Dairy Industry

Dan Rogerson Excerpts

Thursday 13th September 2012 Westminster Hall

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Walker. To put a time limit on speeches was a courageous decision for someone who is currently running for office.

I welcome the new Minister to his post. He may know that the last Liberal Minister to hold the farming brief was Auberon Herbert, who was President of the Board of Agriculture between 1914 and 1915. However, that does not bode well for the current Minister because Herbert only held his post for one year and did not survive the forming of a coalition Government. None the less, I wish the Minister well in the post.

I am sure that hon. Members wish to pay tribute to the outgoing Agriculture Minister, the right hon. Member for South East Cambridgeshire (Mr Paice). While he and I may not always have agreed, he did his best and will be sadly missed by the farming industry and by members of the Environment and Rural Affairs Committee.

I pay tribute to the hon. Member for Tiverton and Honiton (Neil Parish). We served together on the Select Committee, and as many Members know, he is a mine of information on agriculture. He and I have combined on more than one occasion to ensure that our farmers’ voices have been heard in Parliament. He is a real champion of Devon farmers and regularly makes the case that Devon cream is far superior to Cornish cream. With your permission, Mr Walker, he will sum up at the end of the debate.

A number of important debates are taking place in the House today, and I appreciate that Members might not be able to stay for the whole of this debate. None the less, I thank everyone for coming along.

Members will know that despite the favourable market conditions, the UK dairy sector has been a source of dispute for a number of years. During the summer, the public campaign led by dairy farmers to protest against large cuts in milk prices captured the British public’s imagination. The profile generated by that campaign combined with the lobbying and overwhelming support from all parts of the House have resulted in some significant progress. Indeed, more than 70 parliamentarians went to the National Farmers Union’s dairy summit in July. Several retailers that were identified as not doing enough to support the dairy farmers took belated steps to address some of the unsustainable prices that they paid for their milk. That has helped processors either rescind or reverse the effects of their proposed August milk price cuts. Many of the same retailers have made commitments to address their long-term pricing models for liquid milk. That is very welcome.

In recent days, Arla Foods has committed itself to a 2.5p per litre rise, and today Müller-Wiseman has announced that it will raise its price to 29p per litre. Agreement has been reached between farming unions and Dairy UK on a voluntary code of practice for dairy contracts. However, the industry still suffers from systemic problems that need to be addressed. As the NFU has warned this week, if we do not take action, recent progress will be nothing more than a sticking-plaster solution.

The milk supply industry is not made up simply of producers and processors. Supermarkets also have an important role to play in ensuring fair prices. It is simplistic to portray all retailers as the villains of the piece; the situation is much more complex. Some retailers, such as Tesco and Sainsbury’s, have taken progressive steps in the liquid milk sector, with dedicated pools of producers, and they should be congratulated.

The cheese market remains much more challenging for farmers, however. I hope that one outcome of the code will be to increase transparency in the pricing of milk going to make cheese. Last year, the Select Committee took evidence from Tesco for our report on the dairy industry. We found dishonest its arguments on why it does not provide the same support for farmers who produce milk for the cheese market. It is ludicrous to suggest that there is not enough stability in demand for a workable contract for cheese.

The Select Committee was clear that if supermarkets such as Tesco continue to rip off farmers, the Government should be prepared to step in. Tesco is by no means the worst offender, and I am disappointed to have to report that we are repeatedly told that the Co-op provides the worst deal to dairy farmers. It is vital that customers and Co-op Members apply pressure to those retailers to provide a fairer share of the retail value to their suppliers.

The recent crisis was brought about by the reckless actions of Asda, which was selling milk at a loss-leading price of eight pints for £2, which is less than the price of bottled water. That in turn sparked a price war, which inevitably led to a cut in the price being paid to farmers. While supermarkets have seen quarter on quarter rises in their profits, many farmers have been pushed to the brink. Although I welcome moves by Morrisons, Asda and the Co-op belatedly to increase their price, they have a responsibility to ensure that we have a sustainable dairy industry now and in the future.

[Dan Rogerson (North Cornwall) (LD)]

I congratulate the hon. Gentleman on securing this debate. Although he has been making a good case, he made some rather strange assertions about cream, which we will brush over. Does he agree that when looking at how the price is passed on to the various people in the chain, the trends that have emerged are that the processors’ share seems to have been relatively static, the retailers’ share has grown and the farmers’ share has shrunk? Anything that we do to look at the relationship between the processor and the farmer must also take account of the relationship between the retailer and the processor.

[Thomas Docherty]

The hon. Gentleman is correct. I will touch on the role that the groceries code may play in that process in the future. I did not say that I necessarily agreed with the assertions about Devon, but they have been forcefully made on more than one occasion.

I say well done to those retailers who have belatedly got on board, but why did it take them so long? The actions of the House and the dairy industry forced the retailers to take those steps. Members on both sides of the House will look to the Minister to hold all elements of the supply chain to account. We all want the groceries code and the voluntary code to work, but it is vital that he takes the lead on pushing through these issues.

On the specific case of the adjudicator, the previous Government gained cross-party support for a supermarket ombudsman to ensure a fair deal for farmers and food producers from the major retailers. Following a Competition Commission inquiry in 2008, Labour introduced a new groceries supply code of practice in August 2009, which came into effect in February 2010. The Competition Commission also recommended the creation of an ombudsman to enforce and monitor the code of practice.

This Government presented their Groceries Code Adjudicator Bill in the House of Lords before the summer recess. However, the Bill grants only limited power to the adjudicator to tackle the issues in the dairy industry. It will be limited to tackling the direct supply between the processor and the supermarket, or the farmer if they have a direct contract with the supermarket, and will not be able to deal with a three-party contract. I hope that the Minister will reflect on that and listen to the Select Committee’s cross-party advice.

--- Later in debate ---

[Mr Heath]

I am responsible only for farming in England. However, I have already contacted the analogous post holders in the devolved Administrations. I am keen to work with them to establish, as far as possible, common practice across the nations of the United Kingdom to ensure we do the best for our farmers.

I will continue the work of my right hon. Friend the Member for South East Cambridgeshire in the dairy supply chain forum, which is a crucial element in keeping a secure domestic market as a strong base from which to innovate, explore and expand the horizons. There are opportunities for replacing imported goods with British dairy products. I am glad that the hon. Member for Isle of Wight (Mr Turner) has done such work in his constituency.

There are clear openings for sending out British dairy products for the world to enjoy. I have already started that process. My right hon. Friend the Secretary of State and I are committed to opening those markets, which I hope will expand the interests and reach of the British dairy industry to all parts of the world, including emerging markets.

[Dan Rogerson]

Will the Minister give way?

[Mr Heath]

Unfortunately, I do not think I can give way, although I would love to do so.

I will continue supporting the Dairy 2020 project and the dairy roadmap, which we want to continue producing positive change. I wish we had another hour so we could carry on talking about what the dairy industry means to the country and how we can support it, but I will summarise my support for the industry. I am committed to a dairy industry that delivers for the future. I want to work strategically with the industry, with a clear focus, particularly in the dairy supply chain forum, on delivering the vision of an

“ambitious strategy for the UK dairy industry’s future without EU milk quotas, which takes full advantage of growing domestic and global demand for dairy products.”

I want to promote British dairy products overseas and remove barriers to trade through the joint Government-industry export action plan, under which DEFRA is researching markets and products that have the biggest potential for export.

I want to talk directly to businesses and to understand what they really think about their prospects, what barriers they struggle with and what they need to grow and take advantage of export opportunities. I want to encourage collaboration and new approaches and to make the best use of the £5 million boost to dairy businesses through the rural efficiency grant scheme. I want to push marketing, joint ventures and new facilities, which are central to enabling the industry to diversify and increase exports. I want better information and advice, and I want to work with experts to provide the information and advice that dairy businesses need, particularly on exports.

We need a sustainable dairy industry. I cannot do everything, but I am determined to do all I can to support that ambition. I simply do not believe that the consumer buys milk from the supermarket on price, a point that has been raised several times. There is an artificial market for milk and milk products in this country. If we can break free, and if we can unleash the British public’s enthusiasm for buying British products in British supermarkets, which this summer has shown, we will have done well by the industry.

I am grateful for the support of so many hon. Members.