Earlier this week I attended the northern dairy conference. Farmers—including those in the south-west—are experiencing tough conditions with prices having fallen significantly since spring. On 19 November I hosted a meeting of the dairy supply chain forum and we discussed a number of action points, including better country of origin labelling for British products in the EU, opening new markets for exports, and investing to improve competitiveness and add value to dairy products through the rural development programme. The south-west Dairy Crest factory at Davidstow has benefited from such public investment.
My hon. Friend makes a good point. At current prices many farmers are indeed making a loss, and at the dairy supply chain forum we discussed volatility. The last two years have been a rollercoaster ride for the dairy industry—it had a dire year in 2012, last year was very good, but this year is bad again. We have considered whether we can develop a successful futures market, for example in skimmed milk powder or cheese products, to help farmers manage that volatility in future.
With volatility in the dairy industry impacting on farmers generally, does the Minister agree that the EU intervention threshold, which was agreed at 18p per litre in 2003, does not protect dairy farmers across the UK and is in urgent need of review? What representations will he make to Brussels on that?
I met Northern Ireland representatives from Dairy UK when I was in Brussels last week and they raised that point with me. The European Commission is looking at the intervention price, and our officials are working on what the appropriate price would be. Generally, an increase in that intervention price would tend to benefit other countries that have lower prices before it benefits UK farmers, but we are considering the issue.
The dairy price of 25p and falling means that farmers are producing at a loss. The dairy trade adjudicator can look at parts of the trade, but are there more ways to deal with the price, especially of processed cheese in the supermarket sector? The price of milk is dealt with by supermarkets, but processed cheese is not.
I have considered those issues, which I discussed last week when I appeared before the Environment, Food and Rural Affairs Committee. My view is that our grocery code, together with the adjudicator, adequately covers retailers, and the Competition and Markets Authority has powers to consider issues further up the supply chain. Our dairy supply chain code is working successfully—the recent review by Alex Fergusson confirmed that—but we must focus on making it work better.
Like many farmers across the country, dairy farmers do not trade directly with supermarkets but deal with processors and food manufacturers. Does the Minister believe that opening up the responsibility of the groceries code adjudicator would bring greater transparency to the marketplace?
As I said, the Competition and Markets Authority already has some ability to look further up the supply chain. The dairy supply chain code covers 85% to 90% of all production. Crucially, it gives farmers the ability to walk away from a contract at three months’ notice if they do not like it. They can shop around. The code is working successfully.