Farmer-run business must grow NFU

By Robert Harris

FARMER-CONTROLLED businesses must expand and develop along Continental lines if UK farmers are to prosper in the tough times ahead, warns a new report released by the NFU this week.

Recent moves within the sector show some businesses realise that size does matter. But a survey carried out by the union shows there are several hurdles to overcome to accelerate such growth.

Despite the prospect of cheaper supplies, better access to markets and added value which farmer-controlled businesses offer, the UK trails far behind many other EU states, says the report.

Total turnover of UK FCBs is about 40% of the value of agricultural production, or 6 billion. But in six EU member states, FCB turnover exceeds agricultural output.

In Sweden, it is about 260% of that figure, and about 200% in Ireland and Denmark.

Many UK farmers remain sceptical about FCBs, either because they perceive they have a poor track record or they do not trust them as businesses.

Farmer-controlled businesses must recognise this, and talk to potential members more to encourage them to collaborate, says the report, Routes to Prosperity for UK Agriculture.

FCBs must improve their internal organisation and their professionalism too, it adds. “This might include engaging non-farmer expertise for key business functions.”

Mergers will also be needed if FCBs are to counter the “intense pressure” in the food processing and retailing sectors, says Sin Roberts, chief economist at the NFU:

“To deliver the best results to their members, farmer-controlled businesses must be top notch.”

Several UK companies have expanded this year, including United Milk, Countrywide Farmers, United Pig Marketing, Greenvale AP and SCATS.

But Milk Marque remains the only UK FCB in the EU top 30 of agricultural co-ops, with a turnover of about 1.4bn.

Elsewhere in the EU, even national borders are no longer a barrier to growth, says the report.

But size is not everything, as Milk Marque producers and members of Danish pig co-ops have found out. The key is to generate added value and capture a greater proportion of the economic value through the supply chain, says Mr Roberts.

While the UK horticultural sector is well advanced in this respect, where some 45% of total production is collected, graded, packed and distributed through FCBs, other areas fall way behind some of their Continental counterparts.

The high degree of vertical integration in countries like Sweden and Ireland means they produce more processed products rather than commodities.

This is reflected in their high FCB turnover. “They are adding huge amounts of value to achieve these levels,” says Mr Roberts.

Many in the trade agree with the NFU findings.

Chris Austen, company secretary of United Milk says: “The north European model has a lot to commend it. UK farmers are the most efficient in Europe, yet our milk price is at the bottom of the pile.

“A disproportionate share is going to the multiple retailer, and this has to be addressed.”

He believes milk suppliers should re-form into three groups, plus Milk Marque.

UM, formed from five groups earlier this year, handles 800m litres a year, which could double through further mergers, he says.

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