Andrew Arbuckle: Hopes that spring will herald an uplift in ANM’s fortunes

THE road over the Cairn O Mount can be either one of the most scenic routes in Scotland or one of the most dangerous, if travelled in the depths of winter.

Last Thursday it was at its most benign, offering tremendous views looking back over the Angus countryside before plunging into pure Highland scenery.

The carload of journalists had travelled north through the rich Howe of the Mearns countryside, watching ewes with early lambs as we rose into the hills. The lambs made their entry into a green grass world vastly more favourable from the conditions faced by their older brethren a year ago when snow still lay oxter deep in late March.

The in-car talk was of record prices for beef cattle and strong prices for the last of last season’s lamb crop. All in all, a farming world where the recession had made no impact. Or so we thought.

We were heading to Inverurie to have confirmed to us the poor financial performance of the ANM Group – specifically the meat processing part of the company touted as one of Scotland’s largest farmer-owned co-operatives.

Over the previous six to nine months the signs and rumours were pointing in the direction of financial pressures. There was talk of long-term supply contracts at fixed prices having to be met from increasingly expensive cattle and sheep. There was gossip of lost contracts as the push for volume brought in cattle from England, which undermined the provenance of the premium labels.

The closure of one plant and the sale of another provided solid evidence of an organisation in trouble and this culminated in the departure of the chief executive in February. So we knew the bottom line figure on the profit and loss page of the annual report would be coloured red. The only question was how deep the colour would be?

And it was bad with, as reported in these pages, losses that could easily exceed £7 million from meat processing before the new chief executive gets the ship turned round.

The figures in the annual report to the end of 2011 showed almost £4m lost with a further £2.7m already listed as post-report losses. These were quantified but it was obvious from the words of the new man at the top, Pat Machray, that the company was still losing cash in that division.

Rightly he pointed both to the strong balance sheet of the company and to the fact the main business of the company, livestock trading, was profitable.

Despite popular beliefs, the press do not revel in bad news. We treat it as part of the job and so the mood in the car on the return trip was more thoughtful than the lovely spring day deserved.

The talk was on issues such as the distinction between a “farmer-owned” and a “farmer-controlled” co-operative. One view was that ANM was farmer-owned and not farmer-controlled, and had been since Brian Pack’s reign at the top.

The carload of hacks decided there was nothing wrong with that situation. In fact, one of the crew claimed that many of the most successful farm co-operatives both now and in the past had as chief executives strong men, some even verging on dictatorship, leaving the board of directors with a rather more passive role.

The trouble with that position, as Royal Bank of Scotland found out, occurs when the chief executive goes down the wrong road – although the inside information on the ANM case is that Machray, and board members, started asking questions early on.

This retired accountant is now far from retired and any thoughts he had on improving his golf handicap in his retirement have gone with the challenge of turning this company around.

The conversation then slipped to having equality from the food chain. This has been a favourite shout from farmers for a number of years when they claim the primary producers does not get his or her fair share.

Someone in the back of the car noted that this call has not been heard recently in the red meat sector as meat processors scurry around trying to keep their plants busy all the time competing for the fewer and fewer stock being produced.

“Perhaps this is an argument only to be used when farmers have the smallest slice of the cake,” said the voice from the back of the car.

The ANM news that part of the trouble came back to customers now buying mince when previously they bought steak was also the first tangible evidence that the recession was biting into the agricultural sector albeit from an indirect route.