Dairy Farming

Private Members’ Business – in the Northern Ireland Assembly at 11:15 am on 12th May 2009.

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Photo of David McClarty David McClarty UUP 11:15 am, 12th May 2009

The Business Committee has agreed to allow up to one hour and 30 minutes for the debate. The proposer of the motion will have 10 minutes in which to propose and 10 minutes in which to make a winding-up speech. All other Members who are called to speak will have five minutes.

Photo of William McCrea William McCrea Shadow Spokesperson (Environment, Food and Rural Affairs)

I beg to move

That this Assembly recognises the difficulties facing the dairy sector and calls on the Minister of Agriculture and Rural Development to set up a task force to consider the way forward for the sector and how it can be assisted in advance of the abolition of milk quotas.

Unfortunately, it is not with great pleasure that I propose this motion. No one can be in any doubt about the pressures that the Northern Ireland dairy sector faces. That includes not only the primary producers but the processors. The dairy sector in Northern Ireland is the largest agricultural sector, and it contributed £444 million to the total gross output in 2008. Not only are hundreds of people employed directly on farms as primary producers, hundreds are employed in the milk processing sector in Northern Ireland.

I will first pay tribute to the stamina, determination and excellence of farmers in Northern Ireland, who have faced great challenges throughout their industry over the past years. They have faced those challenges with great fortitude and have sought to do everything that they can to make Northern Ireland a better and more prosperous place. However, to make that a reality, they need the help and assistance of the Assembly.

Over recent months, the entire dairy sector has been plunged into crisis. In March, the price paid for milk by United Dairy Farmers was only 17p a litre. That was 6p down on the April 2008 price and nearly half the price paid to farmers just 18 months ago. Not only has the price paid to farmers collapsed over the last number of months but input costs have escalated considerably. The costs of fertiliser, feed and energy are all considerably higher than they were this time last year, resulting in the returns to farmers being further cut.

Farmers have also borrowed considerable sums to construct slurry storage facilities and thus adhere to environmental legislation that emanated from Europe. That situation has been compounded by wet weather over the past month, which has delayed the turn-out of livestock on most farms in Northern Ireland. In fact, that process has turned the other way, because many farmers have had to bring their animals back in and have had to pay for the silage that is necessary to feed them, and that has resulted in additional costs. It is vital that we all examine what can be done to assist the sector, in both the short and longer term.

Over recent months, following concerted effort by many across Northern Ireland — certainly by my DUP colleagues in Westminster and Brussels — the EU Commission reintroduced export refunds and intervention storage of dairy products. Although I would like to have seen export refunds set at a higher level, that move helped to stabilise the world market and prevented further falls in the commodity markets. When I meet Commissioner Boel later this week, I hope to thank her and to encourage her to increase the level of EU support to help the market to return to profitable levels.

With the fall in world commodity prices for oil and grain, there have been some signs over recent weeks that farmers will see the prices of feed and fertiliser fall. That is to be welcomed, but prices need to fall further to help struggling farmers.

In the current markets, it is vital that the local banks work with the local industry and do not cause further problems for our farmers. Banks can do more to help our dairy farmers in the current climate. Unlike the property market, the price of farm land has not collapsed in value, and the majority of farmers are still asset-rich but, unfortunately, cash-poor. At this time, it is vital that the banks pass back the interest rate cuts to farmers. I am very critical of the banks that seem to be taking every opportunity to hike up the cost of borrowing money and cut the overdraft facility that farmers had agreed. Farmers and many others in this community desired more assistance and encouragement from banks, bank managers and the banking establishment, bearing in mind that the Treasury assisted many of the banks with their difficulties, which were often self-inflicted.

It is vital that we do not simply look at what can be done to help the dairy sector in the short term; we must look at where the sector is heading in the longer term. I welcome the recent Dairy UK study into the milk processing sector, which was part-funded by Invest Northern Ireland and the Department of Agriculture and Rural Development. We need to rationalise the number of milk processors in Northern Ireland, look at new markets and reduce the overheads in the milk processing sector.

The study does not relieve DARD of its responsibility to have a strategy and direction for dairy farmers in Northern Ireland. DARD has strategies and policies that look at everything from rural proofing to childcare, renewable energy, tackling poverty and disability action plans. Although DARD’s reports on each of those issues are important, they will do little to help the largest sector in our agriculture industry.

I am glad that the Minister is in the Chamber to take note of the debate. Will she outline her Department’s strategy for the Northern Ireland dairy sector? I also ask her to detail how many officials in her Department are working on dairy policy. Due to the importance of the sector, I suspect that more people in Dundonald House are working on dairy policy than on policies on rural development or forestry. Will the Minister outline her Department’s position on the processing and marketing grant for the dairy sector? Is that scheme open? Are there many applications in the system? If so, when can those applicants expect to receive funding?

We already know that many of the support mechanisms will be either dismantled or removed over the coming years. For example, by 2015 not only will milk quotas be a thing of the past but intervention support and export refunds will have been done away with. Therefore, it is vital that we plan for our future, and our motion proposes a way to do that.

My party colleagues and I propose that DARD set up a task force for the Northern Ireland dairy sector to look at the future for dairy farming in Northern Ireland and pull together farmers’ representatives, processors, retailers, Departments, research organisations and Invest Northern Ireland. It should also set out a clear strategy for the development of our dairy sector. That is not a novel concept, and it is not something that we have dreamed up or sought to manufacture for today’s debate; it has already been carried out for the red meat sector in Northern Ireland. In the past two weeks, it was announced that there will be a dairy summit in Scotland to look at the dairy sector there.

There is a long-term future for the dairy sector in Northern Ireland. Milk production in the United Kingdom is at its lowest level since milk quotas were introduced in 1984. Milk production is falling in America and New Zealand, and the world population is rising.

Photo of David McClarty David McClarty UUP

Will the Member draw his remarks to a close?

Photo of William McCrea William McCrea Shadow Spokesperson (Environment, Food and Rural Affairs)

With its family-run, grass-based farm system, Northern Ireland is the best location in the world for milk production. Therefore, it is vital that DARD provide leadership and that together we chart a way over the next five years to secure the future for Northern Ireland dairy farmers.

Photo of Pat Doherty Pat Doherty Sinn Féin 11:30 am, 12th May 2009

Go raibh maith agat, a LeasCheann Comhairle. I support the motion. The dairy sector is facing many difficulties. Some arise from the massive fluctuations in milk auction prices, which, in many ways, depend on world prices. In November 1995, farmers were getting 30·48p a litre for milk, but by May 2002 that had fallen to 13·53p a litre. That is a massive drop. Many of the reasons for price fluctuations are outside our control, depending on auction and world prices.

However, the dairy sector itself must take some issues on board. It is my judgement and observation as a result of discussions with dairy farmers that they are a bit too dependent on powdered milk. More emphasis needs to be placed on diversification into products such as cheese.

I am sure that the Members who tabled the motion are aware that two major initiatives were launched recently. First, an Executive delegation, led by Michelle Gildernew, the Minister of Agriculture and Rural Development, and ably supported by Arlene Foster, the Minister of Enterprise, Trade and Investment, the First Minister and the deputy First Minister, went to Europe and met Commissioner Fischer Boel. As a result of their discussions, the export refund was agreed. That was a very useful and timely intervention.

Secondly, and more recently, the Minister of Enterprise, Trade and Investment and the Minister of Agriculture and Rural Development set up a study group. That, too, indicates that they are entirely aware of the pressures on the dairy sector.

As I said, I totally support the motion. However, I sound one small word of caution, which concerns the timing of the establishment of a task force. It should come into play immediately after the study group that the two Ministers commissioned has completed its work. There would be a logic to carrying out the study and analysis first, after which the task force could implement the findings, but that should occur immediately after the analysis has been completed.

Photo of George Savage George Savage UUP

First, I declare an interest as a farmer. Secondly, I congratulate my colleagues on the Committee for Agriculture and Rural Development for securing the debate.

I agree with the rationale behind tabling the motion today, because the milk industry, not to mention the milk cheques for farmers across Northern Ireland, is at a particularly low ebb, especially when compared with our friends on the UK mainland, who receive significantly more per litre than Northern Ireland farmers. Indeed, with the Chancellor’s announcement in last month’s Budget of a 2p a litre increase in fuel duty from September, the Labour Government seem intent on making life more difficult for the sector. That will significantly increase the cost of milk production, which stands at 28p a litre. For their efforts, meanwhile, the farmers, as Dr McCrea, the Chairperson of the Agriculture Committee, said, receive a mere 17p a litre, although I say it is 19p, if they are lucky.

A farmer can go on for only so long. Farmers in Northern Ireland cannot continue to produce milk at a loss. Simple economics tells us that the reason for the low price is supply and demand. The current low price is caused by there being too much milk in the marketplace. The question is then how to access that surplus. A possible Northern Ireland-wide solution exists. One in every six children in Northern Ireland receives school milk.

There is a potential market for providing milk to 329,000 children in nursery, primary, secondary and special needs schools. Only 55,000 children get access to daily school milk, in spite of the fact that an EU subsidy is available courtesy of the Commission Regulation (EC) No 657/2008 of 10 July 2008.

If we were to take the excess milk out of the market, put it into schools and encourage children to drink it, they would benefit from a healthier lifestyle, the farmer would receive a better price for his product, and DARD would receive an EU subsidy. It is a win-win situation for everyone. I hope to meet with the Minister and other key stakeholders soon to discuss those plans in more detail.

Returning to the motion, I agree with the proposal to set up a task force, but I urge caution. It must not become a talking shop, but rather a vehicle that can explore and implement new and innovative ideas for the betterment of the dairy sector in Northern Ireland. Furthermore, we need to promote milk better and we need to promote the benefits of our local, fresh, quality milk product. I am sure that the Minister will be happy to outline in detail what has been done, and what can be done, to better promote Northern Ireland’s local, fresh, quality milk. We must work together to solve the problem in the interests of dairy farms across Northern Ireland.

In conclusion, I commend the motion to the House, and I call on the Minister of Agriculture and Rural Development to do all in her power to help to sustain the dairy industry in Northern Ireland. The dairy industry, along with all the other industries associated with agriculture, is the backbone of Northern Ireland. Everyone in the House must play their part in ensuring that the agriculture sector is not forgotten. We must also try to seek better and more open markets for our products.

Photo of P J Bradley P J Bradley Social Democratic and Labour Party

I support the motion and ask that my comments are taken as being supportive of the dairy industry, irrespective of the size of the herd or holding.

The ‘Statistical Review of Northern Ireland Agriculture 2008’, which was issued by the Department of Agriculture and Rural Development, is an excellent reference book. The section relating to dairy production shows that 53% of the total number of Northern Ireland’s dairy cows is owned by 24% of our milk producers. The figures show that milk production has not really dropped even though the number of producers has dropped significantly. Almost 2,000 million litres of milk are produced but on less farms than in previous years.

Our large dairy farms are getting even larger while the smaller farms are gradually fading out, and the hybrid Holstein is now the prime producer of milk. I wish to slot in a question that is perhaps for another debate on another day: is there a possible link between the ever-increasing high-yielding cows and their vulnerability to disease?

Our large farms are becoming larger at the expense of historical levels of farming. Not everyone in the Chamber might agree with me, but I believe that large and small farms should be afforded equal attention and support.

The Government, and DARD in particular, cannot talk about creating rural sustainability if they are not prepared to look at how this once productive sector can be reinstated. When it comes to milk production, big is not necessarily beautiful, and the small farmer should not be allowed to fade away courtesy of the Government’s lack of real interest or support. I welcome the Minister’s views on that line of thinking.

Milk production, like farming in general, must not and cannot be allowed to fade into oblivion. If we were to let the industry die in Ireland and leave future generations to depend on an unreliable supply of imported milk and dairy produce, it would mark us out in the future as an irresponsible generation.

No one knows what the future holds for any industry. However, from the era of Frederick Joseph Flintstone through the Copper Age, the Bronze Age, the industrial revolution, the electronic world, and the IT world that we live in today, people have had to eat and drink to survive. We should never overlook the fact that farming is the only industry that has survived since then. I join the call to set up a task force.

In keeping with my earlier comments, I ask the Minister to assure that at least the top seven categories of dairy production, which are listed at table 4.16 of the ‘Statistical Review of Northern Ireland Agriculture 2008’, are represented on the task force, even if only on a pro rata production-level basis. By allowing such representation, the Minister, the Department and those of us who support milk producers will never be accused of backing only the large farming concerns.

If and when such a task force is set up, one of its considerations will be to undertake marketing milk as an all-Ireland product. With all-Ireland marketing as a possible long-term solution, the task force should seek regular updates on the benchmarking system that is soon due to get underway at the Moorepark dairy production research centre. Teagasc, in conjunction with the Irish Cattle Breeding Federation (ICBF) and the Dairygold Co-Operative Society is developing a pilot benchmarking scheme to benefit the dairy sector.

It is recognised that milk price volatility, particularly downward price movement, will force milk producers into lower-cost production. The benchmarking system at Moorepark will collect, validate, centrally store and draw up reports that dairy farmers can use prior to making key business decisions. My information is that the scheme captures various performance indicators electronically by a number of stakeholders, including milk processors, ICBF, marts, meat factories, banks and accountants. That data may then be used in the decision-making process.

The information gathered at Moorepark will assist producers across the island of Ireland and should help in providing what the motion calls for when it asks that consideration be given to:

“the way forward for the sector and how it can be assisted in advance of the abolition of milk quotas.”

I support the motion.

Photo of William Irwin William Irwin DUP

As a dairy farmer, I declare an interest at the outset. Perhaps I can share some of my experiences of that sector and highlight the present difficulties faced by producers.

The agricultural industry is a large and important part of Northern Ireland’s economy and the dairy sector is a significant player in that industry. It employs approximately 10,000 people, has an annual turnover of more than £500 million and worldwide annual product exports worth more than £300 million. In 2007-08, we enjoyed a period of increased prices. However, that was relatively short-lived.

Since October 2008, the price of milk per litre has been in a downward spiral. Surveying the present market shows the dairy industry in Northern Ireland to be in real difficulty. Producers are largely operating at a loss, receiving less than it costs to produce each litre of milk. Prices for Northern Ireland milk have been the lowest in Europe. With the added stresses and strains on farm budgets caused by meeting the ever-lengthening list of EU directives, and taking into account rises in input costs, it is no surprise to predict that the situation cannot continue.

Dairy farmers are under increasing pressure. When it is considered that many have borrowed significant sums of money to make their operations more efficient and to meet stringent EU demands, it is no wonder that many dairy farmers are considering an exit from the industry. That is the unfortunate reality. The figures show that, since 2003, the number employed in agriculture has fallen steadily.

Dairy farmers are trying to exist in a climate in which the drain on resources is becoming more unsustainable. Feed prices have rocketed. Fuel prices settled earlier this year, but have again started to rise. There has been a hike in electricity prices. Added into that mix is the very wet weather that we experienced in late spring, which led some farmers to put their cattle back indoors at more expense in feed bills and running costs at a time when the animals would normally be out at grass.

For the dairy industry in Northern Ireland to begin to compete, there must be predictability in the marketplace and in prices. In turn, that would allow producers to plan ahead in the knowledge that there was some degree of market stability. Stability is not a luxury at present enjoyed by the Northern Ireland dairy farmer. Recently, we have highlighted more than ever the need for a greater market for our produce. Export refunds can be fought for and may give some respite, but they cannot be a long-term answer to the industry’s problems.

We have to up our game and move to a situation in which we rely less on commodity-based products and more on value-added products. In response to a question that I put to the Minister in November 2008, she admitted that the change from commodity-based to added-value products must continue, but at a greater pace. I want the Minister to update the House on the progress of her Department’s efforts to quicken the pace in that regard.

The standard and quality of Northern Ireland dairy products is second to none. Without doubt, there is a bigger market for our produce, and we must work harder to develop our range of products in order to fully avail ourselves of the marketplace. On the UK mainland, milk production has fallen to 1971-72 levels. It is almost 40 years since milk production was so low in the UK, which proves that the exodus from the industry is staggering. However, one small positive fact is that there has not been the same exodus from the industry in Northern Ireland, because we have committed and resilient producers. Many families rise at 5.30 am and put in long, hard hours. In recent times, those families have, sadly, been working at a loss. No matter how resilient those farmers are, they cannot continue to do that indefinitely.

As I said earlier, the industry faces a daunting future if the current price trends continue, and the Northern Ireland economy will feel the strain along with the dairy farmer. Quotas will not be here forever, and we have a limited window of opportunity to address the problems that exist and prepare the industry for the stern competition that will inevitably follow the withdrawal of quotas.

Photo of David McClarty David McClarty UUP 11:45 am, 12th May 2009

The Member should draw his remarks to a close.

Photo of William Irwin William Irwin DUP

The industry deserves a redoubling of our efforts to meet those challenges. I very much support the creation of a task force to prepare a strategy for improving the Northern Ireland dairy industry. I support the motion.

Photo of Francie Molloy Francie Molloy Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. I thank the proposer of the motion for bringing it to the Assembly. It is a timely motion to raise awareness of the dairy industry and to explain the support and the work that is currently ongoing.

Other Members have raised the issue of the future of the dairy industry. To some extent, it has to change if it is to survive. Cross-departmental support is needed from the various Departments that are involved in agriculture. Promotion is also needed, and support to diversify the industry and to create the added value to milk products that everyone is talking about. That will require the Department of Enterprise, Trade and Investment (DETI) and others to come on board to support the industry and its diversification.

The new European rural programme contains projects and funding opportunities for farmers to come together to co-operate and develop in the future. I know that farmers have operated very independently in the past, but it is very important that they come together as a group of farmers to benefit and to build the industry. We know that, throughout Ireland, the co-operative business model has been very successful in the past. Unfortunately, that has been taken over and bought out by big business. Why is that? It has been to the detriment of the farming industry, because the support base that had been brought together to build the industry in support of each other has been lost right across the island. The idea of bringing farmers together in co-operative businesses is important.

George Savage made a point about the issue of school milk. I think that we all remember that quarter-pints or third-pints kept us going when we were at school. It is an important aspect, because people are supported through the supply of milk to schools and because it encourages people to drink milk at a very young age. I welcome the cross-departmental support for the provision of school milk and the support to the dairy industry to enable it to deal with that.

It is also important that farmers come together to challenge the big supermarkets on price. They should buy local and should pay a realistic price for the work that goes into producing milk. The role of the supermarkets is very important, because they came together as a big industry to reduce prices in one sense, but also to create the facilities for themselves.

It is important that farmers also come together to challenge the prices that they are being offered, which, in the light of how much it costs to produce milk, are unrealistic.

For many years, the milk cheque has been the main source of income for dairy farmers, and it has been important in keeping the industry going for as long as it has been. It is important that we do not lose any elements of that industry, because it is one way that the stability of the rural economy in the future will be sustained. Therefore, it is important that we maintain and support that industry in whatever way possible.

Sinn Féin supports the spirit of the motion and commends it to the House. The first job of any task force should be to work cross-departmentally and in Europe, using the various existing strategies, to get as much support for farmers as possible. In addition, the Department must maximise on the work that has been done to date in order to work out exactly what the task force will do when it comes into operation. I support the motion. Go raibh maith agat.

Photo of Tom Elliott Tom Elliott UUP

I thank those Members who tabled the motion, and I apologise for not being in the Chamber for the start of the debate. I declare an interest as a milk quota holder.

Anyone who has been listening to the debate will realise how depressing the situation is for milk producers. When the milk quota system was established in the early 1980s, many people in this part of the world thought that it would be hugely detrimental to Northern Ireland milk producers. In fact, because that system enabled milk production to be controlled throughout the European Union, it helped sustain prices for small and medium-sized dairy producers here, allowing them to continue producing milk.

The milk quota system is one area for which being part of the United Kingdom was hugely beneficial. That is because quotas were able to be bought and sold between the UK regions. Moreover, the system allowed Northern Ireland dairy producers to increase the overall amount of quota in this area. In fact, Northern Ireland farmers are now producing far more milk than they were when quotas were introduced, or even 10 or 15 years ago. That means that Northern Ireland is probably the only region in Europe that has increased its volume of milk production.

Although that increase in production has benefited farmers here, it has also been to their detriment. That is because they are so reliant on the export market. Compared with dairy farmers who are situated closer to larger cities and populations in mainland Britain, Northern Ireland farmers do not have the same market for high-value — mainly liquid — products. Farmers here rely very much on exports. In fact, 80% of our higher-value products are exported, which means that we have to manufacture more of our milk into such products and that we are very reliant on milk powders.

Another difficulty is that in order to compete with dairy farmers in the southern hemisphere, farmers here must try to produce milk at lower prices. Southern hemisphere dairy farmers can produce milk cheaper, given that the climate in places such as Australia and New Zealand means that grass can be grown there much easier and that the cattle there are more accustomed to being outside, whereas cattle here must be kept in for at least six months of the year. Nevertheless, we must compete with those types of producers in the world market, and that makes things more difficult.

As other Members suggested, we must concentrate more on manufacturing value-added milk products. I must commend those in the manufacturing industry who have done a good job of sourcing good sales destinations for our products. It has not been easy for them to compete in the world market.

The proposal to end the milk quota system will have a significant effect on the industry in Northern Ireland. I appreciate what Mr Molloy said about co-operating with the Republic of Ireland, but the difficulty is that we are competing with it, too. Some milk product manufacturers in the Republic of Ireland have been buying a great deal of milk from Northern Ireland. If the quota system is abolished, those manufacturers will be able to expand their production significantly. They will become more self-sufficient and will not need as much Northern Ireland produce, which, in turn, means that we in Northern Ireland may face an even greater reduction in milk prices.

I agree with those who tabled the motion that a task force should be established.

Photo of David McClarty David McClarty UUP

I ask the Member to draw his remarks to a close.

Photo of Tom Elliott Tom Elliott UUP

The key is to concentrate on value-added products to get more money for our producers.

Photo of Thomas Burns Thomas Burns Social Democratic and Labour Party

I support the motion. I am not a farmer and have no farming interests, but I live in the countryside, so I will approach the issue from the perspective of a rural dweller. I recognise the importance of the dairy industry to the countryside. Many people are employed in the production of the fresh milk that we drink every day and the cheese and ice-cream that we regularly enjoy, making the industry one of our most important.

I recall that, as a young boy, all our neighbours were dairy farmers who worked seven days a week, regardless of whether it was Christmas Day, Boxing Day or New Year’s Day; they had, perhaps, 10 days off a year. We thought that we were at the top of the market at that time. One of our neighbours set up his own milk-processing business, and we had our first experience of those wee cartons of milk, which was a move away from the traditional bottles of milk that the milkman left at the door. We thought that we were very progressive and moving forward in our part of the world.

However, there is none of that now at all; it is all change. The entire industry is in decline. Only two of the families who lived near us still work in the dairy industry; they have huge dairy herds and employ a couple of men. Instead of having to work night and day, 365 days a year, those farmers can now take Saturdays and Sundays off because other people are there to help out. The farmer might have to milk the cows himself only once every three weeks. However, fewer families are involved in the dairy industry.

I support the motion and join in calling for a task force to be set up. The Assembly must realise how important the dairy industry is to Northern Ireland.

Photo of John McCallister John McCallister UUP

I declare an interest as one who owns and manages a dairy farm and who still milks a few times a week. That said, I am not sure whether the protocol really requires me to declare an interest, given the amount of money that the average dairy farmer is losing at the moment.

As colleagues said, the difficulties in the dairy sector are well documented. A huge job of work must be undertaken to rebuild confidence in the dairy sector because it has taken such a knock in recent times.

When proposing the motion, Dr McCrea mentioned some of the difficulties that farmers face: the bad weather that we had last year and soaring costs. Although the cost of fuel has come back down, when silage was being made last year, it was particularly high, and feed and fertiliser costs have been horrendous over the past year.

Photo of Tom Elliott Tom Elliott UUP 12:00 pm, 12th May 2009

It has been suggested to me recently that dairy farmers have been losing approximately £2 a cow a day over the six-month winter period. Will the Member confirm whether that is reasonably accurate or a close estimate?

Photo of John McCallister John McCallister UUP

I reckon that it is very close. The losses incurred over the winter have been staggering. There are also issues with credit facilities, as Dr McCrea said, and many dairy farmers spent money over the past couple of years to meet EU requirements. Although there was welcome help from DARD’s farm nutrient management scheme, farmers would still have shouldered 40% of the costs of those schemes at some point. That has left a legacy of repayment, which has to be factored in. I agree strongly with my colleague’s point about farmers counting that loss, and I take issue with the comments of some of the SDLP Members, because they are fixated with the size of dairy herds and the idea of large farms versus small. If a farmer is losing £2 a cow a day, having an extra 100 cows would not be a money-spinning idea.

The sector is losing money, whether it is measured in cows or litres a day. Large farms are being hit hardest, because there is nowhere to go, and paying for labour exacerbates the problem. Sometimes, smaller farmers can resort back to the very tight unit that relies solely on family labour. I caution against saying that our larger dairy farmers are the problem; there are problems right across the sector, and if a farmer is losing money, having a large farm is not advantageous at the moment.

What are the solutions? We are facing a serious problem worldwide. We are competing not only with countries in the southern hemisphere, which have the option of cheap production systems, but with the Republic of Ireland, some parts of which have cheaper production levels that we cannot match. We must remember that we are competing with the Republic of Ireland in production and for processing jobs.

I remind the House that the agrifood industry is still the largest employer outside of Government, so it is of huge importance to the Northern Ireland economy. The role that the dairy sector plays in the agrifood industry is enormously important and influential. If a meaningful task force is set up to report quickly on what can be achieved, it is absolutely vital that it examines a range of issues, such as moving to value-added products, reducing some of our reliance on commodities and getting help to stabilise the market in the short term.

I worry that if we lose too many dairy farms, they will be gone for good. As a result, we will not only lose dairy farms, we will lose processing jobs, and that will have a wider detrimental effect on our economy generally. The sector is too important not to be helped and assisted through this very difficult time.

I urge the Minister, the Committee and the Assembly to play a role in supporting the sector. We must encourage it in any way possible.

Photo of David McClarty David McClarty UUP

The Member should draw his remarks to a close.

Photo of John McCallister John McCallister UUP

That encouragement could take the form of emergency measures such as export refunds. We must build up the industry and ensure that it is fit for the future.

Photo of Willie Clarke Willie Clarke Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. I declare an interest in that I drink milk, and, as you can probably see from my physique, I eat a lot of cheese.

A Member:

You drink Guinness, too. [Laughter.]

Photo of Willie Clarke Willie Clarke Sinn Féin

Although I broadly support the motion, the call to set up a task force pre-empts the dairy process and competitiveness study. I am not against a task force being set up, but as Pat Doherty mentioned, setting up a task force may be recommended by the study. We can consider that matter when the report is complete in December.

Export refunds are also important for the dairy sector. Along with her Executive colleagues, the Minister of Agriculture and Rural Development has worked hard to secure the reintroduction of export refunds for dairy products, which was pressed for by the industry. Great emphasis was placed on that, and a large team was sent to Brussels to fight for the cause.

My contribution to the debate will be based on the need to get involved in niche markets, the need to move the industry away from commodity milk powders, and the need to get a greater return for well-branded, high-value produce. Dairy farmers in the North of Ireland, like farmers throughout Europe, find themselves in a new period in which agriculture has been shaped by an EU policy that seeks environmental and rural sustainability.

Future farm prosperity will be dictated by the marketplace. Free market economies always seek to take full advantage of returns against the most limited resources. Therefore, milk producers must make decisions on the system and scale of enterprise that take account of the factors that limit efficiency production on their own farms.

There are two routes that farmers can take to remain economical. They can produce milk cheaper than it is produced by other farmers, or they can target quality milk at high-value markets. Given the lack of scale, the first of those routes is not an option in the North of Ireland. Therefore, quality milk must be delivered to the processor at a competitive rate.

By adhering to principled production systems, farmers allow consumers to enjoy clean milk and dairy products in the various rural areas in which they were produced. That is an important policy that can secure an improved and sustainable return in the marketplace, but there must be trust and true integration in the supply chain.

Dairy farms, like all other farms, can make more money by either —

Photo of Tom Elliott Tom Elliott UUP

I thank the Member for giving way. Does he agree that it would be extremely helpful if voluntary modulation was taken out of the system in Northern Ireland and that that would be beneficial to the incomes of dairy farmers?

Photo of Willie Clarke Willie Clarke Sinn Féin

The Minister heard that question, and she will respond to it.

Photo of John McCallister John McCallister UUP

You are on message today. [Laughter.]

Photo of Willie Clarke Willie Clarke Sinn Féin

Higher profit, rather than keeping costs low, is the goal. The farm nutrient management scheme was a big step, but there is an opportunity for a lot of farms to cut energy costs by using renewable energy and anaerobic digestion. That may be the next step that some farms can take as a co-operative under the rural development programme. Slurry is a valuable resource that can help to reduce the amount of energy that is needed on dairy farms.

It is almost always more profitable to focus on the income side rather than to try to decrease expenses. Marketing is key to that, and products that can be produced efficiently include milk, yogurts, soft and hard cheeses, ice cream and butter. Developing a niche market is vital to the success of an on-farm processing plant. The decision of whether to pursue direct sales or to utilise established independent retail stores through a distributional channel is also important.

There are opportunities for on-farm processing under the rural development programme. It is not for everyone; do not —

Photo of John McCallister John McCallister UUP

I agree with the Member that niche markets could play a very important part. However, one of the factors that makes Northern Ireland unique is the success that it has achieved in the quota system. Buying in quotas from the rest of the country has meant that our milk production is double what it was in 1984. We produce far too great a volume of milk and we have to export it, whether to the rest of the UK, the Republic of Ireland or the rest of the world.

Photo of Willie Clarke Willie Clarke Sinn Féin

Buying quotas from the rest of the country? I do not know where we bought them from, unless we have drifted off to an island somewhere — [Interruption.] I do not think we bought them from the South either.

Dairy farmers who meet organic requirements are one step further towards having available markets for their products; they have set an example. High quality in cheeses and ice creams is also important. I admit that that is not for everyone, and I say that to the Member through the Deputy Speaker. However, many supermarkets already stock organic milk, yoghurt, butter, ice cream and cheese.

Photo of David McClarty David McClarty UUP

Will the Member please draw his remarks to a close?

Photo of Willie Clarke Willie Clarke Sinn Féin

There is an onus on us to develop those products. In my constituency of South Down, no one is making cheeses. There are opportunities for lots of dairy farmers.

Photo of Michelle Gildernew Michelle Gildernew Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. I thank Dr McCrea, Mr Poots, Mr Irwin and Mr T Clarke for bringing this issue forward for debate. It is a serious subject, and we must do all that we can to help the dairy sector as it faces the challenges ahead. That is why Arlene Foster, the Minister of Enterprise, Trade and Investment, and I co-operate closely for the good of the dairy industry and have agreed to support a dairy sector competitiveness study. I will say more about that shortly.

Before I address the crux of the motion, I wish to stress the important contribution that the dairy sector makes to the local economy. There has been a strong consensus on this and all Members recognise the importance of the dairy sector. The total gross turnover of the milk and milk-products processing sector in 2007 was almost £700 million, which represents 25% of the total turnover of the food and drinks processing sector. In addition, the processing sector employs about 2,400 people.

For many years, dairy farming has been recognised as the sector most able to generate a positive return on investment, but not at present. There is a spake in our country that the banks will give you an umbrella when it is dry and take it off you when it starts to rain. Farmers across all the sectors are feeling the effects of that problem that at the moment. I agree wholeheartedly with the comments made about banks and their contribution. I agree with Dr McCrea on that.

As other Members have said, the milk cheque was for many years the only stable thing in agriculture. Almost 4,000 dairy farmers in the North are affected by the downturn in fortunes. That is a big hit on our economy. Over the years, dairy farmers have been progressive and, as many Members have said, have invested for a sustainable future. Since 1995, the volume of quota held by producers has increased by more than 40% to almost 1·9 billion litres, and the average size of a herd has increased by more than 60%, from 45 cows to 73 cows. That compares with an average herd size of 45 cows in the South and 35 cows in 15 member states of the EU.

Structurally, our dairy farms look good, and that should make them more resilient to the ups and downs of modern farming. Dairy processors have also been proactive, with help from DARD and Invest NI, in improving their overall competitiveness. Nevertheless, it is widely held that the industry cannot be complacent with the pace of progress and there is no doubt that it still needs to do more. Not so long ago, the dairy industry enjoyed the fruits of buoyant world markets, but what a change there has been in over 12 months. In 2007, the milk auction broke the barrier of 30p per litre and dairy farmers were full of optimism, but it is now below 20p per litre and there is an air of despair. We must look at the reasons for that.

I acknowledge that the global economic downturn presents difficulties. We must also face the fact that we live in a world in which markets fluctuate. The industry must take the good days with the bad and not turn to Government when times are hard. It is vital that the industry is market-led and capable of operating without Government subsidies. It does not make sense to produce milk and milk products that customers are not prepared to buy or for which they will give only a poor price.

So what is the crux of the problem facing our dairy industry? First, the liquid markets here and in the South are small, utilising, respectively, only 14% and 10% of production compared to more than 50% in Britain, which is why there is such a difference in price. That is where a good return can be realised.

Our industry remains heavily reliant on the manufacture of commodity products, such as milk powders for export markets, despite 30% of milk being sold to processors in the South. That might have been fine when the EU had strong market support mechanisms in place and the South could not increase its production; however, that position has changed.

As regards the liquid milk market, George Savage and Francie Molloy spoke about the EU school milk scheme. I support that fully, as demonstrated by my and the Executive’s agreement to the top-up subsidy. However, even if there were a 100% uptake of the scheme in nursery and primary schools, it would utilise only another four million litres of milk out of our production of 1·9 billion litres. Therefore, clearly, it is not the answer. However, we need to find markets for such high-price products.

Since 1995, there has been free movement of quota between England, Scotland, Wales and here. As a result of that policy decision and the decrease in production in Britain — an issue about which Mr Elliott in particular spoke — our producers have been able to expand production and are now in a much stronger position than producers in the South. That is why producers in the South were keen to have an increase in quota under the CAP health check. Like us, they want a soft landing when the milk-quota system ends.

The 2003 CAP reform presented the dairy industry with a strategic challenge, because up to that point it was heavily reliant on export refunds. With the reduction in those and intervention prices, it was clear that dairy processors had to move away from basic commodity production and focus increasingly on higher-value products.

However, six years have passed, and the dairy industry is still reliant on basic products. One might ask whether Government in the North provided any help at all in that time. It did, and the industry was encouraged to avail itself of assistance from DARD and Invest NI. I am glad that some producers in the dairy sector availed themselves of that assistance, but more could have.

More recently, the CAP health check made it clear that milk quotas will end in 2015; it will be good to get rid of the red tape and bureaucracy associated with the regime. However, let me be clear: the end of milk quotas will increase the momentum towards a completely market-led agriculture industry, and the North is heavily reliant on external sales.

With changes in global markets and increased competition for commodity products, the future sustainability of the dairy industry will be determined by our ability to respond to changing times. We have done it in the past, and the current challenge is to improve our product mix in line with consumer expectations in order to deliver higher-added-value products and to bring forward products different from those of our main competitors. Only that will shield the local industry from the volatility of global trading.

We need to export milk rather than milk powder, for which there is a poor price. Some companies have already been very successful in exporting dairy products. Fivemiletown Creamery, for example, exports its high-quality cheeses to the US, and a niche market in the US is massive compared with our market here. Therefore, it is important to look at how companies can add value to their product. To that end, technologists at CAFRE’s Loughry campus support processors with technical training and product development. That work is vital, and I encourage the industry to utilise it more.

Dr McCrea made a point about the number of staff working in Dundonald House; we also have technological advisers working out of the DARD direct offices. I do not have time to go through the enormous range of measures that we have in place; however, I am happy to address the Member’s comments in writing.

As I indicated in my opening remarks, Arlene Foster and I are fully apprised of the difficulties that the dairy sector faces and have agreed to support the dairy sector competitiveness study. The aim of the study is to ensure that the North has a sustainable dairy sector, with a structure to enable it to compete globally, and the Committee for Agriculture and Rural Development and the Members who proposed the motion are already aware of that. In fact, I understand that they have received an industry presentation on it.

It is important that the study is evidence-based and not an exercise that looks at the desired results and works backwards. I hope that it will put dairy processors in a better position to recognise the challenges facing the industry and to make strategic decisions about the future direction of their businesses.

A vibrant dairy-processing sector is essential in helping to ensure that farmers receive a good return for all their investment and hard work. I recognise the hard work, long hours, early starts, and so forth that are involved. That sector is important to me, as Minister of Agriculture and Rural Development, and to the Executive.

I am glad to report the positive response from processors to the exercise. I assure the representatives of producers of our full engagement with them throughout the process. Their involvement is important in ensuring that the conclusions reflect what is best for the industry.

Dr McCrea made a point about the Red Meat Industry Task Force. When that body was commissioned, who would have thought that the dairy sector would be in its current position?

Change will not take place overnight. In view of that, my Executive colleagues and I, together with a leading representative of the industry, met the Secretary of State for Environment, Food and Rural Affairs. We pressed hard for the EU Commission to take the necessary measures to stabilise the market. Our efforts resulted in the reintroduction of export refunds, and I am glad that there has been some improvement in recent milk auction prices. When Commissioner Fischer Boel visits the Balmoral Show later this week, I will have the opportunity to update her on the difficulties that the dairy industry here continues to face.

I agree that the motion is important. An active engagement and working relationship with all parts of the industry means that I recognise the difficulties that are faced by all those working in the dairy sector, both producers and processors. I am encouraged that everyone in the industry will contribute constructively to the current study. I am confident that that will prove to be a watershed in the well-being of the sector.

Work on the study is under way, and I expect a report towards the end of the year. Until then, it would be premature to speculate on its outcome or to consider setting up a task force. However, I do not rule out that possibility; I will wish to examine the study’s recommendations. I join Members in wanting the best for the dairy industry.

I look forward to working with the members of the Committee for Agriculture and Rural Development. We can work collectively and, as Members have pointed out, we should chart the future together. The consensus that has been reached and the comments that have been made during the debate are helpful. We want to continue working in partnership for the betterment of the dairy industry. That can be achieved. Go raibh míle maith agat, a LeasCheann Comhairle.

Photo of Edwin Poots Edwin Poots DUP 12:15 pm, 12th May 2009

Over the past 10 years or more, Governments in the UK and beyond have operated a low-cost food policy. That helps Governments in many respects, including keeping down inflation. Unfortunately, the primary producers, rather than the supermarkets, have had to bear the responsibility for delivering that policy. In the past few weeks, Tesco, for example, announced a £ 3·1 billion profit. Given Tesco’s investment in the development of many new stores in the past year, that figure does not reflect its real profit.

When two litres of milk leave a farm, they cost 34p, but they are sold in Tesco stores for £1·28, which illustrates where that company makes its profit. Tesco can make 400% profit from milk that a farmer produces at a loss, and £3 billion off the backs of consumers. Therefore, current policy is not good.

The national Government are failing the people of the United Kingdom by allowing supermarkets to exercise such power. For the benefit of Willie Clarke, by “national Government”, I mean the UK Government. Mr Clarke did not understand the term when John McCallister used it in an earlier question, and I remind Mr Clarke that we are in the UK. When one company accounts for £1 in every £8 spent on the high street, the Government must sit up and accept that that company is far too powerful. The Assembly must reflect on such matters, because Tesco is turning over the farming community and not giving the consumer value for money.

Photo of Ian McCrea Ian McCrea DUP

Yesterday, I met a farmer who suggested that a uniform price should be paid for milk in supermarkets across Northern Ireland. Does the Member consider that one way to prevent supermarkets from selling milk at increased prices and shafting consumers?

Photo of Edwin Poots Edwin Poots DUP

No, because I do not believe in totalitarianism. I believe in a free economy. I encourage individuals to shop around, because my local butcher supplies milk at a considerably lower price than the supermarkets, so perhaps people are better to support their local butchers.

Photo of Michelle Gildernew Michelle Gildernew Sinn Féin

Yesterday, I spoke to the Minister for Environment, Food and Rural Affairs. I raised with her the issues about loss-leaders in supermarkets, the strength of supermarkets and said that more must be done to regulate what the Member talked about. I said that we supported the introduction of a supermarkets’ ombudsman. I recognise that the high profits that supermarkets make are very unfair when one looks at the challenges that dairy farmers go through.

Photo of Edwin Poots Edwin Poots DUP

In the run-up to Christmas 2008, supermarkets used alcohol as a loss-leader. One company made a loss of more than £20 million on alcohol in December 2008, while it ripped off people who were buying basic food products, which are a necessity.

Aside from the supermarkets, the cheap food policy is not sustainable, and it also incompatible with food security. When I show people around this Building, I point out that the Senate Chamber was used to keep the north Atlantic shipping routes open so that Britain could have enough food to feed its people. I hope and believe that we are not entering a situation comparable to a world war, but our country should not be wholly reliant on food from South America and the southern hemisphere in general.

The same guarantee that can be given on the quality of the food on the shelves that comes from this country cannot be given on that from the southern hemisphere. It is important that consumers can be given guarantees that the food that they eat is of the best quality. That is generally the case for the food that is produced in the United Kingdom and across Europe.

I do not have to declare an interest in the debate as I am not a dairy farmer; I could declare an interest in eating ice cream and bowls of rice pudding. I can recall being told in the 1980s that export refunds and interventions were needed because there was an oversupply of milk. We heard about butter mountains and milk lakes. That was eventually done away with, which was to the good. Dairy farmers and the dairy-processing sector were then able to thrive. I am concerned that we are returning down that route, which is not the answer. It is a short-term solution, and we need to deal with the longer term.

There has been a failure in the processing sector in Northern Ireland in that it is over-reliant on milk powders as a commodity and that it has not established other markets to the extent that it should have. Various Members spoke about getting into niche markets. That is easier said than done, and that is why a task force is a necessity. The Red Meat Task Force carried out work to identify what farmers needed to get for their products. Farmers were quite alarmed when they heard some of the outcomes of the Red Meat Task Force report, but, when they read it and gave it full consideration, they realised that it was the reality. Reality is also needed in the dairy industry about the return that it needs and how those returns can be achieved. There are no easy fixes.

Willie Clarke talked about niche markets. It will take a long time to get into niche markets, and the problems of the dairy industry will not be solved in 10 years, never mind one year, by going down that route. Nonetheless, we do need to go down that route as one aspect of resolving the issue.

William McCrea set the scene for the debate with great clarity. Pat Doherty expressed concern about the timing of the establishment of a task force, but he fully supported the concept. George Savage talked about the differential with the UK milk price, and he referred to school milk, which, as the Minister pointed out, accounts for 4 million litres of the 1·9 billion litres that are produced in Northern Ireland. Therefore, although such a measure can provide modest help, it is not the answer. A cocktail of measures is needed to assist the dairy industry.

George Savage expressed concern that the debate would be merely a talking shop and said that better promotion is needed. PJ Bradley talked about large farmers becoming larger and said that there must be equality. There is equality in that the price that a farmer gets for his milk is the same whether he has 400 cows or 40 cows. Unfortunately, I do not believe that smaller herds will be sustainable in the dairy industry in the long term. That is just the nature of the industry.

William Irwin said that prices have fallen to an unsustainable level and that the number of dairy producers throughout the UK has fallen steadily since 2003. He maintains that export refunds are not the answer in the long term and that there must be a switch from commodity to value-added products.

Francie Molloy talked about the need for a cross-departmental approach and for greater co-operation among various Departments. Although I agree with that, I believe that the focus must stay with the Department of Agriculture, which is the lead Department on the matter. In the main, answers to the problem will come from that Department.

Tom Elliott talked about quota expansion and about more milk being produced in Northern Ireland. However, as considerably less milk is produced in the rest of the UK, that is not the problem, albeit Northern Ireland produces a huge amount of liquid milk that must be dealt with better.

Tommy Burns shared an interesting reminiscence with the House. John McCallister mentioned that the problem is worldwide and that Northern Ireland competes with the Republic of Ireland; he said that short-term action must be taken. I suppose that that is where export refunds and intervention come in. However, those measures can only be short-term solutions.

I have discussed Willie Clarke’s comments on the niche market. I have explained to him that the quota came from that other part of our country of the United Kingdom of Great Britain and Northern Ireland, namely Great Britain.

The Minister talked about the contribution that the competitiveness study would make and said that the time might not be quite right; she also talked about the air of despair. I am concerned that she gives the impression that if there is no market for dairy products, farmers should simply stop milking their cows. Better ways to establish a market must be identified.

Question put and agreed to.

Resolved:

That this Assembly recognises the difficulties facing the dairy sector and calls on the Minister of Agriculture and Rural Development to set up a task force to consider the way forward for the sector and how it can be assisted in advance of the abolition of milk quotas.

Photo of David McClarty David McClarty UUP 12:30 pm, 12th May 2009

The Business Committee has agreed to meet immediately upon the lunchtime suspension. I propose, therefore, by leave of the Assembly, to suspend the sitting until 2.00 pm.

The sitting was suspended at 12.33 pm.

On resuming (Mr Speaker in the Chair) —