Dairy Industry

Julian Sturdy Excerpts

Thursday 13th September 2012 Westminster Hall

[Julian Sturdy (York Outer) (Con)]

As ever, it is a privilege to serve under your chairmanship, Mr Betts. Like many hon. Members here, I represent a constituency with strong rural links and I have had regular meetings with local dairy farmers. I want to voice their concerns and discuss the wider conflicts in the industry today, but I must also put on record my declaration of interest, Mr Betts, as I am a farmer, albeit not a dairy farmer.

As has been outlined powerfully this afternoon, for some time, our dairy farmers have found their backs to the wall. To be honest, that is putting it quite politely. It is fair to say that farmers have been unfairly penalised through contracts that, frankly, have sought to take advantage of the product’s perishable nature. As such, I was delighted to learn last week that UK dairy farmers and processing firms had agreed a new voluntary code of practice for future milk supply contracts. I pay tribute to my right hon. Friend the Member for South East Cambridgeshire (Mr Paice) for all his work in getting the code of practice set up. That agreement was the result of significant negotiation, and the new voluntary code will require plenty of scrutiny from both the industry and Government.

Before discussing the path forward, it is important to understand the context of farmers’ concerns. The dispute has centred on frequent reductions in the price paid by processors to milk producers. Combined with the rising cost of feed and distribution, the pressure on dairy farmers is taking a sad toll. To give a local example, Arla, based in Leeds, reversed its planned 1p price cut for August. It actually went further, raising its price to 29.5p a litre, as has been mentioned. However, in the same month, production costs for dairy farmers jumped by 1.5p, so the costs of production were still not being covered, which is the crux of the problem facing those farmers.

The dangers of failing to act now and in favour of milk farmers are stark. Quite simply, if dairy farming does not pay, we will witness an increasing decline in the number of UK-based dairy farmers and an increasing dependence on dairy imports. The farmers with dairy in their blood may continue to champion the industry out of love—I know many who would do that—but, more worryingly, what are the incentives for the next generation to do likewise? The danger, therefore, is not just the immediate threat of dairy farmers going bust, but the threat to the viability of UK-based dairy farmers in the long term.

At this stage, I praise the work, research and general lobbying provided to farmers by the NFU. I agree with the NFU’s dairy board chairman, Mr Raymond, who said only last week that dairy farmers require

“equitable and trusting relationships with their milk buyers and this can only be achieved by putting in place fair and transparent milk supply contracts.”

The recently agreed code certainly seems to address the problem of trust, with the document set to include a range of positive measures. However, I believe that dairy farmers are entitled to be cautious as well as optimistic. As with all such codes and agreements, words on paper must be translated into practical action. I put it to the Minister that the Government must ensure that the situation is kept under constant review, with an understanding that further work and perhaps even legislation might be required—and that is not something that I would often say.

Finally, I want to focus on the Groceries Code Adjudicator Bill. Like many other hon. Members, I have been calling for some form of supermarket ombudsman since my election to the House. I know that supermarkets play an important role in local economies and communities throughout the country. However, in such a competitive market, squeezing prices in the back office to the detriment of standards and of producers, such as dairy farmers, is a constant risk, requiring some manner of independent monitoring. Like many, I look forward to the Bill’s Second Reading. I believe that a strong groceries code adjudicator—I emphasise the word “strong” because it must have teeth—will build on the new code to offer dairy farmers a bit of light at the end of what has been a very long and pretty dark tunnel.