department for Environment, Food and Rural Affairs

Glyn Davies Excerpts

Tuesday 17th July 2012 Commons Chamber

[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.