UK Dairy Sector

Julian Sturdy Excerpts

Wednesday 20th April 2016 Westminster Hall

[Mr Williams]

The hon. Lady is quite right, and she represents a rural area, as I do. For people who do not live in a rural area, it can sometimes be very hard to understand the extent to which the agricultural community and the agricultural economy are engrained in rural areas and every aspect of life in those areas. We have had a big debate in our area about the closure of village schools. If families working on dairy farms move away, that has a direct impact on the capacity of small schools to function. If young families leave a community, public services dwindle as a consequence, as well as the auctioneers and others involved in the supply chain for the agricultural industry, as she said.

The nature of my remarks so far has been negative, but I do not want this to be a wholly negative debate, because we have some immensely innovative farmers who want to stay in the industry and want the industry to thrive and prosper. However, my farmers tell me that they want us to speak out about the reality on the ground as they experience it.

Of course, not all the problems are home-made. There are serious global challenges for British agriculture that are not under our control. The farmers I have spoken to recognise the significant impact of global supply and demand on their businesses, and the difficulties for Government in changing that. There has been a fall in the global commodity price which, along with other factors such as the Russian ban and the reduced demand for milk from China and the middle east, has played a part in the current difficulties we face in Wales and in the UK as a whole.

For those farmers who have stayed in business and continued producing dairy, production has increased, but so has production around the world and it seems unlikely to slow down in the near future. There have been warnings. I will not dwell on them too much, but the Welsh Affairs Committee, of which I am a member, warned about the impact of the end of quota and the impact of the increase in Irish production, which the Farmers Union of Wales has been talking about since 2009; but we are where we are.

While there are positive signs that the global market for milk will continue to grow, the growth in production is higher than the growth in demand, which has a huge impact on the commodity price of milk. We live in a globalised world and at times that unfortunately means that small changes somewhere else in the world have a huge impact at home. There is action that can and must be taken to improve British dairy producers’ opportunities on the global market, such as having a strong and long-term dairy exports strategy; I emphasise that it should be strong and long-term. However, these global factors cannot always be predicted.

The domestic market remains important. Over half the milk produced in the UK is sold directly as fresh liquid milk through retailers and consumed here in the UK. This milk is mostly sold as skimmed or semi-skimmed milk, with much of the remaining milk being processed into products such as cheese, yoghurt, milk powders and butter. There are some very good companies using that milk. I think of Rachel’s in Aberystwyth in my constituency; its products can be bought in Portcullis House. They are excellent products that are made using local milk.

While many dairy products are in a very competitive global market, there has been huge criticism about the relationship between supermarkets and their suppliers, especially when it comes to the price that supermarkets pay for the milk that goes on their shelves. Milk, as a staple in many people’s shopping baskets, has for too long been at the forefront of the UK retail price war. However, rather than affecting the profits of the supermarkets, it seems that much of this cost-cutting has instead affected the price paid to dairy suppliers. Much of the milk that is produced was bought at a price lower than it cost to produce. That situation is simply not sustainable for my constituents who are farmers— or for any constituents in the farming communities represented in Westminster Hall today. The FUW said in 2015:

“It is not, and never has been, the job of the producer to fund supermarket price cuts or to enhance a retailer’s market share. Sacrificing producers to a retailer price war can only function to further break an already fractured supply chain”.

That is why I return to the point about the Groceries Code Adjudicator made by the hon. Member for Eddisbury (Antoinette Sandbach), and it is why many of us in this House supported the creation of the adjudicator.

[Julian Sturdy (York Outer) (Con)]

rose—

[Mr Williams]

I know that the hon. Gentleman has done a lot of work on this issue, so I give way to him.

[Julian Sturdy]

I congratulate the hon. Gentleman on securing this important debate and on making a powerful argument. Regarding the Groceries Code Adjudicator, he will be aware that there is an upcoming review of the adjudicator, two years after the office was created. Is that not the perfect opportunity to strengthen the adjudicator and its remit, as my hon. Friend the Member for Eddisbury (Antoinette Sandbach) touched on? This is an area where Government can act.

[Mr Williams]

Again, I completely concur with that comment. I think the hon. Gentleman secured a debate on the Groceries Code Adjudicator in this Chamber a few weeks or months ago, and he made that point very strongly then. He is quite right; we need the opportunity that this review presents.

I supported the creation of the adjudicator, as did my party, and I commend the cross-party efforts to create the adjudicator. Andrew George, the former Member for St Ives, and others, including the hon. Member for Ynys Môn—in fact, all parties in the House pioneered and put forward the case for the adjudicator, the creation of which was long in coming.

Like the hon. Member for York Outer (Julian Sturdy), farmers tell me that, yes, the adjudicator has the power to name and shame, and, yes, the adjudicator has the power to levy fines, but those powers are insufficient. The adjudicator needs to have the power to examine the whole of the supply chain from gate to plate, even if that requires legislative change. That would instil great confidence in many farmers who do not have a direct relationship with supermarkets through one of the admirable dedicated supply contracts.