Dairy Industry

Part of the debate – in Westminster Hall at 10:41 am on 17th April 2002.

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Photo of Ann Winterton Ann Winterton Conservative, Congleton 10:41 am, 17th April 2002

Thank you, Mr. Beard; it is nice to see you in the Chair.

I, too, congratulate Mr. Heath on his good fortune in securing this morning's debate. We have almost all been singing from the same hymn sheet, and I hope that that will send the Government a clear message about the unanimity of view on what is happening in the dairy industry at present, and how vital it is for the problems to be tackled.

The past year has brought dairy farmers varying fortunes, with the fluctuation of milk prices and the onslaught of foot and mouth, one consequence of which was to reduce significantly the UK breeding herd. However, we all remain concerned that the commitment shown by dairy farmers is not reflected in the prices that they receive for their produce. The dairy sector probably has to fund more capital investment, place more emphasis on animal health and assign more commitment to its work than most other sectors in the agricultural industry. It is an outrage that dairy farmers work longer than the average working week and yet take home less than the minimum wage.

At the beginning of 2001, higher prices led to a sense of confidence and an enlargement of scale in the dairy sector. Milk producers had previously seen a decline in incomes for almost three years. However, there has been a notable and ongoing decrease since the end of last year, continuing throughout this year and this month. The National Farmers Union estimates that the average producer price in April will be 16.5p per litre. If those trends continue, together with seasonality, producer prices may be further depressed, perhaps as far as the trough of prices in May 2000. That would be seriously bad news.

Our milk producers receive the poorest prices in Europe, yet continue to abide by the highest health, safety and hygiene standards of all member states. The Milk Development Council announced on Monday that it intends to commission a survey to investigate why there is such a price difference between the UK and the rest of Europe.

Our dairy farming industry should not experience, and cannot stand, yet another prolonged period of uncertain and depressed prices. Some factors are uncontrollable. For example, world commodity prices have dropped, and the United Kingdom's milk production during the past few months has been greater than expected, which has led to increased competition and has pulled prices down.

As in every sector, UK dairymen remain disadvantaged by the value of sterling in comparison with the euro. This year, £97 million of agrimonetary compensation is available to the agriculture industry, although that is the maximum and the European Commission has yet to rule on the official sum. Approximately £51 million of that figure should be available to the dairy sector. When he replies to the debate, will the Minister indicate the Government's approach to agrimonetary compensation, and whether he recognises the part that that plays in sustaining dairy farmers' profitability?

It is crucial—this has been said several times—that milk prices are maintained at retail level, and that a fair and just proportion of the price is reflected in producer gain. At the time of the April 2001 retail increase, the National Farmers Union was inundated with calls from the public who sought assurance that price rises would mean more money for dairy farmers. Every call made it clear that there was no problem with paying a little extra for milk so long as that extra money was returned to dairy farmers. I say to my hon. Friend Mr. Liddell-Grainger that I shall continue to buy Yeo Valley organic products, which I have done since I visited Yeo Valley when I served on the Select Committee on Agriculture. They are excellent products, and I was delighted to hear that the company is being honourable by continuing to honour contracts to its producers. Long may that continue.

However, all of that could prove of little comfort to producers. It remains clear that the allocation of the final retail price needs further investigation. I agree with my hon. Friend Mr. Wiggin that many believed that the conclusions of the report by the Office of Fair Trading were totally unsatisfactory. Other members of the food chain must recognise that farmers should receive a better and fairer share of the retail price.

The recent Curry report highlighted the need for farmer collaboration, and endorsed the findings of the milk taskforce report. I quote:

"We strongly believe in the potential of collaborative ventures for all farmers large and small. We encourage the competition authorities to consider the wider market context, particularly the consolidation of international suppliers, when looking at new or expanding collaborative ventures."

DEFRA has highlighted the contrast between UK farmer control of production and that in the rest of the world. It states that in 2001, the UK's largest milk group controlled a mere 16 per cent. of production, compared with Sweden's 61 per cent., New Zealand's 90 per cent. and Denmark's 92 per cent. The latter figure impacts strongly on the UK market, because Arla Foods is the company that uses that milk.

Farmers are already doing their utmost to help themselves through the prolonged crisis, but dairy co-operatives are another valid way forward. In some recent mergers, farmers' co-operatives have expressed the hope that they will be able significantly to cut administration and transport costs, and the objective to raise capital and invest in processing, which will allow members to benefit from the added margins between the farm and consumer. What is the Government's view on co-operatives raising money to invest further up the supply chain? Do they have a view on the restrictions and costs that must sometimes be met by those ventures? If those are to be encouraged, that problem should be considered.

Conservative Members are keen for an improvement in honesty in labelling, and would like to see all milk and milk products labelled with the country of origin and the system of production of all major ingredients. If milk is imported, we do not want that information in tiny figures at the bottom of the label. We must enable consumers to choose British milk and British dairy products, which they know that they can trust. Yesterday, I went to the launch of White and Wild, which is a new, high-quality premium product. It is organic milk that comes from farms that have a whole farm biodiversity plan, and it is being sold in about 60 supermarkets from next Wednesday. That is one way forward, and let us hope that the British public will buy that milk, and encourage that movement.

Along with the general decline in milk prices, bovine tuberculosis is a real threat and a constant worry for farmers. In its January 2001 report, the Agriculture Committee called for Government action on farmers' "growing sense of desperation" at the continued spread of the disease. TB testing has been delayed because of foot and mouth disease, but the provisional Department for Environment, Food and Rural Affairs statistics for the period between December 2000 and February 2001 show that 2,231 cattle were compulsorily slaughtered as reactors or contacts. As a result of foot and mouth, we cannot assess the situation from last year's statistics on TB reactors but the release of figures from the most recent batches of testing is imminent, and will prove extremely telling. I have no doubt that they will highlight the sheer extent of the desperation that the Government's strategy against TB is causing among farmers.

I have raised a few issues currently facing the industry. As always in this debate one has to gallop up to the final winning post, as it were, but I leave that for the Minister to do. I am trying to leave him sufficient time to do so. It is in everybody's interest in the United Kingdom that a sector as suited to the UK climate as dairy farming should continue and prosper. However, the Government appear prepared to see that asset squandered, and their lack of action seems almost a refusal to defend it or to instigate a recovery in a very fine sector of our agricultural industry.