Dairy Industry

Sheryll Murray Excerpts

Thursday 13th September 2012 Westminster Hall

[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.

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

Thank you, Mr Betts. It is a pleasure to serve under your chairmanship today, and I will try to beat the bell, like any true Cornish girl.

I would like to say a big thank you to the hon. Member for Dunfermline and West Fife (Thomas Docherty) and my hon. Friend the Member for Tiverton and Honiton (Neil Parish) for securing the debate, as well as to the Backbench Business Committee. I would also like to make colleagues aware that because of the actions of my hon. Friend before the summer recess, there was a tremendously well-attended meeting of the Select Committee on Environment, Food and Rural Affairs. I do not think I have been to such a well-attended meeting, and it shows how committed my hon. Friend is to the well-being of our dairy farmers.

In South East Cornwall, a number of small dairy farms are vital to the local economy and to the livelihoods of their owners and the people who are employed there. I know that we, as a Government, have a will to support those farms. In the past, there has been a trend of supermarkets driving milk prices down to a level that is unviable for our farmers. The dairy industry has proposed positive action to resolve the problem, and I hope that the Government will support that.

Last Saturday, when I visited my local agricultural show in Liskeard, I learnt first hand how our dairy farmers are suffering economically. How on earth can anyone expect dairy farmers to be paid a price for their end product that falls below the production cost? It is just not common sense. I also know exactly how it feels to get up at stupid o’clock in the morning and work such long hours for a product on which there is no viable return, because dairy farming can be likened to the fishing industry, which I have extreme knowledge of. In recent days, it was encouraging to hear that Arla Foods and other processors are increasing the price to 29.5p a litre, but that is not really enough. As my hon. Friend the Member for South Derbyshire (Heather Wheeler) said, that is not sufficient to provide a genuinely sustainable dairy farming industry.

I want to mention the Clarke family and Trewithen dairy in my constituency. The Clarke family were dairy farmers who diversified into processing. They source their product from the local dairy farms around them and work together to ensure that everybody secures a fair share economically of the end result. It would be encouraging if other co-operatives could be formulated to secure similar deals.

It is encouraging that the dairy coalition has produced a voluntary code of practice, but will the Minister say when he will endorse it? If the code does not work, what action will he propose to ensure that we do not see any more dairy farmers going out of business? Will the Minister also say more about the timetable for the Groceries Code Adjudicator Bill, as it does not currently seem to be published?

I would like to endorse all the points that my colleagues have made today. I shall not repeat those arguments, as they have been made on many occasions, but I would like to tell the Minister that last week, I heard even his local farmers on Radio Cornwall, my local radio station, saying that they know he is a man of the land and that he has promised to support the farming industry. I hope that now he holds the position of Minister of State, he will continue the good work that his predecessor was renowned for. We want to see strong decisions and firm help from him for our farming industry.

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[Mr Heath]

That will get me into some very interesting discussions with border officials in a lot of countries. I will take the concept of Caerphilly, Cheddar, Lancashire and Cheshire around the world with me, wherever I go.

The dairy sector is enormously important to the United Kingdom. It is the largest agricultural sector, and we should remember that it is worth £3.7 billion annually. It is iconic in our countryside, and is identifiably British. There are good things to say about the industry. We have some very advanced and efficient processing plants, particularly for fresh drinking milk, and in the past year there has been a lot of wider investment in processing, which shows real promise and confidence in the future. Yet, let us not get away from the fact that in the past two months we have seen rallies and protests. There was the meeting in Methodist Central hall, which I, too, was at, and there is genuine worry about the inequity between farm-gate prices and production costs. A significant proportion of farmers may struggle to make ends meet this year, particularly in the context of the price changes, but also because of the rising input costs and the monsoon conditions that many of us have had to survive this summer.

There is nothing new in much of that. I seem to have been dealing with the issue throughout my political career, and I have always been consistent regarding the matter. I am actually grateful to the hon. Member for Ogmore for mentioning some of the things that I have said in the past, because I have consistently said that we must have arrangements in the dairy sector that are fair to the farmers, to processors, to retailers and to consumers. Those are not incompatible objectives; they are all on a par. To be fair to at least one processor and retailer, the Co-operative has been mentioned several times. No, it did not do terribly well over the summer, but it has today announced that it is increasing milk prices to 30p a litre from 1 October. That is good news indeed.

Members have raised matters that are slightly away from the economic conditions of the dairy sector. They have talked about the improvements in the Rural Payments Agency, for which I am grateful, because it is absolutely right to say that the agency’s performance has improved. We have discussed TB eradication. Unfortunately, we are still none the wiser as to the position of the hon. Member for Ogmore and his party on that, but I am clear. I thought that my hon. Friend the Member for Totnes (Dr Wollaston) spoke more sense about TB eradication in her contribution than I have heard for a long time, and I am grateful to her for that. We also talked about the groceries code adjudicator, for which I certainly have argued for many years, and I am proud that we are now putting through the House the legislation that will make that a reality.

Let us return to the economic position. We import a quarter of our total dairy needs. We have a £1.2 billion trade deficit. There is a growing demand for food at the global level, and an opportunity to fulfil some of it. Milk quotas will be gone from 2015, but we are not restricted by them now. We have room to expand already, while other member states are held back until 2015 and they desperately want quotas removed now. We have a chance to get in first—otherwise we might lose out. That is why some of the things that my hon. Friends have talked about are so crucial to the future of the dairy industry—promoting the industry around the world, promoting exports and import substitution, and increasing the efficiency and competitiveness of our industry. They are all opportunities for the British dairy industry.

It is not my business to tell people how to run their farms, but we need to look at the vast range of production costs on dairy farms and see if we can learn from best practice, helping farmers to recognise the difference that efficiency and profitability can make, and the improvements that can be achieved on the farm. There are things that dairy farmers can do on their own. For instance, I encourage them to sign up for Dairy Pro. Dairy Pro is the industry’s first integrated continual professional development scheme, which provides training and development to improve both standards of business performance and recruitment and retention within the industry.

There are things that dairy farmers can do together. Several hon. Members have mentioned the EU dairy package, which increases the already significant potential for collaboration through producer organisations. The timetable has not yet been agreed by the European Council and European Parliament, but we do not expect any problems. We expect to be able to start consulting in October, and we hope the legislation will bring the package into effect in spring 2013. I hope dairy farmers recognise the wider benefits that producer organisations may offer. Such organisations are not only about negotiating prices. A well organised producer organisation can make a significant difference to the success of its members by sharing best practice, increasing efficiency and competitiveness and opening up new markets.

[Sheryll Murray]

Does my hon. Friend agree that, Europe-wide, only a certain percentage—30%, I think—of producers can become members of a producer organisation? Does he really think that the shortfall we will see between Europe and the UK will solve the problem?

[Mr Heath]

I think it can make a contribution. All of these things are cumulative, but we should encourage collaboration within our dairy industry because it would make a significant difference.

The biggest single factor, and many Members have talked about this, is the voluntary code of conduct. This is the dairy industry’s first code of practice on contracts and it is a significant step from the beginning of the chain. I congratulate the industry, and I congratulate my predecessor on bringing the industry together. The agreement on the code’s detail is potentially momentous and provides all parties with greater clarity on contractual terms and conditions, particularly on farm-gate prices. I hope the code will start to open trusting relationships between the parties, because they need each other. We cannot have war within a mutually dependent industry.

I have been asked many times what happens if the code does not work. That is the wrong question; I want to ask what happens when the code does work, because I am strongly optimistic that this is the best way forward for securing a sustainable arrangement. Under the EU dairy package, we have the option of legislating on contracts. I make it clear that I will seriously consider making contracts compulsory if the code fails to deliver the necessary changes. I have already announced that we will be consulting so that, if such changes are necessary, we can make swift progress. Having said that, it is vital that the industry gives the code its full support and the time needed to take effect.

I confirm that additional funds are being made available to dairy farmers. We are opening the skills and knowledge transfer framework specifically to provide workshop events for dairy farmers from late autumn this year. That should help dairy farmers identify and access emerging market opportunities such as exports; strengthen their position in the supply chain through more effective co-operation and collaboration; develop new products and add value; and establish benchmarking.

The £5 million rural economy grant scheme for high-quality projects in the dairy industry should continue that focus and add, in the new year, the development of a capital investment programme to target infrastructure projects. That is a significant advance in Government support to the industry, which should reap dividends.