Dairy Industry

Baroness Ritchie of Downpatrick Excerpts

Thursday 13th September 2012 Westminster Hall

[Ms Margaret Ritchie (South Down) (SDLP)]

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 owing 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 and 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.

[Roger Williams (Brecon and Radnorshire) (LD)]

The hon. Lady is making a powerful case. Is she as confused as I sometimes am by people insisting on fair trade coffee and tea, but not fair trade milk?

[Ms Ritchie]

I am with the dairy industry and with the hon. Gentleman on that issue. I live in the countryside and am well aware of how the situation affects not only dairy farmers, but those involved in beef and sheep production. They feel that they do not get a fair price at the farm gate. Farmers in Northern Ireland feel that they get a lower price than those in Britain.

In the light of all that, I note with interest the recent voluntary code of practice agreed between processors and non-aligned producers in England and Wales. In such a context, there is a need for a commitment by all sides to reach a similar agreement in Northern Ireland, where no such voluntary code of practice currently exists. I understand that the dairy industry in Northern Ireland decided to wait on the outcome of discussions in Britain before deciding whether the code would be appropriate to its circumstances, and that different industry groups will meet later this month to consider their position. However, I am in no doubt that the achievement of a resolution in Northern Ireland is particularly pressing, as farmers there are less likely to be aligned with large supermarkets.

All sides and interests in the situation must recognise that their relationship is symbiotic and we must find a path that ensures a fair settlement to guarantee the success of a staple native industry. In that respect, I hope for some collaborative governance in advance of the Groceries Code Adjudicator Bill, which I hope will have teeth. I hope it will have the regulatory power to deal with the issues in question. I urge the Minister, whom I welcome to his new post, to talk to the appropriate Minister in the devolved Administration in Northern Ireland about the need to give the Northern Ireland dairy industry a fair wind.

[Mr Charles Walker (in the Chair)]

Hon. Members may have noticed that the bell is broken. I apologise to the hon. Lady.