Brexit could reduce competition within the agricultural supply sector and ultimately lead to UK farming businesses paying more for the essential inputs they need to operate, a leading farmers’ cooperative has warned.
Fram Farmers provides purchasing, grain marketing and administrative services for more than 1,200 members who collectively farm over 270,000ha throughout the UK.
Fram Farmers’ chief executive Richard Anscombe explained: “As area-based payments are phased out, it is inevitable that farming businesses will have less money to spend on inputs.
We could see less ‘farming as we know it’ taking place, and if that is the case then fewer inputs will be required.
“Manufacturers and distributors would compete for a smaller market, and although that might sound like good news for farmers by increasing competition and reducing prices, we believe that the opposite may be the case.
“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.”
Anscombe warned farmers to be wary about ‘all-inclusive’ input deals.
“All-inclusive supply or marketing contracts, for example, may look attractive by helping farmers to overcome short-term cash-flow issues, but ultimately could prove uncompetitive and difficult to exit,” he said.
“Farmers, therefore, must be alert, agile and well informed, which requires them to have access to first-class, completely unbiased information.
One consequence of supply chain consolidation will be that 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.
“In continental Europe, where the average farm is much smaller and owners cannot justify the same level of infrastructure as their UK counterparts, membership of a cooperative is almost a given.
“This model is very different from that of a merchant or distributor, where directors have a legal responsibility to maximise shareholder value.
“There’s 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?
The cooperative 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.
“They want to work with independent organisations with the highest ethical standards and align themselves with the values of a true cooperative.
“Because of this I firmly believe that the best days for well-managed farmer-owned cooperatives are yet to come.”
