Dairy Industry

I start by apologising for the absence of my hon. Friend the Under-Secretary of State for Environment, Food and Rural Affairs, who is engaged on duties connected with his biodiversity responsibilities. He usually speaks on these matters in the House. I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this debate on an important topic. I agree with him that while it is important to accept that the industry faces serious challenges, it is also important not to talk the sector down. He acknowledged that many of the recent developments have been positive. We must encourage new blood into the industry, as well as innovation and ideas. I believe, as one or two hon. Members here have acknowledged, that our natural advantages in dairy production should mean that our dairy industry has a good future. I hope that we can all agree on that, although we may differ in our opinion of how to arrive at that good future. I must say to the hon. Gentleman, however, that the pressure on farm gate prices will remain; it is simply a fact of life. Dairy production exists in a competitive market, and there will always be pressure on costs. However, the acknowledgement of the increased cost pressures borne by dairy farmers, and the resultant action by a number of retailers to increase prices paid for liquid milk, is welcome. It follows discussions that Lord Rooker and I have held regularly with the chief executives of the major retailing companies. The Government believe that it is in the supermarkets’ long-term interest to ensure sustainable arrangements for dealing with their suppliers. Several Members have acknowledged that those retailers have recently put in place initiatives to encourage closer working relationships with identified suppliers, some of which attract a price premium. There have also been positive developments in the contractual arrangements between processors and producers, which should help to develop greater transparency and trust. They are to be encouraged. It is also important to recognise that a considerable proportion of milk and milk products are sold through middle-ground retailers, catering establishments or as food ingredients. The four largest grocery retailers account for less than one quarter of volume sales of raw milk processed in the UK. I know, because I heard it from the farmers in my own region at the Devon show last week, that the south-west has a particular grievance. One of our main recipients of milk is the farmers’ own co-operative, Milk Link, which, according to the table that I was given before the debate, pays the lowest price of any taker of milk. It is important to put the debate about retailers in that context.