department for Environment, Food and Rural Affairs

Helen Goodman Excerpts

Tuesday 17th July 2012 Commons Chamber

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

I, too, value the opportunity to bring the issue before the House. I attended the meeting of 3,500 farmers in the Methodist central hall. They were very angry and unhappy. The Minister handled the situation well, but it was a real demonstration of our dairy farmers’ frustration about their treatment.

At a time when British agriculture is doing relatively well, milk prices have fallen dramatically. A year ago, the average price of milk was about 35p a litre; now, it is less than 25p a litre and, as we have been told, the cost of milk production for the average farmer is about 30p a litre. When people have to sell below the cost of production, we will undoubtedly see farmers leave the industry.

In September 2002, there were 3,100 dairy farmers in Wales, but by May 2012 the number had fallen to 1,900. Across the whole of my constituency, there are fewer than 10 milk producers, which is a huge fall in numbers. There has been a downward trend in the production of milk. In 2003, 14.5 billion litres of milk were produced, but today the figure is around 13.5 billion. If those trends continue, the implications are bad not only for farmers but also for consumers. In the medium and long term, they are bad news for retailers and processors.

What can be done to avert a crisis? There is no single bullet, but we need action at every stage of the supply chain, from farmers, processors, retailers, consumers and the Government. As has been said, farmers need to work together. The voice of one farmer carries little weight in the marketplace, but when they join together, their negotiating power is much stronger.

Processors and retailers need to start paying a fair price for milk. Robert Wiseman Dairies, Arla Foods and Dairy Crest must scrap the scandalous price cuts they have imposed on farmers.

Consumers can reward retailers that are doing the right thing. Sainsbury’s, Tesco, Waitrose and Marks and Spencer have a price formula based on cost. I commend them for that. Consumers should show their appreciation by voting with their feet, and indeed their purses, and punish the Co-op, Asda and Morrisons, which do not have a similar scheme.

We need to start adding value to liquid milk. Our European friends are far better than we are at increasing profits from milk by processing it into cheese, yogurt and the like, which means it can be exported around the world.

[Helen Goodman (Bishop Auckland) (Lab)]

I agree with the hon. Gentleman. In my County Durham constituency, many milk producers are suffering. I also agree that milk producers need to sell to wider markets, but does he agree that is no excuse for the behaviour of the wholesalers and the supermarkets?

[Roger Williams]

The hon. Lady makes a fair point. People who are powerful in the marketplace, such as the processors, use their muscle to bear down on the prices paid to producers, who are suffering.

Finally, I turn to the Government. At the summit, the Minister said that a voluntary code between farmers and processors was close to agreement. Will he update the House on the latest progress?

I commend the Government on the Groceries Code Adjudicator Bill, which is making its way through the other place. Let us ensure that the legislation passes quickly, with the teeth it needs to do its job.

I welcome the work the Minister has already done on lightening the load of regulation on British farmers, but more can be done. I know he will continue to implement recommendations from the Macdonald report as and when he can.

The dairy industry is in crisis, but the crisis can be averted. Let us work together, so that our dairy industry will have a brighter future.

--- Later in debate ---

[Mr Williams]

My hon. Friend graphically illustrates the inconsistent role of some supermarkets. Along with the groceries code adjudicator, we need to look at how we can bring about fair contracts, to which everyone who has spoken has alluded, to stop the exploitation—an emotive word, yes, but that is the perception on the farms that I represent, as well as that of the National Farmers Union and the Farmers Union of Wales. The contracts that farmers are required to enter are simply unfair, as they are required to give 12 months’ notice or more to pull out of them whereas, as we have heard, processors can change the price they pay for milk at a few days’ notice, or quite literally overnight.

The Government are right to move towards a voluntary code. Like other Members, I look forward to an update from the Minister but I hope that if necessary, the Government will proceed with regulation. As Lord Plumb said in another place, rule books without referees generally have limitations. We all agree in the House that farmers deserve to receive the production cost for their milk, but Robert Wiseman Dairies has announced that from 1 August it will pay 24.73p per litre for milk. Arla Foods milk price will fall to 25p a litre, and the First Milk price to 24.35p a litre—5p less than the cost of production. Any situation in which farmers have to accept less than the cost of production is unsustainable. I commend Waitrose, Sainsbury’s, Tesco, and Marks and Spencer on the positive work that they have undertaken, but we need to ensure that those agreements are made across the board, from retailers to processors, with all major buyers of milk and dairy products agreeing to commit to a sustainable purchasing strategy.

[Helen Goodman]

Does the hon. Gentleman not agree that there is a problem with milk imports from countries with lower animal welfare standards and costs, and that those imports are not labelled in the UK?

[Mr Williams]

The hon. Lady served in the previous Parliament when, to be fair, the issue of labelling rose to prominence. It is critical, because it enables consumers to make informed decisions.

Given the feelings in the farming community about the recent price cuts, compounded by difficult weather conditions and rising input costs on-farm, the Government need to make it clear to processors and supermarkets that their failure to deliver fair prices may lead to severe disruption to the supply chain with dire implications not just to farmers but ultimately to us as consumers.

It is always worth remembering that the losses in the dairy sector will have a huge—I do not use that word lightly—impact on the broader rural economy. Welsh Assembly Government statistics indicate that, as my hon. Friend the Member for Brecon and Radnorshire (Roger Williams) said, the number of dairy farms has reduced by 800 over the five years from 2006 to 2011. The number of dairy farmers in Wales alone halved in the past 13 years. This figure will rise if we do not take action over the current price slash and unfair contractual obligations, because they will mean many job losses across the industry among suppliers.

Next week the Welsh farming community, in its widest sense, will gather for the Royal Welsh show in Builth Wells in the constituency of my hon. Friend the Member for Brecon and Radnorshire (Roger Williams). We will see there the breadth of the farming community. The supermarkets, the farming unions and the Young Farmers will be there, as will the machinery contractors, the feedstuff merchants and the farming families from Wales and beyond. I make this prediction: whatever the weather, the sheer number of people there will illustrate how important the industry is to rural Wales. The stakes are high.

It is election time in Ceredigion, when we have hustings with the farming unions—the FUW and the NFU. Before elections, I am always asked this question: “Would you encourage a young farmer, the son of a farming family, to go into the industry and continue with the family farm to earn a living and contribute to the broader rural community?” With hand on heart, if things do not improve and we do not have action, I would hesitate about whether I could say yes to that question.

--- Later in debate ---

[Mr Paice]

No, I am sorry, I need to press on.

Hon. Members also raised the issue of supermarket power. As has been said, we are introducing the groceries code adjudicator. I have always tried to be honest with farmers and say that on its own it will not increase the price of milk, but that it should increase fairness and transparency.

The big problem that we face, which has been mentioned this afternoon, is what I view as the absurd level of price cutting by some retailers, particularly those in what is known as the middle ground. One retailer is openly selling milk at 99p for four pints.

[Helen Goodman]

Name them.

[Mr Donohoe]

Iceland.