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Milk Price

Volume 609: debated on Thursday 5 May 2016

These are undoubtedly very difficult times for many dairy farmers. The combination of oversupply around the world coupled with a weakening of demand in major markets such as China has led to a very depressed commodity price. We secured a £26 million support fund last November to alleviate short-term cash-flow pressure. We introduced a dairy supply chain code to improve dealings between dairy processors and farmers. Longer term, we are working on a project to introduce a dairy futures market to help farmers manage future risks. We are exploring the potential to facilitate investment in new dairy processing capacity, so that we can add value to our production.

A food-secure Britain needs British farmers to be able to make a living. Milk prices plummeted in March this year; they were at their lowest since 2009, with farm-gate prices as low as 16p per litre. This comes at a time when British dairy incomes are dropping; they are forecast to fall by almost half this year. I was disappointed that there was nothing for dairy farmers in this year’s Budget. What action will the Minister take now, working with supermarkets, retailers and farmers, to ensure a future for the British dairy industry?

We have introduced tax-averaging across five years to help farmers who face a tax bill; they can average it against difficult years. Her Majesty’s Revenue and Customs has been clear that it will take a generous approach to the time-to-pay provisions to help farmers who may be under pressure with their tax bill. I completely understand that this is an incredibly difficult time for many farmers. There is a mixed picture; a small number are still on aligned contracts, and still receive a fair price. We constantly meet retailers to try to improve the contracts that they offer, and to encourage them to offer more aligned contracts and to source more dairy production. Many of them are now offering those aligned contracts, or higher prices, to their farmer suppliers.

Can the Minister tell the House and Britain’s farmers why the Government failed to support EU efforts to improve the school milk scheme, which provides a valuable market for our struggling dairy farmers? Can he confirm that the Government will roll out the scheme in our schools, and say what benefit it will bring for British farmers?

It is not the case that we did not support the school milk scheme. The European school milk scheme is very small; it is worth around £4 million a year. It is dwarfed by our domestic schemes. The one funded by the Department for Education and the Department of Health, for infants, is around £60 million a year. The issue that we had with the school milk scheme was the bureaucracy and administration that the European Commission was trying to add to it. We were keen to pare that out, but we certainly supported the scheme; it is not true to say that we did not.

In north Yorkshire, in the last 15 years, we have lost 50% of our dairy farmers, and 90% of those still in business are losing money, despite generous taxpayer subsidies. Does the Minister agree that now is the time for the supermarkets to start paying British farmers a fair price for British milk?

I understand the point that my hon. Friend makes, and as I say, these are very difficult times for farmers. People often lay the blame on supermarkets, but we have to recognise that at the root of the problem is the worldwide issue of low commodity prices. There are very low prices in New Zealand—far lower than we have here—and many people have been driven out of business there. This is a global challenge. Some of the supermarkets have stepped up to the plate and offered aligned contracts, and many of them are selling their milk at a loss; we should recognise that and give credit where credit is due. Of course, we are always trying to improve the position of farmers in the supply chain.

Perhaps there is a win:win here. The hon. Member for Kettering (Mr Hollobone) made a suggestion about Weetabix; if we advocate having British milk with it, that might offer a little solace. The Minister has spoken about a commitment to strengthening the voluntary code of practice for the dairy sector; when will that be in place?

I have already had this discussion with NFU Scotland, and I have offered to meet it to discuss its concerns. The voluntary code of practice for the dairy industry is GB-wide, as the hon. Gentleman knows, but the reality is that it tends to help farmers more in a rising market, when prices are firming, than in a difficult time in which there is over-supply. The crucial element of it is that it gives farmers the ability to walk away at three months’ notice, and that enables them to extract a better price. That obviously only works when market prices are going up, rather than down, but I have offered to meet NFU Scotland to discuss its concerns. We will review the code again with a view to strengthening and improving it where we can.