Dairy Industry

Debate between Eilidh Whiteford and Roger Williams

Wednesday 4th February 2015 Westminster Hall

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I congratulate the hon. Member for Ribble Valley (Mr Evans) on securing the debate and I commend the Environment, Food and Rural Affairs Committee on its report, which provides a helpful backdrop to the proceedings. There seems to be much consensus from industry, stakeholders and others that the present low prices and market volatility are largely attributable to increased global production, lower demand than anticipated in China and the impact of Russian sanctions on EU imports.

There is also fairly widespread agreement that, in the longer term, the demand for dairy products worldwide is likely to rise and our producers could access growing international markets. In the meantime, however, as we have already heard, the situation is a lot less rosy. Farm-gate prices are below the cost of production, which is creating a critical situation for many dairy farmers, some of whom have been struggling to stay afloat for some years.

I have a sense of déjà vu, because back in 2012 we debated the crisis in the dairy industry here in Westminster Hall. At that time, I welcomed the introduction of what was then the new voluntary code of conduct, but I pointed out that farm-gate prices were still too low to be viable, and that, until the prices paid to producers exceeded the cost of production, we would not have a sustainable dairy industry. That essential issue, which is not fully addressed by either the voluntary code or the Groceries Code Adjudicator, still underpins the problems facing the dairy sector.

Most of Scotland’s milk production—92% of it—is for domestic UK markets, and primary producers, who have high input costs, are caught in and continually squeezed by over-concentrated supply chains. Dairy farmers point out that that those who supply Asda, Morrisons, Lidl, Aldi, Iceland and Waitrose receive substantially less than the cost of production for their milk. Asda’s suppliers say that they receive 56p for four pints against a production cost of 68p. Dairy producers cannot be expected to subsidise retailers in that way. In the long term, it is not in the interests of our food security or consumers to push dairy farmers out of business.

There has been some discussion about whether the voluntary code is operating as it should, whether the EU intervention price is too low and whether the powers of the Groceries Code Adjudicator should be extended. The voluntary code has been a positive move—as far as it goes—but it is not designed to tackle underlying structural problems. The dairy industry in north-east Scotland—what is left of it—illustrates well the limitations of the voluntary code in practice in that there is only one processor. That is the case in many parts of rural Scotland. The voluntary code can help in terms of conditions of contracts if stakeholders choose to adhere to it, but, if circumstances change, it is very weak in that there is often no other show in town. That lack of competition means that, in negotiations between producers and processors, one player holds all the cards. That highlights the underlying problems of a concentrated supply chain.

When legislation for the Groceries Code Adjudicator was going through Parliament back in 2012, I argued strongly that the restrictions on who could make representations to the adjudicator would place serious limitations on its effectiveness. I would definitely like to see the adjudicator being able to investigate complaints from parties other than direct suppliers. The situation we are discussing is a good example of where that would be beneficial. However, that would still address only the symptoms.

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

Will the hon. Lady give way?

[Dr Whiteford]

I will not allow an intervention. I apologise. The Government’s failure to empower the adjudicator to impose penalties on those in violation of the code is a real dereliction that I hope they will put right with all due haste. I do not want the adjudicator to be another useless quango. Given the time constraints, I will not say anything about the intervention price except that I hope that the Minister will raise that at EU level so that it is on the policy makers’ agenda.

To allow our dairy sector to sink and diminish without trace is short-sighted. We all recognise that there is a future for the sector in growing export markets. If we are smart, we could develop those markets for high quality, value added products. We have a strong traditional industry with a reputation for quality, excellent animal welfare and food standards and distinctive, unique regional products. Notwithstanding the current market issues, there are substantial and growing opportunities for our dairy industry and a clear role for Governments throughout the UK in supporting their development. However, while we are still selling milk below the cost of production, we will not have a sustainable industry.

Common Agricultural Policy

Debate between Eilidh Whiteford and Roger Williams

Thursday 8th March 2012 Westminster Hall

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I congratulate the Environment, Food and Rural Affairs Committee and its Chair on the report and their important work in scrutinising the CAP reform process.

I want to pick up on a few key issues in the Commission’s proposals that will be of great significance to farmers in Scotland, not least in the parts of Banffshire and Buchan that I represent, where farming has been a way of life for many generations and where food production is still absolutely the mainstay of the local economy.

I suspect that there is a good deal of consensus across the House on a couple of critical issues in today’s debate, the first of which is the need to cut red tape and reduce the administrative burden on farmers. In many respects, that is about fixing a major problem with the current CAP regime and is linked to the need for effective regionalisation and flexibility for member states. I hope that the Minister will consider in his comments at the end how we can start making decisions much closer to home and in the interests of our farming communities.

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

The hon. Lady touches on an important point. A common agricultural policy is needed, but considering the difference between farming in Finland and farming in Greece, we need to ensure that local decisions are taken on local matters within the umbrella of the CAP.

[Dr Whiteford]

I agree entirely with the hon. Gentleman. Clearly, we have different climates and landscapes, diverse methods of farming and different ways of doing business in farming. Without prejudice to the common market, it is important that decisions are made in a practical way by the people best able to make them.

Member states will need flexibility in the process to tailor implementation to their own needs. Within the UK, all three devolved Administrations must be able to work around the challenges that they face in delivering sustainable agricultural development in some least favoured areas. About 85% of Scotland is classified as least favoured areas. That compares with much lower proportions in some other parts of the UK. I hope the Minister will offer assurances that he will press for greater regionalisation as the negotiations intensify and that the issue will not fall off the agenda.

The hon. Member for Thirsk and Malton (Miss McIntosh), the Chair of the Environment, Food and Rural Affairs Committee, quite rightly concentrated on direct payments in her remarks. I welcome the fact that the Government have moved away from the more rigid position of the previous Government, but I am still concerned about their direction of travel. I welcome the Minister’s remarks earlier on clarifying the Government’s position. I hope that he will listen carefully to the Governments of Scotland, Wales and Northern Ireland on direct payments and pursue a negotiating stance in Europe that reflects the needs and wishes of the whole UK.

It is worth remembering, as the hon. Lady pointed out, that direct payments are there primarily to compensate producers for the increased costs of operating in a highly regulated market and to enable them to meet the high animal welfare and food safety standards that we all expect. We need to acknowledge that that does not come for free. We need to accept the reality that, in the past few decades, farming has not been particularly viable as a commercial enterprise. If we did not support agriculture with direct payments, food production and land management simply would not be happening in large areas of the UK. Farming, especially in the least favoured areas, would have ceased a long time ago.

We cannot consider this in purely economic terms. The hon. Lady hit the nail on the head when she put food security at the heart of the debate. Brian Pack’s 2010 report, which was produced for the Scottish Government, highlighted not just the food security challenge, but the challenges of climate change, water supply, energy use and biodiversity as the starting points for CAP reform. In a global context of rapidly increasing demand for food and the need to manage our natural environment much more sustainably, the case for direct support for farmers is actually much stronger now than it ever has been in the past.

We also need to consider the future of direct payments against the historical backdrop of Scottish farmers receiving a disproportionately low share of pillar one support—a pressing issue for those Scottish farmers who want to export their produce. At present, pillar one rates in Scotland are only €130 per hectare, which is less than half the EU average, and well below the UK average of €229 per hectare. The UK needs to argue for its proper share of pillar one, not least so that it can provide a fairer allocation to Scottish farmers.