So once again farmgate milk prices have been cut, farmers are saying they cannot go on, protests have taken place about the unfairness of it all, and a Dairy Summit will be held in Scotland in three weeks time with representatives from across the supply chain seeing what can be done.
And there’s the rub. What can be done? Have we not been at this square before?
It’s interesting to read the various analyses about why prices are so low. Many blame the power of the retailers, most call for the supply chain to work together in a more sustainable fashion, some say the answer is better supply contracts, some have recognised that insufficient investment has been made in the industry generally.
The one thing no one speaks about, yet looms large like the proverbial elephant, is that there are too many dairy processors in the UK. This means that many are too small to work effectively in a market where good returns to shareholders, including farmer shareholders, depend increasingly on investment in low cost technology, added value brands, and a bit of clout when it comes to selling products into the market place. As the Oxford University Milk Chain Supply Project reported baldly last year - “The more processors there are the more options the supermarkets have and the lower the price the supermarkets negotiate.”
Which leads on to the seeming refusal of UK dairy cooperatives to recognise that individually they, and their farmer shareholders, face a difficult future. No one speaks about the drain on profits caused by having three cooperatives each turning over just £600m, yet each with big overheads. The cost of their 3 chairmen, 3 chief executives, 3 financial directors and 21 non executive directors alone is over £3million, according to company reports. Put the three businesses together and the huge savings generated could be invested in developing higher value brands, lower costs of production, and a more productive dialogue with major customers. The result would be better profits, which would translate into the improved returns that farmers are crying out for.
And there’s the rub. What can be done? Have we not been at this square before?
It’s interesting to read the various analyses about why prices are so low. Many blame the power of the retailers, most call for the supply chain to work together in a more sustainable fashion, some say the answer is better supply contracts, some have recognised that insufficient investment has been made in the industry generally.
The one thing no one speaks about, yet looms large like the proverbial elephant, is that there are too many dairy processors in the UK. This means that many are too small to work effectively in a market where good returns to shareholders, including farmer shareholders, depend increasingly on investment in low cost technology, added value brands, and a bit of clout when it comes to selling products into the market place. As the Oxford University Milk Chain Supply Project reported baldly last year - “The more processors there are the more options the supermarkets have and the lower the price the supermarkets negotiate.”
Which leads on to the seeming refusal of UK dairy cooperatives to recognise that individually they, and their farmer shareholders, face a difficult future. No one speaks about the drain on profits caused by having three cooperatives each turning over just £600m, yet each with big overheads. The cost of their 3 chairmen, 3 chief executives, 3 financial directors and 21 non executive directors alone is over £3million, according to company reports. Put the three businesses together and the huge savings generated could be invested in developing higher value brands, lower costs of production, and a more productive dialogue with major customers. The result would be better profits, which would translate into the improved returns that farmers are crying out for.
What is especially frustrating is that other cooperative companies have seen the issues, understood the benefits and overcome the obstacles. Friesland have just completed their merger with Campina, to build a company with a turnover of 9.5bn euros. In 2007 Sodiaal of France led the merger of 7 cooperative entities into 1, and has a turnover of 2bn euros. Why are UK cooperatives so blinkered that they cannot act too?
The odd thing is that the one area where farmers do have influence is through their coops. They own them for heaven’s sake. So the final question has to be - what is stopping the farmers themselves from putting pressure on their cooperative boards?
The odd thing is that the one area where farmers do have influence is through their coops. They own them for heaven’s sake. So the final question has to be - what is stopping the farmers themselves from putting pressure on their cooperative boards?
2 comments:
I agree with almost every word, Colette, but the phrase "turning over JUST 600 million pounds" sent a chill through my heart.
Surely there is an alternative to the gloomy destination that pure capitalism is taking us all towards.
Thanks Matthew. You raise an increasingly hot topic in that the whole area of "whither capitalism" seems to be getting more discussion in light of the economic mess the country's in. Its very early days, but an interesting one to watch. Colette.
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