I congratulate my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) on securing this debate. The over-subscription of the debate, which has necessitated such a tight time limit on contributions,
shows the importance of the dairy industry. Many cheese varieties have been mentioned, and the hon. Member for Somerton and Frome (Mr Heath) said that the best cheese is in the west country. I say that the cheese gets better the further west it is made. If people go all the way to Cornwall, they will find the best cheese.
Volatility is the new challenge facing the industry, and I will briefly describe what has happened, because we seem to have gone almost full circle in little more than two years. In June 2012, UK farm gate milk prices fell to just over 26p a litre, and at that time feed prices were extremely high. The situation was incredibly difficult, and confidence was at rock bottom. Many of us will remember attending a meeting with the then Minister with responsibility for farming, my right hon. Friend the Member for South East Cambridgeshire (Sir James Paice), to highlight the issue and the crisis facing farming. However, we then experienced a much better period and something of a turnaround. Relationships in the supply chain improved drastically following the development of a new code of practice for dairy contracts. By November 2013, prices had gone up to 34.5p a litre. Demand started to grow in China, feed costs fell dramatically and our farmers responded by increasing production. UK milk production increased for the first time in 10 years.
The latest figures from the farm business survey published just last week show that, in the very positive 2013-14 financial year, the average farm business income on dairy farms increased by more than two thirds to more than £87,000 a year, which was driven by both increased prices and increased production. That was perhaps a record year, but as my hon. Friend the Member for South Dorset (Richard Drax) showed when he described the concerns of one of his constituents, many farmers will now feel that that seems a long time ago. Since then we have sadly seen another serious dip in prices, with the latest statistics from the Office for National Statistics showing that the average milk price in September 2014 was just over 30p a litre. Anecdotally, there are some examples of farmers accepting less than 30p a litre. Some projections show that the price could still go down further. In fact, we can probably expect to see another six months of relatively low prices.