This month, Ian Potter looks at how AHDB spends its levy income, whether it should be recruiting extension officers when others in the dairy sector are shedding staff, and questions whether it ought to be auditing the retailer pledged money.
ollowing my last article on AHDB and a subsequent flurry of interesting emails in response, I was encouraged to look into the background behind AHDB’s free consultancy for farmers who have a cash flow or liquidity problem.
In order to qualify for a share of the £300,000 pot, farmers had to either be unable to pay invoices, about to breach their borrowing limit, or have no idea of their current financial position. Of the £300,000, however, only £120,800 was utilised, and by just 151 farmers, all of whom used the maximum £800+VAT available. In total, 27 consultancy firms were engaged, with one accounting for 18% of the jobs (27 forms).
Few farmers, I hazard to guess, actually knew about the fund. However it was publicised on the AHDB website (not that anyone would find it there unless they knew about it) and in the First Milk newsletter. Questions have been asked whether this is the role of AHDB and a good use of levy money; whether the cash injection helps professional farmers or was just social help for inefficient ones; and whether the money will actually change how they operate and/or help create the right conditions for them to prosper, or just help them limp on for another month or two.
Yes, farmers’ cash flow is the big problem, especially for those on a very poor milk price or with high costs. Most farmers will be eager to receive an early, vital, December Single Payment. It’s staggering that last year 42% of dairy farmers’ net profit came from the EU subsidy, and this year the percentage is sure to be well over 50%.
Currently the vast majority of EU dairy farmers cannot survive without that money, but economists like Sean Rickard regularly highlight that part of these payments ends up capitalised into land values and rents. A few who are aggressively competitive are quietly suggesting a dramatic reduction in EU payments would shake up the industry and allow the competitive farmers to grow quickly. Those same farmers also hope the recovery is slow for the same reasons.
These farmers are unlikely to back AHDB’s support fund. The emails (from some very high ranking people too) also suggested I probe further into recent AHDB appointments, and the process adopted, and I certainly intend doing so. AHDB Dairy has recently recruited six new members to their extension officer team. This is also on farmers’ radars because they are taking on more staff at a time when the industry is seeing farmer numbers reduce and processors cutting jobs, eg Fonterra cutting 750, Muller 486, First Milk more than 70, and Arla 100.
The board’s income has increased to £7 million and along with that its staffing. Is AHDB Dairy as lean and mean as the rest of the industry?
Again, one for it to defend. Now to the supplementary payments from retailers to processors, which are slowly filtering through.
Many retailers stepped up to the plate but some have still done nothing, especially on cheese where some still buy own label from all over the world. The question I have is whether the promised money is all real and new. Perhaps what’s needed is for AHDB economists to not only list the retailers who have pledged support but for them to audit each pledge. In the event they are unable to accurately determine what retailers have paid in full, and processors have passed on to farmers, they should call in Grocery Code Adjudicator Christine Tacon to flex her muscles.
If no such analysis is done, we will be seen as a lazy industry, which isn’t really bothered whether the money was handed over in full by retailers, or where it went. Public commitments were made which attracted positive PR but the money needs following and checking.
For sure, FFA don’t have the resources to do this next stage.
Since I last wrote, the Commission’s socalled dairy aid package means €420m will be paid direct to dairy farmers out of a €500m allocation. But this is only 50% of the Commission’s super levy income from 2014/15. So it’s not even new money.
Out of this some £26m is for the UK and while it’s still more money than other farmers in other sectors received, it amounts to diddlysquat on a per farm basis. Perhaps it should have been better targeted towards marketing and milk promotion, since it is clear we desperately need it to build demand, and we’re not going to get it from anywhere else!