Funding Your Future: your Dairy sector questions answered

As part of Funding Your Future, we asked for your questions about the proposed levy increase and the work we do. Below are the answers to the questions we received from Dairy levy payers.

With the proposed increase in levy payment, what will that money be spent on and will that be ringfenced to certain areas? I believe it needs to be put into education of people outside of farming about the products, rather than AH&W which it's currently doing so?

This was answered during the live Q&A.

How will the money be spent, will it be on more staff numbers or resources?

See the answer to the first question.

Do we have a crib sheet with all the facts of where the levy is spent and where the extra money will be spent?

See the answer to the first question.

What is the plan for the extra levy money with regards to it helping levy payers?

See the answer to the first question.

With the proposed increase in levy could they ring fence that amount of money to increase the marketing budget and help educate the general public on the benefits of dairy?

See the answer to the first question.

If this is a catch-up of levy from no increase in 20 years - what will the AHDB be able to do going forward with the extra money?

See the answer to the first question.

Why such a big increase? This is more than a 30% increase.

There are two main reasons:

Levy payers have asked us to do more on top of existing activities, particularly on marketing, exports and reputational defence.
The levy rate hasn't increased in more than 20 years, and with inflation, spending power has declined every year since then. For context, the additional cost of a 0.02ppl increase for the average GB dairy farm producing 1.65m litres per annum would be £330 a year.

As a business manager - when I am investing on farm, I need to know the payback on money I wish to borrow and the timescale as well as justify what I am investing in. Can AHDB confirm when we, as levy payers, will see the payback for this additional investment in particular and confirm what the multiplier effect benefit is for the levy payer?

The process is same as you outline for all AHDB activities, but worth bearing in mind that some activities are targeted to influence consumers attitudes rather than return on cash invested.

For each worksteam (e.g. marketing, exports, environment, animal health and welfare) the Dairy Sector Council see operational key performance indicators (monthly or quarterly measures) and longer term (annual measures) at each of their meetings along with commentary on progress.

If we assume a 60p levy output per 1,000 litres, why are we only spending 7p on defending our reputation and educating kids in school? Our biggest risk is our reputational risk and the damage that's been done in education, our next generation of consumers. Why is it the lowest % spend in the five areas of the budget?

This was answered during the live Q&A.

How much of the levy is spent on bureaucracy and HR and these sorts of thing and how can they be minimised going forward?

The Dairy Sector Council receives a detailed finance report at each meeting which breaks down spend into the main spend areas.

This can be summarised as Dairy sector-specific activities and central shared service costs. Dairy sector-specific activities account for around 89% of levy spend while central shared service centre costs are around 11% and include finance, HR, facilities, IT, procurement, legal etc. Like all costs, central shared costs are kept under review.

Question around market failure and the services that the board provide - if the board wasn't there would I be able to get the services elsewhere?

The sector council went through line-by-line all the activities that AHDB Dairy Sector funded last year and ensured that it was not funding work that is already supplied by the market.

For any new activity, it must pass the 'market failure' test.

Firstly I believe a lower percentage of the levy payment should go into animal health & welfare section because I believe there are better returns on the money spent in other areas. I also feel that AHDB have stands at a lot of agricultural shows and I kind of disagree with this as I don't see them as that busy and think it would be better spent on shows outside of agriculture to try to get to people in the inner cities to educate them about milk, farming and everything we do.

We do a small number of agricultural shows (e.g. DairyTech, UK Dairy Day, Welsh Dairy Show and AgriScot) as it allows us to speak to a proportion of levy payers who do not attend our meetings or webinars.

It’s a good point about doing shows outside agriculture and we will have a look at that with other AHDB sectors.

What's the best return on AHDB investment for the levy spent?

This was answered during the live Q&A.

The biggest challenge on farm today is the training and building of high-performing teams. I would like to see the levy spent on management training programmes, such taking our herd persons to herd managers and eventually to become their own farmers.

This was answered during the live Q&A.

Why is the levy not charged at a percentage of the total milk check rather than a fixed rate per litre? That way when the industry does well AHDB does well. When the industry doesn't do so well pressure goes on to AHDB to deliver as well.

This was answered during the live Q&A.

Can we ringfence levy collected in Wales for specific spend to support the Welsh dairy industry?

This was answered during the live Q&A.

Why now, when the milk price is low and input prices are high? Is AHDB in deficit?

This was answered during the live Q&A.

If AHDB is representing farmers and helping them become more sustainable, why ask for more money now when many of their ‘customers’ are struggling financially?

This was answered during the live Q&A.

Should AHDB be responsible for unified carbon sequestration model that can be used by the whole industry as a single standard?

This was answered during the live Q&A.

Why hasn't the misinformation in We Eat Balanced been amended to show the true figures, according to GWP?

This was answered during the live Q&A.

Why are we receiving no defence from the increasing and completely over the top demands from Red Tractor? They are nothing more than time, cost and mental burden that you are assisting and adding to.

This was answered during the live Q&A.

We are seeing reviews into the RT assurance for grains and cereals, when can we expect similar levels of burden reduction within the Dairy sector? How quickly could the requirement for RT dairy farms required to be RT for beef be removed?

We are already working on an independent international comparison study of competitor beef and lamb standards and announced a similar study within the Cereals & Oilseeds sector in October.

While it’s not our role to unliterally decide farm standards, we will contribute with independent evidence that helps provide a view on the value of assurance in supporting British farmers.

What can AHDB help with to reduce the burden or audits and paperwork? As a family farm it is by far the biggest part of our workload and contributes to stress in an already stressful environment? Why does no one talk to anyone else so that duplication is avoided?

This was answered during the live Q&A.

Why is Red Tractor needed when schemes such as Arlagaarden are much more relevant?

This was answered during the live Q&A.

What if we believe a higher increase is required above the current ceiling?

The levy rate ceilings are written into the legislation that governs AHDB to help protect levy payers. If levy payers wanted an increase in excess of the existing ceiling, then the legislation would need to be changed.

The process for a legislative change requires a Defra (with Scottish and Welsh ministers) to undertake a formal industry consultation, ministers then use this to inform their decision, following which the proposed change to the legislation needs to be debated and approved by Parliament.

What are reserves kept for? Why should we be funding an AHDB savings account?

This was answered during the live Q&A.

If we have a genuine farmer council - surely they have asked all the relevant questions already? If not why have them?

The sector council is there as a representative of levy payers. On an ongoing basis, sector council members (and AHDB staff) seek feedback from levy payers.

You say you don’t know who all your levy payers are. Why is this and how can this problem be fixed?

If AHDB collected all levies direct from every farmer, buyer or processor then we would hold the details of all our levy payers. The fact is the vast majority of AHDB levy payers have their levy collected via a third party - it is deducted by the buyer or processor who holds it and then pays it across to AHDB. AHDB therefore relies on levy payers signing up to receive information or to register in any voting.

AHDB recently asked Defra to make changes to our Statutory Instrument (the legislation that governs AHDB) which would make it mandatory for levy payers to register their details with AHDB. We continue to pursue this with Defra.

Also, many of the processors and buyers that collect the levy on behalf of AHDB said they would be willing to work with us to help us build a more comprehensive voluntary register. We will look to make progress in this area in 2024.

Is KE just a means of reducing COP for the processors and industry to benefit from?

No. Our Dairy KE team is focused on three areas: environment, animal health and welfare and genetics, all of which underpin the industry’s reputation.

Our Strategic Dairy Farm network (which is joint-funded by the Betty Lawes Foundation) aims to provide a 'shop window' for AHDB throughout Scotland, Wales and England for levy payers to engage with AHDB.

Farmers pay for their milk recording data and then have to pay a levy to access genetic data. Shouldn't the semen companies be paying for genetic analyses and not me?

This was answered during the live Q&A.

At a recent meeting discussing ‘cost of production’, I was surprised that AHDB had no new data to add insight into the pressures that farmers have been facing under the current milk price. As I understand it, AHDB made the decision to stop purchasing data from consultancies on this subject on the basis of Farmbench. Now that the situation with FarmBench has changed, what does AHDB feel it needs to do to add independent insight into pressures on farmers? Do AHDB feel they have this role at all?

With this area we need to make a judgement on whether there’s market failure – for example Kite, Kingshay and Promar do cost of production analysis.

If we were to proceed, we also need to judge if the cost of buying in farm datasets to analyse is good value for levy money. We’re currently working through this area to understand where we can add value to levy payers and whether we can add something different from commercial players.

Supermarket buyers have been using AHDB data to drive down prices. Does freely available information lead to commoditisation? Do retailers make any contribution to costs of AHDB?

Why are our prices freely available? We produce price information so that there is a base level of transparency in the marketplace.

Without this, there is a risk of market failure from an asymmetry of information – where one party has an unfair advantage over another due to what they know.

The prices we produce are not intended to be used in contract setting, however, we know that they are frequently used in the supply chain.

The lack of prices could create more risk for farmers who are unable to challenge or question contracted prices without a source of independent information.

As all the useful functions that DairyCo used to do are now carried out by our milk buyer/cooperative and our excellent local representative has now left, I see no justification for a levy-funded body. What are you doing that the likes of Arla and Muller are not doing which might justify a levy at the existing level let alone an increased levy?

This was answered during the live Q&A.

Why does decision on increase come from ministers rather than levy payers?

This was answered during the live Q&A.

What if we don’t agree with a levy increase, but Defra vote for it?

When reviewing a recommendation from AHDB, Defra (and the Welsh and Scottish governments) will look for evidence of levy payer and stakeholder views.

Funding Your Future 2023 – Dairy

Watch the Dairy Funding Your Future live Q&A session

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