Memo 1 ~ The Editor and MVF's original purpose and principles

Updated 20th July 2007

In the spring of 1960 I had read an article in the “Farmer and Stockbreeder” reporting the successful establishment of a farmers buying group in Herefordshire.  Through the local NFU we invited the group’s leader John Rhys-Thomas down to South Molton to address some fellow farmers who were interested in the possibility of starting a similar group locally.  ‘Rhys’ explained the principles of the U.S. groups that he had been visiting as a Nuffield scholar, and we determined to go ahead and form a group, which we called Mole Valley Farmers.  Similar groups were springing up in most counties and the conventional supply cooperatives strongly resented the incursions of this new Buying Group movement because it encroached upon their cooperative turf and exposed their lack of competitiveness due to their high cost overhead structure.  We started trading by October 1960, but it was not until mid-November that we recognised the need to acquire limited liability status. We rejected registration under the I & P Acts in favour of buying an “off-the-shelf” agricultural merchant’s private limited company Memorandum and Articles of Association.

We made several amendments to the Articles to restrict the number of shares held to the same figure for each shareholder, thus ensuring a one man one vote position.  What we did not know was that under the 1948 Companies Act, we would only be allowed a maximum of 50 Shareholders. When the prices at which we were able to supply members became known, our original 30 soon reached the maximum and more applications to join kept coming in.  At this juncture we started an annual membership charge of £1 for Trading Members, whom we treated in all respects as having equal rights to MVF benefits as the Shareholders, the only exception being that they had no vote at General Meetings.  See memo 3, where one of the consequences of our hasty decision still creates obstacles to cooperative voting for all Members. 

When the 50 maximum shareholder limit was removed many of the Trading Members who had wanted to take up a shareholding did so.  From that date onwards new members had the choice between the two categories, either to purchase fifteen £1 Ordinary Shares for £15 or pay an annual levy of £1.50.  In 1997 our Auditors, whom we also used (contrary to what is considered best practice) as our financial advisers, recommended that we change from receiving annual trading members “levy loans” to issuing a second class of “Trading Shares”, which carried no voting rights. Predictably this subsequently caused considerable confusion amongst members, uncertain as to which category they were in, but this system may now be in process of being changed.

In the 1985 Report of the Directors, Chairman Brian Peace, reviewing Mole Valley's first 25 years, wrote

 “Mole Valley Farmers completed 25 years of trading on 30^th September 1985.  From very small beginnings the Company has grown to be possibly the best known price setting farmers buying group in the South West. 

Mole Valley was started by 30 farmers in the autumn of 1960 at a meeting in South Molton organised by John James who was made Chairman of the new Company.  The objective was to cut farmers' costs and coordinate their buying, in order to obtain discounts which, at that time, were not available from existing suppliers.  These principles remain the same today. 

John James has been in charge of the day to day running of Mole Valley Farmers for these 25 years, helping to keep down farmers' costs – which is just as relevant today. 

In July, John sought permission from the Board to leave Mole Valley Farmers for the time being to help with relief work in the Sudan.   John is currently Field Director for Band Aid in Sudan.  The Board asked Anthony Moore, a Chartered Accountant, who has been John James' deputy for several years and Company Secretary, to take over as Managing Director.” 

Shortly after Brian wrote this my African work changed to cover Ethiopia until Band Aid was wound up.  From 1991 – 2005 I continued voluntary work in the Somali region of Ethiopia for several weeks each year.  From 1985-1995, however, I had continuing involvement with Mole Valley, attending some Board meetings though becoming increasingly critical of some of the new policies and of the erosion of original principles. 

In 2001 I was invited by the MVF Board to submit what I understood to be meant by the term ‘ethos’ in the context of Mole Valley.  Ethos was not a word that I had ever used – I first heard it a few years earlier when Steve Edmunds had said that it was what had attracted him to becoming a Director. 

            1.  MVF provision of best value to its farmer members is achieved through lowest possible resale prices, subject only to ensuring a modest annual profit for essential development needs and a small contingency provision.

            2.  MVF operating costs are kept as low as possible consistent with provision of adequate premises and appropriate staffing.  A “do-it-yourself” approach to legal and financial problems can minimise professional fees from external consultants.

             3.  MVF sells to all members at the same price subject only to a rigid quantity rate structure and delivered/collected options.  Similarly, payment term options and conditions are non-negotiable.

            4.  Whenever relevant, MVF “salesmanship” includes cost-saving advice to members even when this may reduce MVF profitability in the subsequent transaction eg. straight feeds when appropriate to replace compounds or generic products to replace identical branded ones.

            5.  MVF policy of open communication and honest trading with its members has built up a reputation which farmers have trusted to provide best available value on almost every occasion.  This transparency and its resultant trust is a priceless asset for MVF’s selling potential and has the practical advantage of minimising advertising and promotional expenditure.

            6.  Mole Valley Farmers has flourished with a Board consisting of elected farmer Directors.  According to the level of their necessary duties for the Company, it is wholly proper that they should receive remuneration consistent with the cost of their absence from their own businesses, plus all other expenses.  There is no need for any farmer Directors to be classified as Executive Directors and if any Director becomes a full-time employee, that Director should resign.  The Chief Executive of the Company is a key person to attend Board Meetings.

 CONCLUSION

The extent to which erosion of any of the above is recognised or approved or condoned or opposed by Board members was not made clear at the recent AGM.  Just where do Directors stand on this issue?”

 At the Board meeting, when the above submission was being considered, there were some reservation expressed regarding point 2, for which there was evidently more confidence placed in professional expertise than within the judgement and common sense of Directors and senior management.

 Apart from this, all the points were fully agreed and stated to be fully implemented in current practice.

 While accepting that this is what the majority of Board members generally believed, I had to express my concern about the growing number of instances in which one or more breaches of these principles had been reported.

 Board members today no doubt regret the rapidly widening gap between the ethos rhetoric and the reality of operational practices within MVF and its associated companies.

 Having seen, in my lifetime, the decline and fall of so many agricultural supply cooperatives in the UK, I cannot avoid being seriously concerned when I see MVF introducing many of the same policies which had led to their eventual downfall.

Click for Memo 2 >>