Dairy Farmers of Britain : fifth report of session 2009-10, Vol. 1: Report, together with formal minutes

The demise on 3 June 2009 of Dairy Farmers of Britain (DFB) resulted in substantial losses for its 1,813 farmer members.

It also resulted in more than a thousand job losses.

A market crash was avoided, thanks to the positive response of - among others - the receivers, the Department for Environment, Food and Rural Affairs (Defra), the Welsh Assembly Government, and, in general the dairy industry itself.

The Committee believes the way in which DFB pursued its vertical integration strategy was over-ambitious.

No single factor caused the demise of the DFB although the purchase of Associated Cooperatives Creameries (ACC) for a total of GBP 81 million in 2004 had lasting repercussions.

They are satisfied that DFB did not fail because it was a co-operative.

However, its failure draws attention to a number of ways in which UK dairy co-operatives could be strengthened.

Defra should be offering advice and assistance and they are urged to set up a task force comprising the Financial Services Authority, members of the banking community and industry representatives to investigate ways to overcome constraints on capitalising agricultural co-operatives. Defra must also raise with the Treasury the need to ensure that farmers are not taxed on money that is only notionally paid out to them and actually retained by their co-operative.

They also recommend that Defra produce a report examining governance and capital raising arrangements in successful co-operatives overseas.

The collapse of DFB also draws attention to the urgent need to update insolvency legislation as it applies to co-operatives.