Report Synopsis

Building financial resilience in free range egg production

Douglas Wanstall

From my travels I have concluded there is little doubt that adding layers of integration can be a good way to build resilient farming enterprises that can deliver acceptable profits year after year. Not everyone is a fan, though, and many policy makers and people of influence are keen to preserve the traditional family farm, not just in the UK but in other parts of the world too. I have not argued against the smaller family-run farm business but I strongly feel that every business needs to be able to survive without being propped up with government subsidies and thus has to become more financially resilient. The poultry industry in particular has had a history of not relying on subsidies and working closely to market conditions. Free range has done well because the market has continued to grow at such a rapid rate, so rapid that supply has only just kept abreast of demand, but now the technical ability of all free range egg farmers will have to improve if they are to thrive.

Integration, however, is nothing without skill and if one makes the transition from small family business to large integrated agri-business, even if still owned by the original family, good management and governance is key. If one fails to make all integrated layers profitable then one might as well not bother; stick to what you know and just produce eggs; let the experts make the feed and grow the pullets.

The transition into integration is the most difficult. Most farmers I met were very good at what they did, producing great quality products with a margin. Not many of them possessed the skills to extract more value from the whole integration chain. Adding layers of integration should be viewed the same as any diversification project. Again, if you are not farming well, don't try and do anything else, get the basics right first.

If you have a strong desire to integrate then take good advice, make sure either you have the skills within your business or the enterprise is large enough to employ a specialist to ensure success.

Skill and productivity levels are key and if one can operate within the top 10% of any sector in physical performance then the future looks secure. Link sector-beating productivity to commodity pricing protection and cost control, and you will have a business that can thrive in almost any circumstance.

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