Changing of the Guard
Market changes lead to higher level of farmer collaboration in England
he farming and food industry in England is
currently going through a period of fundamental
change. It is widely believed that the
recent reform of the Common Agricultural
Policy (CAP), particularly the decoupling of
subsidy support from production, will increase the scope for
farmers to become more flexible in what they produce.
These changing dynamics represent both opportunities
and challenges for farmers as they alter production in
response to market forces rather than subsidy payments.
They must ensure that they meet the needs of their customers
in the supply chain in order to compete successfully
in the global food economy.
Collaboration provides a means for farmers to achieve this:
by farmers working with one another to gain economies of
scale in purchasing of inputs, in production or marketing of
products, or by collaborating with their suppliers and customers
in the supply chain to enable farmers to deliver a
cost-effective, professional service to their customers.
However, the farming industry in England is behind the
game in collaboration. For a range of historical reasons—including previous trading relationships, differing support structures
and land laws and a political focus on the consumer—collaboration
among farmers has not developed in England to the
extent it has in some areas of Europe and North America.
The total output of farmer-controlled businesses (or
FCBs, which are collaborative initiatives often referred to as
cooperatives) in England is at some £4.7 billion, or roughly
35 percent of gross agricultural output. By contrast, in
Denmark and Sweden farmer-controlled business is double
that of their agricultural industries.
English Farming & Food Partnerships (EFFP) is a membership
organization with an industry mission to strengthen
the profitability, competitiveness and sustainability of
England’s farming, food and related farm-based businesses
through collaboration. EFFP’s work is funded through a variety
of sources, including the public sector, membership fees
and commercial income, and any trading surpluses are reinvested
to further develop our mission within the farming and
food industry.
EFFP aims to make collaboration work through the
growth of market-focused and professionally run FCBs and
by developing cooperation and partnership activities not only
among farmers, but also between farmers and the supply
chain. EFFP offers a comprehensive range of services to help
make this happen. These include help with collaborative supply-chain development, business start-up, business development,
corporate governance services, performance management,
director development, finance and communications.
The following examples illustrate some of the ways partnership
activities among farmers result in a more effective
and efficient supply chain. In each case, collaboration has a
different role in improving the competitiveness of the farm
businesses involved, including collaborative purchasing of
inputs, farm production, storage and processing and marketing
of outputs.
They demonstrate the importance of collaboration in creating
a vibrant and profitable farming and food industry in
England and reinforce the need for farmers to develop
understanding of the market they are producing for, act upon
opportunities identified, reduce unnecessary costs and add
value to production.
Achieving production efficiencies
Brixworth Farming Co. was established in 2000 by a group
of neighboring farmers wishing to collaborate with each
other at the production level to reduce overhead costs and
improve profitability in an increasingly challenging trading
environment. This joint venture business now farms 4,000
acres and is able to reduce operating costs by 25 percent, or
£40/acre, by pooling resources.
The group is also able to purchase inputs more cheaply
due to its collective bargaining power. In addition, the partnership
offers additional spare management time for the
group to explore other business opportunities or interests.
The key to the success of the partnership is that all collaborating
farmers share the same vision for the joint venture
and have compatible business objectives. Consequently, combined
lateral thinking among the farmer members has
improved profitability of their farm businesses.
Sourcing of inputs
Woldmarsh Producers Ltd. was
founded in the 1960s by a group of
farmers who believed they were paying
too much for their inputs. By aggregating
their input demand and employing
professional buyers they not only have
managed to significantly reduce their
input costs, but have saved time in the
buying process and administration.
The company has grown to reach an
annual business volume of more than
£46 million and has over 600 members.
This growth has been helped by a cellular
structure, whereby Woldmarsh
negotiates input prices for its members
through a central buying team, while
maintaining a high level of communication
with its members through local
groups across the region. The dedicated
central-buying team has built close supplier
relationships and is able to maximize
cost savings to members.
Members buy as much as 95 percent
of their production supplies through
Woldmarsh. This loyalty is a result of
the prices the company is able to negotiate,
but also the large range of services
offered to its members.
Woldmarsh Producers is based upon
a simple but effective business model.
Attention to detail and a constant desire
to improve its service for its members is
the key to success.
Storage and processing of outputs
Grainfarmers PLC stores and conditions
grain on behalf of its members
and is now the largest farmer-owned,
arable and grain-marketing company in
the United Kingdom, with an estimated
20 percent of the grain market volume.
Grainfarmers recognizes two key
“customer” groups: its members and its
customers. For members, the company
has focused on cutting out costs in the
supply chain, minimizing risk and
developing guaranteed markets for its
grain. For its customers (e.g., major
end-use flour millers, feed compounders
and crushers), Grainfarmers
has focused on reducing costs in the
supply chain and meeting specific enduser
product requirements.
During 2002, the company entered
into a period of disinvestment, acquisitions
and joint ventures to strengthen
and expand its grain-trading business.
The joint venture formed between
Grainfarmers and United Agri-Products
(UAP) during this time provides the
company with access into national seed,
fertilizer and agro-chemical supply capabilities
and is seen as a key area of development
going forward. Subsequently, in
October 2005, Grainfarmers bought out
the UAP share of the joint venture
agreement to further strengthen its
position in this area.
The forging of long-term supply
partnerships has added value for both
growers and end users, supported by
the provision of an appropriate level of
investment in logistical infrastructure
and robust quality-control and foodsafety
systems.
Marketing of outputs
Long Clawson Dairy is a marketing
FCB, which adds value by processing
and marketing milk produced by its
members. It provides an excellent
example of how farmers can collaborate
to add value to their products, secure
routes to market and create new economic
opportunities by being better
placed to provide the volumes, quality
and consistency of supply required by
customers.
Long Clawson Dairy was founded in
1911 when 11 farmers formed a cooperative
to produce Stilton cheese in the
village of Long Clawson in
Leicestershire. Today, Clawson is the
largest independent producer of Stilton,
making around 3,400 tons a year with a
turnover of over £31 million in 2004.
About 85 percent of its milk comes
from dairy farmer shareholders, the
majority of whom are within 15 miles
of Long Clawson. Long Clawson is run
on a commercial basis; the benefit to
the farmer is focused on enhanced dividends
rather than the milk price.
A major development for Clawson in
the mid-1970s was the move from
Stilton production into specialty
cheeses. This move followed recognition
that it needed to diversify into
more value-added products for its
growth and development. Since then, a
significant level of investment has been
made in research and development, so
that Clawson now has a portfolio of
more than 50 blended-cheese products,
which account for around 40 percent of
turnover.
Clawson’s clear focus on its consumers—the retailers—has allowed the
cooperative to outperform industry
trends, taking a larger share of both the
Stilton and blended-cheese sectors.
Furthermore, Clawson has expanded its
markets by becoming involved in two
initiatives to develop its export market
in both Europe and the United States.
Long Clawson dairy is acutely aware
of the need for investment in the business,
particularly in research and development
of new products. In July of this
year, a new dairy and innovation center
was opened. The new dairy will significantly
increase output and will also help
accommodate increased demand during
seasonal peaks. The automation of
many processes in the dairy will
improve efficiencies and product quality
and consistency, and the new innovation
center will allow Long Clawson to
respond effectively to their customers’
requirements.
Editor’s note: for more information
about EFFP, the services it offers or the
businesses featured in this article, visit its
web site: www.effp.com, or contact it via email:
info@effp.com, or call (+ 44) 02027
2130430.
