UK agri co-op Fram Farmers warns that Brexit could push up input prices for UK farmers by reducing competition among suppliers – but says co-operation in the industry could offer a solution.
The co-op, which performs purchasing, grain marketing and administrative functions for 1,400 farming businesses across the UK, says the problems will be triggered by the phase-out of area-based payments under the EU’s Common Agricultural Policy, forcing consolidation in the supply sector.
Industry website Agriland reported Fram CEO Richard Anscombe saying: “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.”
Mr Anscombe warned that this consolidation will leave farmers with less influence over suppliers – but if the farmers act as part of a co-op, it could level the playing field.
“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,” he added.
“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 co-operative 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?”
Mr Anscombe added that the co-op model has growing appeal to millennials, who are wary of large corporations and put a high value on ethics.
“Because of this I firmly believe that the best days for well-managed farmer-owned co-operatives are yet to come,” he said.