UK Parliament / Open data

Dairy Farming

Proceeding contribution from James Paice (Conservative) in the House of Commons on Tuesday, 7 June 2011. It occurred during Adjournment debate on Dairy Farming.
I congratulate my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) on securing this debate. It was widely discussed when I was at the Suffolk show last week, so I was given plenty of notice that I would be grilled on these issues. I also thank my hon. and learned Friend the Member for Torridge and West Devon (Mr Cox). I am not sure whether he was appearing for the prosecution or the defence, but his speech not only contained the gravitas that we expect but correctly conveyed the huge importance that the dairy and beef sectors attach to the issue of bovine TB, to which I will refer in a few moments. Finally, I thank the hon. Member for Glasgow North East (Mr Bain). As he has said, there is probably agreement among the parties about where we need to go. I will address some of the points made by my hon. Friend the Member for Central Suffolk and North Ipswich. He said that our food production is 40% of our total food supplies; it is actually well over 50%, and we could produce more than 70% of our food indigenously. I do not want him to think that things are worse than they are, although I want to improve both positions. It is worth making the point that we are the EU's third largest milk producer, well ahead of the only country that we might reasonably say could do better than us, Ireland, which has the temperate climate and conditions to grow grass for more of the year and more effectively. With the exception of Ireland, we should be competing effectively with every other country in the EU. My hon. Friend and others are entirely right that the industry is under huge pressure. Members who watched ““Countryfile”” on Sunday evening will have seen yet another auction of a large dairy herd by a farmer going out of business. However, we have a slight conundrum. Although the number of dairy farmers is decreasing significantly, by an average of 5% a year over the past decade, there has been no such dramatic reduction in the number of cows or in the amount of milk that we produce. In fact, milk production in the UK increased by 500 million litres last year, and it is now almost back to the level of three years ago. That is due to the expansion of herds by many farmers, as well as to genetics, better feed and so on, which cause individual cows to produce more milk. From the Government's perspective, we are faced with a dilemma. Are we interested in supporting individual dairy farmers or the industry and this country's ability—to return to the issue of self-sufficiency—to produce the milk that we need at home? It is a conundrum, and I do not pretend to have the answer. The state of the UK market is easily clarified in some round figures. Roughly 50% of UK consumption of milk and dairy products is liquid milk, almost all of which is domestically produced—as my hon. Friend has said, carting liquid milk overseas is not common. Another 25% of the market is milk products such as cheese, yoghurt and so on processed from British milk. The other 25% is processed products imported from abroad. It is fairly easy to divide the market into those three. To return to my point about the European market and competition from elsewhere, there is no doubt in my mind that we should be able to compete much more effectively with other countries, with the possible exception of Ireland, in the 25% of the market that consists of imported processed products. My hon. Friend made a great deal of the prices being paid by our supermarkets. I am not saying that supermarkets are without fault, but the real issue is the price being paid lower down the chain at the processed end. The latest milk prices—they are published weekly, so this is open information—say that the highest price being paid for milk is 29.01p in the dedicated supply chain for Marks and Spencer through Dairycrest. The second highest is in another dedicated pool, for Sainsbury's, through Arla. The lowest, at 23.8p, or more than 6p a litre less, is paid by North Milk Co-op. A little above that, the supplier First Milk pays 24.2p. The table that appears in the farming press each week simplifies things slightly, but the top half of prices mainly go to the liquid trade, while the bottom half go to the processed trade. There are exceptions, but that is a general point. Increasing the price paid for processed milk would improve the overall situation for everyone. As my hon. Friend has said, the retail market is important. The average farm-gate price in March was 26.57p a litre, which is 10% higher than the year before, although, as several people have said, costs have rocketed proportionately or by even more. However, the retail price of a 4-litre carton of milk is about 55p a litre, which means that the processor and retailer take 28.5p a litre—that is more than the dairy producer, the guy who keeps the cow for 365 days a year, takes—just to bottle, distribute and retail the milk. There is no doubt, as the Dairy Council and others have shown, that the share of the overall retail price taken by the farmer has stayed the same or even fallen, the share taken by the processor has stayed roughly the same and the share taken by the retailer has rocketed. There are questions to be asked about that, and I will come back to them in a moment. I will discuss the shape of the industry to demonstrate to my hon. Friends that the issue is not only about liquid milk or about supermarkets. Much has been said about the European package, particularly about contracts. The first thing to say in response to the hon. Member for Glasgow North East is that we are a long way from any decision, because we do not have the European Parliament's decision yet. That is a post-Lisbon treaty event that involves the European Parliament. I will come back to the other points, but we support the issue of contracts as presented by the Commission. We support the proposal that individual member states should be able to make contracts compulsory in their own country, if they so wish. As far as England is concerned, I have already said publicly that, if that is what the end version looks like, we will consult the industry about whether to have compulsory contracts, but I have not hidden my view that I do not think that they will achieve what people believe they will. That is the point that I want to address, because my hon. Friend the Member for Central Suffolk and North Ipswich paid great attention to the issue of contracts. Let me make it clear that, in the UK, virtually all farmers have contracts, which takes us back to what is in them. The main reason why this matter features so highly in the European dairy package is that most dairy producers in other countries do not have contracts, so for them it would be a great innovation. Although this is a devolved issue, it is relevant to the UK and, as far as England is concerned, it is clear that the proposal as it stands—we do not know how it will end up—does not allow individual member states to lay down minimum standards or terms in the contract. It says that the contract must address the issue of price, either by setting a price or a formula, but it does not allow the member state to set it. It will be open to negotiation between the producer and processor to decide the price or formula by which the price is arrived at. Similarly, the contract must address the issue of duration, but it does not allow the member state to lay down a minimum duration. Some, including the National Farmers Union, seem to think that the contract should include a lot more. We can argue about whether it should, but it does not. The proposition from the European Union does not allow member states to lay down detail on standards, which some seem to believe that it should. That is why I do not think that it is the panacea that some have made it out to be.
Type
Proceeding contribution
Reference
529 c10-2WH 
Session
2010-12
Chamber / Committee
Westminster Hall
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