Farming Profitably in the Uplands: The Need for a New Mindset Séan Rickard Cranfield School of Management s.h.rickard@cranfield.ac.uk 2006 Séan Rickard
Introduction Appreciate the realities of CAP reform and the need for a food focus; Recognise than industrialization and sustainability are not in conflict; Understand the importance of moving down the food chain to capture value and the importance of collaboration.
Why farm payments are not the solution? Think of revenue and costs on a per animal basis: Increasing value means cutting costs and raising revenue Commercial operations Revenue Profit Costs Public operations SFP steadily reduced and more conditional Subsidy Must be positive to be viable Costs
Comparative performance no subsidies 250 200 150 100 50 0 50 100 150 LFA Suckler Cows GM NM GM NM Top third Bottom third LFA Breeding Flocks GM NM GM NM 70 cows 600 ewes Top third Bottom third
Individualism-Consumerism Reformed CAP: an irreconcilable trinity? 2006 Séan Rickard Globalisation-Interdependence Liberalization (Competitiveness) EU Traditional CAP Regionalism-Autonomy Sustainability (Environment) Local autarky (rural economy) Community-Conservation
Local autarky: an unrealistic option? Defined as smaller scale, low productive farms selling to local communities supported by Limited practical help for the exchequer rural economy and is defended on the dubious grounds of Primarily a lifestyle reducing protection, dependent food miles on size restrictions and trade barriers to raise farm prices
Sustainability key questions Support for extensive-organic farming is primarily driven by desire to reduce output; It is the quality of management not production techniques per se that matters; First key question: how will costs adjust as support is removed? Second key question: how much countryside would we get without support? Third key question: how can upland farms create and capture more value?
Continued intensification New knowledge Traditional CAP sought to limit by restrictions Technology Genetics Management Larger scale farms and lower unit costs Replaces people with machines and new techniques Economies of scale and rising productivity
Protecting the environment An environment focussed policy is only viable with public support but experience suggests it will What are the implications be inefficient of continuing to support production in the hills as support in Studies suggest lowlands is larger scale farms removed? better manage the countryside and conservation
Capturing more value 100 80 bn Consumers purchases of food Value of farm-gate sales 60 40 Value not volume 20 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
FCBs: capturing downstream value Product space Downstream control and access to more value Distribution Farming Processing Product Information Management and access to capital provided by FCB The beef and sheep sectors are lagging when it comes to a collaborative mindset
Concluding thoughts Agricultural support is in its end-game and global competition will increase; Farming s primary role is to produce food and it is far from clear that this is in conflict with sustainable production; Farmers must think and act like other SMEs and concentrate on capturing value possibly through Farmer Controlled Businesses.
Farming Profitably in the Uplands: The Need for a New Mindset Séan Rickard Cranfield School of Management s.h.rickard@cranfield.ac.uk 2006 Séan Rickard