THE Co-operative Group's farming business, farmcare, is to withdraw from dairy farming in order to concentrate resources on arable, fruit and vegetable production and its contract farming business.
Farmcare currently produces over 20 million litres of milk a year at four UK locations in Ayrshire, Cheshire, Leicestershire and Shropshire. The announcement will mean the loss of 48 jobs, most of them part-time.
The business has entered into a 30-day consultation period with its employees over the decision and has drawn up a closure programme for the four locations involved, which will run through to Spring 2004.
Christine Tacon, farmcare's general manager, said that the decision had been made with regret but was a "strategic business necessity".
She said: "In the last two years, we have been very successful in adding value to the crops we produce by ensuring we have a buyer for them before they are sown. As a large commercial farming business we have been able to take benefit from economies of scale, whether satisfying large retail contracts or sharing machinery.
"In dairying, however, the outlook for farmcare is bleaker: it is far more difficult to add value to milk on a national level. The Co-operative Group needs to make a return both from the land assets it owns, as well as the goods it produces.
"Many dairy farms are family owned and do not pay rent and although farmcare dairy performance is technically excellent, it has to have significant economies of scale to compete with family farms. We have found this difficult to achieve in the dairying sector.
Added Ms Tacon: "Recent Common Agricultural Policy reforms are likely to drive liquid milk prices down in the UK and make businesses dependent on subsidy payments.
"Farmcare's strategy is to become less dependent on subsidy payments and in circumstances where the Co-operative Group must carefully prioritise investment, we need to focus on those areas likely to give the best returns."
Farmcare has stressed that it will make every effort to find alternative employment for those affected, either through retraining or through transfer of employment to the purchasers of the dairy farms affected.
The business manages 85,000 acres of farmland in the UK, 25,000 acres of which are owned by the Co-operative Group, making the society Britain's biggest farmer.
However at the recent half-yearly meeting in Manchester, Chief Executive Martin Beaumont warned that, in future, the emphasis will be on the Group being the nation's best farmer, rather than necessarily the biggest.