agricultural division of Rabo Bank.

Forming powerful marketing co-operatives would give farmers the strength to set prices, he told delegates at the 59th Oxford Farming Conference

Britain lags years behind its continental neighbours in terms of co-op development, with no farmer controlled businesses even in the top 20.

“The dairy industry or the beef industry is no different from the car or electronics industries: small is definitely not beautiful and you need to make economies of scale.

“Farmers must organize themselves into strong commercial organizations to countervail their weak positions.

“Compared to European co-operation and collaboration, you don‘t have the economies of scale to maintain your position and seize a fair part of the value of your product.”

It is no use complaining that supermarkets are too strong, said Mr van Diepenbeek. They have to do the best for their shareholders.

The problem is that farmers are too weak, and he urged them to adopt the continental model of strong, professionally-managed co-operatives acting across the supply chain.

Following a “zero loss policy”, members should be paid no more than the co-op has earned.

With all the risk on members‘ shoulders, and not those of the organization, and with strong discipline and good communication, co-ops would become “bankable”, he explained.

But it is farmers‘ attitudes not money problems which are holding up co-operation in the UK, and a nationwide concept of the principles behind a successful co-op is vital.

“There needs to be much more agreement amongst each other for the farmers of Britain to achieve this [co-operative model].

“It‘s never too late, and you can make a lot of money, but outside pressure will not decrease, so there are not too many alternatives.”

Britain also needs to give co-ops better recognition in the law, and he said that legal change would be necessary to allow them to flourish.

Citing the milk industry, he argued that organizations with a truly national profile would emerge, enabling them to make real economies of scale.

This would probably mean cutting the hundreds of different processing units to just tens.

“The efficiency to be gained from reorganising the whole milk supply chain is more important than the milk price paid by consumers.”

Typical investment profile

After initial investment, co-op retains €5/100kg milk,
equal to about 15% of the milk price. Capital is
returned on leaving co-op, plus interest at the rate
of inflation. Farmer-member does not “shop around”
for better prices