Although there are limits to what Governments can do when there is a global downturn in commodity prices, we have implemented a number of measures over the past two years. We made a crisis payment to farmers at the end of last year, we have extended tax averaging to make it easier to offset tax from good years, and we have supported intervention and private storage schemes. Looking to the future, we are working with industry to develop risk management tools such as futures markets, supporting new producer organisations, and opening new export markets.
I welcome efforts to increase exports of food and drink, but there is still concern about the domestic market in milk. What efforts are being made to ensure that farmers obtain fair prices from supermarkets, and what assistance could the Groceries Code Adjudicator provide?
My hon. Friend has made a good point. These have been two very difficult years for the dairy industry. However, I think we should give credit where it is due, and acknowledge that many of the major supermarkets offer their farmers aligned contracts that are linked to the cost of production. Those farmers have continued to obtain good prices over the last two years. Nevertheless, they are a minority, so we are investigating ways of strengthening the negotiating position of farmers in the supply chain, such as reviewing the operation of the Groceries Code Adjudicator, strengthening the voluntary dairy supply chain code, and strengthening recognition of producer organisations.
As the hon. Gentleman will know, there is a small European Union scheme to support school milk, which is worth a few million pounds, but it is dwarfed by the much larger, much more important nursery milk scheme run by the Department for Education and the Department of Health, which is worth some £60 million a year.
The Government’s proposal to withdraw operating licences for approved finishing units with grazing in culling areas is causing great concern to dairy farmers in the south-west. Has the Minister assessed the impact that that measure will have on dairy farmers’ ability to sell their calves, and generally on the market for livestock in the south-west? I urge him to think carefully about it before introducing it.
I can reassure my hon. and learned Friend that I consider such issues very carefully. Approved finishing units do have an important role to play as we try to tackle the long-term challenge of bovine tuberculosis, but if we are trying to roll back the disease, the risk associated with grazing on approved finishing units is greater. It is still possible to have a licence for housed finishing units, and there will still be finishing units in other areas where there is no cull.
The Department’s farm business survey for last year shows that dairy farm incomes fell by 50%, largely owing to lower milk prices. Will the Minister consider introducing a statutory code to safeguard the dairy sector, and will he agree to expand the role of the Groceries Code Adjudicator to cover the primary producers’ relationships with their suppliers and provide more stability for those producers in the market?
A consultation on the Groceries Code Adjudicator is in progress and is, I believe, open until 10 January. We have issued a call for evidence from the industry, and from others who may have ideas about how we might be able to extend the adjudicator’s remit or consider it further.