Memorandum submitted by Group from the
DFB Members Council (DFoB 30)
SUBMISSION TO THE ENVIRONMENT, FOOD &
RURAL AFFAIRS COMMITTEE
DAIRY FARMERS OF BRITAIN
This report has been prepared on behalf of some
members of the DFB Council (Separate list provided) without prejudice
with the intention of giving information on some of the issues
surrounding the DFB business. It is a mixture of fact and informed
opinion and intended to give an insight into the business failure.
EXECUTIVE SUMMARY
The business failed with debts estimated in
excess of £100 million the larger part of this money
is owed to the farmer members. The impact on individual DFB producers
was proportionate to their size, and were as high as capital losses
of £200,000 and bad debts of £100,000.
As DFB was an important and integral part of
the dairy supply chain its failure disrupted the market place
and weakened prices for all producers and may also have indirectly
encouraged more imports.
DFB worked hard to establishing good governance.
However the effectiveness of the different elements eg council,
board and executive and their team work were questionable. The
ultimate failure proved that the key ingredient of business acumen
was missing.
The prime cause was the price paid and the failure
to assimilate ACC and generate sufficient cash surplus. This created
an impossible burden of debt. In the period following acquisition
the board strategy was based on further merger and consolidation
and the board and executive did not grasp the management challenges
which lead to economic failure.
Government policy created the environment in
which the co-op model was expected to work in a highly competitive
market. The lesson to learn is that unless a co-op has a strong
market position (As elsewhere in Europe) and has historic reserves
of capital it can not compete effectively in the fierce UK market
unless; it can move cautiously choosing market segments which
do not bring it into direct competition with the plcs, European
co-ops and the entrepreneur owned businesses.
1. THE CAUSES
AND LESSONS
TO BE
LEARNED FROM
THE COLLAPSE
OF DFB
Background
1.1 With the government deregulation of
the Milk Marketing Board (MMB) in 1994 the UK dairy industry
entered a new era where the market controlled by the MMB's benign
monopoly (from the farmers' view point) was replaced by a free
market for milk.
1.2 The process of deregulation initially
saw the nationwide creation of Milk Marque a single dairy co-operative.
However, due to concerns from the competitions authority over
its dominant market position this evolved into three farmer-controlled
regional dairy co-operatives, First Milk, Milk Link and Zenith.
1.3 It is worth considering that co-operatives
such as Fonterra in New Zealand and Arla in Denmark have over
95% of national milk supply and this strong market position is
permitted. These businesses which have enjoyed strong market positions
in their own country have developed to become international market
players. (Including the UK market) They have had the benefit of
substantial capital invested by several generations of farmers,
possibly over 50-100 years of co-operative development.
1.4 Strategically the decision to have three
competing co-ops handed much of the power relationships in the
supply chain to the retailers and as a consequence we have seen
retail margins on dairy produce climb from around 6% to up to
50% during this period, largely to the detriment of farmers.
1.5 The dismantling of the MMB saw the milk
processing factory assets become part of Dairy Crest plc in which
farmers became share holders. These processing assets which had
been built during the period of MMB control had directly benefited
farmers now they operated for the benefit of plc shareholders.
1.6 This has had a huge impact on milk suppliers
who indirectly paid for the investment in modernizing and developing
the MMB's processing assets which were transferred to Dairy Crest.
Much of the cost of reorganization and restructuring of the industry
again is being indirectly paid for by farmers.
1.7 There were no processing assets under
farmer control through their newly formed co-operatives; they
were simply milk brokers and administrators of the milk supply.
As a consequence milk suppliers lost any effective means of returning
financial benefit from further up the supply chain; they no longer
enjoyed the financial benefit of processing. The DFB ambition
was to achieve a significant position in the supply chain and
thereby improve the market returns from farmers.
The Origin of DFB
1.8 DFB came into existence from the merger
of Zenith one of the three co-operative businesses set up following
deregulation and another recently formed farmer controlled business
called The Milk Group. It was set up with advice from Rabobank
(A major European co-operative banker and adviser) and had many
similarities with the New European co-operatives models. However
in the UK it was obliged to operate within the restrictions of
the UK Industrial & Provident Societies Act. (1965)
1.9 Zenith operated as an effective milk
broking business arranging and administering the collection and
sale of member's milk to processors and customers across the region
in which they operated. Their membership had evolved from the
process of deregulation; some farmers made a positive decision
to remain with Zenith their regional co-operative; others simply
continued to supply by default ie the co-op continued to collect
their milk.
1.10 A significant number of co-op members
were recruited during this period to become direct suppliers to
plc processors and other private milk buyers. During this period
direct milk buyers were able to return a better milk price than
the co-operatives partly because the co-ops were carrying the
cost of balancing the UK milk supply by jointly operating Westbury
and providing a bottom to the market for surplus milk.
1.11 The Milk Group came into being as a
result of a number of larger producers being dissatisfied with
their milk prices and coming together to form a new farmer controlled
business. Their view was that their size and locations as producers
would make them attractive to customers and allow them to develop
a broking business capable of obtaining a better than average
price from the market place.
1.12 Milk Group enjoyed early success which
saw them grow quickly to become a significant milk purchaser.
They subsequently acquired two processing sites Nene Valley Foods
at Peterborough a factory producing dairy ingredients and Lubborn
in Somerset a specialist soft cheese producer. However, under
performance of their two factories combined with an over supply
of milk and an unanticipated down turn in the market saw them
in some financial difficulties.
1.13 The merger with the more financially
secure Zenith in 2002 provided a solution for The Milk Group
and theoretically created a stronger business. Potentially they
could enjoy economies of scale and a critical mass for further
acquisition and strategic consolidation of processing assets in
the milk industry. Their aim was to improve their market position
and deliver a better milk price to their milk supplying members.
1.14 In the financial year ending 2005 the
DFB business purchased in the region of 2 billion litres
of milk from 3,200 member farms and was the third largest
milk processor in the UK. Turnover at year end was £594 million
with a group operating profit of £21.2 million after
goodwill amortization of £2.5 million. It is significant
that the majority of this profit £21.1 million was from
the milk supply division.
1.15 During the financial year ending 2005 the
opportunity occurred to acquire the dairy processing business
of the Co-operative Wholesale Society (CWS) This business the
Associated Co-operative Creameries (ACC) was a predominantly liquid
milk business of five processing sites at Blaydon in the north
east, Whitby, Fole near Uttoxeter, Cardiff and Portsmouth. In
addition there were two processing factories in Wales at Llangadog,
a dairy product canning factory and Llandyrnog a cheddar cheese
factory.
The Acquisition of ACC
1.16 In September 2004 the acquisition
by DFB of ACC was completed for circa £80 million with
a budgeted profit potential at the time of £9 million
pa. To finance the acquisition the members made substantial financial
commitments and guarantees to the bank for total borrowings which
would later exceed £100 million.
1.17 The logic was that the acquisition
of processing assets would give direct and immediate access to
the significant market which ACC serviced. This market was approximately
1 billion litres p.a. With the significant indicated profit
of £9 million at the time of purchase, it was recommended
to farmers as an investment which would reward the member with
better milk price returns and the potential for an investment
income.
1.18 Acquisition of the CWS asset gave access
to what were perceived to be lucrative co-op retail liquid milk
and cheese supply contracts, and the opportunity to build a long
term relationship with a leading milk purchaser in the UK. In
addition ACC had numerous milk supply contracts and relationships
with other milk purchasers.
1.19 In reality the purchase did not live
up to expectations. The suggested ACC profit potential was never
realized. Many of the purchased assets were in need of substantial
investment and many of the management and working practices were
outdated. In addition only two of the sites were purchased freehold;
the other sites were on relatively short term leases. Their limited
life made future rationalization of the business a future operational
necessity.
1.20 Furthermore the supply relationship
with the co-operative group proved to be problematic particularly
regarding pricing and direct to store distribution. The cost of
delivery and service to their geographically fragmented store
base was high.
1.21 The ACC purchase in terms of scale
was a massive acquisition by the newly formed DFB business which
at the time only employed 180 people with little experience
of operating a major processing business. The acquisition of a
business with over 2,300 employees was a major undertaking.
There was also a major culture gap between the management styles
of the two businesses.
1.22 Member council have expressed concern
that the acquisition was over priced and that the due diligence
process had not been sufficiently vigorous in several areas. These
included a failure to appreciate the financial consequences of
a long term milk supply agreement with Medina which had been agreed
and signed immediately prior to the acquisition by the ACC business.
1.23 The Llangadog canning factory in South
Wales was closed almost immediately post purchase due to operational
issues and financial losses; this undermined confidence in the
acquisition. There were also environmental risks requiring significant
capital investment following acquisition on several sites. Within
three years of acquisition the loss making Whitby factory was
also closed and should perhaps have been closed sooner to stem
losses.
1.24 The acquisition was costly and problematic
in many areas. The executive failed to get prompt and effective
control of the business and the financial requirements of the
inefficient processing business created an economic burden on
the business which impacted on milk price and undermined farmer
confidence. The original purchase price did not leave the business
with sufficient financial headroom to restructure and reorganize
the loss making parts of the business.
1.25 It proved difficult to get proper financial
and operational control and understanding of the business. The
ACC acquisition was poorly managed and failed to achieve the objectives.
The Acquisition of Lincoln Dairy
1.26 The acquisition of Lincoln Dairy from
the Lincoln Co-operative Society was made in addition to the ACC
business in the financial year ending 2005. It was seen as an
appropriate infill acquisition. Lincoln had a turnover of £23 million
and an annualized volume of 50 million litres.
The Acquisition of Bridgend Dairy
1.27 This acquisition in 2006 was made
to allow the closure of the Cardiff dairy from the leased site
to merge it with the newly acquired dairy business on the Bridgend
site. This appeared to be good business; however the merger of
the dairies was problematic in several areas. The effluent control
on the new site required major investment and the merging of two
employment cultures created management problems. The milk supply
which was acquired with the new factory very quickly resigned
to supply alternative milk buyers creating the need to import
milk from further afield.
The Market
1.28 DFB operated a defensive strategy on
managing market fluctuations by having a broad base of products
with short and long term contracts with a variety of customers
in the liquid, cheese and commodity markets. This broad base of
exposure meant risk was managed in a steadily moving market. However
in a "spiking" market such as occurred in 2006-07 where
commodities were rapidly increasing in value this strategy placed
DFB at a disadvantage where more market adept competitors were
able to pay significantly improved returns to milk suppliers.
The Customers
1.29 Over the period of DFB's development
a new team of managers and sales executives were recruited to
join the business and manage customer's accounts. Through most
of the period following the ACC acquisition customer relationships
were good.
1.30 In the key areas of product availability,
quality and price DFB were consistently competitive and customers
remained loyal. In particular the extensive depot and distribution
system allowed the business to service key customers to a high
standard.
1.31 This ability to service customers did
however come at a cost and although the commercial team achieved
significant price increases and commercial successes; the high
level of overheads in the business meant that although prices
were market competitive the inefficient processing and distribution
business was unable to deliver at a profit.
1.32 Following the failure of the business
to pay the dividends to members at the end of 2008 relationships
deteriorated as customer confidence was damaged by further negative
comments in the press and from industry commentators.
1.33 In addition it has been suggested that
the emphasis on building a relationship with Tesco for local choice
milk diverted energy and resources away from relationships with
core middle ground retail customers such as Spar and The Co-op
and food service customers such as Brakes and Compass.
1.34 At first sight the decision to pursue
the local milk initiative with Tesco appeared to be an opportunity
for DFB to play to strengths as a regional milk processor. The
location of their medium sizes liquid dairies gave them the opportunity
for regional milk which was attractive to retailers and consumers
at a time when the market place appeared prepared to pay for the
cost.
1.35 However the demand placed upon the
DFB business by Tesco to pursue an agenda for 18 local milks
required dedicated local supply chains. The additional cost associated
with this caused serious operational and processing problems.
The costs incurred and the failure to achieve the volumes required
ultimately contributed to the financial demise of the business.
1.36 Tesco remained supportive to DFB throughout
and remained a customer up to the time just prior to the receivers
appointment. Perhaps if the initial ambitions of local choice
had been more modest and the market had been allowed to grow gradually
based in larger regions the impact on the processing business
would have been more manageable and ultimately would have delivered
a greater chance of success with less risk.
Government Policy
1.37 The largest significant impact was
the original deregulation which saw the creation of the co-ops
and placed DFB head to head in a hugely competitive market place
with well invested and highly capitalized public companies. With
the heavy reliance on member debt and bank debt and little retained
profit, the poor gearing and low capital base has meant that DFB
struggled in what was effectively a Government imposed model where
DFB was at a disadvantage and out competed and out-maneuvered
by the plcs.
1.38 The government has supported the creation
of producer based co-operatives through several initiatives, however
for a business operating on the size and scale of DFB these initiatives
were of relatively little significance.
1.39 This government deregulation and the
subsequent evolution to three main co-ops and the movement of
producers to direct supply relationships effectively handed the
power in the supply chain to the major retailers to the detriment
of the milk suppliers. DFB at the point of the ACC acquisition
was the third largest UK processor but over the next four years
was diminished as a market force.
1.40 The way the co-ops were created and
the evolution of their milk fields meant that the co-ops milk
producers were smaller in size and dispersed geographically. This
impacted on the economics of milk collection and distribution.
This made them less competitive against the "cherry picked"
milk fields of the plcs and other direct suppliers.
1.41 The failure to review and update the
Industrial and Provident Societies Act also impacted on the business.
Taxation
1.41 Member capital invested in DFB was
taxed and this had significant cash flow implications to farmer
members. Take for example a member who invested £10,000 in
DFB by capital retention deducted directly from his milk cheque;
this money was lost in his cash flow but because it was counted
as income was liable for income tax. In effect for every 10,000 invested
the farmer could be liable for up to an additional 40% tax. On
dairy farms operating on very low profit margins this had a substantial
cash flow impact and was another significant reason for member
resignations.
1.42 If tax relief had been given to members'
capital loans this would have assisted the development of the
co-op particularly in the early years. The ambition of DFB to
become a major milk processor using member loans as capital would
have been assisted by tax relief or tax deferral as has occurred
in other countries within the co-op sector.
2. GOVERNANCE
AND ACCOUNTABILITY
STRUCTURES OF
DFB
2.1 At the formation of DFB advice was obtained
from Rabobank a leading European co-operative banker and advisor.
The business was intended to be modeled to replicate European
Co-operatives. In reality it was a UK co-op regulated by the Industrial
& Provident Societies Act. (1965)
The Members
2.2 The elected member council was the ultimate
governing body. It was encouraged to participate with regular
meetings and a strong emphasis on training and development. In
practice a lot of information was shared with council but there
was on occasions a tension with the board over issues of commercial
sensitivity. The council appointed the board who had delegated
powers to appoint the executive and run the business.
2.3 The member council voted in favour of
the ACC purchase with a minimal amount of information provided
to them on the day they were informed by the board of the intended
acquisition. Concern was expressed by several council members
that there was insufficient information or time to make an informed
and rational decision on the acquisition. The council lacked experience
or competence in this area.
2.3 The problems following acquisition which
undermined milk price also undermined member confidence and caused
many members' resignations. At the end of the financial year in
which Zenith and The Milk Group Merged (2004) the business handled
almost 2 billion litres of milk from 3,200 farmers.
At receivership five years later this was 1 billion litres
and around 1,850 members. Of these remaining members almost
half had resigned and were serving out their notice.
2.4 The loss of membership and their capital
contributions created further financial pressure. The capital
base was weakened and the cash flow benefit of member retention
was lost. Both factors were crucial in a highly geared margin
managed business. In addition the capital structure of the co-op
meant that the money already in the business as a member loan
became a significant future cash liability.
2.5 Despite these issues there remained
a strong commitment by many members to make the co-operative work.
Within the member council there were many who worked hard and
diligently with little financial reward to improve communication
and a more open and informed style of governance in the organisation.
There was also a constant demand for the executive to provide
more information on the business plan and to encourage a greater
degree of transparency, understanding and accountability.
2.6 There was a strong training culture
and the member council fostered an environment for personal development
and self improvement at council level. Many council members participated
in training and worked to improve their knowledge and understanding
of business issues and co-operative governance. Throughout the
most difficult period immediately prior to the business failure
the member council conducted themselves with considerable professionalism,
integrity and dignity.
The Board
2.7 The merger of Zenith and The Milk Group
saw the creation of an interim board made up of farmer members
of the two co-ops. The need for competent and experienced board
directors and senior and executives was recognized and a recruitment
and selection process commenced.
2.8 Rob Knight was originally viewed as
a potential CEO for which his previous experience was appropriate.
His role as chairman of the Institute for Grocery Distribution
was seen as a potential asset with the industry contacts it provided.
He was subsequently appointed as board chair and he reorganized
the board structure. The outcome was a board made up of a majority
of relatively inexperienced farmer directors with non executive
directors providing business experience.
2.9 Following the acquisition of ACC the
DFB board did not swiftly and decisively put in place a competent
and effective executive to manage the enlarged operation. This
probably undermined the future of the business.
2.10 The over riding view of the board was
that success would come from further industry consolidation through
merger or acquisition. Considerable money was spent in consultancy
and professional fees evaluating and trying to create the opportunity
for a major strategic move to rationalize the industry. This strategic
move was never achieved. The poor performance of the business
also meant it was less attractive for merger.
2.11 It has been suggested that the professional
firms used for evaluating opportunities and advising DFB were
insufficiently experienced in certain specialist area of business.
This may have jeopardized opportunity for strategic development.
2.12 There was also council concern that
there was a board level conflict of interest. DFB board director
Philip Moody was also a Director of Smith Williamson Corporate
Finance who evaluated proposals and advised in these areas providing
support to the chairman and board for considerable financial reward.
2.13 The relationship between the board,
executive and council appears to have been dysfunctional. With
the benefit of hindsight it became clear that the under performance
of the business was hidden from council behind issues of confidentiality.
(A failing business has many secrets!)
2.14 Despite this there were many efforts
by council to achieve greater business transparency and accountability.
For example a committee of the council submitted a paper to the
board highlighting ways in which the capital structure could be
improved. Following this submission a growing number of members
of council felt the board and executive were out of touch with
the genuine concerns of the membership.
2.15 It has been also been suggested that
the relationships in the board and the executive was not effective.
There was council concern that directors at times operated more
like executives. It is suggested that projects undertaken on cost
reduction initiatives were not fully supported and implemented.
Examples would be in the depot and distribution side of the business
and HR plans to implement management key performance indicators
and efficiency programmes on processing sites. It is not clear
if this was due to lack of money to finance the initiatives or
other reasons.
The Executive
2.16 Following the ACC acquisition in August
2004 the CEO Malcolm Smith left the business in March 2005.
This left a period of many months with this crucial position unfilled.
During this period post acquisition the Board Chairman Rob Knight
acted as executive-chair, but there appeared to be a failure to
manage effective operational and financial control of the new
business, The dual role was substantially financially rewarded
with over £400,000 paid to the executive-chair in the
financial year 2005-06
2.17 This high financial reward combined
with the subsequent poor financial performance of the business
and its failure to pay a competitive milk price caused concern
and resentment among members and was an important issue in further
undermining their confidence.
2.18 A new and relatively inexperienced
CEO Andrew Cooksey was promoted from the internal role of Managing
Director (previously Marketing Director). The chairman continued
to receive significant financial reward while mentoring Andrew
in the MD and CEO roles. The failure to get timely and effective
operational and financial control of the ACC business during this
period probably undermined many aspects of its future performance.
2.19 It has also been suggested that there
was too much emphasis on the DFB marketing strategy in the period
following the appointment of the new CEO from a marketing background.
2.20 There were not sufficient financial
resources available to invest in major new product branding, development
and marketing campaigns. However, there was still considerable
promotional expenditure and recruitment activity which showed
little or no return. This activity diverted executive time and
energy away from the important area of effective factory level
operational management in a processing business which was producing
mainly generic dairy products.
The Employees
2.21 In a failed business it is easy to
assume that the employees underperformed or were ineffective in
carrying out their duties. Within the organisational and management
structure of DFB there were many people who in situations of considerable
adversity carried out their duties in a thoroughly professional
and business like manner. They operated effectively to face the
business challenges and achieved notable success.
2.22 In many other areas of the business
such as in the restructuring and reorganization of cheese factories
success was achieved. Aspects of the business management in areas
such as risk management, auditing and health and safety management
were ably managed and applied.
2.23 However, there is no doubt that there
remained in some parts of the business until the end a division
between the old ACC business and DFB. A failure to address these
different cultures and internal conflicts contributed to some
extent to the businesses failing.
The Banks
2.24 Relationships with the bankers throughout
the early periods of DFB appear to have been good with the business
working within the bank covenants and monetary constraints. The
credit crunch and financial crisis of 2008 and 2009 had
a significant impact on DFB.
2.25 As a highly geared business experiencing
cash flow issues they were vulnerable to a tightening of their
credit facilities. This is particularly important where the business
was heavily reliant on asset financed banking facilities.
2.26 Where asset values are stable or growing
asset financing is viable but as asset values deflate this financing
method proved problematic. In the autumn of 2008 a change
in bank personnel resulted in rigorous financial supervision.
This coincided with a higher than budgeted level of cheese manufactured
and held as stock at Llandyrnog.
2.27 The demands on the cash flow necessitated
the sale of cheese stocks into a falling market at a time when
customers and intermediaries were also experiencing restrictions
to their bank facilities. This forced sale of stock placed DFB
at a serious disadvantage in the market and also fed rumour and
speculation about the business which in turn impacted on customer,
supplier and member confidence.
2.28 This cash flow pressure meant it was
not possible to pay members the interest payment on member capital
accounts. This interest level was set high and proved to be a
strategic mistake as non payment encouraged commentator's customers
and members to further speculate on the position of the business.
The lack of any kind of financial buffer to weather these short
term cash flow problems made the business vulnerable. The delayed
payment of creditors during this period made the situation worse.
The Business Advisers
2.29 It proved very disappointing that despite
the board investing millions of pounds in professional services
and advice from individuals and business advisors over several
years that the business failed to achieve the creative strategic
solutions required. These advisors were unable to provide a managed
solution to the problem for the business which avoided it being
placed into administration.
2.30 There has also been concern expressed
that the money invested in an effort to find a creative solution
was in later days used to prepare the business for receivership.
Perhaps the broader question should be asked is it appropriate
or could it be considered a conflict of interest for a business
to be offering business advice to be then appointed receiver and
manager. This is not a point exclusive to the DFB situation.
2.31 In the last few months that the business
continued to operate PWC were tasked with selling factories particularly
those in the liquid business. The failure to bring these intended
sales to completion ultimately sealed the fate of the business
because the continued cash loss of supporting these loss making
factories was unsustainable. This was particularly important as
the customer base disappeared as confidence fell. The business
was forced to sell more milk into spot liquid and commodity markets
at poor prices.
2.32 In addition to the companies tasked
with advising the DFB board a number of individuals with specialist
skills were given board positions or employed as advisors to the
board.
3. THE IMPACT
OF THE
COLLAPSE OF
DFB ON DAIRY
FARMERS AND
THE INDUSTRY
3.1 The loss of confidence has impacted
on farmers and the broader industry. As a direct consequence of
the business failure, around 50 members ceased milk production
almost immediately and in the region of another 150 are currently
managing their exit from the industry. There has also been an
impact on the confidence of other co-op members who have concern
for the future of their businesses which also carry significant
debt burdens.
3.2 The amount of total capital retained
from members was £65 million a contribution of up to
4ppl for each member. For an average producer with an annual production
of 700,000 litres milk this represented £25,000 to
£30,000 however individual members production levels
ranged from 200,000 litres pa up to 5,000,000 litres
and therefore capital losses for some members will be up to £200,000 of
capital contributions.
3.3 In addition to this the members were
paid a milk price below the market average. Over a four to five
year period this represented revenue lost to their businesses
and was effectively a further subsidy to the business equivalent
to another £60 million.
3.4 The loss of cash flow from the failure
to pay the June milk cheque and the low milk price paid during
receivership is a serious bad debt which will range in quantum
from a few thousand pounds to in excess of £100,000 for
larger producers and has had a serious impact.
3.5 All former DFB producers have entered
into new milk supply contracts and whilst some are satisfactory
a substantial number of farmers are being paid on market spot
prices, this is having a continuing depressing impact on their
incomes.
3.6 The market place was impacted by the
failure of DFB because it caused dislocation of the arrangements
for milk supply. This created surplus milk which in turn weakened
the market for all suppliers. DFB was a major player in milk industry
logistics and within the complex structure of UK milk supply the
loss of the business has had a negative impact on the cost efficiency
and organisation of dairy industry milk collections.
3.7 This market dislocation also created
the environment where major customers are encouraged to turn to
imports on a larger scale.
3.8 Including job losses in the past 12 months
there have been a total of around 2000 jobs lost at DFB.
There have also been consequential job losses in suppliers directly
to the DFB business and also to the businesses supplying the farmer
members.
3.9 Farmers who have lost capital and revenue
have been compromised in their ability to reinvest in their own
farming infrastructure which will have implication for the longer
term sustainability and competitiveness of their businesses.
3.10 The bad debt of four weeks lost milk
revenue and consequential losses to DFB members is equivalent
to around £20 million. This has had an impact on farmers
suppliers who are owed money by DFB members and is revenue lost
throughout the rural economy.
4. DEFRA'S
RESPONSE TO
THE COLLAPSE
OF DFB
4.1 There was little public evidence of
DEFRA intervening although we believe that they were fully briefed.
However, future consideration should be given to the impact this
failure has had on milk supply and the loss in ability of UK agriculture.
4.2 The Welsh Assembly Government has agreed
to pay single farm payment to DFB members in October which will
aid their cash flow. To date no similar commitment has been made
for English Farmers.
Note:
A number of questions were separately submitted
to PWC by DFB council members and it is suggested that a request
is made to PWC for a list of these questions and their response.
End:
This report was compiled on behalf of the
members of DFB Council listed separately.
Group from the DFB Members Council
August 2009
| 
