Some years ago a prominent politician was castigated for not knowing the price of milk. It meant he was out of touch with everyday matters. In actual fact, as a shopper, I know that knowing the price of milk is not that easy – is it organic, skimmed, semi-skimmed, full-cream, half litre, one litre, two litres, etc.? That aside the price of milk or rather the price that farmers are getting, is once more in the news.
There is no doubt dairy farmers receive a lot of sympathy from the public and quite rightly so. Their job is relentlessly tough, requiring long working hours, 365 days a year, with no respite. But as with many things, the issue is more complex than it may first appear. The efficiency of production of dairy farms varies quite markedly – I am told on good authority that the cost of production varies by as much as about 12p per litre (that in the context of a market price of around 26p per litre currently). This means that some farmers are able to operate profitably, whilst others are struggling. It also means that ‘the cost of production’ is not a uniform figure across the UK. Of course, the production of a vital commodity like milk has significance beyond market price – there are the important issues of food security and stewardship of the countryside which should influence purely commercial considerations.
The current situation is a product of the convergence of several adverse events creating volatility in global markets, notably the reduction in purchasing of milk for dried milk by China, which has stockpiled supplies and is compounded by the effect of Russian sanctions, which has meant that continental processed dairy products that historically were destined for Russia are now on the open market. Notwithstanding these current financial challenges, the longer term outlook for the dairy industry is generally regarded to be good.
So what can be done to help our dairy farmers? Well firstly we can buy our milk from supermarkets (such as Marks & Spencer, Sainsbury, Tesco, and Waitrose) which have got agreements in place to provide a fair price to our farmers with a degree of forward security of that price. This should help to force other supermarkets to do likewise. Secondly, we can ensure in purchasing processed dairy products such as butter and cheese, that they are produced using British milk – look for signs like the Red Tractor label. To provide further protection, I asked in the Lords chamber on the 15th of January 2014 that the Government consider extending the protection of the Groceries Code to dairy farmers. This Code was introduced by Act of Parliament in 2013 with the very purpose of protecting suppliers from unfair contracts forced upon them by large supermarkets. Unfortunately, it only applies to those who directly supply supermarkets; since most dairy farmers do not directly supermarkets they are not protected by the Groceries Code. The Minister in his reply said that the Government had considered this issue and that a review of the matter was due in 2016. Let us hope this is not too late for some of our hard pressed dairy farmers.