Post Brexit, UK farming businesses are expected to have less money to spend on inputs as area-based payments are phased out in line with the government’s much-publicised “public goods” yardstick.
As a result, we could well see less “farming as we know it” and, if this is the case, then fewer inputs will be required, so manufacturers and distributors will have to compete for a smaller market.
That might sound like good news by increasing competition and reducing prices, but the opposite may well prove to be the case, so farmers must be alert, agile and well informed.
Consolidation within the agricultural supply sector will become more pronounced and those companies/distributors that remain will become larger and more focused on protecting shareholder value and profitability, in various ways.
All-inclusive supply/marketing contracts, for example, may look attractive by helping farmers to overcome short-term cashflow issues, but may prove uncompetitive and difficult to exit.
One consequence of supply chain consolidation will be that individual farming businesses have less influence over suppliers. As such, belonging to a farmer-owned co-operative, which aggregates members’ purchasing/marketing volumes and negotiates effectively on their behalf, will become more important.
In continental Europe the average farm is much smaller and owners cannot justify the same level of infrastructure as their UK counterparts. Membership of a co-operative is almost a given.
This model is very different to that of a merchant/distributor, whose directors have a legal responsibility to maximise shareholder value.
There is nothing wrong with that. But when the going gets tough, wouldn’t you rather that you were the shareholder the value was returned to you and a team of industry professionals was batting only on your side?
A true farmer co-operative, owned by and operated exclusively for its members, is a compelling model, being completely impartial, trustworthy and transparent. But for it to be successful requires complete commitment and trust on both sides.
Members must trust their co-operative implicitly to always do what’s right for them and, conversely, must understand that it’s an exclusive, confidential club they should support fully, not treat as just another merchant to “phone for a price on the day”.
The co-operative I manage is dedicated to helping member businesses achieve best value in the market and make better, more profitable decisions.
In 2018 we analysed our price competitiveness in some depth, looking at a range of inputs over the past five plus years. The analysis showed we saved our members almost 10% on their input purchases, while reducing administration time significantly.
Even the largest farm enterprises cannot hope to replicate the expertise, resources and range of services co-operatives provide, including industry experts who give totally independent input purchasing and combinable crop marketing advice.
Consequently, professional farming businesses increasingly recognise that membership is the most cost-effective and efficient way to deal with suppliers.
The co-operative model is particularly appealing to independent-minded “millennials” – the next generation who tend to eschew convention, don’t like having products and services “pushed” on them and are wary of the motives of large corporations/organisations.
They want to work with independent organisations with the highest ethical standards and align themselves with the values of a true co-operative.
I believe the best days for well-managed farmer-owned co-operatives are yet to come.
As well as purchasing inputs and marketing combinable crops on members’ behalf, co-ops will become a trusted source of added-value services and information to help progressive farming businesses make decisions and manage change in this fast-evolving world.
Richard Anscombe is chief executive of Fram Farmers.