OFC debate: Should the UK embrace mega-dairies?
Few issues in farming have provoked as much debate as economies of scale. Whether it’s the arguments over the failed bid to create an 8,000-cow herd at Nocton, the glazed superstructure of Thanet Earth, or the sheer size of the global corporations that operate in the industry, farmers are split over whether these are signs of progress to embrace, or pose a threat to UK farming itself.
Chairman of Oxford Farming Conference, Mike Gooding, said: “Farmers are re-evaluating the very basis of economies of scale. Global dynamics are changing as resource availability becomes more of an issue – perhaps what we do isn’t so dependent on how big we are. The debate is as hotly contested as ever, which is why we chose it as the motion for the 2013 conference debate.”
The annual debate in early January draws hundreds of farmers and industry leaders to the historic Oxford Union, which has welcomed prominent figures as diverse as Winston Churchill and South Korean Gangnam Style rapper Psy. The conference debate follows House of Commons protocol, but this tends to pose little restriction on an individual’s contribution, Mr Gooding suggested.
“We try to choose a motion that also offers the opportunity for a fair amount of humour. This one is likely to draw out some creative elements from the floor,” he said.
There’s also strong encouragement for young farmers and graduates to put forward their views. “It’s a good opportunity to stand up and be noticed by some of farming’s most influential figures.
“The theme is Confident Farmers – Delivering for Society. We’re looking for that confidence and communication talent to come forward. So be prepared and have your arguments ready.”
Oxford Farming Conference debate
6pm Thursday, 3 January 2013, Oxford Union
Motion: This house believes economies of scale in agriculture are overstated – size is not important
Proposing: Wilfred Emmanuel-Jones, owner and managing director, The Black Farmer food company
Opposing: John Cameron, farmer and past president, NFU Scotland
FOR Simon Pope, Director of campaigns and communications, World Society for the Protection of Animals (WSPA) UK
We’re delighted to see that the theme of the 2013 Oxford Farming Conference debate will be tackling the subject of size in farming, specifically the idea that economies of scale in agriculture are overstated and that size is not important.
This is something that WSPA has been a firm proponent of, ever since we launched the “Not in my Cuppa” campaign back in 2010, and a trap that we hope the dairy industry does not fall into.
The urge to scale up is an appealing and seductive notion – particularly when farmers are fighting against a triumvirate of hurdles to financial success in the form of the government, supermarkets and processors.
This year has been one of the most difficult for our dairy industry in recent memory.
However it would be a mistake to apply factory production business principles to dairy farming and hope for it to be some kind of silver bullet; farming is about so much more than a hard head for figures and to isolate it as such could be disastrous for the industry, the cows within it and rural communities.
Farmers are the custodians of our countryside, shaping it for the generations to come. The majority of dairy farmers won’t want to see the industry and landscape forever altered by failed intensification experiments driven by a misplaced faith in economies of scale.
We recognise that dairy farmers may be feeling now, more than ever, that there are few alternatives left. However, the truth behind achieving true economies of scale is that you would need to run a huge operation in order to compete at world prices, otherwise you will simply put other farmers out of business.
US dairy economists, witnessing this business model being played out, tell us that smaller dairy farms do better in the face of an unstable market because they are less reliant on external commodities, such as feed, vets bills, machinery and additional staff. Graziers tend to have a higher percentage of their investment in assets that don’t rust, rot or reduce in value.
So crucially, it’s the system as much as the herd size that is important.
The response to low milk prices is invariably a drive to increase yields, which builds in costs, heaping pressure on farmers to chase more litres in pursuit of the elusive economies of scale.
True financial and economic stability and sustainability will only come with working with the strengths of our countryside, not forcing it to our will until it breaks, unable to support intensive farming any longer.
We should all be working to champion a robust industry, full of dairy farmers who recognise British pasture strengths. We should aim to enable real market competitiveness, more financial and economic stability within the industry. And we should try to empower farmers to work together to get better prices for their milk.
WSPA believes that a secure dairy farming future will only be achieved when these aims are realised.
AGAINST John Allen, Dairy industry specialist, Kite Consulting
Debates thrive on controversy. So here’s a provocative start to my opposition of the motion: animal welfare organisations love large dairy units. That’s because nothing else is greasing their publicity wheel quite as effectively. Two years ago few in dairying had heard of WSPA. Now they’re represented in Farmers Weekly supporting the motion. I rest my case.
Now I have stated their vested interest (as I see it), I’ll turn to mine: I want to see a diverse industry with large units, small ones, indoor ones, outdoor ones. I don’t have a preference. What I don’t want to see is the industry dictated to about which size and sort are best (and should be allowed), and which aren’t (and should be banned). There are no right or wrong systems. I am proud of dairy and the diversity we have in the UK and consumers should choose – we do not live in a food-fascist state.
With that said we’ll turn to the nub of the debate: “Scale is overstated. Size is not important.” As far as dairying is concerned that statement is wrong. One cow producing 10,000 litres is more efficient than two producing 5,000 litres. One tanker filling up from one farm is more efficient than one filling up from a dozen. One creamery processing 500m litres of milk a year is more efficient than 10 processing 50m.
Eight pints of milk in one bottle use fewer resources than one pint in eight bottles. And Tesco et al know that selling those pints through superstores is the way forward. You don’t see them putting in planning applications for Open All Hours shops, staffed by the likes of Arkwright and Granville.
The world wants efficiency, as few food miles as possible, and a low-carbon supply chain. Only scale delivers those. Thus scale matters.
But what of the dairying system? Again, scale is important. Large units, because of economies of scale, can invest more money and management time in animal welfare than smaller units, for example.
They can also spread their costs over more cows and litres. That, though, doesn’t mean small can’t be “big” either: a 120-cow unit, perhaps with robots, can be “big” on milk output per labour unit, and thus very efficient.
Indeed data from the UK shows that all types of unit can be efficient, with Kite’s data indicating a strong link between reducing cost of production and increasing herd size. There is also evidence from the USA that herds with more than 1,000 cows have typically 30-35% lower operating costs than herds of 100-199 cows.
Recently I co-authored a report in conjunction with David Alvis and Amy Jackson entitled Can Big be Beautiful? The relationship between size of unit and sustainability in housed livestock systems. There are more than 27,000 words in the report, but the opening question can be answered in one: “Yes.”
Provided input cost/output price risk can be managed, then a business continually operating at a lower unitary margin, but generating a disproportionately higher level of output, will ultimately be more viable than one generating a higher margin at a much lower level of output.
Thus size and scale do matter and, unless we go back in time to the days when Arkwright was a lad, they will continue to. And, contrary to all the preaching, the really good news is that animal welfare does not have to suffer.
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