Dairy Industry

Neil Parish Excerpts

Thursday 13th September 2012 Westminster Hall

[Neil Parish (Tiverton and Honiton) (Con)]

Thank you, Mr Walker, for calling me to speak. It is a great pleasure to speak in this debate.

I thank the hon. Member for Dunfermline and West Fife (Thomas Docherty), because he and I have secured this debate. He has a great knowledge of the retail trade, so perhaps with that knowledge, my own knowledge of farming and some cross-party support we can get a really good price for milk. We want this debate to be about the price of milk, and the fact that we have nearly 40 Members in Westminster Hall who want to speak in this debate shows how important the issue is to everyone in this House. In fact, I suspect that at the moment there are probably more people in Westminster Hall than there are in the main Chamber. I thank all Members who are present for coming, and the number of Members who are here shows the seriousness of this matter. I also thank the Backbench Business Committee for granting this debate; it is a very important one.

Confidence in the dairy industry has been at an all-time low this year, not only because of the prices for its products but because we have had probably some of the worst weather that we have ever seen in the UK. As a result, we have had some of the worst May silage, and all those types of things, coupled with the high price of cereals, have meant that farmers are being crushed between low prices and the high cost of feeding animals.

Ten years ago, there were more than 26,000 dairy farmers; now we are down to fewer than 15,000 dairy farmers. That shows how many dairy farmers have been forced out of the industry, and how things have become more and more competitive.

It is good to see the new Minister here in Westminster Hall today and it is also good to see my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the Chairman of the Environment, Food and Rural Affairs Committee, here.

The voluntary code of best practice on contracts between milk buyers and dairy farmers is an important settlement. It will prevent producers from being trapped in unfavourable contracts and it will add much-needed transparency to milk contracts. I pay great tribute to my right hon. Friend the Member for South East Cambridgeshire (Mr Paice), who worked absolutely tirelessly with all parties to reach that agreement. It is a great legacy and I know that Members from all parts of the House are grateful to him for his profound knowledge of farming and for his support.

I welcome the new Minister to his post, and I hope that he can pursue the voluntary code as quickly as possible. The contract between producers and purchasers should set out a clear price. It should also set out that in future producers must receive at least 30 days’ notice of a price change; that retrospective price adjustments will not be accepted; that dairy producers are allowed to supply more than one processor when their primary milk buyer seeks to cap their production; and that supermarkets setting farm prices must engage meaningfully with farmers and their representatives, rather than just driving farmers into a corner and every now and again adding a sop, when what farmers need is a long-term future. The code must be implemented and then monitored for compliance and effectiveness. If it is not working, the Government must consider what statutory powers and mandatory powers can be added to it.

The Government have also made a very welcome and long-overdue move to introduce the Groceries Code Adjudicator Bill. It was presented to the House of Lords only last week and we now look forward to its Second Reading.

This issue is about fairness. It is also about supermarkets, particularly the few large ones that dominate the retail market and that have been able to increase their profits at the expense of food producers by using—

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

There is one issue that my hon. Friend forgot to mention just now. He lives in Somerset and I represent a Somerset constituency. However, he forgot to mention the Wiseman dairy at Bridgwater, which is one of the processors, and the processors are equally culpable in this matter.

[Neil Parish]

I thank my hon. Friend for his intervention. I will be talking about processors shortly, but he is absolutely right to make that point. However, we should not forget that processors, especially when there is a fixed price with the supermarkets, are very often the ones that get squeezed, because there is a guaranteed price to the farmer and then the farmers enter into a trade war with their supermarket friends—or enemies—and at the end of the day it is probably the processor that actually pays the price.

We must move more swiftly to make the Groceries Adjudicator Code Bill law, so that supermarkets play by the rules, producers have confidence that their complaints will be taken up and third parties can also raise issues with the buyers. If the supermarkets and other larger retailers are not doing anything wrong, they have nothing whatever to fear from the groceries code adjudicator. However, some supermarkets and other large retailers are less than enthusiastic about the adjudicator, so I feel that there is much to answer for.

It is also very important that third parties, such as unions and trade associations, are able to submit complaints to the groceries code adjudicator on behalf of producers, so that producers are able to benefit from the legal advice and support that those third parties may be able to offer.

All supermarkets can and should do more when it comes to responsible sourcing of all dairy products. The pursuit of ever greater margins, coupled with a short-termist approach to sourcing British dairy products, is jeopardising the future of the British dairy industry. Marks & Spencer, Waitrose, Tesco and Sainsbury’s should be acknowledged for introducing more transparent pricing mechanisms into their milk groups but, as the hon. Member for Dunfermline and West Fife said earlier, they have got to do much more about the cheese market. Retailers that have promised to do more, such as the Co-op, Morrisons, Lidl, Farmfoods, Iceland and Spar, have got to be brought to the table actually to do something, rather than just promising to do something, because let us not forget that all the time they are driving the price of milk down.

The point that I want to make very strongly to everybody here in Westminster Hall today is that consumers already pay enough money for their milk. The problem is that many of the large retailers are taking 16p in profit out of that money. That is where the problem is, and therefore some percentage of that profit needs to go back to the farmer. It is not just a case of farmers breaking even; they need to be able to make a profit to reinvest.

[Mr Marcus Jones (Nuneaton) (Con)]

On that point of reinvestment and making milk production more efficient, does my hon. Friend think that there has been an absurd situation in recent years whereby the regional development agencies have been distributing Government funding to try to support farmers in that regard, but in my constituency farmers on one side of the A5 have been unable to access that funding whereas on the other side of the A5, and under a different RDA, farmers have been able to access it? Does he agree that we need to have a more transparent system, a more level playing field and a sensible amount of funding from Government to try to help our farmers to become more efficient?

[Neil Parish]

Yes. My hon. Friend raises an interesting issue. It is not only a question of RDAs and which side of the A5 they are on; it is also a question of which side of the border people are on, because there are probably different policies in Wales and Scotland too. At the end of the day, all these things distort the market and we should not distort the market with public money. We need a level playing field, so that farmers can compete very well together.

I want to ask the Minister for an update on the milk package proposals, particularly on the establishment of producer organisations that will be able jointly to negotiate contracts, collaborate over price and adapt the production of their members to market demands. I hope that the farmer-owned co-operatives will be able to work more together to drive the price up, rather than compete with each other, which sometimes drives the price down in the liquid market.

It is also vital that farmers are given more bargaining power. Today, 87% of milk comes from just five companies, resulting in an effective monopoly in some regions.

[Neil Carmichael (Stroud) (Con)]

The producer group question is really important, because it leads us on to the contracts. It is very important that contracts are fair for farmers; they are already rather too prone to defend the position of the purchaser. Let us ensure that the farmer gets a fair chance in the contract.

[Neil Parish]

I welcome my hon. Friend’s contribution. More producer organisations being able to negotiate decent contracts, and being able to cut the contracts within three months, which is what the voluntary code is all about, will help to drive the price up. In the past, some contracts have done the reverse, and have driven the price down.

Currently, there are no formally recognised producer organisations operating in the dairy sector, nor is there a definite interpretation of what the dairy package regulation means for the establishment and recognition of producer organisations known to the industry. Members will hiss when I say that my experience is that producer organisations are much stronger in many other countries across Europe and, dare I say it, probably get a better price because of that. Let us not always shun what may be done across the channel, but endorse some of it if it improves the price to farmers.

[Sheryll Murray (South East Cornwall) (Con)]

Does my hon. Friend agree that if producer organisations are to have clout they have to represent everyone in the industry and not be dictated to by the large producers, as we have seen happen in other industries, such as fisheries?

[Neil Parish]

My hon. Friend is absolutely right. Farmers’ great strength is their independence, but sometimes they do not get together as much as they should. This is an opportunity, with producer organisations, to do precisely that. It is important that the Rural Payments Agency is in a position to formally recognise groups of farmers who wish to constitute themselves as a dairy producer organisation before spring 2013. We have to stop talking about that, and do it.

The Government must also continue their work in making farming and the dairy industry more competitive, through cutting regulation, waste and red tape. The independent taskforce, set up by Richard—Dick—Macdonald, has been successful, but it means that the Department for Environment, Food and Rural Affairs has revoked some 39 statutory instruments only to turn around and introduce a further 41. We have, therefore, to run a little faster to get rid of regulation.

Farmers have to spend a great deal of their time filling and refilling forms on everything from livestock movements to nitrates regulation. The cost of current regulation is upward of £5 billion a year, with 50% of all DEFRA regulations coming from the EU. In particular, it is important that the Government look again at the nitrate vulnerable zone, because I do not think that it is scientifically based, and it costs the industry a huge amount. Ultimately, DEFRA must go further in cutting the barriers to growth domestically, and give Parliament more scrutiny over EU regulation coming in.

Farmers are never going to get a good price while we flood the UK market with liquid milk. The majority of milk produced in this country is for the liquid milk market, with only 49% of it going into processed products such as cheese and yogurt, which is far less than in many other countries. For instance, in Eire—the Republic of Ireland—80% of the milk is exported.

[Mr Charles Walker (in the Chair)]

Order. The hon. Gentleman has had more than the allotted time. Out of deference to him, I will let him start to wind up now. I will give him one more minute.

[Neil Parish]

I am very close to the end.

We need, therefore, to get more milk into the emerging markets of China and the far east, to ensure that we take more milk out of the system and create greater competition, which can drive up the price.

Finally, please can we ensure that the groceries code adjudicator is given real teeth and comes in quickly? Please can we ensure that all the work that the previous Minister did on the voluntary code is up and running immediately? When are the Government going to spend the £5 billion earmarked for producer organisations? Can we keep up the good work that we have done on eradicating tuberculosis? Healthy livestock, healthy wildlife.

[Mr Charles Walker (in the Chair)]

Lots of colleagues want to speak. I was slightly generous to the hon. Gentleman, but I really am going to do six minutes, with a minute for an intervention.

--- Later in debate ---

[Neil Parish]

In the short time I have left, I thank everyone for their contributions this afternoon. There have been more than 30 contributions, which shows the strength of feeling across the country. I will not enter into whose milk is the best, whose cream is the best or anything else, but this debate has shown that dairy farming is important to this country, and not only for dairy—the industry produces 70% of beef animals, too.

I am an optimist. I believe there is a future for agriculture, and I believe young farmers will go into agriculture. I was a young farmer many moons ago, and I have milked cows for 25 years. I have seen prices go up and down. We have marched up and down this hill before, so we have to ensure that this time we get the code in place and make it bite.

I welcome the Minister’s comment that he will legislate if the code does not bite. If there is such a threat to legislate, the code will work. There is enough money out there from what consumers are paying for milk, but the money is not getting back to the farmer.

I thank everyone for their contribution. This debate has shown the House at its best. Finally, I am looking forward to hearing the Labour party’s view on tuberculosis and the badger cull, because we have to be united to get rid of that disease.

Question put and agreed to.