War in Ukraine: UK Farming and Food Production — [Dame Angela Eagle in the Chair]

Part of the debate – in Westminster Hall at 9:30 am on 20th July 2022.

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Photo of Chris Matheson Chris Matheson Labour, City of Chester 9:30 am, 20th July 2022

I absolutely do, and the hon. Lady is right. Many of those workers are back defending their homeland—who can blame them for that? The resultant labour shortages have been met with an inevitable demand for increased wages. One Cheshire farmer told me of an 11% increase in this year alone. Without sufficient labour, farms simply cannot be profitable and, frankly, sometimes cannot work. As one farmer put it, “We’re all running hand to mouth.”

I am not going to query or reject the idea that farm labourers should not get a decent pay rise. I am a trade unionist and I absolutely support that, but the costs need to be shared fairly across the sector and borne by the whole chain. Day-to-day costs are rocketing. Fertiliser, which can increase crop yield by about 30%, has become cripplingly expensive. One Cheshire farmer estimated to me that his fertiliser costs had risen by 300% in just over a year, while another suggested that he was being optimistic and it was more than that.

The situation has not been helped by the closure of the CF Fertilisers factory in Ellesmere Port. I know how hard my neighbour and hon. Friend Justin Madders has been working to find a solution to keep the factory open, and he has told me that he is in regular contact with the Minister and her Department—I thank her for that. I desperately hope that we get a solution to the problem, and I thank them both for their work.

Without fertiliser, crop yields will fall. I remind the House that farmers do not tend to buy fertiliser on the spot. They are already ordering their supplies for next year, just as they are already planning crops, ordering animal feed and securing energy deals for six, 12 and 18 months ahead. The uncertainty globally and domestically is impossible to live with.

One of the big asks of the NFU is to have a gas fertiliser price index. Fertiliser markets are opaque, meaning that farmers have low trust in those markets, and are receiving poor market signals to enable them to be responsive. That is a threat to confidence, because farmers do not want to invest in fertiliser, which is stalling fertiliser sales, as well as threatening farmers’ productivity and the UK’s productive capacity. The NFU wants farmers to have access to proactive forward prices on fertiliser, allowing producers, distributors and farmers alike to manage their risk. That will require Government to establish a trusted gas fertiliser index with the industry, to drive transparency in fertiliser markets.

In addition, the industry needs to be able to see clearly where the market is relative to the global benchmark prices. That is well established in the grain, dairy and meat markets. It is also a fact that much of the gas that was used to produce the fertiliser came from Russia. I welcome the fact that we are reducing—I hope to zero—any dealings that we have with Russia, including buying gas from it, but we have to recognise that that will have a major impact on this market.

Fuel costs are also on the rise. Red diesel is more expensive, with one farming contractor I know of having to increase their cash reserve by an astonishing £50,000 to pay for fuel costs. Meanwhile, farmers pay more than ever to fill up the machines that keep their businesses going. Those affected ask me why crude oil prices fall, but their costs go up. The answer is sadly clear: this is a broken market, and without action to address it, things will only go downhill.

Food production relies very much on the packaging available, much of it specialised for certain foodstuffs. Even essentials such as cardboard and the necessary plastics for meat storage are in short supply, before we consider more specialised materials such as silage. British food has some of the lowest carbon footprint in the world, due to how efficient British farmers are, but there is only so much they can do on their own. Such businesses are starting to feel that they are, almost literally, at the bottom of the food chain.

As things stand, the risk is entirely with the farmer. For example, a potato farmer stored his crop from the 2021 harvest until June 2022—just last month—without earning an extra penny from the processer. One grower was paid £200,000 for potatoes, which sold in the supermarket for £4.2 million, so the grower received only 4.7%. Free-range eggs have also gone up at least 20p per dozen in supermarkets, but only 5p of that increase goes to the producer. Farmers want to grow, to survive and to flourish, but we must have a market that allows that. We need to take the bottlenecks out of the system, so that it flows more smoothly. Only by threatening to withhold supplies did dairy farmers secure a slightly better deal, and they are still struggling.

This period of unprecedented agricultural inflation coincides with the introduction of the agricultural transition plan from the Department for Environment, Food and Rural Affairs, under which the old direct support payments to farmers in England under the common agricultural policy are being reduced. Farmers have already received significant cuts to those old direct payments, with further to come this year. The largest farms will receive cuts of 40%.

The Government are in the process of rolling out new support schemes, but the NFU is seriously concerned that the new schemes simply are not ready for farmers to be able to access them and start to make up the shortfall. That is not just the view of the NFU; it has been echoed by the National Audit Office, the Public Accounts Committee, and the Institute for Government. Vital farm supplies sit inaccessible in Ukraine, and veterinary medication sits undeliverable in Northern Ireland because of the problems with Brexit. Alternative options are becoming scarce.

When British farmers suffer, so does the rest of the world. As the crisis in Ukraine hits other nations, one farmer asked me why Britain, as a leading member of the G7, does not consider its own agricultural sector to be part of the solution. The farmers who told me their stories also tell a sorry tale about the future of the sector. One simply asked, “Where is the future?” Every year, 8% of dairy farmers quit their business. Previously, others would step in to replace them. That, it seems, is no longer the case. As confidence falls, young farmers find that they cannot get loans. They cannot get started and cannot continue this proud British tradition.

I wish to finish on a positive note on behalf of the UK farming sector. I want to celebrate the success of the sector and the hard work and 365 days a year commitment of our farmers and farm labourers. Let us make every day Back British Farming Day and let us resolve to get a fair deal for farmers. The future could be positive. As I have said, British food has one of the lowest carbon footprints in the world. Our farmers tell me they want to adapt to further change—certainly moving away, for example, from carbon-intensive fertiliser—but they want to be able to do so in a managed way and not in a way where they are faced, as they currently are, with the shock brought about by the war. They want to reduce emissions and move to more sustainable fertiliser, as I have said. They want to reduce antibiotic use and further increase animal welfare, but they are doing that now on wafer-thin margins. As one farmer put it in what is probably a very agricultural farming way, “We have no fat on our backs right now, and we need this.”

Farmers want to grow, survive, flourish and contribute to the success of our nation. The war has put intolerable pressure on them at a time when the prevailing situation was already difficult. They feel that all the increasing cost pressures are being borne by the farming sector when they should be shared across the entire food chain. We must have a domestic market that allows that contribution to flourish.