To ask Her Majesty’s Government what estimate they have made of the impact on dairy farmers of the latest fall in milk prices.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and refer to my entry in the Register of Lords’ Interests.

My Lords, increased global milk production, along with the Russian trade embargo and weaker demand in China, has resulted in surplus stocks and downward pressure on worldwide prices. This has had a significant impact on British farmers. Average incomes are expected to fall to £46,000 in 2015-16, although there are considerable variations. Some farmers have sought to offset low prices by producing more. Lower prices for feed, fertiliser and fuel have also helped to reduce farmers’ costs.

Will my noble friend agree to review the remit of the Groceries Code Adjudicator to end the gross imbalance between small, often family, dairy farmers and huge processors, many of which are seeking to consolidate, and put an end to the retail price war that is damaging the future of the family dairy farmer?

My Lords, I should declare an interest in that I come from a long-standing dairy farming family. I therefore clearly have considerable sympathy with the plight of dairy farmers. The Groceries Code Adjudicator has no powers over prices. However, we are looking at a number of issues in relation to suppliers and processors to see whether there are ways in which we can make improvements. I am pleased that a number of supermarkets—I encourage other chains to do so—see that they have a responsibility to the domestic dairy industry.

My Lords, in declaring my interest as noted in the register, may I press the Minister on this issue? He is aware, is he not, that family dairy farms have their backs against the wall? The prices they are getting are not only less than the full price of production but less than the marginal price of production, and hundreds will be going out of business. Will the Government please take this seriously and do something about it?

My Lords, I assure the noble Lord that the Government are very concerned about this. Indeed, other Ministers and I have been discussing the matter only today. There are a number of things that government can and are doing. We want to promote more exports; we believe that the export of our dairy products is tremendously important, and more British cheese is going abroad. We think that the Middle East and China are very important markets, and we have trade counsellors in Beijing precisely to encourage exports. A lot is going on, but I am very mindful of what the noble Lord has said.

My Lords, the Minister said that the Groceries Code Adjudicator cannot adjudicate on prices, and that is the case at the moment. But is not the problem that the Groceries Code Adjudicator does not have sufficient power? I know that a review is going on into their power, but could the Minister clarify whether expanding the power of the Groceries Code Adjudicator is being considered, so that they can intervene in what is clearly an unfair system where people in that sector are being exploited by big business?

My Lords, clearly we will be looking at all things. However, the truth is that we are not in a position to start setting prices; that is market driven. We have global overproduction at the moment, and that is the plain economics of it. But we are going to look at all these things and we want to see whether there are ways in which the dairy farmer can be assisted. We think that the dairy farming industry should be more joined up, so that there is strength in its negotiations. Clearly, we want to make sure that supermarkets understand that it is very important to sustain the domestic dairy industry.

My Lords, does the Minister agree that it really is quite ridiculous that the price of a bottle of milk is often less than the price of a bottle of water, bearing in mind the real difficulties that our dairy farmers are now suffering? Will he, as he has already referred to, put real pressure on the retailers and supermarkets to see what they can do to help this industry that is in such dire straits?

My Lords, I understand what my noble friend has said. Indeed, quite a number of retailers have introduced schemes to help farmers: for instance, Morrisons Milk for Farmers cheddar, where an additional 34p per 350 grams goes to farmers; Aldi championing British quality; and Waitrose highlighting British sourcing. A number of retailers are doing more, and we want to ensure that, across the piece, there is more support like that.

My Lords, one way for dairy farmers to cut costs is to herd cows into huge sheds where they are given processed food, unable to go out and graze in fields. Do this Government accept mega-farms as the future face of our countryside?

My Lords, we certainly see the need for mixed farms. The most important thing is that animal husbandry and animal welfare are at their best whatever size of farming unit it is. SoI would not say that large units are bad and small units are good. The important thing is that there are high animal welfare standards across the piece.

My Lords, will the Minister undertake to look at the policy of Booths supermarkets in the north of England, which have deliberately set out a policy to help dairy farmers? Booths supermarkets package their milk so that customers know that they are giving appropriate support to local dairy producers. Will the Minister investigate that and compliment them?

I would be delighted to compliment all those retailers that are taking their responsibilities seriously. What the noble Baroness has said is that it is very important that we improve our labelling. It is very important people know that, when they buy British produce, it is not British-processed produce but produce that is grown in this country.

My Lords, may I follow up that comment? The work undertaken by retailers is beginning to have an effect, but part of the problem— I hope that my noble friend will be able to tell us a little more about this—is that only half of that milk ends up as liquid milk. Most of it ends up as processed milk. The difficulty is the amount that we can actually use, so export, which the Minister spoke about, is key. The price that retailers pay is in some ways better than the bulk commodity price; it is the bulk commodity price that is the real problem.

My Lords, I am grateful to my noble friend. A lot of retailers are paying 20p or 30p a litre. She is absolutely right to say that one way in which we can help to address the problem is to become much more resilient and much more export focused. We have brilliant produce in this country and we need to export more of it. That is what the Government are working on.