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Dairy Industry

Oral Answers to Questions — Environment, Food and Rural Affairs – in the House of Commons at 11:30 am on 11th March 2004.

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Photo of Alun Michael Alun Michael Minister of State (Rural Affairs), Department for Environment, Food and Rural Affairs

In line with our strategy for sustainable farming and food, we are facilitating industry action, most notably through the dairy supply chain forum chaired by my noble Friend Lord Whitty. The forum seeks to improve efficiency and increase innovation, and to help the industry adapt to the new environment created by the reformed common agricultural policy.

Photo of Mr Simon Thomas Mr Simon Thomas Chief Whip, Spokesperson (Agriculture; Culture; Environment; Heritage; International Development; Sustainable Energy; Transport)

The milk price report that DEFRA published yesterday showed that, even before this year's spring flush, milk prices have fallen over the past six months. In light of that, may I commend to the Minister the idea embodied in my private Member's Bill, which proposes the establishment of an independent milk ombudsman? That ombudsman would be a watchdog rather than a regulator, able to monitor the industry and report on its state, and to keep an eye on what the supermarkets are doing. In that way, the ombudsman would be able to determine whether a fair price was being paid to dairy farmers, in west Wales and throughout the UK. If the Minister is not in favour of that idea, what steps will he take to bring more transparency to the industry?

Photo of Alun Michael Alun Michael Minister of State (Rural Affairs), Department for Environment, Food and Rural Affairs

I do not think that the hon. Gentleman will get far with that idea, especially given the Opposition's promise of a bonfire of the tsars. However, I point out that farm-gate milk prices have been rising since last June. The average price for deliveries in December was 19.54p per litre—1.81p above the price in December 2002. We must be careful not to treat a single month as having massive significance.

Secondly, we are working closely with the industry. I point out to the hon. Gentleman that the causes of low farm-gate prices are identified in the KPMG report, which examines the matter in detail, and are mainly for the industry to address. We seek to assist the industry in addressing those issues.

Photo of Paddy Tipping Paddy Tipping Labour, Sherwood

The real problem is that the industry is fragmented—relationships are often antagonistic and the operation of the supply chain is not transparent. Is not the Government's important role to bring all the parties together so that they can find a solution to the problems that they undoubtedly face?

Photo of Alun Michael Alun Michael Minister of State (Rural Affairs), Department for Environment, Food and Rural Affairs

My hon. Friend is right, and that is the purpose of the forum chaired by my noble Friend Lord Whitty to which I referred. There are a number of explanations for low farm-gate prices—for instance, the low value of the product mix, the low level of product innovation within the UK compared with some other European states as well as the structure of the UK industry to which my hon. Friend Paddy Tipping referred. The forum is addressing all those points.

Photo of Ian Liddell-Grainger Ian Liddell-Grainger Conservative, Bridgwater

As the Minister knows, a proposal to reclassify yoghurt is going through Europe. Yeo Valley Organic yoghurt is based in my constituency, and dairy farmers throughout Somerset and the west are concerned that if the proposal goes through not only will they be unable to sell organic milk because yoghurt will be reclassified, but the dairy industry will have trouble selling milk into other yoghurt producing companies because of the reclassification in Europe. Will the Minister guarantee that the British Government will stand up to the proposal and not allow Europe to reclassify yoghurt?

Photo of Alun Michael Alun Michael Minister of State (Rural Affairs), Department for Environment, Food and Rural Affairs

The hon. Gentleman may be referring to accounts of ongoing discussions rather than a conclusion, and I am happy to write to him on the detail of the position. I congratulate him on representing not only his constituents but a very fine product in Yeo Valley Organic yoghurt.