Lessons Must Be Learned From DFB Collapse

UK - The NFU has described the receiver's report on Dairy Farmers of Britain (DFB) as an extremely sad story but acknowledged that the report brings a degree of closure and clarity to what has been a long and agonising period of uncertainty for DFB members.

28 August 2009

2 minute read

Europe

NFU Director General Richard Macdonald said: "The creditor's report makes for depressing reading. I'm sure that many farmers won't be surprised to learn that the underlying causes of DFB's problems appear to include a flawed business plan, poor management and bad decision making, which gradually eroded the profitability and viability of the company.

"There are of course certain events that stand out - the huge sums of money spent on the ACC business, the disappointing failure of Tesco's Local Choice brand and the loss of the Co-Op supply contract - all of which delivered devastating blows to the business.

"Most importantly, this must never be allowed to happen again and it is time now to consider the lessons learned.

"These events once again demonstrate the vital role and influence that farmer directors have in governing a co-operative and the huge responsibility they have for member investments.

"Farmers will be looking for somebody to blame for the pain and losses they have experienced and many of our members have questioned the integrity, professionalism and ability of DFB executives and council members in light of its collapse.

"The report shows no evidence of wrong-doing but makes it clear that the main responsibility for the long line of bad decisions, aborted projects and lack of any clear strategy within DFB rests with the board and the executive team. This underlines the need for Farmer Directors to be properly supported, trained, highly skilled and have the ability to manage large and complex businesses. These requirements are not easy to find when most farmers are accustomed to running single operations or sole trading businesses.

"We believe there is a need for greater scrutiny on the finances of co-ops, which should be just as accountable as plcs. There is an urgent need for more frequent financial appraisals of co-ops, including regular trading statements, financial updates and a full annual audit.

"I would like to acknowledge the good work that has been done by the receiver. The process has been openly transparent, well communicated, with a practical and clear strategy. While it is extremely disappointing that the receiver doesn't expect that any monies owed to farmers will be paid out, the improved milk price and, in particular, the news that no steps will be taken by the receiver or the bank to call in member guarantees, are a huge relief."

The NFU will submit recommendations to the EFRA Committee Inquiry into the collapse of DFB. A briefing for NFU members on how to prepare for, and what to expect from, a creditors' meeting will also be available shortly on NFU Online.