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Dairy Industry

Volume 458: debated on Wednesday 14 March 2007

Recently, dairy farming has been in dire straits, particularly because of the low price of wholesale milk. One of the issues that will affect prospects for the future is the high incidence of bovine TB in Northern Ireland compared with the Republic, where a selective cull has been exceptionally successful. Will the Northern Ireland Office consider that matter and take action to assist dairy farmers in Northern Ireland?

I assure the hon. Lady that animal health issues are a significant priority for my Department. We work very closely with our counterparts in the Republic, and I discussed this issue with Mary Coughlan, the Republic’s Minister for Agriculture and Food, when I met her last year. On a small island such as Ireland, it is important that we have an all-Ireland animal health strategy. If the hon. Lady is particularly referring to the selective cull of badgers, we have a group considering that. As with all such emotive issues, it is best to proceed on the basis of fact and evidence, and we are looking at the lessons that we can learn from the Republic. However, she is absolutely right that big challenges face the dairy sector in Northern Ireland. That is why it requires a full-time Agriculture Minister, who is accountable to local people in Northern Ireland, and I very much hope that one will be in place the week after next.

There are only two ways in which the Northern Ireland dairy industry can remain competitive. One is to produce bulk milk cheaper than alternative suppliers—that option is not open because of limited scale—and the other is to target high-value markets, perhaps through ethical dairy production with integrated supply chains. Does the Minister believe that the dairy industry in Northern Ireland is investing in those areas and not making the same mistakes as the dairy industry here in Great Britain?

My hon. Friend is correct. The industry is over-reliant on exporting powderised milk. The changes to the common agricultural policy in relation to export guarantees, which we entirely support, will mean that that is not an attractive option in future. There must be diversification into higher-value products such as cheese, yoghurt and premium ice cream—for example, the excellent Tickety-Moo ice cream. The Government have a role to play in this, and we can help by making grants available, but essentially it has to be a market-led process. I recently opened a new line at the Dunmanbridge cheese factory, which has risen to the challenge. My hon. Friend is right that such diversification has to be the way ahead.

Given that the average market price across the globe for whole milk powder has risen to some $900, does the Minister agree that it should be a realistic expectation for farmers in Northern Ireland that prices for milk should increase, and increase now?

There is of course a very competitive free market in milk and milk products, and it is not the role of the Government to interfere in that. However, the hon. Gentleman highlights the fact that given that the price of whole milk powder fluctuates wildly, it is folly to stake one’s entire economic development strategy for the dairy industry on what is essentially a global commodity. He is right that prices go up and down. However, I return to the point that I made earlier: the future for Northern Ireland’s dairy industry—which is tremendously important, as dairy products represent 30 per cent. of the value of its agriculture industry—is to diversify into cheese, yoghurt and other high-value products.

I agree with my hon. Friend about diversification, but what is he going to do? We cannot just allow the market to run things for farmers—we need some intervention by Government. Can he tell me what his Department is doing to help them?

Yes, I can. My hon. Friend is correct to say that we need to support the industry in this period of transition, and processing and marketing grants are available from national funds. The extra dairy premium on the single farm payment has also helped the dairy industry to diversify. The factory at Dunmanbridge has benefited to the tune of £500,000 from Government assistance for developing its product line. We stand ready to support the industry as it makes this important transition, but ultimately this must be an issue that the market determines, with Government support.