Monday, July 15, 2019

Brexit could see farmers paying more for inputs

July 2, 2019 by  
Filed under News & Business

Growers and livestock producers could end up paying more for essential inputs as Brexit reduces competition within the agricultural supply sector, warns farmer-owned cooperative Fram Farmers.

Fram Farmers provides the purchasing, grain marketing and administrative function for 1,200-plus members who collectively farm over 270,000ha throughout the UK, enabling them to obtain better value from the supply chain.

“As area-based payments are phased out, in line with the government’s much publicised ‘public goods’ yardstick following Brexit, it is inevitable that farming businesses will have less money to spend on inputs,” said chief executive Richard Anscombe.

“We could see less ‘farming as we know it’ taking place – and if that is the case then fewer inputs will be required.”

This would see manufacturers and distributors competing for a smaller market, said Mr Anscombe. Although it might sound like good news for farmers by increasing competition and reducing prices, it could also lead to higher prices.

“Consolidation within the agricultural supply sector will become more pronounced, and those companies and distributors which remain will become larger and more focused on protecting shareholder value creation and profitability, in various ways.”

All-inclusive supply and marketing contracts, for example, may look attractive by helping farmers to overcome short-term cash-flow issues. But Mr Anscombe said this may ultimately prove uncompetitive and difficult to exit.

Farmers therefore must be alert, agile and well informed, which requires them to have access to first-class, completely unbiased information, he warned.

“Individual farming businesses have less influence over suppliers. Belonging to a true farmer-owned co-operative which aggregates members’ purchasing and marketing volumes, and negotiates effectively on their behalf, will become increasingly important.”

Fram Farmers says it has saved members an average of 9.6% on the cost of their input purchases over the past five years, while reducing administration time significantly, enabling growers and livestock farmers to concentrate on farming.

“Even the largest farming enterprises cannot hope to replicate the expertise, resources and range of services which our cooperative provides, including the support of 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. Those who make full use of their cooperative find it very liberating.”

Mr Anscombe says the true farmer cooperative – owned by and operating exclusively for its members – is a compelling model, being completely impartial, trustworthy and transparent. But it requires complete commitment and trust on both sides to be successful.

Next generation

“Members must trust their cooperative implicitly to always do what’s right for them and, conversely, must understand that it’s an exclusive, confidential club which they should support fully, not treat as just another merchant to ‘phone for a price on the day.”

The cooperative model is seen as particularly appealing to independent-minded millennials – the next generation of farmers who tend to eschew convention, don’t like having products and services ‘pushed’ on them and are wary of the motives of large corporations.

“They want to work with independent organisations with the highest ethical standards and align themselves with the values of a true cooperative,” says Mr Anscombe. “Because of this I firmly believe that the best days for well-managed farmer-owned cooperatives are yet to come.

“In the case of Fram Farmers, our future will be not just as an organisation which purchases inputs and markets combinable crops on our members’ behalf, although those will remain fundamental, but as a trusted source of added-value services and information to help progressive farming.”

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