There's fertile ground on the Co-op's farm

The society is making hay in hard times, writes Clifford German

f the Co-op is Britain's biggest commercial farm, Mike Calvert, the 50-year-old boss of the Co-operative Wholesale Society farms division, must be a leading candidate for its biggest farmer. Mr Calvert is every inch the bluff Yorkshireman, all six foot five of him. He graduated from Edinburgh University with a degree in agriculture in 1972, spent two years with ICI's agricultural division and six years as a farm business consultant before becoming a farm manager. He has run the CWS farms division from its base just outside Leicester since 1985.

But times are hard for farmers. They have a legendary capacity for complaining about their misfortunes, and for once their professional pessimism is fully justified. British farming is going through its worst slump since the inter-war years and the prospects don't look bright. World food prices are depressed and the EU's price support system is under multiple pressures - from politicians looking for ways of reducing the cost of farm support programmes before a fresh influx of farmers in East Europe can get their shovels in the trough; from foreign competitors, led by the US, pressuring the EU to open its markets; and from domestic consumer lobbies seeking to cut the cost of the weekly shopping bill.

Consumer confidence has not yet fully recovered from the BSE scare, and is once again being undermined by fears that genetically modified foods are creeping surreptitiously on to the supermarket shelves. In the last two seasons the strong pound and bad weather have added to British farmers' cups of woe.

The depression is affecting working farmers, all the way from small farmers in upland areas to the biggest commercial operators. Last month Sentry Farming, Britain's only quoted farm management company, reported a trading loss of more than pounds 1m. CWS Farms, the Co-op's umbrella company, is expected to stay in the black when its results for 1998 are published next month, but these will be well down on the pounds 3.4m it reported in 1997. This, in turn, was well down on the pounds 6m it made in 1996. Not for the first time, however, the Co-op could profit from adversity.

The movement bought its first farm back in 1896 in order to grow fruit for its jams and preserves business. It bought more land in the Twenties and Thirties, when land prices were depressed, and moved into contract farming in 1986. Now, in a curious reversal of roles, the movement set up to get the little man an even break is Britain's biggest farmer, competing aggressively for markets at home and abroad. Mr Calvert employs more than 400 farm workers, 90 per cent of whom live in tied houses on the farms.

CWS Farms runs 15 farms, totalling more than 28,000 acres of farmland, which the Co-op owns outright. Mr Calvert also manages CWS Agriculture, which manages a further 20,000 acres, and last year the Co-op took over Broadoak, the farm management business. Broadoak added a further 30,000 acres to the portfolio.

"There is no policy of aggressively expanding," Mr Calvert says. Farming is a capital-intensive investment and land alone still costs an average pounds 2,000-pounds 3,000 an acre. But if the adverse financial climate for farming that drove prices down by around 10 per cent last year and is threatening the livelihoods of thousands of small dairy and pig farmers continues, the Co-op stands ready and willing to expand, especially by taking on more contracts to manage farming land.

In spite of its collective origins it now competes strenuously for sales and supplies, and drives just as hard a bargain with its Co-op customers as it does with its commercial customers. Unlike its struggling counterparts in the retail trade, which are the victims of their own commitment to social engineering and lack the infrastructure and the commercial nous to match their purely commercial rivals, CWS Farms enjoys the advantages of scale and diversity.

Mr Calvert justifies this hard-bitten approach to profit by emphasising CWS Farms' commitment to conservation and environmentally friendly farm practices. CWS Farms produces no eggs or poultry and all its pigs are reared out of doors, so it can take a relatively high profile in the debate over the ethical aspects of factory farming and animal cruelty. It is also a leading exponent of new farming methods and makes the results of its trials available free of charge to the farming industry.

It has around 500 acres devoted to organic farming, and this is set to rise to more than 2,000 acres by the end of next year. Mr Calvert is a pragmatist, however. He admits that organic food is always going to appeal to a minority of relatively wealthy consumers, and that the vast majority of customers in Co-op stores will always want to buy non-organic produce on the grounds of cost alone.

To compensate for the lower yields, organic farm produce needs to sell at a premium of around 40 per cent to standard farm produce based on the intensive use of commercial fertilisers and pesticides. His main concern is that the incentives and grants will attract too many new entrants into the business leading to a collapse of prices.

CWS Farms has also been a pioneer of integrated crop management, which reduces the need for chemical inputs into farming by closely monitoring crop development and applying the minimum inputs needed at the optimum time. ICM yields are on average about 15 per cent below those achieved by intensive farming but can be commercially competitive because production costs can be reduced by similar amounts.

Mr Calvert has nothing against genetically modified foodstuffs in principle. However, last month CWS Farms pulled out of planned government-backed trials of GM foodstuffs, mainly maize and oil-seed, on the grounds that there is no common agreement on the way in which the trials will be conducted. "The design of this year's trials would do little or nothing to allay current environmental and consumer concerns," he explains.

Conditions for UK farmers are likely to stay tough, he predicts. Although last month's meeting of EU agricultural ministers fudged the issue of radical reform of the Common Agricultural Policy and maintained milk quotas until the next big review in 2006, it reduced support prices by an average of 20 per cent over the next few years. European farming needs subsidies for the forseeable future, he admits, but the burden will have to be shifted from the consumer to the taxpayer.

"The average cost of supporting farming may not significantly reduce but it will have to be more efficiently targeted at supporting small farmers in specific areas like the hill farms of Wales and Scotland," he says.

Meanwhile, he is working on ways of increasing co-operation with food manufacturers and retailers to develop products that will add value to the Co-op's crops and meet the needs of consumers.