I am pleased to serve under your chairmanship, Mr Walker. I thank my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) for securing the debate.
It has been a difficult summer for the farming industry, and for farmers in general. It has been a challenging number of months for dairy farmers, and I welcome this parliamentary time to debate the issue. The dairy industry is critical to the farming community and the broader agricultural industry in my constituency of South Down, where different conditions appertain to how prices are set for the dairy industry.
I am more than aware of the problems that exist for English producers. I attended the recent rally in Methodist central hall where that case was put strongly. In fact, we took evidence in the Environment, Food and Rural Affairs Committee, under the chairmanship of the hon. Member for Thirsk and Malton (Miss McIntosh), on the issue. From that evidence session, it was quite clear that dairy farmers here were financially challenged and looking for a better deal.
However, I would like to take this opportunity to concentrate on issues encountered by dairy farmers in Northern Ireland, who face similar problems combined with other potentially more pressing difficulties and, as the Minister will know, a different operating regime whereby prices for milk are set by the auction system. Raw milk prices are more volatile in Northern Ireland when compared with prices for the same commodity here due to the exposure of the Northern Ireland dairy industry to world commodity markets. Approximately 80% of milk production in Northern Ireland is exported in one form or another, the majority of which is sent outside the European Union. The price volatility of global commodity markets has contributed to milk prices that are still 3p per litre behind last year’s higher figure.
Like producers in England and Wales, the industry in Northern Ireland has suffered from the drought in America and Russia, combined with an extremely wet summer, all of which has had a decisive impact on silage-concentrate prices across the market, and the
resulting milk production rise has been calculated at approximately 4p per pint. The extremely wet summer has further increased the reliance on more expensive imported food concentrates as local silage and hay supplies become depleted. This is likely to continue into autumn and winter. Such conditions have largely negated the recovery in prices witnessed in the last few weeks at the most recent milk auction in Northern Ireland. The milk price at the latest milk auction in Northern Ireland was between 25p to 26p, with the price falling as low as 22p back in June. Notably, despite the slight rally, this remains markedly lower than the cost of production, which can run 4p to 5p higher, and is 3p lower than the price this time last year.
That cost of production has risen because of the wet summer and rising feed prices, and the situation is exacerbated in Northern Ireland as so much of our milk is exported, which makes our industry particularly prone to outside pressures and volatility that are quickly reflected in the auction system. In fact, I understand that price volatility is likely to remain a feature of the dairy industry in Northern Ireland. New ways will have to be found to minimise its impact on the industry.
A parallel issue is the price reductions in milk offered by some small independent retailers, which can also leave farmers vulnerable to market conditions. Milk is often used as a loss leader, with prices being dropped to a level that is not sustainable for the industry. They can be significantly lower than the price of production. It is also notable that market research has shown that customers are willing to pay up to an additional 5p per litre to ensure that farmers get a fair deal, especially when that is explained in terms of the sustainability of the dairy industry.