NFU price negotiation with British Sugar - competition law

[Andy Nash]

A processor who NEEDS produce already has it grown on contract. Why would any processor or retailer put themselves in a position where their whole business is exposed to failure ?

Maybe their suppliers are unhappy with the prices on offer and are looking/have found a better market?

 

[wanton dwarf]

Maybe their suppliers are unhappy with the prices on offer and are looking/have found a better market?

Then supply that market if it exists - it's a pointless statement because that is the current situation. Which only benefits retailers.

If you cannot beat them join them.

 

[wanton dwarf]

I'd like to see the British Farming Union help facilitate this, but it must be done within bounds of competition law. See attached document.

I was thinking about this and what the possible options are.

How about copying "Opec" . Farmers club together, estimate UK markets and supply just under demand - if the price is currently reasonable. Otherwise reduce the quantity - also ought to think about sharing information - quantity, prices and contracts terms.

No single supplier is going to be aware of Supermarkets ordering an over supply situation.

Whether it would be good to have all contracts negotiated with the involvement of BFU lawyers - agents - consultants - advice ? Needs to be strong enough to be treated seriously.

 

[Grass And Grain]

British Sugar is not a monopoly because farmers can always grow a different crop.

Beet Growers don't have to grow Beet.

You already have a future contract price which you can sell at the moment. You COULD theoretically setup a contracts system to link farmers to processors but that wouldn't work because commodities are traded on ships worldwide.

The only way to increase prices dramatically is to take money from further up the chain.

I don't know much about poultry, but am told broiler producers weren't restocking due to zero profit margin from high feed costs. 6-7 week production cycles, and no contract requirement to restock. Processors/retailers therefore had to agree to pay an extra £0.60/bird.

Compare this to egg producers, on longer production cycles and having to order pullers well in advance, and it's more difficult for them to realise price increases.

The purpose of this thread isn't to say "we know what we're doing, and we're going to do x,y,z". No, it's more for exploring possibilities, and look at the big picture, to ascertain what techniques might help secure better prices.

As you suggested in some earlier posts, if it were legal to get lots of farmers to negotiate pricing, the processor might just get on the phone and source some imports.

 

[wanton dwarf]

I don't know much about poultry, but am told broiler producers weren't restocking due to zero profit margin from high feed costs. 6-7 week production cycles, and no contract requirement to restock. Processors/retailers therefore had to agree to pay an extra £0.60/bird.

Compare this to egg producers, on longer production cycles and having to order pullers well in advance, and it's more difficult for them to realise price increases.

The purpose of this thread isn't to say "we know what we're doing, and we're going to do x,y,z". No, it's more for exploring possibilities, and look at the big picture, to ascertain what techniques might help secure better prices.

As you suggested in some earlier posts, if it were legal to get lots of farmers to negotiate pricing, the processor might just get on the phone and source some imports.

Yeah I was thinking about the fact meat producers are facing problems - what is fast enough to help them. Quantity is something that could be controlled.

Another way of controlling quantity would be moving stock from chilled to cooked, cured & frozen - advertising and manipulating which processors are contracted to. I don't know if producers are exposed to losses from chilled for example - if less chilled is supplied and more goes to frozen does that lead to better incomes ?

Quality might be another option producers could go down. What I mean here is the creation of their own standard - is there the potential to piggy back off existing standards and gain control of better outcomes. Producers are fully in control of the circumstances behind supporting data so they are the king makers as regards standards and costs - if there is such a thing as a league table.

Its all money though.

 

[Grass And Grain]

Yeah I was thinking about the fact meat producers are facing problems - what is fast enough to help them. Quantity is something that could be controlled.

Another way of controlling quantity would be moving stock from chilled to cooked, cured & frozen - advertising and manipulating which processors are contracted to. I don't know if producers are exposed to losses from chilled for example - if less chilled is supplied and more goes to frozen does that lead to better incomes ?

Quality might be another option producers could go down. What I mean here is the creation of their own standard - is there the potential to piggy back off existing standards and gain control of better outcomes. Producers are fully in control of the circumstances behind supporting data so they are the king makers as regards standards and costs - if there is such a thing as a league table.

Its all money though.

The quality aspect is interesting. Currently we seem to be often required to provide high provenance (thinking Red Tractor) produce, yet often compete with standard quality imports. Suppose this is simar to the processor who is required by Mr Supermarket to be BRC audited, just to be able to supply the supermarket.

Clearly with the broiler example, lack of willingness to produce by individual farmers caused a price rise. Free markets working to settle on a market price. Although wouldn't have been lawful if all those broiler growers had organised this between themselves, yet they could join a cooperative marketing association. I'm not sure where the line is drawn (maybe at 40% of the market volume, i.e. dominance in the marketplace).

One thing for certain, many producers negotiating price as a large group will likely secure better prices than thousands of farmers working as individuals.

 

[homefarm]

A lot depends on the quality of the man sent to negotiate.

One farmer elected from within a group is skilled in farming not negotiating mega deals.

This is where I feel the other farming union fails, they send amateurs to deal with professionals.

I hope BFU learns from this if they ever get called into negotiations and pay for a professional.

Being elected chairman or whatever BFU man/woman is called will not make him or her an expert deal maker and negotiator.

 

[Sid]

A lot depends on the quality of the man sent to negotiate.

One farmer elected from within a group is skilled in farming not negotiating mega deals.

This is where I feel the other farming union fails, they send amateurs to deal with professionals.

I hope BFU learns from this if they ever get called into negotiations and pay for a professional.

Being elected chairman or whatever BFU man/woman is called will not make him or her an expert deal maker and negotiator.

I guess the BFU members or any farmer, could reject the offer and negotiate their own deal?

 

[thorpe]

id hate the nfu to be negotiating my fodder beet prices! ill do that myself, thank you very much!

 

[Grass And Grain]

A lot depends on the quality of the man sent to negotiate.

One farmer elected from within a group is skilled in farming not negotiating mega deals.

This is where I feel the other farming union fails, they send amateurs to deal with professionals.

I hope BFU learns from this if they ever get called into negotiations and pay for a professional.

Being elected chairman or whatever BFU man/woman is called will not make him or her an expert deal maker and negotiator.

I know a man who's done it for past 20 years.

As an aside, think I saw NFU were recently running some sort of course with a negotiator.

It's complex isn't it, but think there's scope for improvement compared how most farmers currently go about selling and price negotiation.

OP was just to find out how it's OK for NFU to negotiate the sugar beet price. Maybe, as suggested by someone else, could be because BS have a monopoly, so it's OK for the farmers to negotiate as one group.

 

[wanton dwarf]

The quality aspect is interesting. Currently we seem to be often required to provide high provenance (thinking Red Tractor) produce, yet often compete with standard quality imports. Suppose this is simar to the processor who is required by Mr Supermarket to be BRC audited, just to be able to supply the supermarket.

Clearly with the broiler example, lack of willingness to produce by individual farmers caused a price rise. Free markets working to settle on a market price. Although wouldn't have been lawful if all those broiler growers had organised this between themselves, yet they could join a cooperative marketing association. I'm not sure where the line is drawn (maybe at 40% of the market volume, i.e. dominance in the marketplace).

One thing for certain, many producers negotiating price as a large group will likely secure better prices than thousands of farmers working as individuals.

Really need to be careful if negotiating price - because some people will be looking for a good angle to shoot the new guys down.

Just having a good database of contracts and being able to calculate volumes month on month is a step forward - from the producers side at least.

A single producer isn't going to know that Retailers are creating a glut of a commodity, having the data - which they keep to themselves - will allow individuals to have one eye on risk and take any mitigation action they can.

I'd also consider if the BFU thinks any action/negotiation process MIGHT be called to account legally, then follow that route via an umbrella company/organisation which isn't going to wipe out all fighting funds. BFU would be part of the process as a Consultant/Agent/Representative, not exposed to any fallout.

 

[wanton dwarf]

I hope BFU learns from this if they ever get called into negotiations and pay for a professional.

I've seen professionals in action, don't expect to get a professional if you are paying for one.

There is no harm in having a committee of representatives interviewing either a single or several people in a negotiation.

People learn by their mistakes and if an issue is raised then there is no need to negotiate the deal there and then - a professional charged out at £100s an hour is another matter. Those that ARE interested and have vested interests will make it their business to get the situation sorted IMHO.

Those who will face no consequences literally won't care.

 

[Grass And Grain]

Really need to be careful if negotiating price - because some people will be looking for a good angle to shoot the new guys down.

Just having a good database of contracts and being able to calculate volumes month on month is a step forward - from the producers side at least.

A single producer isn't going to know that Retailers are creating a glut of a commodity, having the data - which they keep to themselves - will allow individuals to have one eye on risk and take any mitigation action they can.

I'd also consider if the BFU thinks any action/negotiation process MIGHT be called to account legally, then follow that route via an umbrella company/organisation which isn't going to wipe out all fighting funds. BFU would be part of the process as a Consultant/Agent/Representative, not exposed to any fallout.

Tbh and realistic, I think any hope of clubbing together to negotiate sales terms will be some way along the road, with the obvious caveat Mr Customer will buy in some cheaper stuff from abroad.

That said, there's got to be a real justification for suggesting welfare is important, and meat/dairy products should not be sold for less than cost of production. To ensure high welfare, sensible stocking rates, reinvestment in staff, training, housing, facilities, it should not be allowed to offer farmers below production costs for livestock. Yes we've got laws to follow, but it's not so easy with zero cash, and welfare can be taken to the next level with sensible money moving along the chain. Don't blame farmers if 10's of thousands of chickens are crammed in a shed. That happens because production is pushed to the limit to provide a bird on the dinner table for £3.50.

This isn't a simple free market of goods, survival of the fittest, competition creating the best price for consumers. No, it isn't at all. It's animal welfare, and we must not accept loss leaders, or disregard for UK produced livestock in favour of cheap meat products from The People's Republic of Cheap Production and Low Animal Welfare. We must guarantee a reasonable investable profit margin for UK livestock production, and woe betide any processor who is going to argue otherwise. Shame on them.