AHDB - who pays and who gains?

[Dr John Strak]

Do you want AHDB to continue and improve with more expense or something else?

AHDB should only continue if it can demonstrate value to its levy payers. Just like the farm vet, nutritionist, agronomist, or any supplier to farmers, AhDB has to deliver value for money. If you ask me about the principle of AHDB I would say that there are strong arguments for a body that can act for farmers collectively - but those situations are likely more restricted than they were even 10 years ago. The number and scope of levy paying bodies in developed countries is less than than it was 20 years ago. There are good reasons for that.

 

[Humble Village Farmer]

Vigorous scrutiny of any tax levied on farmers (or consumers) is welcome - and essential!

Before they kill the golden goose as farmers stop producing.

 

[Humble Village Farmer]

The number and scope of levy paying bodies in developed countries is less than than it was 20 years ago. There are good reasons for that.

Any reasons in particular?

 

[delilah]

They don't work for us, they work for the cartel.
Tim Rycroft was a plant, i'm sure his successor will turn out to be the same.
Dr Gilliland is a chancer, he can't say that cows don't cause climate change because that would derail the gravy train.
@AIMS , remind us, what input have AHDB had to the Abattoir Sector Group ?
To talk about the size of the levy is to miss the point. Did I say, they don't work for us they work for the cartel.

 

[Dr John Strak]

Any reasons in particular?

Markets change. Consumers and producers change. The food chain changes. In general, farm/food interactions are very different in 21stC than in 1950s when most levy funded bodies were introduced. We havent discussed this in U.K. Agric - maybe a delicate subject for AHDB but it shouldn’t be ignored. The world moves on - move with it or be left behind.

 

[Simon Chiles]

AHDB should only continue if it can demonstrate value to its levy payers. Just like the farm vet, nutritionist, agronomist, or any supplier to farmers, AhDB has to deliver value for money. If you ask me about the principle of AHDB I would say that there are strong arguments for a body that can act for farmers collectively - but those situations are likely more restricted than they were even 10 years ago. The number and scope of levy paying bodies in developed countries is less than than it was 20 years ago. There are good reasons for that.

Isn’t the best way to make the AHDB deliver value for money is to make the levy performance related. If it was there wouldn’t be any need for it to be scrutinised at yet more expense as it would be self enforced. The easiest way would be to make the levy a percentage of the product price, that way if my wheat etc was undercut by imports it would hit them ( as well as me ) in the pocket. I think it would make the service ( the AHDB ) concentrate more on marketing the levy payers products. Anything that was direct marketed or for personal use should automatically be exempt from the levy.

 

[Humble Village Farmer]

Isn’t the best way to make the AHDB deliver value for money is to make the levy performance related. If it was there wouldn’t be any need for it to be scrutinised at yet more expense as it would be self enforced. The easiest way would be to make the levy a percentage of the product price, that way if my wheat etc was undercut by imports it would hit them ( as well as me ) in the pocket. I think it would make the service ( the AHDB ) concentrate more on marketing the levy payers products. Anything that was direct marketed or for personal use should automatically be exempt from the levy.

Agree, but they won't like that.

How will they plan for their salaries and pensions if their income streams are subject to the vagaries of the marketplace?

 

[Steevo]

How will they plan for their salaries and pensions if their income streams are subject to the vagaries of the marketplace?

Yes how will farmers survive on that basis?

 

[DrDunc]

Agree, but they won't like that.

How will they plan for their salaries and pensions if their income streams are subject to the vagaries of the marketplace?

Performance related pay

 

[DrWazzock]

As an old farmer once said to me “If you are having to ask yourself whether or not you need something then you don’t.”
What next? An inquiry into the inquiry that did the inquiry? The amount of overhead and gravy trains that are heaped atop the fairly basic job of growing food and selling it staggers me.
Even if a study is done into AHDB performance criteria I’ll bet it will cost about £2 million, be inconclusive, and full of “on the other hand” so favoured by academia.
Down with the lot. Had enough of platitudes.

 

[Dr John Strak]

Isn’t the best way to make the AHDB deliver value for money is to make the levy performance related. If it was there wouldn’t be any need for it to be scrutinised at yet more expense as it would be self enforced. The easiest way would be to make the levy a percentage of the product price, that way if my wheat etc was undercut by imports it would hit them ( as well as me ) in the pocket. I think it would make the service ( the AHDB ) concentrate more on marketing the levy payers products. Anything that was direct marketed or for personal use should automatically be exempt from the levy.

Sounds like a perfect solution. But not so easy to implement. Certainly should have regular evaluations and VFM calcs. That would go a long way to achieving your aims - would emphasise quantifiable results instead of vague nice-to-haves. This may sound like second best to you but don’t let the best be the enemy of the good.

 

[Dr John Strak]

As an old farmer once said to me “If you are having to ask yourself whether or not you need something then you don’t.”
What next? An inquiry into the inquiry that did the inquiry? The amount of overhead and gravy trains that are heaped atop the fairly basic job of growing food and selling it staggers me.
Even if a study is done into AHDB performance criteria I’ll bet it will cost about £2 million, be inconclusive, and full of “on the other hand” so favoured by academia.
Down with the lot. Had enough of platitudes.

I assure you it won’t cost £2 million. Not even 5% of that would get results that would improve AHDB resource allocation. In effect, evaluation pays for itself by reducing waste and identifying best use of resources. An efficient business does this all the time - no sensible farm business blindly carries on using animal medicines or Crop inputs without evaluating the results and considering alternatives.

 

[Dr John Strak]

As an old farmer once said to me “If you are having to ask yourself whether or not you need something then you don’t.”
What next? An inquiry into the inquiry that did the inquiry? The amount of overhead and gravy trains that are heaped atop the fairly basic job of growing food and selling it staggers me.
Even if a study is done into AHDB performance criteria I’ll bet it will cost about £2 million, be inconclusive, and full of “on the other hand” so favoured by academia.
Down with the lot. Had enough of platitudes.

I assure you it won’t cost £2 million. Not even 5% of that would get results that would improve AHDB resource allocation

 

[Dr John Strak]

I assure you it won’t cost £2 million. Not even 5% of that would get results that would improve AHDB resource allocation

I would add. I don’t blame you for being cynical. I have seen a lot of BS reports in my time - from academics and business consultants. I also remember the words of an old farmer (my Dad) who never trusted anyone who arrived on the farm in a tie and jacket. You have to navigate your way thru the BS - and demand VFM of everyone who wants your money!

 

[soapsud]

AHDB should only continue if it can demonstrate value to its levy payers. Just like the farm vet, nutritionist, agronomist, or any supplier to farmers, AhDB has to deliver value for money. If you ask me about the principle of AHDB I would say that there are strong arguments for a body that can act for farmers collectively - but those situations are likely more restricted than they were even 10 years ago. The number and scope of levy paying bodies in developed countries is less than than it was 20 years ago. There are good reasons for that.

What reasons?
Once all the inputs and marketing are done then it must only be fine tuning improvements left?

Yes, a few percentage points may seem to incrementally drive a compound affect over time but it also does taper off the initial attraction as the returns become less and less.

I'd like to hear why increasing the levy costs makes some believe it justifiable for profitable production rather than just accumulating knowledge for its own sake.

 

[Grass And Grain]

Given that potato and horticulture sectors voted to get rid of their levy altogether, it does beg the question if AHDB are on touch with their levy payers (by wanting levy increases).

 

[Words&Piglets]

This is a long post from me but I hope you can find time to read it all.
I am an Honorary Professor in Food Economics at the University of Nottingham and I acted as the secretary to the AHDB’s AgEcon Advisory Group for 3 years (2018-21). The Group was dissolved by AHDB in 2022. As a consultant I have worked on projects for for the MLC (post-BSE promotion effectiveness), the HGCA (malting barley exports grants), the PMB (structure reform), BPISG (BPEX creation) and the MDC (price analysis), and on a small project dealing with performance evalaution for the AHDB in 2020. I have also worked for several international organisations and sovereign countries, and for Clarence House. My "day job" is providing global market information for the pig sector at www.porkinfo.com My observations here are based on a long experience of the theory and practice of levy-funded organisations and this post is largely based on work I completed for the Ministry of Agriculture in the UK back in 1994.

When farmers talk about levies on farm commodities, they usually do so with three questions in mind: how are “they” spending my money, who pays the levy, and who gets the benefits? Just now, with the AHDB is in the spotlight as it asks farmers to support an increase in levies on beef, lamb, pigs, dairy, cereals and oilseeds, these questions are especially worthy of debate. They are not new questions but they need careful consideration and evidence in order to be answered accurately.

Let’s remind ourselves of the theory – a good place to start when thinking about how stuff works (or doesn’t). First, the theory shows that a mandatory levy on a farmer’s output is the same as a tax. One of the justifications for this tax on farmers is that there may be “market failure” in the agricultural economy and that there is a “free rider” problem. Together, these are reasons for justifying a compulsory levy. Significantly, they should always underly any appraisal of how a levy-funded body allocates its budget.

Because a levy is a tax on all farmers it raises important issues about transparency, accountability, and evaluation: together we can term these factors, “performance” and this term offers a convenient heading for the second group of questions. How a levy-funded-body “performs” is crucial and, in theory, should be examined in the same way that the National Audit Office or a Parliamentary Select Committee examines public spending of a government department. You can see examples of the NAO’s value for money reports at https://www.nao.org.uk/reports/. For some reason, that I have never understood, the NAO, nor any parliamentary select committee, has ever examined the performance of any of the levy-funded bodies in the UK – certainly not the AHDB. Such examinations do not have to be undertaken by official audit bodies or parliament. Examples of independent evaluations of the operation of levy-funded bodies are to be found in Australia and the USA. For example, Australian Pork Ltd provides a copy of its recent independent performance review at https://australianpork.com.au/sites/default/files/2023-06/230413_APL review_FINAL CLEAN.pdf and the National Pork Board in the USA is subject to a mandatory independent performance review of its spending every five years https://porkcheckoff.org/wp-content...Economic-Analysis-of-NPB-Checkoff-Program.pdf

Note, these performance reviews must be independent in order to avoid the accusation that a levy-funded authority is “marking its own homework” and, the results should be disclosed to levy-payers and their representatives.

If farmers could individually opt out of a levy these issues of “independent performance review” and “transparency” might not be so important but they can’t. Hence, one key aspect of the current debate on AHDB levies must be that farmers should be satisfied that the appropriate systems and schedules are in place to ensure that an independent appraisal of levy expenditures is regularly happening.

Another (third) aspect of the theory of levies is the incidence of a tax i.e. who pays the tax and who gets the benefit? This isn’t a straightforward question. A levy (tax) is paid by domestic farmers to the extent that processors, retailers and consumers can’t avoid it being passed on to them. Each of these actors can avoid it by substituting home grown product with competitive products e.g. imports or other meats/non-meat protein, and to the extent that farmers have any alternative outlets. So, for example, a levy on domestic pig producers is less likely to be passed down the food chain to processors or retailers/consumers if there is a large import component in national pork consumption, and if there is a highly competitive meat like chicken available. It could be even worse for producers if they are faced with local monopolies from processors because of transport costs or other aspects of how the supply chain works. A challenge for farmers is that processors will be able to pass their processor levy back to farmers (in the form of lower prices) if the market power of farmers is weak. Note, even if farmers have to absorb all of the levy in their costs they may still justify paying it if the benefits are high enough – and if they can use productivity to offset this cost. And some sub-groups of farmers will have unique calculations. Consider the case of a producer who creates a successful on-farm shop and butchery or, perhaps, a pop-up catering stall for events selling pulled pork or a hog roast. What is the balance of costs and benefits of levies for that farmer? Another example might be a group of arable farmers who have negotiated a price premium based on specific production operations. AHDB (and any levy-funded body) should be able to answer questions about the incidence of levies in these different cases – who pays and who gains – and farmers should be considering those answers in the debate about higher levies.

The lessons I draw from this short discussion are that farmers need to be sure that AHDB understands and communicates its views on who pays and who gains from the levies that it collects. And that farmers need this information as part of their ongoing assessment of the performance of AHDB and the value for money that levies offer.

If you have got this far reading these words it may seem a rather negative piece. I hope not. These questions about performance and transparency and the incidence of the levy are not value judgements or trivial. The answers directly affect levy-payers in a factual way. Asking questions about value for money is best practice. If you think performance or VFM doesn’t matter you can throw your money away of course. That’s your prerogative. That said, the existence and level of a statutory levy is a collective decision – it’s not just about one farmer’s view. In my opinion, the collective view of the industry should be based on a careful and thorough consideration of the issues I have identified above.

Read this thread. Time for change and some validation on value. It's your investment, is it returning something worthwhile? The UK agric sector is facing so many challenges, the supply chain is knackered and food security is dwindling. Surely AHDB can't keep tapping producers for funding without demonstrating its strategies and services are delivering value, improving market position and achieving some measurable economic benefit at production level? Methinks a rethink needed.

 

[JP1]

Your comments are welcome and IMO very relevant. It seems to me that much of the technical work/advice that AHDB does cannot be justified by the market failure argument ie its info that the market can provide without the levy. The marketing issue is, IMO, the Cinderella in AHDB spending. Much of the levy spend on marketing is swallowed by generic promotion - and the market power issues, as you mention, are neglected. This issue of where to allocate resources is exactly the issue I believe is not debated or considered fully by AHDB internally. It’s a performance matter - where to allocate levy money to get the most bang for your buck. To do that properly requires a long hard look and some fresh thinking by outside experts and economists - current thinking/allocation discussions in AHDB looks tired and uninspired.

AHDB always say trade rules prohibit them from pro British marketing only generic

We don't know what their response to DEFRA's call for evidence for food labelling

UK levy payers should expect pro British marketing and promotion and clearer food labelling to allow the consumer to make informed purchasing decisions

 

[Dr John Strak]

To be fair to AHDB on the meat side @AIMS stated the AHDB work on getting 5th quarter products out of the country had good value.

I am undecided on the levy increase. Farmers keep getting told to cut costs and increase efficiency to remain viable, but I wasn't yet convinced that the increase in levy would pay me back by making my business any more efficient or any more viable.

I wanted more engagement and to be asked my opinion in a meaningful way before the AHDB applied to the SoS for the increase. I don't think they did get the backing of the largest group of stakeholds and biggest payer of levy. I can't see anyway they could have collected evidence to support that claim in their application. That put me off the idea quite a bit if I'm honest.

Demonstrating value for money and transparency of actions and costs are very important for an organisation that has mandatory powers to impose a tax on producers. The flip side of having these powers is that an organisation has a responsibility to show costs and benefits in a clear, well communicated manner.

 

[Dr John Strak]

I have added a my observations in italics
This is a long post from me but I hope you can find time to read it all.
I am an Honorary Professor in Food Economics at the University of Nottingham and I acted as the secretary to the AHDB’s AgEcon Advisory Group for 3 years (2018-21). The Group was dissolved by AHDB in 2022. As a consultant I have worked on projects for for the MLC (post-BSE promotion effectiveness), the HGCA (malting barley exports grants), the PMB (structure reform), BPISG (BPEX creation) and the MDC (price analysis), and on a small project dealing with performance evalaution for the AHDB in 2020. I have also worked for several international organisations and sovereign countries, and for Clarence House. My "day job" is providing global market information for the pig sector at www.porkinfo.com My observations here are based on a long experience of the theory and practice of levy-funded organisations and this post is largely based on work I completed for the Ministry of Agriculture in the UK back in 1994.

When farmers talk about levies on farm commodities, they usually do so with three questions in mind: how are “they” spending my money, who pays the levy, and who gets the benefits? Just now, with the AHDB is in the spotlight as it asks farmers to support an increase in levies on beef, lamb, pigs, dairy, cereals and oilseeds, these questions are especially worthy of debate. They are not new questions but they need careful consideration and evidence in order to be answered accurately.

Whoa, slow down, you are smuggling in an axiomatic belief here that there are 'benefits' that come from Levy bodies. You ask three questions when in reality it is two questions which easily answerable with the facts that will be available to somebody ('how are they spending the money, who pays the levy') and then present a matter of conjecture as a question, it should not be 'who gets the benefits' but 'what are the benefits', then once the benefits have been calculated with imperical data and metrics to measure them against what would have happened without the levy it would be then possible to calculate 'who gets the benefits.

Let’s remind ourselves of the theory – a good place to start when thinking about how stuff works (or doesn’t). First, the theory shows that a mandatory levy on a farmer’s output is the same as a tax. One of the justifications for this tax on farmers is that there may be “market failure” in the agricultural economy and that there is a “free rider” problem. Together, these are reasons for justifying a compulsory levy. Significantly, they should always underly any appraisal of how a levy-funded body allocates its budget.

Even more brakes please, I don't know the 'theory' so please explain it to me in simple terms (a la Feynman) and then is it a theory that is falsifiable with imperical data. Please define more clearly 'market failure' with examples. In your opening three paragraphs you appear to have accepted as 'faith' that the levy is a 'good', and I would need much more evidence to convince me. This goes to the very heart of the hostility by some towards ADHB, and that is there is limited or no evidence to the benefits that accrue to the levy payers, and if there were benefits it would be easy to explain with examples and data the benefits that accrue to the levy payers. In my experience most levy payers would see that as the 'acid test' of worthwhileness of the levy body and would be in full support of a levy body that could do that task.

Because a levy is a tax on all farmers it raises important issues about transparency, accountability, and evaluation: together we can term these factors, “performance” and this term offers a convenient heading for the second group of questions. How a levy-funded-body “performs” is crucial and, in theory, should be examined in the same way that the National Audit Office or a Parliamentary Select Committee examines public spending of a government department. You can see examples of the NAO’s value for money reports at https://www.nao.org.uk/reports/. For some reason, that I have never understood, the NAO, nor any parliamentary select committee, has ever examined the performance of any of the levy-funded bodies in the UK – certainly not the AHDB. Such examinations do not have to be undertaken by official audit bodies or parliament. Examples of independent evaluations of the operation of levy-funded bodies are to be found in Australia and the USA. For example, Australian Pork Ltd provides a copy of its recent independent performance review at https://australianpork.com.au/sites/default/files/2023-06/230413_APL review_FINAL CLEAN.pdf and the National Pork Board in the USA is subject to a mandatory independent performance review of its spending every five years https://porkcheckoff.org/wp-content...Economic-Analysis-of-NPB-Checkoff-Program.pdf

The problems just keep piling up for me, the above paragraph to me reads like, well the levy board is for the good, above any questioning and therefore any issues are a matter transparency, accountability and evaluation or performance. Which then becomes what methods are available to us to demonstrate our right to survive? Let's use other bodies that get their funding from the taxpayers to do that. The problem there is all their snouts are in the same trough and none of them want it taken away.

Note, these performance reviews must be independent in order to avoid the accusation that a levy-funded authority is “marking its own homework” and, the results should be disclosed to levy-payers and their representatives.

There is no independent way of doing this, as outlined above both the sides of the equation are funding by the taxpayer and have a vested interest in maintaining the status quo. Independence is being used as a substitute for worthwhileness. If we are to have levy bodies it is not independent oversight that guarantees anything whatsoever, it is competence and commitment to a moral imperative that the people involved will work diligently and be honest with their results and not lie or obfuscate the results so that good and valuable work will be seen for what it is and bad and worthless work will be quickly stopped.

If farmers could individually opt out of a levy these issues of “independent performance review” and “transparency” might not be so important but they can’t. Hence, one key aspect of the current debate on AHDB levies must be that farmers should be satisfied that the appropriate systems and schedules are in place to ensure that an independent appraisal of levy expenditures is regularly happening.

Deftly skipping over the 'skin in the game argument'. If we are to have levy bodies then then the levy body having something to lose by levy payers withdrawing their support through their subscriptions must be a good thing .I would be a fool to take lessons from a man who preached about 'market failure' when the very organisation he worked for was at no risk of failing through its own market failure.

Another (third) aspect of the theory of levies is the incidence of a tax i.e. who pays the tax and who gets the benefit? This isn’t a straightforward question. A levy (tax) is paid by domestic farmers to the extent that processors, retailers and consumers can’t avoid it being passed on to them. Each of these actors can avoid it by substituting home grown product with competitive products e.g. imports or other meats/non-meat protein, and to the extent that farmers have any alternative outlets. So, for example, a levy on domestic pig producers is less likely to be passed down the food chain to processors or retailers/consumers if there is a large import component in national pork consumption, and if there is a highly competitive meat like chicken available. It could be even worse for producers if they are faced with local monopolies from processors because of transport costs or other aspects of how the supply chain works. A challenge for farmers is that processors will be able to pass their processor levy back to farmers (in the form of lower prices) if the market power of farmers is weak. Note, even if farmers have to absorb all of the levy in their costs they may still justify paying it if the benefits are high enough – and if they can use productivity to offset this cost. And some sub-groups of farmers will have unique calculations. Consider the case of a producer who creates a successful on-farm shop and butchery or, perhaps, a pop-up catering stall for events selling pulled pork or a hog roast. What is the balance of costs and benefits of levies for that farmer? Another example might be a group of arable farmers who have negotiated a price premium based on specific production operations. AHDB (and any levy-funded body) should be able to answer questions about the incidence of levies in these different cases – who pays and who gains – and farmers should be considering those answers in the debate about higher levies.

It is a straight forward question, it is not a straightforward answer. All questions are straightforward but can ask for or need complex answers. A complex answer can be explained in simple terms. The problem is as Feynman noted, if you can't explain the in simple terms then you don't understand your subject.

The lessons I draw from this short discussion are that farmers need to be sure that AHDB understands and communicates its views on who pays and who gains from the levies that it collects. And that farmers need this information as part of their ongoing assessment of the performance of AHDB and the value for money that levies offer.

Its 'views' are conjecture, what matters are facts, facts that can be measured and demonstrated to bring value to the levy payer. Views fill the void left by facts.

If you have got this far reading these words it may seem a rather negative piece. I hope not. These questions about performance and transparency and the incidence of the levy are not value judgements or trivial. The answers directly affect levy-payers in a factual way. Asking questions about value for money is best practice. If you think performance or VFM doesn’t matter you can throw your money away of course. That’s your prerogative. That said, the existence and level of a statutory levy is a collective decision – it’s not just about one farmer’s view. In my opinion, the collective view of the industry should be based on a careful and thorough consideration of the issues I have identified above.

I do not see it as negative at all and I suspect that deep down you intuit that the costs compared the benefits are not that significant because if not, what is the point of your post. Ergo, you demonstrate the sentiment 'I ought to do the right thing', which you are doing by trying to increase the information available to you to inform your actions. I am one hundred percent with you in that 'ought'.

I hope you will not take anything I have said a criticism of you personally but I do have some antipathy toward things such as the ADHB but mostly because I see little of what the 'ought to do' is in their thinking and a lot more 'how can I best present myself' I have answered as truthfully as I can, as I 'ought to' and hope they may be of some use to you.

Your comments are welcome but your interpretation of my piece is faulty. I have no axe to grind for the AHDB. I am only interested in efficiency and fairness - not defending any institution or making hidden assumptions. The farmers deserve value for money from all their suppliers and if AHDB can’t deliver VFM then I would say, scrap it if reform is not possible. There isn’t room here to answer all your points about market failure and the theory of taxes. And you can research these points on line. There are many writers more learned than me whom you can reference. Please accept my assurance that I am interested in truth and accountability and, for equity in public policy (I accept that the latter concept is subjective and I happily admit my bias towards the “little guy” in society). The great thing about this forum is that these sort of debates and exchanges are promoted. Well done TFF!