Agrihive is an innovative new company out of Australia conceived by an idea that fellow Nuffield scholar James Walker had on his travels.
His dream was to start a platform to tackle global issues and create actionable ideas. Part of that involves a U.K. Dairy Summit that was broadcast live on YouTube from London.
The background to the summit was a case study that reflected the current state of the U.K. dairy industry, which is now on the heavy end of supply and the short end of demand. After the lifting of quota barriers at the beginning of the year, it did not take long for the industry to feel pinched.
As we in Canada are on the starting line of the Trans-Pacific Partnership trade deal, this is a very relevant topic. Unlike Canada, which has a long phase-out and a generous compensation package, the U.K. experience was more abrupt.
Participants came from all corners of the globe to discuss the dairy industry and the conversation rallied from credit concerns to pricing. One fellow asked a rather provocative question,“Just what does it take to go bust?” From a cost-of-production standpoint it would seem fairly obvious but then again, nothing is standardized in farming. One can have a low cost of production and still be in the red because of volume or milk price.
It is the unknown that always lurks in the room and the cost of production in the U.K. varies from 12 to 81 cents per litre. This variability is enough of a challenge, but there are many situations where the cost of production is actually unknown. Knowing the cost of production is the first step in reconciliation of one’s financial state on a per-unit basis.
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Bankers on the panel liked to refer to alignment — such as the alignment of the dairy industry with the processor and end-user. They like to see a forward contract or some other sort of price mitigation. A farmer on the panel made a clear argument away from contracts to focus instead on quality or branding. In his operation, it was the quality of the product that assured him a good return. Others argued that as the industry changed and responded to the current economic environment, price would cascade to the lowest common denominator, which in the dairy world is equivalent to skim milk powder. In this context then the relationship of the producer with the buyer remained very important.
Investing in the domestic market is a target for the open dairy market. It not only assures a steady demand for milk and milk products but in a secondary way, introduces folks to farming. The transparency of the source of product at retail is very good in the U.K. and this is an opportunity for domestic supply.
It also led to the conversation about attracting youth to the industry. In one instance when the question was asked about getting folks to invest in the farm the answer was, “You don’t. You get them to invest in themselves.”
And here we are back at the human component of farming.
How do we get our folks to change? The answer: “You don’t!” How then do you initiate change? The answer: “One little bit (of education) at a time.” How do we attract young people to the farm? That is the question indeed, and the answer was that young people are attracted to the farm and they would love to be farmers. How the industry fosters that transition and growth will deeply influence the future in agriculture in the U.K. and around the world.
On the issue of labour and returning sons and daughters, the panel recognized that “most people lack in leadership training.” This refers to training to lead teams, to treat individuals as part of the whole, to align your help with your vision, and to allow for some sort of joint venture for successful succession. To do this, farmers need to encourage youth to invest in themselves and show that they are willing to do the same. It is a full-time job to manage a team (family or otherwise) and continuing education is critical.
So what does it take to go bust? At some point farms may be leveraged to the point of triggering change. Talking about solutions early and continually was a repeated message. Unfortunately, it does not always happen. A rather raw honesty was expressed when a panellist indicated that an exit was indeed an acceptable solution. “These are not bad decisions but solutions to a bad problem.”
At the end of the day, the moderator summed up the discussion nicely by taking it back to honesty, clarity, and transparency in the dairy sector.
Honesty includes being honest with oneself and recognizing where improvements may be made or changes need to occur. Clarity in the value, purpose and opportunity in dairy and in youth is so important as is transparency — not just to consumers but between producers — to share and gather that collective intelligence.
These are actionable ideas brought to the global platform by agrihive.com and the beginning of a new level of interaction for farmers to tackle agricultural issues.