Category Archives: Speculation

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?

 

 

 

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MEP Molly Scott Cato urges the Co-operative Group to source locally

Could co-operative retailers sell good quality food produced on their former farms (now owned by the Wellcome Trust) as MEP Molly Scott Cato advocated two years before the sale?

With foreboding in 2012, she saw the depressing comments from the Co-operative Group that the Co-operative Farms are a ‘non-core’ part of the business, and that attachment to them is sentimental, as indicating that the current generation of co-operative managers shared a short-sightedness about their role in providing customers with access to a reliable source of ‘good food’.

In 2010, Molly co-wrote a paper called ‘The co-operative path to food security‘. In it, she pointed to the increasing volatility of global food prices as speculators moved their gambling activities from financial products to commodities markets, saying, “It never was enough for me that the food I bought in my local Co-op was ethical and fairly-traded; as a green economist I also wanted it to be as local as possible”.  She continued: 

Supermarkets that sell the same corporate products as the rest have lost all but the merest token of a co-operative identity

“The Co-operative shops have not been as successful in this regard as I would like because of their centralised distribution system, but my own Midcounties Co-op has been building up its Local Harvest offer in recent years and I’m surely not the only customer who looks to see whether the vegetables on the shelves have been grown on the Co-operative Farms”.

Now that is no longer an option, the writer wonders if an agreement could be made with local Wellcome (former Co-op) farms to provide local food in Co-op stores – and offer some organic options for those who want to avoid food with pesticide residues?

 

 

 

 

Agriculture can reboot the economy: advice from India and Northern Ireland

More precisely: “Contrary to the dominant economic thinking, agriculture alone has the potential to reboot the economy”

devinder-utube-6In a recent article in The Wire an editorially and financially independent site, relying principally on contributions from readers and concerned citizens “who have no interest other than to sustain a space for quality journalism”, Devinder Sharma denounces the practice of outsourcing food production to other countries, and opening up the country to cheaper imports, destroying food self-sufficiency.

Energy desk reports that British taxpayers are paying more than £400,000 a year to subsidise the Newmarket farm of Khalid Abdullah al Saud, a billionaire Saudi prince who breeds racehorses, while successive governments have greedily and stupidly continued to undervalue and short-change agriculture – the most important sector in nourishing and maintaining life.

British and Indian governments encourage the import-export sector in which middlemen, who shuffle paper or figures on a screen, profit from lowering import duty and – as Sharma puts it – ‘opening the floodgates to cheaper imports’ ostensibly justified in the name of ‘taming food inflation’ but really increasing the profits of the establishment peer group.

Another sector is indicted by a Lancashire dairy farmer

She believes that supermarkets – powerful lobbyists and valued party funders – are driving out production of staple British food and compromising food security, adding, “The greedy giants are also putting at risk the livelihoods of hard working British farmers, their families and their communities. Large businesses are gradually asset-stripping everything of value from our communities to make profits which are then invested abroad in places like China and Thailand”.

Shamefully unjust and unwise: in both countries many farmers are paid below production costs for their produce

WT planning

We read that William Taylor and other leaders of Northern Ireland’s farming organisations have been actively lobbying politicians from all parties and none, seeking support for legislation on farmgate prices which would ensure farmers in NI a minimum of the cost of production plus a margin inflation linked across the staples.

The Indian government has offered assurances to farmers in Mozambique and in Brazil that it will procure whatever is produced at a good price. Many will ask why the same assurance cannot be given to British and Indian farmers?

William and Devinder both firmly believe that – contrary to the dominant economic thinking – agriculture alone has the potential to reboot the economy. Outsourcing food production, paying prices below production costs and opening up to cheaper imports will place both countries in a vulnerable position.

 

 

 

East and West: food commodity prices plunge & farmers are denied a legitimate income

East and West, successive governments have ensured that the farmers alone carry the economic burden of keeping food inflation low. Forget about profit, farmers are actually being penalized to grow food.

Though India-focussed, the words of Dr Devinder Sharma (below) in APB News apply equally to all but the largest landowning farmers in the east and west.

“Peter is being robbed to pay Paul”

dev youtubeDenying income parity with other sections of the society has made farming a losing proposition. In the absence of a fair level of income, many farmers have been pushed into a mounting spiral of debt in an effort to survive.

The suicide death dance long witnessed in Britain and India, taking a heavy toll of farming families, is a reflection of the economic hardship that farmers undergo for no fault of theirs.

Denial of a legitimate income to farmers: Sharma asks

  • Why should farmers be penalized for keeping food inflation under control for people whose pay or pension rises annually?
  • Why can’t the average consumer also share the burden of keeping food prices low?
  • Why is farming the only section of society in the country which is being deprived of its legitimate income.

Drop in prices is destabilising agriculture – east and west

Today, the FT reports that in Pakistan, where more than 60% rely directly or indirectly on farm incomes, farmers’ incomes have fallen more than 25% in the financial year to the end of June, according to projections by the country’s central bank. While partly due to a global plunge in commodity prices, critics say the problem has been exacerbated by the failure of Prime Minister Nawaz Sharif’s government to step in with support, and that the latest incentives for farmers are inadequate. The volume of Pakistan’s cotton crop has crashed by almost 30%. “The main issue has been a major drop in prices of crops,” Abida Hussain, a farm owner and former MP, told the Financial Times. “To stabilise agriculture, a way has to be found to deal with that fundamental issue.”

Kathleen CalvertEnglish dairy farmer Kathleen Calvert, and others, emphasise that payment which covers production costs and overheads should be the norm for food producers.

She adds that if food producers are not fairly paid it has a knock-on effect on many small rural businesses and affects their families and surrounding communities.

She makes further globally applicable points about small and medium sized family farms:

  • they provide a level of food security and community enterprise that is pivotal to local community support systems in the event of natural or manmade disaster;
  • they are centres of topographical knowledge and skills gained through individual experience that cannot be learned in a classroom environment or from a text book;
  • they are our greatest national asset as they strike a balance between nurture and neglect of the land;
  • and they provide local employment and business opportunities for a range of small suppliers of goods and professional services where different levels of income and assets spread wealth back into local economies rather than concentrating it and removing aspiration from the reach of ordinary people.

She would surely agree, as Sharma points out, that the money put into the hands of farmers will not only promote the security of future food supplies, but generate wider demand – the pre-requisite for industrial and manufacturing prosperity.

 

 

Government should ensure the country’s future food security

 

The supermarket ombudsman has announced what has been known to food producers for many years: that Tesco (and we add, others) “knowingly delayed paying money to suppliers in order to improve its own financial position”.

The position of successive governments is that – as farmers go to the wall – we can increase food imports from a global market designed only to enhance the profits of the already rich middlemen and commodity speculators. That means, as at present, importing cheap food from countries outside the EU with poorer standards of animal husbandry.

Cheap yes – now but it is a basis commercial practice to gain a foothold in the market, undercut rivals eventually wiping them out of business, then being free to set price levels at will.

In calling for fair trade in Britain – the ability to put fairly traded milk in Fairtrade coffee is recognised by Fairtrade chief, Barbara Crowther – but a thoughtful reader has reservations:

On the Fair Price for Farmers issue I agree that it is vital that environmental costs, especially carbon footprints, are taken into account in all economic calculations. Also that big business should not be able to hold small business to ransom. But, with these important provisos, I would none the less be cautious about supporting ANY BUSINESS ANYWHERE in that some industries are just not likely to be profitable either because of, say, an unsuitable climate or the lack of skill or diligence on the part of those involved. The issues seem to me a bit different and in some respects more complex than in the usual FairTrade process. But some one needs to make a start!

He was informed that assessments of the costs of competent production have been done – there are a few methodologies – the best was an earlier study by the RABDF – a note on this work was attached.

Just price/fair trade theory was put into practice in medieval Britain – see the work of R.H.Tawney. It is not just a matter of food security but of basic justice.

In England, Scotland and Wales, to varying extents, government and large agricultural bodies have used a version of the colonial divide and rule practice with food producers, so that in each sector, milk, meat, veg and fruit producers look inward to their own affairs and as relatively small entities are powerless to press effectively for change – most urgently needed for those selling quickly perishable food.

Not so in Northern Ireland – see farmers there combining, commissioning fact-finding research, and entering effectively into dialogue with Stormont, before forthcoming elections (see next post).

Scots pioneer: will collective action on marketing fresh produce help to counter the imbalance of power in Britain’s food supply chain?

Injustice: when a product is imported at a price below its cost of production the British government may take action under WTO/GATT international agreements – but when British produce (often liquid milk) is sold at a price below its cost of production government takes no notice and certainly no remedial action.

Currently large buyers can shamefully hold producers of perishable food to ransom

alyn smith mepEarlier this month, Clyn Gallagher reported that MEP Alyn Smith (right), the Scottish member on the European Parliament’s Agriculture Committee, approves the setting up of the country’s first producer organisation. He described it as “a vital first step in saving Scotland’s dairy industry”.

Legally constituted groups of farmers or growers assist in the distribution and marketing of fresh farm produce and can optimise production costs, stabilise producer prices, and respond faster to changes in the market.

Members of the Milk Supply Association (MSA) are in the process of registering with the Rural Payments Agency to form the first EU Dairy Producer Organisation (DPO) in Scotland. Following the 2013 reform of the Common Agricultural Policy, these organisations can negotiate collectively for contract terms, including price, and access markets unavailable to individual producers.

ec 2 press release header

Dacian Cioloş, European Commissioner for Agriculture and Rural Development, pointed out in the press release that the 2013 agreement was intended to lead to far-reaching changes:

  • making direct payments fairer and greener,
  • strengthening the position of farmers within the food production chain and
  • making the CAP more efficient and more transparent.

These decisions, he believes, represent the EU’s response to the challenges of food safety, climate change, growth and jobs in rural areas.

MEP Alyn Smith said: “I hope to see more Dairy Producer Organisations popping up all over Scotland to counter the imbalance of power in the food supply chain, and I will do everything I can to support them in the European Parliament and at home.”

“Farmers have traditionally eschewed collective action but attitudes have to change in this world of the modern supply chain and the retail juggernauts.

 

Government must address the threat to Britain’s fresh food supply: Ian Potter’s advice

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milk farmers leaveFarming Weekly has reported that almost half of Britain’s dairy farmers are scheduled to leave the sector, according to an intentions survey carried out by the Royal Association of British Dairy Farmers (RABDF).

Farms are vitally important to a region’s rural economy, trading with many businesses and professions, including vets, animal footcare specialists, accountants, various environmental, financial or animal health services, haulage companies, insurance brokers, auctioneers, land agents, agricultural contractors, agricultural engineers, mechanics, electricians, builders, plumbers, feed merchants, hairdressers and miscellaneous agricultural goods suppliers as well as local pubs, shops, garages and other vital community services.

That is the key message from dairy farmer Kathleen Calvert, who asks for a fair deal for dairy farmers, now once again receiving a significantly lower share of the retail milk price than ten years ago, despite considerably higher costs.

price milk 14-15

She says: “We are losing hold of a vital skills base at an alarming rate as dedicated dairy farming families are no longer financially able or prepared to work at a continual loss. We believe that many milk buyers gamble with the continuity and security of the UK milk supply by keeping much of the profit further up the market chain. Despite varying business structures and the importance of food production, most farm gate prices are now lower than production costs. This has a knock on effect on a wide range of other businesses and livelihoods of countless people involved, ultimately leading to pressure on incomes”.

It is easy to put pressure on those producing perishable food: fresh milk, fruit and vegetables, who have to sell quickly – in effect holding them to ransom.

ian potterInitially specialising entirely in agricultural quotas Ian Potter Associates has consistently headed the field in providing the very best market intelligence, knowledge, expertise, customer service, advice on trading or on increasingly complex regulations and on the most transparent and up to date prices in the market place.

In a recent newsletter Mr Potter refers to the situation in France. The French Fédération Nationale des Coopératives Laitières (FNCL) advocates that no further permission be granted for the import of dairy products, though Dutch Dairy Associations are demanding they respect the EU single market principles and allow foreign dairy imports into France.

hollande with farmers

The French president, François Hollande – who really seems to care about food producers – has vowed to address the pricing issue, urging French consumers to buy domestic produce.

Their agriculture minister also has urged consumers to be patriotic in their dairy purchasing to help save the livelihoods of the 25,000 French dairy farmers. “All must favour French products,” he said.

Ian Potter continues: “In my opinion we now need a campaign to promote the buying of British dairy products using British milk”

Dairy farmers are compelled to pay a levy to DairyCo/AHDB, a body set up by government, which, Mr Potter notes, has received more than £1 million extra as a result of the increase in production, so it has already had AND SPENT the extra money. He asks: “But on what? Cynics say it spends the money on encouraging more production because that generates more levy money for it…and so on!”

DairyCo told the Radio 4 Farming Today Programme on the 13th August that it can’t promote British dairy products

Ian Potter ends: “I think farmers will want to know exactly why that is. I have heard one Tesco farmer would prefer to give his levy to Tesco if he could to help it promote British milk. That makes sense to me if DairyCo won’t!”

Meanwhile food imports rise and government ministers advise hardworking farmers to place their ‘commodities’ on the global market so that internet bound speculators can ‘make a killing’.

Next: advice from Barbara Crowther, Director of Policy & Public Affairs, Fairtrade Foundation