Is bigger better? Farm businesses urged to scale up to boost their ‘influence and leverage’
PUBLISHED: 06:59 18 October 2019 | UPDATED: 07:07 18 October 2019
Business growth is the best way to retain influence and rise to economic challenges in a rapidly-consolidating food supply chain, farmers were told.
This message was delivered at the Agribusiness Outlook event hosted by AF Group, formerly known as Anglia Farmers, at its headquarters in Honingham Thorpe outside Norwich.
The nationwide agricultural buying group is owned by its 3,500 members, using its purchasing power to source around 10pc of the UK's farm inputs.
Chief executive Jon Duffy said he believed the group needed to continue growing to stay fit for the future, and to compete in a market where consolidation was commonplace among feed, chemical and fuel suppliers - and he urged farmers to adopt the same attitude.
"We are in absolutely extraordinary times," he said. "There are some enormous challenges ahead, but if people get it right there are also some enormous opportunities.
"AF currently has an influence over somewhere between 8-15pc of agricultural spend. It averages out at about 10pc, but we are up against people with 25-30pc market share, who have much more leverage and much more influence.
"I firmly believe we have got to get bigger in order to make sure we have that leverage and that influence. We've also got to get bigger to attract the best people. Going forward one of the biggest differentiators for any business is the talent within the business.
"As an agricultural industry we are faced with more and more consolidation. The businesses you are dealing with either upstream or downstream are getting bigger.
"But one area that is not consolidating is farmer-owned businesses. I think that needs to change. They need to consolidate. They need to get bigger to have more influence, more leverage. They can still have local offices and that local connection , but they need to get that power and leverage back into their business to give more value back down the chain."
Mr Duffy said AF's growth had also helped it to deliver greater value and benefits to its farming members.
"Last year we returned about £1.6m in rebates directly back to members," he said. "It is the first time we have ever got anywhere near that figure, and it is on top of the good prices we can get for you.
"I won't apologise for running AF as a commercial business. It has to be run commercially, it has to look after its customers and to give a return to its members. So growth is in the interest in our members. You cannot do that without running it as a hard-nosed business."
Mr Duffy said the continuing "massive uncertainty over Brexit" was preventing farms from planning for the future, which he said was "the worst possible thing for business."
"I think we are in a situation now where politics is getting in the way of what this industry should be doing, and could be doing," he added.
But aside from politics, he said businesses needed to adapt to four global "megatrends": Population growth, population wealth, environmental pressures and technological advances - and he argued that agriculture was the only industry which touched all four of them.
"There are going to be some seismic changes, but if you look at any part of history where there has been seismic change, there has always been significant opportunity at the end of it," he said.
"Whatever happens with Brexit, I am amazingly optimistic that British agriculture will prosper. I think provided agriculture is well-resourced and has the right people, the future is bright if you look to the medium to long term."
Mr Duffy said AF Group's future-proofing strategy could be followed by any farm business - focusing on monitoring and controlling costs, having a risk management plan and being "agile" enough to recognise and grasp opportunities when they arose.