Establishment of producer organisations for beef farmers has been part of the recent discussions on how to give farmers better bargaining power in their negotiations with beef factories. While this is a new departure in the Irish beef industry, there are 3,500 producer organisations in the EU with half of them in the fruit and vegetable sectors.
Establishment of producer organisations is recognised by the EU as a way of giving farmers the opportunity to collectively organise and negotiate with their customers who typically operate huge businesses and have their legal basis in EU regulation 1308/2013 with an omnibus regulation of January 2018 making negotiation by producer organisations on price exempt from EU competition legislation.
Establishing a producer formally gives a legal basis to farmer collaboration
Farmers combining to negotiate supply contracts with factories is now encouraged by the EU and while price is an important element there is more to a properly functioning producer organisation with the obvious opportunity to collaborate on issues from agreeing specifications to haulage and transport.
Establishing a producer formally gives a legal basis to farmer collaboration but there have been numerous successful producer partnerships in farming. Lamb groups are numerous and are particularly suited to a sector when timing of sales is critical to achieve weight specifications.
In the dairy industry, processing is predominantly co-op-based with farmer suppliers shareholders with a stake in the processing side of the business
They are less common in the beef sector but there are examples such as a Monaghan farmers’ group with ABP and in the specialist breeds sector with Angus and Hereford cattle. In the dairy industry, processing is predominantly co-op-based with farmer suppliers shareholders with a stake in the processing side of the business.
Benefit of producer organisations
Farmers who finish large numbers of cattle usually negotiate better prices when selling to factories. The attraction to factories comes from the fact that finishers with big numbers can give consistent supply and are likely to work to tighter specifications.
Farmers who just bring a few cattle to the factory occasionally don’t have this negotiating strength and are very much in a position of having to accept whatever the factory offers.
This is where producer organisations can have a role.
Savings can also be made on transport costs
Having a coordinator who puts a substantial number of cattle together in batches gives the critical mass to have a negotiation with the factory, similar to what large beef finishers can achieve.
Savings can also be made on transport costs and a properly engaged coordinator will also fulfil the function of an agent and ensure the flow of cattle from when they are dropped off in the lairage until they are weighed and graded at the scale.
While producer organisations will maximise the value of a farmer’s produce, the premium they achieve may be smaller than some farmers might expect. Market values are fixed by the simple economic equation of supply and demand and the time when farmers have real bargaining power is when factories are chasing cattle to supply their customers who in turn are chasing beef.
It is the same principle as farmers bulk-buying inputs such as feed or fertiliser where a very large order will secure a better price per tonne than a small order.
Are producer organisations worthwhile?
Establishing a successful producer organisation takes serious commitment and effort by members to maintain the discipline to work together. There is an ongoing temptation for larger members to see a group as providing a floor in the market from which they can negotiate better favourable terms for themselves.
Also, to succeed an organisation needs a well-motivated coordinator to conduct negotiations and organise deliveries. When they operate well they do usually achieve a modest premium on sales with added benefits on transport costs and buying inputs also a regular feature.
They are worthwhile for farmers but not a magic solution to fix a weak market such as we have experienced this year.
Establishment of producer organisations for beef farmers has been part of the recent discussions on how to give farmers better bargaining power in their negotiations with beef factories. While this is a new departure in the Irish beef industry, there are 3,500 producer organisations in the EU with half of them in the fruit and vegetable sectors.
Establishment of producer organisations is recognised by the EU as a way of giving farmers the opportunity to collectively organise and negotiate with their customers who typically operate huge businesses and have their legal basis in EU regulation 1308/2013 with an omnibus regulation of January 2018 making negotiation by producer organisations on price exempt from EU competition legislation.
Establishing a producer formally gives a legal basis to farmer collaboration
Farmers combining to negotiate supply contracts with factories is now encouraged by the EU and while price is an important element there is more to a properly functioning producer organisation with the obvious opportunity to collaborate on issues from agreeing specifications to haulage and transport.
Establishing a producer formally gives a legal basis to farmer collaboration but there have been numerous successful producer partnerships in farming. Lamb groups are numerous and are particularly suited to a sector when timing of sales is critical to achieve weight specifications.
In the dairy industry, processing is predominantly co-op-based with farmer suppliers shareholders with a stake in the processing side of the business
They are less common in the beef sector but there are examples such as a Monaghan farmers’ group with ABP and in the specialist breeds sector with Angus and Hereford cattle. In the dairy industry, processing is predominantly co-op-based with farmer suppliers shareholders with a stake in the processing side of the business.
Benefit of producer organisations
Farmers who finish large numbers of cattle usually negotiate better prices when selling to factories. The attraction to factories comes from the fact that finishers with big numbers can give consistent supply and are likely to work to tighter specifications.
Farmers who just bring a few cattle to the factory occasionally don’t have this negotiating strength and are very much in a position of having to accept whatever the factory offers.
This is where producer organisations can have a role.
Savings can also be made on transport costs
Having a coordinator who puts a substantial number of cattle together in batches gives the critical mass to have a negotiation with the factory, similar to what large beef finishers can achieve.
Savings can also be made on transport costs and a properly engaged coordinator will also fulfil the function of an agent and ensure the flow of cattle from when they are dropped off in the lairage until they are weighed and graded at the scale.
While producer organisations will maximise the value of a farmer’s produce, the premium they achieve may be smaller than some farmers might expect. Market values are fixed by the simple economic equation of supply and demand and the time when farmers have real bargaining power is when factories are chasing cattle to supply their customers who in turn are chasing beef.
It is the same principle as farmers bulk-buying inputs such as feed or fertiliser where a very large order will secure a better price per tonne than a small order.
Are producer organisations worthwhile?
Establishing a successful producer organisation takes serious commitment and effort by members to maintain the discipline to work together. There is an ongoing temptation for larger members to see a group as providing a floor in the market from which they can negotiate better favourable terms for themselves.
Also, to succeed an organisation needs a well-motivated coordinator to conduct negotiations and organise deliveries. When they operate well they do usually achieve a modest premium on sales with added benefits on transport costs and buying inputs also a regular feature.
They are worthwhile for farmers but not a magic solution to fix a weak market such as we have experienced this year.
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