It is a pleasure to serve under your chairmanship, Mrs Riordan. I thank the hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) for securing this important and thoughtful debate. I begin by conveying an apology from my hon. Friend the Member for Ogmore (Huw Irranca-Davies) who is currently on a shadow ministerial visit to Brussels, where he is discussing several topics, including the ongoing dairy crisis, with European counterparts. I assure Members that we take such matters very seriously and consider them to be of the greatest importance.
As has been made clear this afternoon, the recent situation in the dairy industry is extremely worrying for rural communities, tourism and the availability of local food. Britain has a long tradition of dairy farming, which is the country’s largest agricultural sector. The UK is Europe’s third largest producer of milk after Germany and France, and the industry employs more than 50,000 people and contributes £3.7 billion to the British economy. For that reason, the Government must respond to the current dairy crisis by co-ordinating action by European officials to support dairy farmers and restore confidence in the industry.
We need stability in the industry, but consecutive months of high domestic milk production, combined with the ban on dairy imports to Russia and falling returns from global commodity markets, have resulted in an overall fall in milk prices because the largest UK milk processors have reduced payments to farmers for raw liquid milk. Low global dairy commodity prices have been compounded by price wars between major retail outlets, which have used milk as a loss leader to attract customers. Several hon. Members have made that point.
Farmers for Action states that some farmers are selling milk for as little as 25p a litre, which is far below the market price. That results in farmers operating at a loss and not even covering production costs. Not only is that financially unsustainable, but it raises further questions
about responsibility in our food supply chain. If the illusion is created that food is cheap, it may damage the agricultural industry and affect how the public view food. That is not at all helpful to achieving our aims. The Government must address long-standing structural imbalances of low profitability in the industry. Farm incomes are still falling, and many farmers have left the industry altogether. We currently have just over 10,000 dairy farmers in England and Wales, and that figure is down 4.1% on the previous year.
Although the dairy industry is not yet self-sufficient, we do not believe that its future is bleak. Population growth, increased wealth in developing nations and changes in dietary habits all point to greater long-term demand for dairy. The Government must ensure that the UK dairy industry is well placed to take advantage.