Dairy Industry

It is a great pleasure to see you in the Chair, Mr. Chope. I pay tribute to my hon. Friend the Member for Ceredigion (Mark Williams) for obtaining this debate; he has been persistent, even relentless, in his work on the dairy industry. Dairy farming is an important facet of his local economy; indeed, it is the cornerstone of British agriculture in both Wales and the UK. While there has been a limited increase in UK farmers’ incomes, it has not been on the back of improved returns for the dairy industry. The increased profitability in UK farming has come from the arable sector, where the competition for crops for food and for energy purposes has led to some movement. Dairy farms used to be a step on the ladder for young farmers entering the industry. As the hon. Member for Caernarfon (Hywel Williams) said, they could take on a small farm that did not have a huge number of cows, farm it intensively, put a lot of work in, make a living and bring up a family. However, those days are far gone. Efficiency and effectiveness have increased enormously through improved nutrition, grazing techniques and breeding. Consequently, there have been increases in output per cow, per acre and per person working in the industry. However, the huge pressure on prices has put more and more dairy farmers out of business; now, there is barely half the number that there used to be. That did not result in a fall in milk production until quite recently because fewer farmers were producing the same amount, but such has been the pressure on price recently that milk production has fallen from 14 billion litres a year to 13.5 billion. The fall in milk production has focused the minds of supermarkets a little. They know that they cannot import liquid milk into the UK in any real quantities, and that they will really feel the pressure if there is a shortage of British milk. They are also considering the Competition Commission’s inquiry. So there are two pressures on supermarkets: whether there will be sufficient British milk for them to stock their shelves, and the question of the outcome of the commission’s inquiry. That is why they have made certain moves recently. Those moves have given some people confidence, while others think them cynical. I pay tribute to my hon. Friend the Member for St. Ives (Andrew George) for his work in developing our party’s policy of having a fair trade inspector. One of the real problems in the dairy industry is that although about 7 billion litres of the milk produced is sold as liquid milk and 3 billion litres goes into high-value differentiated products, about 4 billion litres still goes into producing a standard quality product—a basic cheddar. British-made cheddar cheese is of a high standard, but it must compete on a world market and it is not differentiated. Because such a large quantity of our milk goes into that market, there is a downward effect on milk prices. The task ahead is to work out how we can change more of our standard—very high quality—cheddar into a much higher-priced, differentiated product. We have some wonderful products, such as the organic yoghurt and other products produced by Rachel’s dairy in the constituency of my hon. Friend the Member for Ceredigion. I would also like to pay tribute to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), who has done sterling work as chair of the all party-group on dairy farmers. I accompanied him to Brussels, where we met the Agriculture Commissioner. She gave an indication of work that could be done in future, and encouraged us to refer to her anything that we felt was undue pressure on the part of the Competition Commission against the interests of the industry. I should tell the Minister that a number of farmers’ organisations have been threatened with Competition Commission inquiries when contemplating amalgamation and working with other organisations to build up their market share. The mere threat of an investigation is often enough to put people off taking a step that would strengthen their place in the market, make them efficient and lower their costs. I know that the Minister will tell me that the Competition Commission acts at arm’s length from him, but he must have some influence on how it does its work, and on the levels and particular points at which it intervenes. I believe that the hon. Member for Stroud (Mr. Drew), who is not in his place, told us that we had an efficient and effective system for marketing milk: the milk marketing boards. We saw their demise and the break-up of their successors.