Mike Brady: ‘Producer groups are not the answer to beef farmers’ woes’
There are almost 140,000 farmers in the Republic of Ireland – many different characters running many different types of farm enterprises. But they all have one thing in common – they all produce food.
Ireland’s agri-food and drinks industry operates in the global economy because with a population of 4.8 million people, we produce enough food to feed over 40 million. Exporting food for sale is a necessity for the success of our industry.
Ireland was recently deemed the most food secure nation on the planet in the 6th Global Food Security Index produced by the Economist Intelligence Unit, so we must be doing something right.
There are two ways to be competitive in the global food economy:
Being the lowest-cost producer of a commodity produce;
Providing the market with a superior product which is unique in terms of quality, special features or after-sales service.
However, there is a long chain between the farmer and the ultimate consumer of the food product.
For example, the beef on one’s dinner plate can move through six or more links in the food chain before it is consumed: farmers, cattle dealers, factory or butcher, food distributor and retailers.
Every link in the chain is a business, businesses must make profit to survive and prosper. But how much profit is left at the end of the chain when it comes to the primary producer – the farmer?
Again, taking beef as an example, ‘not a lot of profit’ is the evidenced-based answer to this question.
The current depressed price of beef has brought the concept of ‘producer groups’ back into focus for the industry.
Producer groups are defined as follows: “Individual farmers, who on their own initiative, group up to establish a stronger marketing strategy, thus improvising on the competitiveness and value of their produce.”
The first and foremost aim of a farmer producer group is to make more profit by obtaining a higher price for their produce.
A well-run producer group with a clear focus will produce a consistent quality product.
A team is better than the sum of its parts. A vibrant producer group can evoke a sense of pride and belonging, which can both motivate and inspire members.
Create a brand
A successfully marketed product can become an established brand. This can create value for the business or producer group to the benefit of all its members.
Not farmer controlled
A producer group must be for farmers and controlled by farmers so that it is clear in its vision, mission and focus. A producer group which is set up and controlled by other links in the food chain can have a different focus to that of the primary producer. Always ask the question: who set up this group and why?
Farmers want to farm – they are often limited in time and expertise to run producer groups. Groups often do not invest in employing or contracting the correct experts for the business. Such groups are doomed to failure.
Being a producer group member is just like being in a sports team. You must be loyal, committed, enjoy the good times and weather the bad times. Many farmers are independently minded and are not suited to such groups.
In Ireland, we have a very strong history in co-operation in the dairy sector. Creameries at a crossroads have successfully grown into national and even international businesses.
The strong co-operative presence for milk processing and marketing in the dairy industry is often cited as one of the reasons why Irish dairying is so profitable in comparison to the beef sector, where the processing is primarily privately owned.
This argument is supported by the fact that dairy farmers in the UK don’t appear to be as prosperous as their Irish neighbours. Milk processing there is also primarily privately owned.
However, I believe the reason for the vast difference in profitability at farmer level between dairy and beef in Ireland is much more basic than who owns the processing and marketing rights.
The reason goes right back to the two ways to be competitive in the global food economy stated earlier:
- Being the lowest cost producer of a commodity produce;
- Providing the market with a superior product which is unique in terms of quality, special features or after-sales service.
There are many products produced from milk, i.e. butter, cheese, milk powder, ice cream etc, which comfortably meet these two criteria. We produce commodities and niche products which are international bestsellers.
Unfortunately, the same cannot be said for beef and beef products.
We cannot produce beef as cheaply as Brazilian or Australian farmers and products unique in terms of quality are few and far between.
Therefore, there is less profit to go back up the food chain to the primary producer – the beef farmer.
Will producer groups resolve this problem? It is difficult to see this happening in the global economy for commodity beef. The domestic market in Ireland is too small for superior niche products, so can we produce superior niche products for the global market?
I genuinely don’t know the answer to this question, but surely research and development will deliver the best odds of developing a global superior niche product from beef, not producer groups.
Mike Brady is Managing Director at Brady Group agricultural consultants & land agents; email: [email protected]