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.

There are two main reasons:

  1. Levy payers have asked us to do more on top of existing activities, particularly on marketing, exports and reputational defence.
  2. 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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