This week, the Thames Valley branch of the Institute of Agricultural Management hosted Will Jennings, the CEO of Rabobank at the well-appointed Mapledurham Golf Club, just outside Reading.
Rabobank was of course formed over 125 years ago by Dutch farmers and was initially founded as a credit union for them. It now has some 48,000 staff in 38 countries around the world and is the largest bank in the Netherlands.
Outside of the Netherlands, it only operates in the farming and food sectors. In the UK, they provide services and funds in areas such as corporate banking, management of commodity risks, interest rates and foreign; value chain finance (inventory, supplier, receivable finance) Rabobank in the UK typically works with agricultural and food companies who have a £200 million+ turnover.
Will gave a very wide ranging talk on how Rabobank see the UK farming and food sector, as well as engaging in a lively Q & A session. He talked about the challenges facing the UK industry at the moment, but also contended that for every threat, there was an opportunity too.
It would be impossible to cover all the areas that Will touched on during the course of the evening, but some of the most interesting (to me anyway!) were as follows:
- We are facing a combination of global, regional and local challenges which impact, directly and indirectly, UK farming and food: the strength of the USD; conflict in Ukraine; climate change; energy issues; the ongoing impact of Brexit, COVID and then our own UK economic/food policy, local food culture and industry capacity/capabilities
- This all makes for an unusually high degree of uncertainty in the agri food supply chain. In some cases, we could be feeling the effects of these for up to 5 - 10 years from now. These are not short term issues we are facing or dealing with. As a result, the “new normal” we are experiencing is probably here to stay for some time
- The ongoing volatility and cost pressures we are experiencing will inevitably create change in how the food and agribusiness sectors operate. Not least, we can no longer take our own food security and food sustainability in the UK for granted (to the extent we should ever have). Many food producers around the world now see markets such as China, the US and India as highly attractive when compared to the UK. We might not always be their first market of choice
- Supply chain margins are (still too) thin and so the ability to withstand further shocks as we have experienced in the last few years (Brexit, COVID, the situation in the Ukraine etc.) in a way that maintains confidence is open to question
- Farmers need better/fairer prices going forward. There has to be a better distribution of reward/remuneration through the chain. Consumers will, ultimately, have to be prepared to pay more for food, but with the relatively poor appreciation of how food is produced and what it costs to do this by many, this is a major mindset challenge. It also impacts on food processors and retailers too
- The changes needed to produce this situation in the supply chain are often quite idealistic, are not easy to bring about and maybe even involve unpopular/difficult decisions. They may even require an element of generational change, but in the mid to long term, both market regulation and consumer behaviour needs to alter if we are to genuinely create a sustainable food chain and not one that lurches form crises to crises
- This also has implications for banks too, in that the sort of transitions that are needed in the supply chain to produce a fairer, more transparent and more sustainable food system will be in cases, capital intensive. Not least, we are also moving away from the era of “cheap money” to fund this
- The whole discussion on sustainability has become more sophisticated over the last 5 years. There is still a need though for better data on this and time is still required to see the impact of investments made in this “space”
- The UK supply chain is still very ‘transactional’ and/or commercial in its nature, but is increasingly being required to consider issues around sustainability which test the ability and willingness to invest just not for profit, but also for resilience. We have already probably reached something of a tipping point on this with the supply chain shocks we have seen in the last few years
- Change in the supply chain cannot be achieved by taking a “silo” based approach. It needs the full supply chain to work together on this, in order to build a more resilient future. It may well be led just as much by strong industry players as by government policy and objectives
This was a well attended and highly informative evening, which I think it is fair to say, was enjoyed by all, even if some of the messages Will had for us were pretty salutary to hear. Thanks to Will for coming to speak to us and to the 27 members and friends of the Thames Valley branch who came along for the evening! See you again next time.
John is a Divisional Director of Promar international, the agri food consulting arm of Genus plc, serves on the National Council of the IAgrM and is a long standing member of the Thames Valley branch too.