Farmers set to face rising costs post-Brexit, Suffolk farm co-op boss warns
PUBLISHED: 10:33 17 May 2019 | UPDATED: 10:33 17 May 2019
Brexit could lead to farmers having to pay out more for essential inputs which will drive up their costs, a leading Suffolk-based UK farming co-operative has warned.
Fram Farmers, which is based at Framlingham, and serves more than 1,200 farmer members across the UK, buying in essential goods for them and marketing their grain, fears that the loss of farm subsidy will lead to a shrinking farmer market, which in turn will lead to consolidation of the supply sector.
While a smaller market might normally lead to keener competition, Fram Farmers chief executive Richard Anscombe warned that in reality the result might be supply and marketing contracts which on the face of it look attractive, but actually prove uncompetitive and difficult to exit. Farmer co-op membership will be one way to navigate the pitfalls, he argues.
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"As area-based payments are phased out, in line with the government's much publicised 'public goods' yardstick following Brexit, it is inevitable that farming businesses will have less money to spend on inputs," he said. "We could see less 'farming as we know it' taking place, and if that is the case then fewer inputs will be required."
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Manufacturers and distributors would compete for a smaller market, causing consolidation within the agricultural supply sector to become more pronounced.
"Those companies and distributors which remain will become larger and more focused on protecting shareholder value creation and profitability, in various ways. All-inclusive supply/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 will need to be alert, agile and well informed, and have access to "first-class, completely unbiased information", he said.
"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," he said.
He believes the best days for UK farmer-owned co-ops are yet to come, and that the continental European model will be more readily adopted because of the pressures UK farmers will face.