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British Dairying Response
Published 1 August 09
In the last issue of British Dairying, Chris Walkland looked closely at the implications and results of DairyCo's relocation to Stoneleigh and use of levy payers' money. This month, DairyCo chairman Tim Bennett sets out the facts behind the move, and explains DairyCo's strategy going forward.
Since DairyCo was established in 2008 our first and foremost priority has been to be open and accountable to our levy payers. A vital part of this is that we are challenged on our strategies, and that our use of levy money is scrutinised, so we welcome Mr Walkland's article.
Mr Walkland acknowledges that DairyCo services funded by the levy, including Datum and our various industry reports, make an invaluable contribution to the industry. However, there are two areas where Mr Walkland focuses his scepticism. Firstly, he suggests that in becoming part of the Agriculture and Horticulture Development Board (AHDB) our financial performance has been weakened and our efficiency reduced, making it of questionable value to you, the levy payer; secondly, he questions the decision by the DairyCo board to increase funding to our MilkBench+ benchmarking service.
To address the first point, the question over the value of the relocation to levy payers is not a new one, but it is one which has been carefully considered in the past. Mr Walkland suggests that the cost of the relocation could be £1.2million. Fortunately this is not correct, DairyCo's actual figure being much lower with an expected maximum of £300,000; the final figure needs to be calculated based on the savings that the six sectors make by sharing back office costs. This figure could eventually be even lower.
The whole relocation has been instigated because the different sectors working together have the potential to deliver significant savings and improve the services offered by working together to best practice. Indeed, we are already seeing our colleagues establish strong working relationships with their counterparts in other sectors which will provide more co-operation and savings as time goes on. And, in a recent interview, the new chief scientist for AHDB stressed the importance of getting value for money for levy payers.
Cost-benefits are already starting to be achieved and other wider operating benefits particularly in front line services will be delivered over the next few years. It is important that these costs and benefits are constantly scrutinised, and the DairyCo board will always be looking closely at these figures to ensure good value for dairy farmers. The other sectors involved will demand good value as well, so we have a shared agenda in achieving a good outcome for levy payers.
Mr Walkland states that DairyCo central costs will increase by 12% per year, but the budget used by Mr Walkland was done before it was possible to quantify the savings to be made, only in next year's budget will we be able to do this accurately.
DairyCo board costs have risen in the last year as Mr Walkland states in his article. In part, this is because more board meetings were held in the first year of DairyCo operation because it was a new organisation. However, in addition to this, board members are now paid a more commercially representative rate of £257 per day (increased from £200), which is standard across the AHDB. Now that DairyCo is well established the number of meetings and time required from board members will decrease and costs are budgeted to fall from now on.
As well as looking at board costs, Mr Walkland has taken a close look at staff costs. The actual spend on staff will not increase significantly from 2009/10 to 2011/12, however in the last year, staff spend has increased due the recruitment of new members for the extension team, the communications team and research and development.
These are key, frontline areas for DairyCo activity, and they provide essential services that interact directly with our levy payers. Not to invest in these areas would be self defeating and would significantly inhibit our ability to get information and knowledge to our levy payers. It is also important to note that the increase in staff costs seems higher than it is because DairyCo income has fallen in line with lower milk production.
Where staff are concerned, it is an unfortunate fact that in the process of relocation you lose good people. Change over of staff inevitably costs an organisation both financially and through the experience lost, however, we are recruiting new, equally good and experienced people, and I believe strongly that the benefits to be brought from having skilled members of staff from across all sectors working together far outweigh the unfortunate losses in the long term.
Mr Walkland also suggests that our reserves are falling badly and that this is due to the reorganisation. I can state categorically that this is not the case. DairyCo's reserves are at a healthy level and will remain so. Any predicted income difference is only due to milk production levels falling.
To come to Mr Walkland's comments about Milkbench+. This is a brand new tool which, to
31 March 2009, has cost DairyCo just under £260,000, not the £1million suggested by Mr Walkland in his article.
2008/9 was the trial period for the system, and during that time we have collected a total of 151 datasets. But the trial revealed that to make it work well you had to give it enough resources. It was decided by the board that more resources should be given to Milkbench+ for the year 2009/10 and beyond, this way we have the resources to make the system reach its potential.
DairyCo is confident that Milkbench+ provides a much more rigorous analysis of a dairy farmer's enterprise than other benchmarking tools in the marketplace and enables dairy farmers to compare themselves against a national standard and also help to compare ourselves internationally.
Our decision was based partly on the fact that Milkbench+ has characteristics over and above those of current commercial tools which are on the market and I would encourage all dairy farmers to investigate it and respond to the feedback it provides.
Milkbench+ will also provide an annual 'state of the nation' report on efficiency within dairy farming production systems. All levy payers will be able to access the report, look at areas of efficiency and compare them with other systems whether their data is on Milkbench+ or not.
Importantly, for farmers to have confidence in using the system confidentially, I would stress that it does not detail individual farmer's costs or average costs of production but concentrates on efficiency and the main areas where improvements can be made.
Finally, it is worth noting that the continued and increased funding of the project was also strongly supported by the farming unions, and this was also a factor that the Board took into consideration.
Our accountability to our levy payers is never in question, we are committed to openness and happy to be challenged on our strategies. But it is only by engaging with us that our levy payers can ensure that we deliver valuable and relevant services that directly address their needs.