Parliament 18th September 2015

Long-term prospects for dairying are bright, but supply is out of kilter with demand, Catherine Paice reports

With the ‘Hogan package’ ignoring pleading calls for a review of EU intervention prices, EFRA’s first committee meeting of the new session wanted to know what more could be done in the UK to help alleviate dairy farmers’ woes. DEFRA minister of state George Eustice (Con, Camborne & Redruth) estimated British dairy farmers could benefit from around £29 million of the dairy package if it is distributed in a similar way to the 2009 crisis package – around £5,000 per farm. Mr Eustice said some of his constituents were losing between £10,000 and £30,000 a month.

Demand for dairy was growing by 2% a year, Sian Davies, chief NFU dairy adviser at the NFU, told the committee, now chaired by Devon MP Neil Parish (Con, Tiverton and Honiton). But output is still far outpacing this. “It would take a very brave person to predict when prices will improve, but we hope we’re at the bottom,” Ms Davies said, homing in on the tools needed to manage price and supply volatility: “This will happen again in future.” New Zealand has a guaranteed milk price scheme through Fonterra, the US has a margin protection scheme and even Ireland has contracts linked to volumes – all leave something to be desired, but the UK urgently needs risk management tools, including viable futures markets, she said.

Witnesses complained that UK milk price and production figures supplied by DEFRA were frequently up to three months out of date, making it impossible to read the market, let alone allow for a functioning futures market.

What is the potential for dairy to export their way out of the current difficulties? asked Margaret Ritchie (SDLP, South Down). “It’s part of the answer but it may not be the lowest hanging fruit as we’re only 85% self-sufficient,” said Michael Oakes, Worcestershire farmer and vice chairman of the NFU dairy board. Opening export markets takes time, said Ms Davies, but we should be looking at our processing capacity for the potential, “which is unlikely to be liquid milk or cheese”.

The need for more producer organisations (POs) was back under the spotlight. “Too often I’m hearing from farmers who feel they can’t raise their concerns with their milk buyer as they feel they may lose their milk contract,” said Mr Oakes. “That’s why better producer representation is vital.” DEFRA still needed to take action to facilitate the creation of more POs, he said.

Dr Judith Bryans, chief executive of Dairy UK, urged the procurement of British dairy products by public bodies and organisations. Dairy companies were spending £150 million on brand promotion, she said, “but to promote and protect British dairy products requires promotional funding from other sources.”

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