The Status of Farmer-Controlled Businesses

The purpose of the Directory of Farmer-Controlled Businesses is to provide a definitive guide of the current scope, scale and development trends of the farmer-controlled business sector in the UK today. The Facts and Figures review provides a status report of trading activity for the farmer-controlled business sector, and places that sector in the context of the agricultural industry as a whole.

The Directory is as current as the information we have received to date. Although we are always at risk of being overtaken by events subsequent to the collation of information and publication, we take considerable pains to ensure that the information in the Directory is as up-to-date and accurate as possible.

In the absence of a response to our survey form, and in the absence of relevant information from other sources, we have repeated entries from the previous survey forms received. Although we understand that this approach does not ensure complete accuracy, it is nevertheless more accurate than the complete absence of known businesses from our records.

Company Status

With appropriate Articles and Memoranda, a company can be constituted with co-operative status. Over recent years a number of Industrial and Provident Society co-operatives have converted to companies without adopting co-operative status. However, for reasons explained under Definitions, these have continued to be defined as farmer-controlled businesses in the context of this publication.

However, where the purpose of such businesses becomes exclusively to achieve a return on investment for shareholders who may or may not be farmers, they are no longer eligible to be included in this Directory.

The acquisition of investment-based company status is relevant only to the purpose of the business. It has no bearing on the style of management, operation or direction. Co-operative models of business can and should possess the same qualities of commercialism, progressiveness and competitiveness as are demonstrated in the farm businesses for whose benefit they exist.

Profit in Farmer-Controlled Businesses

An understanding of the role and relevance of profit in the context of farmer-controlled businesses is so important that some explanation is appropriate in a publication of this nature. Farmer-controlled businesses exist for the benefit of their members, who are almost invariably farmers.

For this reason, the main measure of FCB success is the extent to which this benefit is provided, whether it takes the form of financial surplus in the organisation itself, or some kind of benefit manifested only within the farming business. This benefit can be delivered in any of the following forms, or any combination of them: lower farm input prices; higher farm output prices; creation of markets where they would not otherwise exist; and allocations of FCB profit (proportional to produce marketed, inputs purchased, etc.) Although all have a financial impact, direct measurement of benefits is not always easy in financial terms. All this means that the success of a farmer-controlled business in providing benefit cannot be measured simply in terms of the conventional profit of the FCB itself. Some FCBs have specifically defined non-profit policies; they exist purely to create benefit at the farm business level.

Thus, comparisons between FCBs and private businesses with a similar function, based solely on financial criteria drawn from published accounts, are meaningless. The success of an FCB is measured by different criteria.

The information in the Facts and Figures part of the publication is collected from all types of farmer-controlled businesses, including agricultural co-operatives, however registered. Explanations as to the precise meaning of the terminology used in this connection are included under Definitions.

We go to considerable lengths to achieve representative and accurate results, and the figures need careful interpretation, partly because organisations are not obliged to supply detailed information, and partly because it is difficult to assess the accuracy of some of the information supplied. Finally, if, despite having a majority of farmer shareholders, an organisation rejects the description "farmer-controlled business", we must accept this and exclude the company from our survey.

Turnover Analysis

Turnover analysis is of most relevance to the statistics publication. However, since the Directory entries include a turnover banding, accurate, categorised figures are necessary. Given the high number of respondents, extensive individual checking is not feasible. Obvious anomalies are, however, subject to clarification.

On our survey form we provide an analysis category for all major items. While, inevitably, there will be some categories which we do not include on our form, it is likely that the high level of turnover entered in the "others" category suggests that some of the values in this field properly belong in one or more of the designated categories. While it would be arithmetically improper to reallocate the "others" total, proportionally into the analysis headings, the possibility that some of these headings are understatements of the true values should be borne in mind.

Marketing turnover has increased considerably as a direct result of the formation of milk marketing co-operatives, which replace the role previously performed by the milk marketing boards. The turnover of milk marketing boards was not included directly in our earlier turnover analyses. Because of the arithmetical impact of the high milk turnover on the total marketing turnover, the apparent percentage of marketing turnover represented by other products appears to have reduced. This does not reflect a decrease in marketing activity for other products, but simply the impact of including a much higher volume of milk turnover.

The Significance of 'Service Co-operative' Turnover

When interpreting the significance of 'service co-operative' turnover it is important to remember that this turnover figure represents a different type of activity from that of marketing or supply co-operatives where the turnover is related to the trading value of products handled.

Service co-operative turnover is not normally based on trading values but simply on the cost of staff and facilities needed to deliver the service. Hence the turnover does not represent a comparable level of activity to that of marketing turnover data. For example, the activity of one agronomist may be represented by a turnover of, say, £75,000. The activity of one-grain marketer may cover 75,000 tonnes of grain with a trading turnover value of £9 million.

Overseas FCBs Operating in the UK

For the purpose of our statistical review, the commodity turnover analysis is restricted to the activity of co-operatives and other farmer-controlled businesses within the UK, which have their registered offices in the UK. This means that the activity of those businesses outside the UK is excluded from our review where the turnover is not consolidated into their accounts. Turnover of overseas FCBs who have significant activities within the UK is also excluded. Therefore, the UK operations of farmer-controlled business enterprises such as MD Foods, based in Denmark, and Irish dairy enterprises such as Glanbia Ltd, (formerly Avonmore-Waterford) are not included.

The total turnover of milk and milk products, for example, will be understated in relation to a literal criterion of farmer-controlled business activity.