Category Archives: Profit margins

A farmer reflects: “corporate leviathans threaten the rural economy . . . export expertise not food”

 

James Odgers’s letter to the Financial Times addresses the assumption that all economic growth must be good. He opens:

“Unbridled corporate power is at the heart of an ever-fiercer anger felt by many, and by millennials in particular, who view the growth and influence wielded by large corporations as malignant rather than benign. They place less emphasis on mere profit and more on the need to belong, to be part of a community”.

As a small-scale farmer in the south-west of England he is seeking to establish a sustainable model of farming post-Brexit that allies share farming with mutuality and stand in direct opposition to ever-larger farms selling to the multiple retailers.

He and others similarly placed have been amazed at the lack of political opposition to the proposed tie-up between Asda and Sainsbury’s as the competition authorities seem to be craven when faced with the power of these leviathans of commerce and ruefully reflects:

”The rural economy has been almost wholly destroyed by what is clearly an oligopoly and yet we are told that there is sufficient competition between these vast concerns to meet the needs of consumers”.

In another interview Odgers, from Stream Farm, Broomfield, points out that whilst prices in the supermarkets increased by 50% over a recent period of 7 years, the price at the farm gate rose only 12% and every new supermarket store that opens results in a net loss of 226 full, local livelihoods – mostly small-scale family businesses that have had to be closed – and the local communities have suffered accordingly.

His mission: to establish as many basic farming businesses as possible on the land and hand them on to those who want to farm, perhaps have tried and failed in the past, and to encourage them to earn a livelihood and by helping each other to produce the very best food.  So far 8 businesses have been set up: beef, lamb, chicken, pork, rainbow trout, apple juice, honey and spring water, still and sparkling.  He is keen to start on vines and perhaps crayfish. To read in more detail use this link.

Share farming is a microfinance model in which a farmer (often referred to as the owner) with land and fixed equipment enters into an agreement with another farmer (operator) who provides labour and machinery. The profit from the agreement is split between the two or an alternative compromise is reached. It gives each farmer the opportunity to run their own business and earn a livelihood from their share of gross income and the owner recovers, slowly, the costs of capital invested.

We could feed ourselves in this country and help the poor in other parts of the world if all farming were to be organic, if we took out the profiteering supermarkets, and farmers were paid a fair price for their produce.

  • It need be no more expensive for the consumer – our Dexter beef box is at least £60 cheaper than the equivalent cuts in Waitrose.
  • If we stopped wasting as much as we waste and demanding out-of-season and perfect-looking produce, there would be more food than we need.
  • If there were large numbers of small farmers helping each other as happens at Stream Farm, communities would be enhanced and the countryside would become vibrant and would require many more farmers.
  • And if we stopped pouring onto our land and into our animals chemicals that have no place to be there, we might all be a sight healthier too!

It is expertise that we should export from this tiny island of ours, rather than feeling we have an obligation to feed the world by unsustainable farming practices that are causing an ever-greater environmental deficit.

 

 

 

o

Advertisements

Dairy industry collapsing: stabilised by MacDonald government, 61 years later – thrown to the wolves by Margaret Thatcher

In recent years, dairy prices have been on a rollercoaster: at one point in 2015, farmers were receiving less money for their milk than it cost to produce.

Arla has reduced the price it pays farmers for milk. The drop of 1.73 pence follows a small price reduction last month, giving Arla’s British producers 29.27 pence per litre.

Andrew Cozens (below) has a herd of 230 dairy cattle near Stroud, and sells his milk to Arla.

Lucy Taylor interviewed him for Farming Today (Link to audio, Mr Cozens at 8mins 20 secs.

He remembered the 2015 drop to 16p per litre when all the profits saved from earlier years were used up just to keep going. The price drop in January was expected but a further cut in February had been a ‘bolt from the blue’; he added that if the forecasts of further drastic falls in May were correct he would have to sell up and do something else.

NFU Scotland Vice President Gary Mitchell said that dairy farmers in UK have little confidence that the supply chain is fairly sharing returns from high value dairy products with those milking the cows and must deliver fairer returns to milk producers.

UK Milk Prices – The Twenty Years War: an archived 2015 article by Bruce Jobson, published in a dairy breeders’ magazine. Edited extracts:

Farmers were at the mercy of the individual dairies and prices were extremely volatile. In order to establish a fair and coherent system, the British Government established the Milk Marketing Board (MMB) system for England and Wales as well as, separate Boards for Scotland and Northern Ireland Milk Marketing Board. Set up in 1933 the MMBs pooled all the milk and guaranteed a minimum price to farmers, providing them with a regular service, and a regular cheque.

“The system proved successful and capable of withstanding the instability of the markets. The collective strength (remember: divide and conquer) provided a negotiation position and a pricing system that secured the liquid market price”.

Deregulation and privatisation were part of the Thatcher Government ideology. Though milk producers voted 99.9% to maintain the MMB system, Thatcher abolished the MMB in October 1994 in England, Wales and Scotland and in Northern Ireland in February 1995. In a democratic world the wishes of 99.9% of UK farmers not to abolish the MMB system would, and should have, prevailed. As a result, thousands of dairy farmers were subsequently ruined and this in turn created the rise of division; and supermarket power.

According to the Farmers Guardian, the farm gate price fell by 28% in real terms between 1994 and 2010. “With no MMB as the counterbalance, in 2000 our farm’s milk began a price drop of 40% in 18 months,” recalled Anthony Bradley, a former farmer from the Yorkshire Dales. £50,000 per annum “effectively walked off” the family farm. “That was the end for us as dairy farmers.” In December 2014, an estimated 16 dairy farmers per week were leaving the industry. For some, enough was enough.

In 1995, there were 35,000+ dairy farms in the UK, now there are 13,000+ (Dairy industry in the UK: Statistics, 2016).

Will the next British government institute a similar co-operative, retaining the advantages of the MMB and restoring the country’s collapsing dairy industry?

 

 

o

‘Bright Blue’ Conservative proposal: damaging to British food producers but profitable to the hospitality industry, commodity speculators and Exim traders

,

The proposal by a Conservative think tank opens with a people-pleasing injunction: end the payment of vast subsidies to wealthy landowners after Brexit.

However, those who read and remember more than the headline will begin to see that profits are simply to be redirected.

“The EU system of paying farmers according to how much land they own should be replaced by payments for environmental benefits plus a ‘means-tested livelihood support’ for the poorest”, the report by Bright Blue says. It accepts that the system could reduce food production and make Britain more reliant on imports, which account for 40% of consumption. However, it says that the loss of self-sufficiency is a price worth paying for protecting wildlife and natural beauty.

After a lyrical paragraph about the environment, Bright Blue sheds sentiment and proposes three income sources for food producers (in order of preference?):

  1. A market-based commissioning scheme;
  2. means-tested livelihood support – aka government dole
  3. and/or income from agricultural produce or other monetisable services sold at market prices without any production subsidies.

Yet another nightmare administrative system?

Chapter Three of the report explains, “We envisage ‘suppliers’ bidding together or individually to supply ecosystem services to paying ‘beneficiaries’ in specific catchments on online market-places. Suppliers would include farmers, land owners, and land managers”. 

Voices of sanityTimes readers’ comment:

David Illsley 

How to do the right thing for all the wrong reasons! Lower subsidies for empty fields, yes! but don’t pay farmers to stop producing food only to pay them for planting flowers! This country needs to be self-sufficient in basic foods, milk, grain, meat, food, water, and as much as possible energy. 

Tony Perryman 

So right, when the Chancellor might be announcing a relaxation of greenbelt rules this week. Land and the production of food for the nation is more important; our trading deficit will become a concern post Brexit. 

Keith William Hendry 

Scotland is self-sufficient in fish, meat, dairy products, vegetables & we have copious amounts of water. Our whisky is the biggest net export cash raiser for the exchequer.

Jane Cooper says it all:

“One problem is that UK farmers, farming to support and enhance our environment and with high animal welfare standards, will be competing on a world market with overseas companies that produce food cheaply by trashing their environments, abusing animals and paying slave-labour wages to employees.  That’s not a fair ‘market’ for UK farmers to be competing in.  

“If you can find a way to have farmers fairly paid what it actually costs to produce food in the UK to the environmental and welfare standards expected by most people in UK, then I agree subsidies wouldn’t be needed”.

 

 

 

n

Saluting the French President – the first head of state to seek fair food legislation?

Macron: “We should allow farmers not to rely on subsidies anymore and therefore ensure than they be paid a fair amount for their work.”

Reuters reports that President Emmanuel Macron – during a meeting at Rungis international food market in Rungis, near Paris – has called for changes to France’s food chain on Wednesday to ensure that farmers, who have been hit by squeezed margins and a retail price war, are paid fairly.

Macron said that he supported a new type of contract, based on farmers’ production costs

In common with Farmers for Action (NI) which has joined a producer organization (Farm Groups) he is proposing a change in legislation – ‘a new type of contract, based on farmers’ production costs, which would require stronger producer organizations and a change in legislation’.

Prices are currently defined by buyers tempted to pressure prices, leaving many farmers unable to cover their costs.

The changes are part of a wide field-to-fork review promised by Macron during his presidential campaign as a third of farmers, an important constituency in French politics, earned a third of the net minimum wage.

Macron endorsed a proposal from the workshops to create a reversed contract starting from farmers, to food processors and to retailers. This would ensure a better spread of added value along the chain.

Just Food adds: “He promised to shake up the current “balance of power” between producers, food processing firms and retailers. A tougher line would be taken on low prices and discounting and a higher loss-leader threshold for retailers established, Macron underlined . . .

“Legislation will be prepared early next year reversing the current system of food pricing. In future, prices will be calculated on the basis of production costs instead of being imposed by retailers”.

First published here: https://politicalcleanup.wordpress.com/2017/10/19/saluting-the-french-president-the-first-head-of-state-to-seek-fair-food-legislation/

 

 

n

Butter price rise: falling milk production, rising demand, adverse weather, liberalisation – low prices are still the elephant in the room

As salaried workers in the commercial media, futures markets and organisations including the NFU, AHDB, DEFRA, DairyUK and RABDF pontificate about the situation, it is good to see that the ignored elephant in the room is slipping in to the columns of the Financial Times.

Emiko Terazono, commodities correspondent, reports that many dairy farms in Europe and Brazil have endured years of ‘sluggish’ (aka low) dairy prices and quotes Kevin Bellamy (Rabobank): “Many dairy farms in Europe and Brazil are suffering from a shortage of young cows to bring into the herd after the years of sluggish dairy prices. Because of the period of prolonged low prices the young stock aren’t there”.

She refers to the EU’s move to liberalise its dairy market in 2015, lifting restrictions on production and exports, which caused prices for fall by more than half between 2014 and 2015, with many dairy farmers around the world going out of business or struggling under increased debts. The EU then responded by introducing voluntary output cuts and compensated farmers for not producing milk. World milk supplies from leading five producer regions slipped 0.4% in 2016.

January protests outside the EU Council building covered here. Above, see the European Milk Board’s Faironika, the artificial cow canvassing for fair payment for dairy farmers and explaining the nutritional value of milk, the role of farmers and their value to the rural economy

During the protests in January, Sieta van Keimpema, dairy farmer and vice-president of the European Milk Board, the lobby group representing the region’s producers, “Milk producers all over Europe are still in the throes of the crisis . . . and although the milk price has rebounded from last year’s lows, it is still lower than the cost of production”.

 

 

 

No fair trade here: cream and butter prices rise but farm-gate prices for milk don’t

The Financial Times reports that a reduction in the milk supply, due to a cold spring and dairy farmers leaving, has led to prices of butter and cream rising 18.7% in the year, according to data from the Office for National Statistics. But despite “record prices” for wholesale cream and butter in recent weeks, the National Farmers Union point out farm-gate prices for milk have continued to fail to keep in step.

BBC online reports that Arla’s CEO Peter Tuborgh said producers “put the brakes on” in 2016, in the wake of previous overproduction of milk and consequently lower prices and Michael Oakes, chairman of the National Farmers Union dairy board, added that UK supply had fallen partly because so many farmers “decided enough was enough during that downturn”. Many farmers have often had to sell milk for less than the cost of producing it and so – understandably – the number of UK dairy producers has fallen.

The National Farmers’ Union said the “constant boom-and-bust dairy market cycle” helped “no-one, most of all farmers” and expressed concern about the lack of strong upward movement in the farm-gate milk price.

Milk buyers are worried about milk volumes falling but, the NFU spokesperson added, “Confidence within dairy farming is at an all-time low [due to] mistrust in the market dynamics and suspicion about how milk buyers are treating their supply base, coupled with the lack of direction on the impact of Brexit on the dairy sector.”

Post-Brexit, will the UK government ensure that ‘ordinary’ farmers receive a fairer proportion of the agricultural payments and turn away from the practice of subsidising offshore companies and rich individuals?

And will the Groceries Code Adjudicator, who places great emphasis on scrutinising supermarkets give more time to food producers and address the issue of unjust farmgate prices?

 

 

 

k

The Royal Association of British Dairy Farmers: 2003 and 2017

In August 2003 the Farmers Guardian reported that a series of industry-wide meetings, called by the Royal Association of British Dairy Farmers (RABDF), were held for a year to discuss the true costs of milk production.

Members of RABDF, with independent research consultancies and dairy farmers, produced a report showing that the cost of milk production is much higher than current estimates state. The true cost of milk production was found to be between 20 and 23p a litre, rather than the 18p currently being paid. Dairy farmers were working an average 70-hour week with only a few days holiday each year and low milk prices have left them earning just £2.90 an hour.

The chairman, Tim Brigstocke, said that problem areas were fixed costs, farm overheads, farmer remuneration, family labour costs, pensions and staff development had not been included in current assessments.

The new guidelines proposed by the RABDF included gross costs such as feed, forage, bedding, and vet’s bills; operational costs like labour (£10 an hour deemed a reasonable figure to factor into the equation, given the level of skills required in dairying), machinery, depreciation, property-related, unpaid family labour and resource costs: rent, quota leasing and finance costs. Mr Brigstocke urged producers to adopt these guidelines to arrive at a realistic picture of how much their businesses were costing them.

A Lancashire dairy farmer contacted this site to voice concern about the very differently focussed RABDF of 2017 and its ‘elitist style’.

RABDF, now described as the ‘the new secretariat to the Trehane Trust’, is advertising its October conference in Birdcage Walk London for ‘leading farmers’ who are to be granted the opportunity to ‘rub shoulders’ with policy makers and supply chain leaders. The conference will be held in conjunction with the Trehane Trust which funds research into all aspects of the dairy supply chain, from production to new product development and consumer trends in the dairy sector – but the crucial subject of farmgate prices is not listed.

One of the invited speakers at this most opulent venue (above) is from Arla – a downward trend-setter, announcing a price reduction for the April payment – the first milk price drop in 2017 by a major UK milk buyer. A further online search will reveal that this company has closed several processing plants making hundreds of workers unemployed, though the net profit of the Arla Group last year was €356 million.

The key findings of Trehane Fellowship recipient Mike Houghton of Andersons will be included. He has been researching future options and opportunities for the sector at home and abroad, using his contacts in Canada and the USA to find out more about their support systems, in particular crop insurance schemes and futures markets and consulting key people within the legal profession and the insurance industry to obtain a different perspective on the topic. 

Tim Brigstocke is now RABDF’s policy director

When this ‘Business and Policy Conference’ has taken place, will he help the RABDF to come down to earth in the interests of the average dairy farmer – arguably an endangered species?

In the interests of food security, will the RABDF present the facts about rising costs but low and fluctuating farmgate prices to the complicit policy makers and supply chain leaders, with whom wealthy farmers are being invited to rub shoulders?

Or will they continue their failed policies as the dairy sector continues to decline and foreign importers take over?

 

 

 

ccc