(12 years, 5 months ago)
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Glyn Davies (Montgomeryshire) (Con)
Thank you for calling me to speak, Mr Deputy Speaker, on a subject—the British dairy industry—hugely important to my constituency and, I contend, to our nation. I want to speak in particular about the crisis currently engulfing it.
I have always appreciated the importance of dairying. My first job, for the first 10 years after I joined the family business, was milking cows. I do not suppose I am unique among Members in that regard, although I might be the only existing MP who has actually milked cows by hand. I often stayed with my grandparents when I was young; they had eight cows which they milked by hand, and they produced butter that was circulated in the village. Therefore, I feel a considerable attachment to the industry—and we really did use three-legged stools, for those who are wondering.
Dairy farming has shaped and maintained the countryside of Britain as we know it for a century. It is an industry we should value and support. Today, dairy farming is in deep trouble—an important primary production industry torn apart by the corporate greed and ruthlessness of processors and retailers. Dairy farming is being reduced to an unsustainable position. Dairy farmers will be forced out of business and inevitably, more dairy products will be imported unless there is change. We should do our utmost to prevent this from happening.
It is not possible to calculate precisely the cost of milk production because circumstances vary, but it is generally accepted to be 29p to 31p per litre. Some of our major retailers acknowledge this. Waitrose and Marks and Spencer contract with farmers and allow for the production costs to be covered. Sainsbury’s and Tesco, too, contract with farmers for some of their milk, and they too allow the costs to be covered. However, others do not and they should be named and publicly shamed: Asda, Morrisons, and Co-op are huge businesses that show a shocking disregard for their suppliers. The processors—the in-between businesses that buy from farmers and sell to the retailers—should also be named and shamed: Arla, Robert Wiseman and Dairy Crest are happy to watch suppliers go out of business, in order that they can maintain their large profits.
The dairy products marketplace, as we know, is deregulated and unbalanced. The contracts under which milk is traded are incredibly one-sided. Buyers have discretion to impose price cuts almost without warning, while sellers are tied to long-term notice periods.
Andrew Stephenson (Pendle) (Con)
I congratulate my hon. Friend on raising what is a vital issue to the dairy industry. I recently met Roberta Parsons of Manor House farm in Brogden, in my constituency, which is a small farm with only 140 cows. Does he agree that it is the smallest farmers who are hardest hit by the reduction in milk prices and the abuse of power by the larger milk companies?
Glyn Davies
I thank my hon. Friend for that intervention. It is undoubtedly true that it is the average-sized businesses that are likely to survive and that can carry a period of loss, while the traditional farmers are likely to go out of business unless there is change.
A few weeks ago, the processors reduced the price by 2p a litre—just like that: a 6% to 7% reduction. Now they have told farmers that on 1 August there will be another 6% or 7% cut, which reduces the price they are paying to the farmers to way below the cost of production. Last week, unsurprisingly, there was a huge reaction: 2,500 dairy farmers came to a dairy summit here in Westminster and many of my hon. Friends attended. The purpose was to highlight this unacceptable position, and to demand that these cuts do not go ahead in August and that those that took place in July and July be reversed.
Andrew Griffiths (Burton) (Con)
I thank my hon. Friend for raising this important issue, which is dear to both our hearts. Does he agree that this crisis enveloping the dairy industry, whereby on 1 August dairy farmers will face going bust, means that if we cannot find a voluntary code between the producers and the supermarkets, we should look to impose some sort of mandatory regulatory regime to save our dairy industry?
Glyn Davies
I thank my hon. Friend for his intervention, as he makes a point that I was intending to deal with. I was going to raise it with the Minister to seek his opinion and perhaps his assurance on that very matter.
Processors in this deregulated, unbalanced market are behaving as though they are a cartel; they are imposing across-the-board cuts and there seems to be some agreement between them. That is outrageous behaviour. We know that across the world dairying is a volatile market—prices fluctuate. We all understand that; it is why there must be some order, which is why we have contracts. However, the current order is for the processors and the retailers, with catastrophic chaos for the producers. I shall now deal with the point that my hon. Friend raised. We need a code, preferably a voluntary one, and more balanced contracts. We had hoped that there would have been an announcement of a voluntary code already, and I know that the Minister had, too. Unless we can have an agreement on a voluntary code, the Government and the Minister have to consider going forward with a statutory code. Only with that hanging over people’s heads are we likely to achieve the voluntary code we want.
In the longer term, the Government need to encourage progress on lots of other issues. We need to encourage farmers to come together to form producer organisations. The big problem we have with individual farm businesses and micro-businesses is that they are incredibly small and do not carry any power. We know that there is now an agreement from the European Union in the dairy package that we can encourage up to 30% of farm producers to deliver producer organisations. I am hoping that the Minister will reassure us that he wants to do that.
We also need to move forward on the grocery adjudicator, although that might well have a limited impact on this particular problem, as for markets to operate we have to have a degree of fairness. When there is bullying and unfairness, the Government have to deal with it. That is why we have a Competition Commission, the Office of Fair Trading and other such organisations. The Government have to step in when the market is not working, and all of us know that this market is currently simply not working. It is working in favour of big bullying retailers and processors, and it is causing huge damage and driving into bankruptcy the dairy farmers that have sustained our countryside for so long.
Mr David Hanson (Delyn) (Lab)
I support the hon. Member for Montgomeryshire (Glyn Davies) in his request to the Minister today. The hon. Gentleman represents mid Wales and I represent north Wales, and a number of my constituents from the National Farmers Union and from the Farmers Union of Wales have echoed very much the concerns that he has raised. They simply cannot plan their businesses on the basis of a 2p cut in the price of milk already, with the potential for further cuts before 1 August. As he has mentioned, dairies such as Robert Wiseman Dairies are squeezing the dairy farmers of north Wales hard on the price of milk. A number of farmers in my constituency have raised the concern that they have potentially lost, because of the cut to their businesses, between £40,000 and £60,000 per business. No business could take a mid-year hit of that proportion with so little notice without it potentially having an impact on their viability. Farmers in my constituency came to London last week to raise the issue and are seeking the solution proposed by the hon. Member for Montgomeryshire.
Andrew Griffiths
I thank the right hon. Gentleman for giving way and agree with much of his speech. Does he share my concern that the contracts that dairy farmers have to put up with mean that they have to live with cuts of 2p, then another 2p, then further erosion, but if they want to get out of them they have to give six months’ notice? Does he not agree that that is unacceptable?
Mr Hanson
I am grateful to the hon. Gentleman for raising that issue and the key is to have a code of conduct for the contracts. I know that the Minister had discussions last week about a potential voluntary code and look forward to his updating the House today on his progress. If a definitive decision has not yet been made, I would welcome hearing from the Minister what plans he has to ensure that during the period between now and when the House returns in September he will be able to update Members who have an interest in the dairy industry, as well as Members in general, on this matter. I share the wish of the hon. Member for Montgomeryshire to see a voluntary code at first, but I know that my colleagues on the Labour Front Bench would certainly support regulation through a statutory version of that code if the voluntary form was not successful.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
I wonder whether my right hon. Friend can help me. Was it not a previous Conservative Government who did away with the milk marketing boards? The whole question of their being able to maintain prices meant that the farmers could maintain their businesses.
Mr Hanson
My hon. Friend and I have both been in the House since 1992 and I vividly remember the Milk Marque being abolished in the early 1990s, which led to a free-for-all that caused some difficulties. Let us put those issues to one side, however, as I am concerned about how we can make progress today.
The Minister has an opportunity to explain to the House how he is progressing on the voluntary code. If a voluntary code does not succeed, he will certainly have my support and that of my hon. Friends on the Front Bench, I think, for a statutory code in due course. The key issue, however, is how to ensure that those who produce get a fair price for their produce. At the moment, the big businesses mentioned by the hon. Member for Montgomeryshire in his opening remarks, such as Robert Wiseman, can squeeze my constituents to the extent that they cannot make a living out of the production of milk.
Much of the milk produced in my constituency does not go to retail in supermarkets; it goes into the production of butter, yoghurts, cheese and other produce. The code needs to encompass not just supermarkets but all outlets for milk.
Jim Shannon (Strangford) (DUP)
Does the right hon. Gentleman feel the same concern as many of us about the large investments that farmers have had to make because of the new regulations on slurry and its disposal? That investment, on top of a worse price for milk, makes it more difficult for them to survive.
Mr Hanson
The key point is that whatever challenges farmers face in their investment and their businesses, no business can take the type of change that has been imposed now with a 2p cut some months ago followed by a further 2p cut by August. That is being imposed by businesses that are choosing to do so to enable supermarkets to have loss leaders. Customers can have cheaper milk, which must be welcomed in some ways, but ultimately we need a fair deal for all. We need a fair deal for producers, for supermarkets and for those people who buy and transport milk and make it into other products. At the moment, that is not happening because, as the hon. Member for Burton (Andrew Griffiths) said, the inflexibility of contracts means that farmers cannot get out of them.
We need an update from the Minister on the review of the contracts and an examination of how we can ensure long-term stability for milk production. We need the voluntary examination of contracting and, if that fails, we need the Government to take regulatory action to ensure that the interests of all parties in this important industry, not just in my area of north Wales but throughout the United Kingdom, are defended.
Finally, will the Minister update us on his discussions with my colleagues in the National Assembly for Wales? They have a devolved responsibility for some aspects of dairy production but contracting legislation must be dealt with on a UK-wide basis to ensure that markets are not further distorted between England, Wales, Scotland and Northern Ireland. I support what the hon. Member for Montgomeryshire wants to see, which the hon. Member for Brecon and Radnorshire (Roger Williams) will no doubt comment on in a moment.
Roger Williams (Brecon and Radnorshire) (LD)
I, too, value the opportunity to bring the issue before the House. I attended the meeting of 3,500 farmers in the Methodist central hall. They were very angry and unhappy. The Minister handled the situation well, but it was a real demonstration of our dairy farmers’ frustration about their treatment.
At a time when British agriculture is doing relatively well, milk prices have fallen dramatically. A year ago, the average price of milk was about 35p a litre; now, it is less than 25p a litre and, as we have been told, the cost of milk production for the average farmer is about 30p a litre. When people have to sell below the cost of production, we will undoubtedly see farmers leave the industry.
In September 2002, there were 3,100 dairy farmers in Wales, but by May 2012 the number had fallen to 1,900. Across the whole of my constituency, there are fewer than 10 milk producers, which is a huge fall in numbers. There has been a downward trend in the production of milk. In 2003, 14.5 billion litres of milk were produced, but today the figure is around 13.5 billion. If those trends continue, the implications are bad not only for farmers but also for consumers. In the medium and long term, they are bad news for retailers and processors.
What can be done to avert a crisis? There is no single bullet, but we need action at every stage of the supply chain, from farmers, processors, retailers, consumers and the Government. As has been said, farmers need to work together. The voice of one farmer carries little weight in the marketplace, but when they join together, their negotiating power is much stronger.
Processors and retailers need to start paying a fair price for milk. Robert Wiseman Dairies, Arla Foods and Dairy Crest must scrap the scandalous price cuts they have imposed on farmers.
Consumers can reward retailers that are doing the right thing. Sainsbury’s, Tesco, Waitrose and Marks and Spencer have a price formula based on cost. I commend them for that. Consumers should show their appreciation by voting with their feet, and indeed their purses, and punish the Co-op, Asda and Morrisons, which do not have a similar scheme.
We need to start adding value to liquid milk. Our European friends are far better than we are at increasing profits from milk by processing it into cheese, yogurt and the like, which means it can be exported around the world.
Helen Goodman (Bishop Auckland) (Lab)
I agree with the hon. Gentleman. In my County Durham constituency, many milk producers are suffering. I also agree that milk producers need to sell to wider markets, but does he agree that is no excuse for the behaviour of the wholesalers and the supermarkets?
Roger Williams
The hon. Lady makes a fair point. People who are powerful in the marketplace, such as the processors, use their muscle to bear down on the prices paid to producers, who are suffering.
Finally, I turn to the Government. At the summit, the Minister said that a voluntary code between farmers and processors was close to agreement. Will he update the House on the latest progress?
I commend the Government on the Groceries Code Adjudicator Bill, which is making its way through the other place. Let us ensure that the legislation passes quickly, with the teeth it needs to do its job.
I welcome the work the Minister has already done on lightening the load of regulation on British farmers, but more can be done. I know he will continue to implement recommendations from the Macdonald report as and when he can.
The dairy industry is in crisis, but the crisis can be averted. Let us work together, so that our dairy industry will have a brighter future.
Andrew Stephenson (Pendle) (Con)
I should like to raise the subject of dangerous dogs, as I was unable to participate in the recent Westminster Hall debate on the topic. Although I have publicly supported changing the dangerous dogs legislation for some time, and support the Government’s proposals, the issue took on personal significance for me in May. My mother, Ann, had her finger bitten by a dog while she was delivering local election leaflets in Colne. She was initially treated in Burnley general hospital and then transferred to a specialist unit in Wythenshawe hospital. I put on record my thanks, and my mother’s, to the doctors and nurses who treated her, and to the volunteers from Age UK who made her time in Burnley general more comfortable.
The dog bit my mother’s finger so hard that it broke the bone, and it also bit off the nail and the end of the finger. She was kept in hospital for several days. It is worth noting that my mother is not alone: two local Liberal Democrat councillors in Pendle were also bitten in separate incidents in the same week. I have on a number of occasions been critical of the law relating to dangerous dogs, which fails to protect the public; indeed, in February, I wrote an article in the local press calling for changes to it.
Justin Tomlinson
(North Swindon) (Con): This is a very important subject. Does my hon. Friend agree with my wife, who has studied animal behaviour, that the actions of a dog are almost always linked to the way the owner brings them up and handles them, and from where they purchase the dog?
Andrew Stephenson
My hon. Friend makes an excellent point, and I know that he is acutely aware of the subject, given the recent high-profile case in his constituency, in which a two-year-old was attacked by a dog.
Something must be done to protect postal workers, volunteers and the public from dangerous dogs, and to remind owners of their responsibilities. As we are all aware, postal workers are especially at risk; there are an estimated 6,000 dog attacks on them every year. Of course, the issue of irresponsible dog owners goes wider than that. Dog fouling, status dogs and noise nuisances are all raised with me and other hon. Members time and again. The local press regularly cover horrific incidents. Last October, I read about a Staffordshire bull terrier attacking a 10-year-old in Pendle after the dog had been given lager to drink. Of course, because of the way the current law works, no one was punished. Under the Government’s proposals, that would change, and I especially welcome the proposal to provide funds to train expert dog legislation officers in each force.
There is widespread agreement that the Dangerous Dogs Act 1991 is one of the worst pieces of legislation in history. It is probably the best example of how knee-jerk reactions from politicians can sometimes make a bad situation worse. A key respect in which the legislation got it wrong was in focusing on breeds of dog, when the real problem, as my hon. Friend says, was and is irresponsible dog owners. However, surely one of the other biggest mistakes was that the law did not cover attacks that happen on private property. That is one of the most important issues for the Government to address, and the one that would have the biggest impact.
To be clear, owning a dog is a great thing to do, and the vast majority of dog owners in Pendle and around the country are considerate and take responsibility for making sure that their dogs are safe. I congratulate the Government on engaging with the many groups that have come together to sort out the laws on dog ownership, many of which, including the Kennel Club and the Royal Society for the Prevention of Cruelty to Animals, e-mailed me before today’s debate. By getting the legislation right, we can make communities safer and more pleasant to live in, and protect the reputation of those dog owners who make sure that their pets are safe to the public.
Thankfully, my mother is doing well, although the damage to her finger is permanent. She passes on her thanks to those colleagues of mine who have wished her well, but what she would value most is us at last introducing a law on dangerous dogs that works and protects the public.
Mr Mark Williams (Ceredigion) (LD)
I return to an issue that colleagues raised a little earlier: the dairy sector, its critical importance to the economy, and the crisis that it faces. Last week, there was a gathering of 2,500 milk producers in central London; 300 of them were Welsh dairy farmers. There is understandably enormous strength of feeling on the part of the farming industry, following the latest round of cuts. We have heard from other hon. Members, and it is not an overstatement to say that the price cuts threaten the very future of many of the family farms that we represent, not just in Wales but across the United Kingdom as a whole. Indeed, the shortfall from that round of cuts will cost the Welsh dairy industry alone an estimated £80 million per annum—a huge sum of money that will put many dairy farmers out of business. The right hon. Member for Delyn (Mr Hanson) discussed the hit that businesses would suffer—£40,000, £50,000, or £60,000—and that would drive many struggling family farms out of business.
Although the price cuts have been set by milk processing companies, there are things that Government can do to assist our dairy farmers. The Government have commendably introduced the Groceries Code Adjudicator Bill, which is going through the other place, and I share the farming industry’s eagerness to put that law in place as quickly as possible. I am relieved that, after so long, legislation is coming our way, as it will restore some confidence in the industry and enable consumers to make real choices between the practices of different supermarkets, allowing them to choose which ones they shop from. It will provide, I hope, an adjudicator with real teeth, but it will not guarantee farm incomes.
Neil Parish (Tiverton and Honiton) (Con)
Asda has said today that it will put its prices up by 3p for direct sales for farmers, but in 2010, it dropped the price of milk for four pints from £1.50 to £1. Does my hon. Friend agree that that brought about the drop in milk prices across the piece?
Mr Williams
My hon. Friend graphically illustrates the inconsistent role of some supermarkets. Along with the groceries code adjudicator, we need to look at how we can bring about fair contracts, to which everyone who has spoken has alluded, to stop the exploitation—an emotive word, yes, but that is the perception on the farms that I represent, as well as that of the National Farmers Union and the Farmers Union of Wales. The contracts that farmers are required to enter are simply unfair, as they are required to give 12 months’ notice or more to pull out of them whereas, as we have heard, processors can change the price they pay for milk at a few days’ notice, or quite literally overnight.
The Government are right to move towards a voluntary code. Like other Members, I look forward to an update from the Minister but I hope that if necessary, the Government will proceed with regulation. As Lord Plumb said in another place, rule books without referees generally have limitations. We all agree in the House that farmers deserve to receive the production cost for their milk, but Robert Wiseman Dairies has announced that from 1 August it will pay 24.73p per litre for milk. Arla Foods milk price will fall to 25p a litre, and the First Milk price to 24.35p a litre—5p less than the cost of production. Any situation in which farmers have to accept less than the cost of production is unsustainable. I commend Waitrose, Sainsbury’s, Tesco, and Marks and Spencer on the positive work that they have undertaken, but we need to ensure that those agreements are made across the board, from retailers to processors, with all major buyers of milk and dairy products agreeing to commit to a sustainable purchasing strategy.
Helen Goodman
Does the hon. Gentleman not agree that there is a problem with milk imports from countries with lower animal welfare standards and costs, and that those imports are not labelled in the UK?
Mr Williams
The hon. Lady served in the previous Parliament when, to be fair, the issue of labelling rose to prominence. It is critical, because it enables consumers to make informed decisions.
Given the feelings in the farming community about the recent price cuts, compounded by difficult weather conditions and rising input costs on-farm, the Government need to make it clear to processors and supermarkets that their failure to deliver fair prices may lead to severe disruption to the supply chain with dire implications not just to farmers but ultimately to us as consumers.
It is always worth remembering that the losses in the dairy sector will have a huge—I do not use that word lightly—impact on the broader rural economy. Welsh Assembly Government statistics indicate that, as my hon. Friend the Member for Brecon and Radnorshire (Roger Williams) said, the number of dairy farms has reduced by 800 over the five years from 2006 to 2011. The number of dairy farmers in Wales alone halved in the past 13 years. This figure will rise if we do not take action over the current price slash and unfair contractual obligations, because they will mean many job losses across the industry among suppliers.
Next week the Welsh farming community, in its widest sense, will gather for the Royal Welsh show in Builth Wells in the constituency of my hon. Friend the Member for Brecon and Radnorshire (Roger Williams). We will see there the breadth of the farming community. The supermarkets, the farming unions and the Young Farmers will be there, as will the machinery contractors, the feedstuff merchants and the farming families from Wales and beyond. I make this prediction: whatever the weather, the sheer number of people there will illustrate how important the industry is to rural Wales. The stakes are high.
It is election time in Ceredigion, when we have hustings with the farming unions—the FUW and the NFU. Before elections, I am always asked this question: “Would you encourage a young farmer, the son of a farming family, to go into the industry and continue with the family farm to earn a living and contribute to the broader rural community?” With hand on heart, if things do not improve and we do not have action, I would hesitate about whether I could say yes to that question.
The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice)
I was expecting at least one further subject to be brought up during the debate. [Interruption.] That, like many other wonderful speeches, will be consigned to the filing cabinet of those never to be delivered in this Chamber.
I hope that the House will forgive me if I devote most of my response to dairying, which was the subject of most Members’ speeches. First, though, I will reply to my hon. Friend the Member for Pendle (Andrew Stephenson). I am very sorry to hear about the dog attack on his mother. I am pleased to hear that she is recovering, even if she will bear the scars for the rest of her life. He was absolutely right to refer not only to the measures that we have announced but to the importance of dealing with dog owners. As he said, often the problems with dogs are in fact a problem with the owner, either because they do not understand how to control the dog or have the desire to use it as a form of weapon for intimidation or worse. That is why the Home Office proposals on antisocial behaviour will include measures on the use of a dog as a weapon, which will rightly be seen as an antisocial activity and dealt with in that way.
My hon. Friend referred to the measures that I announced on 23 April. The consultation that stemmed from that closed on 15 June. We have begun to analyse the responses and will announce our conclusions as soon as we can. To recap, the most important element was to extend the criminal offence of allowing a dog to be dangerously out of control on private property, which addresses his point about postmen and the many other people who have a legitimate right to come on to one’s property. We are consulting on the compulsory microchipping of dogs—in particular, precisely on how early to do that and whether it should be at the puppy stage. We are increasing the fee for placing a dog on the index of exempted dogs. We are removing the need to seize and kennel all dogs where court proceedings are pending. We are also, as my hon. Friend said, making a grant to the Association of Chief Police Officers for the training of dog legislation officers. I hope that he agrees that we are endeavouring to address an issue that is long overdue.
Dairying and the crisis in the British dairy sector were referred to by at least four Members in their speeches and by others in interventions. Like my hon. Friend the Member for Montgomeryshire (Glyn Davies), I had milk cows earlier in my life. I fully recognise the huge crisis that is affecting many people in the sector. As a number of Members have said, some supermarkets that have aligned groups of producers have not cut their prices. However, the processors for many producers cut their prices in May or June and have announced further cuts for 1 August. The cut will total some 3.5p to 4p per litre over the two periods. We now seem to have an industry of haves and have-nots—those who have a supermarket deal and those who do not.
As my hon. Friend the Member for Tiverton and Honiton (Neil Parish) said, there has been some good news today. Asda has announced that it will increase the premium that it pays its processor, Arla Foods, by 2p a litre, thereby nullifying the cut that Arla has announced. In other words, the producers affected will not face a cut on 1 August. From memory, that is about 227 producers. Dairy Crest has announced today that, in future, it will require only three months’ notice when producers leave their contracts, and it has guaranteed that it will give four weeks’ notice of any price cut.
Bob Stewart (Beckenham) (Con)
I have been listening to the debate and, although I do not know much about this subject, it seems to me that we should somehow ensure that price cuts are not passed on to the dairy farmer. The big supermarkets should take whatever they wish, but they should not pass it on to the milk farmers.
Mr Paice
My hon. Friend’s point is properly made and is an important one.
I will concentrate on the issues that need to be addressed. I fully recognise that what matters to the dairy farmer is the price that they are paid. However, as several hon. Members on both sides of the Chamber have said, it is not simply a matter of reversing the price cuts, although that is what the producers want. We need something more substantial and more permanent than that.
As I say frequently outside this place, we have an obsession in this country with the liquid market and with the desire of our processors to gain bottling contracts for supermarkets. They keep undercutting each other to keep their bottling plants at full capacity. When, as has happened on this occasion, cream prices collapse and they face major problems, the only way in which they can recoup any income is by cutting the price for their producers to below the cost of production. That is a direct consequence of the obsession with bottling for supermarkets.
As several hon. Members have said, and as is abundantly clear, there are ample other opportunities for investment. Some 20% of our total dairy consumption is imported. The hon. Member for Bishop Auckland (Helen Goodman) talked about imports. We do not import liquid milk. All the imports are dairy products, but they nevertheless make up a significant part of our total consumption.
What are our processors doing to combat that? One or two are trying to do something. Dairy Crest has gained back some of the cheese market with one of its products and it should be congratulated on that, but there is still much to do. Where do the supermarkets with aligned dairy groups, which pay a premium for their liquid milk, get their own-label brands? Where are their other dairy products, such as their yoghurt, produced? Do they use British milk? In many cases, they do not. There is therefore a great opportunity for import substitution.
There is an even greater opportunity for exports. The world is crying out for increased dairy products. Yes, global prices have fallen back and that is part of the immediate problem that we face. However, I say to my hon. Friend the Member for Ceredigion (Mr Williams) that if I was asked whether I would encourage a young person to go into dairy farming, my unequivocal answer would be yes, because I am convinced that there is a long-term future beyond today’s crisis.
Miss Anne McIntosh (Thirsk and Malton) (Con)
Will my right hon. Friend give way?
Mr Paice
No, I am sorry, I need to press on.
Hon. Members also raised the issue of supermarket power. As has been said, we are introducing the groceries code adjudicator. I have always tried to be honest with farmers and say that on its own it will not increase the price of milk, but that it should increase fairness and transparency.
The big problem that we face, which has been mentioned this afternoon, is what I view as the absurd level of price cutting by some retailers, particularly those in what is known as the middle ground. One retailer is openly selling milk at 99p for four pints.
Mr Paice
It is on the record, and I did not move my lips.
The reality is that such a price is completely unsustainable. Such retailers need to understand that if they go on like that, there will be no milk. There is a limit to cost cutting. Maybe some producers can cut their costs, but not to that level. It is completely impossible. There is no country in the world that can sell bottled milk at the equivalent of 25p a pint by the time it has been through the whole processing chain. That is absurd, and such retailers are biting off their nose to spite their face.
The final issue that several hon. Members raised was the lack of producer power and the need to promote producer organisations. That brings me to the dairy package and the voluntary code. I am grateful to Members of all parties for the support that they have expressed this afternoon for my work in trying to get a voluntary code. I genuinely believe that that offers a far better prospect than legislation, and I shall explain why.
A voluntary code can, if agreed by both sides—the processors and the producers—cover such issues as price, notice periods, contract lengths, volume and exclusivity. A raft of other points could be included if both sides wanted them to be. Conversely, the dairy package and the legislation that would be permissible under it are about a contract, not a code. We could legislate to make contracts compulsory, but the permitted legislation would limit greatly what could be put into those contracts.
For example, as we understand it, no notice period would be permitted. A length of contract would be specified, and it would probably be a year or more. The idea of a short notice period to get out of a contract would not exist. That is just one of many examples showing that the regulatory route, which I fully accept appeals to some people, is not as good as a code, which could accommodate a range of measures.
I agree with farmers and others who said last week that we cannot go on like this, because the discussions on a code have now taken 14 months and we cannot continue simply hoping it will happen. I had a meeting with both sides last week before the public meeting to which reference has been made. We got very close to an agreement, but both sides still had what I considered to be very minor issues to resolve. Those issues were obviously important to them, and they were not resolved. There have been further, private discussions with my officials and others over the past few days, and I intend to precipitate a final decision. I do not want to give the House more information than I have given the industry, because that would not be right, but I intend to say that enough is enough, that the negotiations have been going on long enough and that it is time for both sides of the industry to show some maturity and demonstrate that they can agree a voluntary code of practice.
I would be foolish to pretend that it is a certainty that we will get a code. There are still some stumbling blocks on both sides, coming both from those representing producers and from at least one major processor. However, I have every intention of driving the process forward and getting a result. We have got to the point at which knowing it was not going to happen would be better than living in the never-never land that we have been in for some time. However, I emphasise that I do not believe that the regulatory approach recommended by some hon. Members would give either side of the industry anything like the beneficial future that is there for the taking.
I hope I have answered the points raised by hon. Members in the debate. I entirely share their concerns. I can assure the right hon. Member for Delyn (Mr Hanson) that we are in discussions with colleagues in the devolved Administrations. We are getting together prior to the Royal Welsh show this weekend. We were going to discuss the common agricultural policy, but we will also discuss the situation in the dairy sector. I can only hope that, before the cuts take place on 1 August, we can get a voluntary code at least. I hope others agree that that is the best way forward.