Category Archives: Supply chains

CONSUMERS WILL NOT ALLOW COMPLACENCY OVER ANIMAL WELFARE

This post first appeared online at http://www.thatsfarming.com on the 21st August 2017

This week That’s Farming post “Fatally injured Bullock left for over 10 hours in mart” has been viewed over 24,000 times. It is also a week when BBC Countryfile raised the question of how many calves are killed soon after birth on UK dairy farms. And it is not so long ago that the fate of Irish cattle exported live to Turkey was also attracting the attention of the media.

The common theme of these stories is ‘animal welfare’; a term that covers an array of activities, be they everyday farming practices to what one hopes, as with the mart bullock, are far from common-place incidents. Animal welfare is a concern from birth to death and, if you believe that eating quality is influenced by pre- and post-slaughter practices, it extends to the consumer’s fork.

Vegetarian and vegan numbers are rising as more people prefer not to eat meat or any animal-derived products respectively. Some may consider them as at the fringe but to do so is to hide from the reality of their broader influence. Then we have foodies who seek premium foods and who want to know more about production and processing practices and animal welfare issues are high on their agenda. And then we have those lobbying for an eat less but better approach. True their primary concern may be to reduce foods’ carbon footprint but you can rest-assured, most will see better as also relating to animal welfare.

In a social-media-informed market that is increasingly urban, animal welfare, in all its guises, is only going to rise further up the agenda. We are only seeing the tip of the iceberg at present. And any producers who aspire to supply these markets need to be highly aware of animal welfare, what it means to consumers, and to work out how to respond accordingly. If you don’t you will join a race to the bottom where only cost matters, whereas, for a country with small-scale farmers, it is must be about partaking in the race to the top.

To do so, we must first ask if we want to impose market-orientated regulation upon ourselves or accept it from others as has happened before? Demands for higher animal welfare offer opportunities for those who recognize them as such and are willing to change to meet those demands. Ireland’s farmers work on the periphery of major consumer populations and they will have to react to the demands of those consumer, eventually. The question is, do they wish to be in control to the degree that they can they make a profit while fulfilling those demands?

Inevitably, there will have to be some change to farming practices. It will mean, for example, questioning dairy systems that produce low-to-zero-value bull calves. At the other extreme, a few dairy farmers in the UK are trying to develop calf-at-foot milk production; it is a positive way to address the rise of veganism but it is not easy. It also means developing very close contact with the consumer. Without doubt, changes accrue cost and the question must be asked of our broader society, do we wish to support farmers to make these changes?

After decades of responding to a low-cost-food policy environment, change will cost farmers and if we, as consumer-taxpayers, wish to see major changes to our food systems we must be willing to pay for the changes through the shop till and through offering change-over financial support. One would also like to see more animal welfare groups support farmers to change. There is a relationship in the UK between Compassion inworld Farming and the Pasture for Life Association.

The issue of live exports for meat animals is a case in point; it can only be resolved without antagonism by cooperation. Farmers point out that live exports are needed to counter-balance a local livestock market dominated by a few processors. It is this lack of local competition in the supply-chain that is driving the farmers desire to see live exports grow. The solution is more routes to market that enable farmers to slaughter and process close to home. It is a double win as the presence of these new routes should also allow farmer groups to access premium markets with fully traceable, designated-origin products. Hence, farming leaders and animal-welfare lobbyists should hand-in-hand be demanding that the government helps to create more routes to market. Further, those Irish in Brussels who talk of more competition in the food supply-chains should demand that it happens within Ireland first.

Over the years Irish beef has gone from being sold frozen to being sold fresh. It was a step-change in the industry. It is now time for another one. This will not happen overnight and there will remain a major role for the current high-throughput/low-margin players to handle the volume side of the business. In theory, they could provide farmers with alternative routes to market, but does their operational model or facilities allow it? Could they provide a fully-transparent, competitively-priced slaughtering and processing service to enable farmer groups to develop their own consumer markets? It would certainly take a great leap forwards in cooperation and trust from where the often-antagonistic relationship is now, but one should not rule anything out. Supply-chain partnerships is where it is at, but will the Irish meat sector ever get there?

If not, it is time for farmer groups, possibly in the guise of co-operatives [where farmer-ownership is guaranteed infinitum], to go their own way. In so doing they need farm to fork control. Both farming leaders and animal welfare lobbyists need to see that this happens. And within this the farmer groups need to do their own market research and product sales as it is imperative that they understand their customers and the final consumer. For too long now they have been several steps divorced from the consumer. They now need to fully appreciate what motivates them, animal welfare perceptions included. Only then can they ‘design’ the products that meet the expectations of consumers who are willing and able to pay premiums to those who satisfy their demands.

And as to the Government, it must ensure that supply-chain development funds are available and that regulatory burdens are not inhibitory, even to the degree of subsidizing the on-going bureaucratic costs. So often, these are cited as the reason why we have lost crucial, local supply-chain options and they need to be addressed directly. The Government’s role is about removing bottlenecks to farming’s development and this is a prime case in point when it comes to enabling Irish farmers to sell high animal-welfare, high-value products to consumers who want to buy them. And ensuring that the Government plays this role is why farmers pay their associations to represent their interests and, in this instance, it is now time for the latter to stand up and to be counted.

 

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IRELAND’S FAILURE TO DOMESTICATE THE UK FOOD MARKET

As I was writing about Brexit earlier, I was thinking upon the position that Irish farmers now find themselves in. Elsewhere I have said that it is the single most important issue facing Irish farming since the Emergency [that is World War Two for readers outside of Ireland]. I have also recently read it described as the greatest challenge facing Irish farming since the Republic came into existence.

Somehow there was an inevitability about the latest crisis to hit Irish farming. If it was not Brexit it would have been triggered by a proliferation of international trade deals that exposed Irish farmers to the chill winds of free-trade. It may well happen for UK farmers post-Brexit, but at least UK farmers got to vote in the Referendum; unlike their Irish counterparts who are just being taken along for the ride.

As I stated in my earlier post ‘Post-Brexit delusions about deregulation’, I can see British farmers responding to the threat from cheaper imports by creating comprehensive unique-selling-points for their products. By so doing they will self-impose greater regulation upon themselves than what they lose from leaving the EU. It is perverse but quite probable. A major part of such a market-driven strategy will be to fully exploit ‘local’ and ‘British’. And therein is the crux of the matter for Irish farmers, they are neither ‘British’ or ‘local’; although one could argue that Wexford is closer to London than any part of Scotland.

Now, for historical reasons, I know the UK food markets reasonably well. I was taught at College to walk the food aisles and have been doing so ever since. And as I have alluded to frequently, I am shocked by how poor the presence of Irish produce is. As far as consumer-facing, visibly-Irish products go, Ireland is a one trick pony, Kerrygold butter. Yes, Ornua controls a major cheese brand in Pilgrims’ Choice but you would have to be knowledgeable to know that it is Irish.

As for Irish beef, it is only in three supermarkets [Asda, Sainsbury and Tesco] and even then, it fills the ‘budget’ and ‘standard’ shelves. Again, as I have said before, Irish beef finds its way into mince, meatballs and burgers. It is not the premium, grass-fed product that Irish farmers envisage or expect. They frequently send well-reared stock off to the factories that grade well. They are also likely to quality assured. And they end up on the bottom shelves of UK supermarkets or in burgers served up by the burger chains. If one is at the foundations of such a food chain, can one really expect to receive a premium price? And if you are so positioned, far better that you are a low-cost Brazilian rancher than a small-scale, Irish family farm.

Just why has Ireland ended up in such a weak market position in the UK? It is after all Ireland’s major market and it is one that it is highly dependent on; a fact that it will not be able to change in a short space of time before and after the reality of Brexit. With such a dependency, it is truly shocking that the country has allowed its food products to become [Kerrygold apart] nearly invisible in the UK. It is a marketing failure of truly awesome proportions.

One can probably find rational explanations for such a situation. Possibly the supermarkets have not wanted to promote Irish beef [after all British beef holds something of a special place in the minds of UK consumers similar to ‘English strawberries’]. Has the status quo been perfectly acceptable to the factories? Has it suited them to operate a simplified high-throughput, low-margin-per-head model; not least in the face of a supply base that offers them a far from homogenous raw material. They must also deal with the purchasing weight of the few buyers from the retailers and burger chains. And as for cheese, maybe it is a sound strategic choice not to put Irish front and centre when it comes to promoting Irish-origin cheddar in the UK. All of them are interesting explanations but they all leave the Irish farmer devilishly exposed to what Brexit might well usher in.

What I cannot understand is how so little has been done to develop Irish products for the UK markets. And by that, I mean products that would have created a following and a brand loyalty that goes beyond the UK-living Irish community. France does it, Italy does it, and others do it. In my childhood years, New Zealand Anchor butter was iconic [and how NZ must now regret having sold off the rights to use the Anchor brand to Arla Foods] and NZ lamb had a great reputation’ Likewise Argentina for its beef. And the owners of the Dewhurst chain of high-street butchers were ranching and processing across South America. They even owned the Blue Star Line to ship their beef back to the UK. And then as now, if you wanted cheese, you thought of France. Why then did the development of Irish products stall after Kerrygold?

The lack of recognized products and brands is now going to make dealing with Brexit that much more difficult for the Irish farming industry. Just how much easier would it have been if the UK consumer has developed an affinity over the years for an array of Irish food products? Due to location alone, British consumer should be thinking that Irish is not British but it is local and it is produced to standards that are clearly akin to those employed by Britain’s own farming industry. Food miles are obviously lower and there is a strong, untold story about Irish family farms and rural Ireland. The story is there but the book remains unpublished. And sadly, when it is, where are the products to accompany the marketing story? This is, and it should be recognized as one of the great mysteries of food marketing; just how did the Irish fail to ‘domesticate’ the UK market?

DIVERSITY AND COMPETITION FOR OUR FOOD SYSTEMS

Dear Mr Hogan,

One applauds your intention to create a fairer food supply-chain for the farmer and the consumer. But can this really be achieved through regulation? With a food industry dominated by major corporations, can regulation bring about change within a meaningful timeframe?

Is the situation worse in Ireland than elsewhere in the EU? We have polarization in both retailing and processing. And further processing consolidation is still seen as desirable by some.

Regulation must be about enhancing competition. Also, it is not only about providing lower-cost foods to the consumer; that has often been achieved but to the detriment of farm income. We do need a fairer food system that works for all.

For farmers, it is about more competition, both above and below their position in the food supply chain. Will regulation alone create this? Or do we need to proactively facilitate it?

It will take years for regulation to rebalance our food systems; those within it are just too powerful. So let us create route-to-market options for the farmer [and for the consumer to link to the farmer]. These can be simple and we need to believe that oaks do grow from acorns.

Small, local initiatives can make a difference; not least when localization is a rising issue for consumers. To local can add provenance, diversity, healthy, less-processed, and ecologically-, environmentally- and climate-friendly. Local foods linked to the land and processed within the rural community can tick these boxes.

We need to see food production in terms of enhancing the rural economy, premiumizing the farm-gate price and improving farm business and farming household incomes.

Does this require vast EU expenditure to do this? It is not like spending fortunes on, for example, re-balancing a milk market that was distorted by poor market knowledge, the creation of and contract price-linkages to a ‘global’ commodity market and over-investment in industrial milk processing?

We need to think local, not least to improve the flow of market information between consumer and farmer. Farmers need to operate in a more market-information-rich environment. We need more competition and competition needs effective information transmission. What better way to achieve this than by returning to short supply-chains and improved linkages between farmer, local processor and consumer?

For the farmer, a fairer supply-chain is about the competition that comes from having access to multiple routes to market. Preferably, they will have some control over them. For the consumer, it is about having access to a diversity of products. more purchasing options and the ability to directly influence how their food is produced. It should be a win-win scenario.

It was good to read that Minister Creed is talking about replicating the English Market in Cork. Such an initiative would be positive but it needs to be remembered that local and artisan is not just about providing for tourists and the wealthy; it needs to also be about providing everyday foods to the general populace.

What do we need to do? We should provide grants for local/on-farm processing and route-to-market initiatives like community-located packing. We should support small-scale retail. On farm, we should be thinking about poultry tunnels and pig arks, fruit trees and bushes and integrating livestock with trees.  We should be grant-aiding the growing of vegetables year around and supporting farmers to use breeds, varieties and farming systems that transmit through to a diversity of flavours and eating experiences. And all this should be done within the context of creating a strong and alternative marketing story?

This is about alternative and multiple income sources for farms and rural communities. It is about creating new routes to market. It is about stimulating competition; however limited that may first appear. It also needs to be done within a designated-origin framework that can allow up-scaling to supply wider and larger markets. It needs imagination but it is possible.

Crucially, we need to ensure that the regulatory and bureaucratic environment supports and does not hinder [including from a cost perspective] smaller-scale, food-chain initiatives. It is reputed that bureaucracy and regulation have killed off many route-to-market entities in Ireland and, ultimately, that was not in the interests of the primary producer, local processor or consumer. The Government should be obligated to reverse this situation.

As I said, this is about simple solutions. We do not need massive EU and government expenditure to create what is necessary. It is not about heavily regulating the major players within the supply-chain, it is about creating options for the farmer and consumer. It is, nevertheless, about ensuring that they are unhindered by unfair practices and it is about using the tax payer’s [the consumer] money to support the small changes from which large ones may grow.

Here is to wishing us all something different for 2017.

Yours sincerely

Stuart M. Meikle

Agrifood Solutions

THE IRISH FARMERS’ CONNECTIONS TO THE CONSUMER?

Just how often does one hear that Irish farmers produce the best produce in the World? Rather often is the answer. It is then usually followed by the complaint that it does not receive a price that reflects the quality. One can add that it is also often quality assured but that does not confer much premium. It is frustrating but it is, by and large, the reality.

The blunt truth is a premium price has to originate from the consumer. Can one really expect those in the supply-chain to provide the primary producer premium off their own bat? It is unlikely that the farmer will often meet such generosity.

Maybe processors can pay a premium but the circumstances would be limited to a ‘quality’ differential [a factor that improves in-factory efficiency whilst the value of the end product itself is not enhanced] created at the farm level that improves processing efficiency and the margin for the processor.

It may also be that a continuous-through-the-year, raw-material supply that equates with market need and allows efficient processing can justify a farm-gate premium for the raw material supplier. It is a reason why milk processors pay a premium at those times of year when supplies are short [i.e. winter premiums] and/or milk is more expensive to produce. The reverse can also happen;  offer raw materials at the wrong time of year or at levels that are out of kilter with processing needs and prices fall or contracts get terminated.

Setting aside processing efficiency [important as it is to think in terms of whole supply-chain efficiency and not just inside-the-fam-gate efficiency], if the farmer wants to see a sustained premium for his or her produce, it needs to be derived from consumers who are willing to pay the premium.  And the first requirement to ascend to that position is to be able to place a premium-quality product in front of the consumer through a supply-chain that will transmit that premium back to the primary producer. Does that happen in Ireland? And if not, why not?

First let us look at the beef sector. It is well known that it is dominated by a very few private, family-owned factories. Is it fair to say that their modus operandi is high throughput / low margin? Are they also a role model for an agri-foods policy that believes large-scale factories are necessary for Ireland to compete on global commodity markets? It is, however, a model that ignores the size of Ireland’s farming industry and the small-scale, family-farm, nature of the primary producers themselves.

The author has often said that supply-chains that link premium farm produce to premium-paying consumer almost, by definition, do not include industrial-scale factories. It is partly about consumer perception and it is partly about the high-throughput factory model is not conducive [or at least their usual perception of operational efficiency] to small processing ‘runs’ of premium products. It is this that means that Ireland’s beef supply chains are not suited to getting niche-market products from the farm to smaller sized but premium paying markets. For that to happen, smaller-entity, flexible supply chains [inclusive of operational facilities] are required.

On the surface and certainly according to local folk law, farmers have more control over the dairy supply chains through their cooperatives. Is this the reality?

The beef supply chain has few entities. It often goes farmer to factory to retailer or burger-chain to consumer. By contrast, for dairy the typical supply-chain is farmer to primary processor [the co-operative] to secondary processor [often privately owned] to retailer to consumer. Of course other routes exist but these are probably the dominant farm-to-consumer supply-chains?

There will of course be many exceptions to the multi-link dairy supply chains as some co-operatives will produce consumer products that go direct to retailer to consumer. To identify who is actually producing what one needs to get used to looking at retail labels when shopping [sometimes it also helps to know who the EU code on the oval label belongs to].

At present some of the smaller cooperatives are towards the top of milk price league tables. Is this because a greater proportion of their milk goes into Irish-market  consumer-products? Or is it because they are more effective at selling ingredients to the next stage of the supply chain? One would also be interested to know the effectiveness of the smaller cooperatives when it comes to exporting consumer products [possibly via Ornua [another ‘level’ in the supply chain]]or ingredients.

Beyond these examples, just how clear is the line between primary and secondary processing?

  •   What consumer products are the cooperative themselves producing?
  •   To what degree are cooperatives producing butter and cheese for Ornua?
  •   How often are they producing ingredients for private supply-chain partners?
  •   Which entity creates and sells the higher-margin, branded consumer-product?

As said, in some cases one needs to check on the retail shelf to see who actually owns the consumer-orientated brand name; is it the primary or secondary processor?

One should consider the Irish infant formula success story. It is often said that Ireland produces 15% of the World’s formula but is it just assumed that this benefits the Irish milk producer?

Just what milk-derived ingredients are in the infant formula? One assumes it includes milk fat but it may only be used in premium products within a branded range. The rest may contain palm or other vegetable oil. It may contain lactose and whey powder. Does the use of milk constituents translate into a premium that is clearly passed back to the farmers’ milk price?

And then one gets to the crux of the matter; who formulates and produces the formula and who owns the brand name? Just how often is it the farmer-owned cooperative? Or is the farmer-owned cooperative only a supplier of raw materials for a privately-owned, significant other?

Whilst one hears “but we are lucky, we have our co-operatives” should one be asking whether they have largely become primary processors of milk into ingredients for others to add value to?

There has been much recent investment by the co-operatives to ensure that they have the capacity to handle their farmers post-quota expansion milk [as per their own co-operative rules] but has this predominately gone into stainless steel for primary processing? Have farmers invested heavily [inside and outside the farm gate] for others to accrue the benefits? One does wonder.

It was mentioned earlier that a problem with the beef supply chain is that it is dominated by entities with a high-throughput / low margin model that is inflexible when it comes to providing a supply chain that can develop niche markets. One fears that in the pursuit of extra capacity for expansion milk that some of the cooperatives have now achieved the same result. They have invested heavily in scale and left themselves in a position where they now do not have the flexibility to provide members with routes to alternative, possibly higher-value, premium markets.

It was reported on 20/02/16 in the Farmers’ Journal that the Irish dairy product mix will move from 10% powder in 2014 to 33% in 2020. So who is going to produce these commodities; is it the cooperatives or the privately-owned secondary processors? If it is the former, has the big-is-best model now committed most of the farmers’ expansion milk to commodity supply chains destined for global markets or to secondary processors who then utilise the ingredients to make a margin that reflects their closer-to-the-final-consumer position?

Hence, should one be asking if some of the cooperatives have invested in the low-return end of the supply chains in a way that limits their ability to pay a good milk price to their members?

And, at the same time, has this commodity focus allowed others in the supply chain to pass the current low milk-price pain back to the milk producers [via the farmer-controlled primary processor] whilst also protecting their retail or secondary processing margin?

If so, one can only imagine that re-balancing the situation within the dairy supply-chain is now a long road back. At least that is now a destiny they can share with their beef farming counterparts.