Dairy Industry

Glyn Davies Excerpts

Wednesday 5th November 2014 Westminster Hall

[Ian Paisley (North Antrim) (DUP)]

I congratulate the hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) on securing the debate. The current Parliament has been one of the most supportive of rural debates. More than many previous Parliaments, it has heard the voice of the primary producer, and it should be commended for that.

Many hon. Members have described how important the milk producing sector is to the economy. My constituency has one of the largest bottling plants, and United Dairy Farmers, one of the most successful farming co-ops, operates there producing yogurt, drinks, butter and other milk-based items. It is the backbone of the local economy and jobs, and it is important to support it. However, we must bear in mind in the debate the world pressures on milk produce—over-production of milk worldwide, and the closure of the Russian market to EU-produced milk. Also, Chinese imports are now half what they were two or three years ago. My constituency helped to provide some of the biggest quantities of whey to China. The market needs to be encouraged and expanded, but there is pressure on it. I should certainly appreciate it if the Government could do more about that.

[Glyn Davies (Montgomeryshire) (Con)]

One of the key issues seems to be the world market and the competition problems that we face. Many farmers tell me that they are concerned about the end of quotas leading to other countries taking losses to the market and expanding hugely into countries such as Portugal, and completely under-mining the market. Does he agree that that is one of the major concerns, if we are to tackle long-term prices?

[Ian Paisley]

There are a number of fundamental things that need to be tackled. I am going to say something that will probably be quite unpopular, but it is a fact: the consumer must be educated to understand that if they want to eat clean, green, traceable local produce, they will have to pay more for it. All sectors of the industry must support that message, educating children, housewives and consumers about the fact that if they want to fill their basket with local produce it will cost more. We should get away from the notion that we can have cheap mass quantities of foodstuffs; we can have cheap mass quantities of food-like stuffs—but not of food. We must be clear about it, but it is difficult to sell that message to the public, especially in times of austerity. However, we need to address it.

Northern Ireland is more reliant on exports than the rest of the UK, so the effect that the milk sector feels is of course much greater. Cheap imports are pressed on us by our neighbour, the Republic of Ireland, which aggressively sells its milk in Northern Ireland but also aggressively opposes the sale of ours in the Republic. The Government should give that strong scrutiny.

I want to leave two matters with the Government for consideration. UKRep should be encouraged to press in the EU for an increased level of intervention to take surplus off the market. If that were done it would be of considerable help to world prices and local UK prices. The Government must help companies to find new markets. That is easy to say and difficult to achieve, but significant action must be taken, and, as the Chairman of the Select Committee on Environment, Food and Rural Affairs, the hon. Member for Thirsk and Malton (Miss McIntosh), said, pressure must be put on people to buy red tractor-marked goods and local goods. That means aggressive Government encouragement of the sale of those goods; and they can take it right to the line. Many European Community countries break the rules when they sell their local products. I want our Government to bend that line and be as proactive as they can in ensuring that British products are sold to as many British people as possible. The Government could also encourage DairyCo, a statutory body paid for by a farmers’ levy, to do its job, if they gave it more support.

--- Later in debate ---

[Angela Smith (Penistone and Stocksbridge) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Riordan. I thank the hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) for securing this important and thoughtful debate. I begin by conveying an apology from my hon. Friend the Member for Ogmore (Huw Irranca-Davies) who is currently on a shadow ministerial visit to Brussels, where he is discussing several topics, including the ongoing dairy crisis, with European counterparts. I assure Members that we take such matters very seriously and consider them to be of the greatest importance.

As has been made clear this afternoon, the recent situation in the dairy industry is extremely worrying for rural communities, tourism and the availability of local food. Britain has a long tradition of dairy farming, which is the country’s largest agricultural sector. The UK is Europe’s third largest producer of milk after Germany and France, and the industry employs more than 50,000 people and contributes £3.7 billion to the British economy. For that reason, the Government must respond to the current dairy crisis by co-ordinating action by European officials to support dairy farmers and restore confidence in the industry.

We need stability in the industry, but consecutive months of high domestic milk production, combined with the ban on dairy imports to Russia and falling returns from global commodity markets, have resulted in an overall fall in milk prices because the largest UK milk processors have reduced payments to farmers for raw liquid milk. Low global dairy commodity prices have been compounded by price wars between major retail outlets, which have used milk as a loss leader to attract customers. Several hon. Members have made that point.

Farmers for Action states that some farmers are selling milk for as little as 25p a litre, which is far below the market price. That results in farmers operating at a loss and not even covering production costs. Not only is that financially unsustainable, but it raises further questions about responsibility in our food supply chain. If the illusion is created that food is cheap, it may damage the agricultural industry and affect how the public view food. That is not at all helpful to achieving our aims. The Government must address long-standing structural imbalances of low profitability in the industry. Farm incomes are still falling, and many farmers have left the industry altogether. We currently have just over 10,000 dairy farmers in England and Wales, and that figure is down 4.1% on the previous year.

Although the dairy industry is not yet self-sufficient, we do not believe that its future is bleak. Population growth, increased wealth in developing nations and changes in dietary habits all point to greater long-term demand for dairy. The Government must ensure that the UK dairy industry is well placed to take advantage.

[Glyn Davies]

If there had not been such demand today and I had been able to make a speech, I would have liked to make the point that quotas come to an end next year. European countries will expand dramatically to take over the growing market that the shadow Minister is talking about. We need an assurance from the Minister that the instruments in Brussels will not be used to enable other countries to expand their industry at the expense of the British dairy industry.

[Angela Smith]

That is clearly for the Minister to answer. I made the point earlier that we need to see effective, co-ordinated action from the UK Government in its relationship with Brussels to ensure that the UK dairy industry is properly served.

In June, the industry pulled together and launched a plan called “Leading the Way”, which states that an estimated 2.5% annual growth in global demand for dairy products over the next 10 years will boost UK dairy production through increased exports and import substitution. The hon. Member for Somerton and Frome (Mr Heath) made a point about marketing. My hon. Friend the Member for Ynys Môn (Albert Owen) talked about localism and the need to ensure that people properly understand that cheeses such as mozzarella are sometimes made in Wales. That is an important point, and a lot can be done on that score. In particular, more can be done to encourage British people to eat British cheese. My own favourite is Wensleydale, the great Yorkshire cheese that is produced in Hull.