Easier to perfect system when everyone is in tune

Gwyn Jones' Farm Diary
Gwyn Jones' Farm Diary

Cold damp weather most days with some sunshine, pretty average if not indeed quite good for February?

The birds are singing in the morning as the days lengthen, which means they feel spring is not all that far away? Let’s hope they are right! Looking at the snowfalls in the States, it could be much worse and let’s hope the snow doesn’t migrate over here which it sometimes does.

I was up in York at the end of last week and farmers there were telling me that they have not had any snow at all. Considering that we had snowflakes in London and Plaistow earlier that day, it is quite remarkable that there has not been snow as far north as York.

I was in Denmark last Monday and Tuesday looking at dairy farming and innovation in the dairy industry. There was snow everywhere there of course, but only a couple of inches which they don’t even notice. A small group of us were there to see what the situation is like for dairy farmers in Denmark as their farm structure is similar to ours in terms of scale with an average herd size of close to 200 cows; very different from the rest of Europe where the average farm is far smaller.

One big difference in Denmark is that farms are sold when the farmer retires, sold either on the market or to the next generation. This enables the retiring generation to pay their debts, move away from the farm and enjoy their time in retirement.

The next generation buys the farm and get on with running it for themselves with no interference, with enough debt to sharpen their concentration! Whilst it is not quite as straightforward as all that, this seems to have served the Danes well, and they have built up a dairy industry consisting of around 3,500 dairy farmers who between them produce enough milk and dairy products for 12 million people, where there are in fact only 5 million in Denmark (we have 8 million in London alone).

However, when I asked what effect the present dairy prices are having on Danish dairy farmers, I was astonished to be told that 30 – 35% of well invested, efficient and very good dairy farmers face bankruptcy! It stems back to the land price ‘bubble’ of 2004 – 08 where the price of land rocketed and farmers either bought land as it is scarce, or borrowed against their vastly increased land values in order to modernise and expand their business.

Today, with land prices far lower, these farmers have very little or no equity and only a swift recovery in the global dairy market will save them.

Due to production the dairy industry in Denmark is therefore focused on exports and they do that very well, with their leading brands ‘Lurpak’ and ‘Castello’ from their Co-operative ‘Arla Foods’; a Co-op established over 100 years ago, now operating across the globe.

There are 3,000 dairy farmers in the UK who are also suppliers and co-owners of this business, who will in time have a major say in how it operates. The investment in factories and processing plants in Denmark and the UK, with other smaller investments in other countries including China is very impressive and long-term.

The Russian ban has hit Denmark very hard but they are developing markets elsewhere as they grow Arla Foods, pushing into China, the Middle East and Africa.

Their best market is the UK which they are looking after, and the bulk of the money is made in Europe where demand is high and prices are good.

They see the growing middle classes changing to western diets in developing countries and are focused on taking their share, accepting that in Asia, New Zealand and Australia will take the bulk of the trade.

I tasted some of their new products for these markets which are very good, focusing on protein where dairy can compete very well; their dairy ‘Tofu’ which is highly popular in China is of the highest quality and texture.

Given that all dairy farmers in Denmark run their businesses in the same way; that is fully housed cows and well invested dairy farms producing high yields from high genetic cows which are very well fed and efficient converters of food, it simplifies many things.

It is far easier to compare and perfect a system where all farmers are in tune with the message and no time is wasted on which system is best.

As I was there as a Board member of the Agriculture and Horticulture Development Board (AHDB), my interest was in how they assist their farmers in coping with volatile markets and increasing their efficiency and productivity in order to compete.

I found that not only do they operate the same system throughout Denmark, but their equivalent to the AHDB and the equivalent of the NFU, together with their government developed a system of accounting some years ago, which most farmers use and which is taught to the next generation in agricultural colleges and Universities.

With most farmers operating the same costing and accounting system, it is then a small matter (given that most farmers give their permission) to collate all that data and produce an amazing ‘bench-marking’ system which can be used to push their dairy agriculture forward.

The best farmers and researchers work together to drive the industry forward, with the average farmers then taking full advantage of this, and a few of the poorer performance farmers will make the leap, whilst the bottom get out of the industry.

This gives the Danes a huge advantage, and we see in Ireland that a similar approach is being taken. In New Zealand we see the same, as we do in Holland, also in the productive parts of Australia (Victoria).

The Danes have a huge problem at present due to low prices and very high borrowing and low equity on many farms, but there are signs that the Global market for dairy is turning and coupled with a drought in New Zealand, and the Chinese likely to return as buyers, they could be saved.

Tesco is still under the cosh as the Grocery Code Adjudicator now investigates the way it has been dealing with suppliers.

Tesco of course fell foul of the regulators for miss -representing their profits, and now Christine Tacon has pounced on the accounts.

She will not in a position to fine Tesco if she finds anything wrong as that power has only just been given to her (after the event).

Will this be the spring-board she has been looking for or will it all settle down once she has dealt with Tesco and suppliers will be unwilling to tell her tales? Time will tell.

Politicians of all parties have been very active, asking what they ca do to help dairy farmers. I find this odd considering that they all believe in globalisation and the markets, and furthermore would like to cut the cost of the CAP to boot which would leave the vast majority of dairy farmers in serious trouble when prices are this low.

Hypocrisy or is it election time?