Anne McIntosh: We must seize this opportunity to find a fairer future for our dairy farmers

In short, the dairy industry’s future is precarious. Farm incomes are predicted to fall by nearly a quarter this year and roughly five per cent of dairy farmers choose to exit the industry each year.

I believe that we cannot continue as at present where farmgate prices are below the average cost of production and where there is such an imbalance of bargaining power between dairy farmers and milk buyers.

The Environment, Food and Rural Affairs Select Committee has just published report on EU Proposals for the dairy sector and the future of the dairy industry.

The European Commission’s package of measures for the dairy sector, “the Milk Package”, contains some good ideas which the Committee supports, but we fear that these measures will be insufficient on their own to redress the problems in the UK industry.

We were disappointed to find that the Government was not able to offer more concrete or proactive suggestions itself to improve the state of the dairy sector, nor was the Minister willing to give his full support to the Commission’s proposals.

In my view, the Government has not tackled the systemic structural failings in the dairy sector.

Dairy farming has an essential role in maintaining the fabric of rural areas like North Yorkshire.

It is an integral part of our uplands landscape, as well as providing traditional culinary specialities, such as the world-famous Wensleydale or Yorkshire Blue cheeses.

I am concerned that, should dairy farmers continue to go out of business, the impacts on rural communities, tourism, and the availability of local food will be enormous.

Dairy farmers are particularly disadvantaged as they sell a highly perishable product in a consolidated market, often with little choice to whom to sell.

In the UK, nearly 90 per cent of milk is processed by just five companies. The current system of contracts between farmers and processors falls short of the standards set out by the European Commission and gives little certainty and confidence to farmers.

The EFRA Committee recommends that written contracts between farmers and dairy processors should specify either the raw milk price or the principles underpinning price, as well as the volume and timing of deliveries, and the duration of the contract.

We were not persuaded that dairy processors will voluntarily make their contracts more transparent. Therefore, Defra must make the new form of contract compulsory, otherwise there will be no improvement in the system.

The Groceries Supply Code of Practice sets a precedent for regulation of terms and conditions between food suppliers and buyers where there is deemed to be an imbalance of bargaining power.

The price per litre of milk more than doubles between leaving the farm gate and being sold as bottled milk or cheese by retailers.

We argue that there needs to be a more sustainable distribution of profit margins along the supply chain.

Many big supermarkets have started paying a premium to the farmers that supply their bottled milk. This is a positive development, but only a fraction of dairy farmers actually benefit from these higher prices.

Supermarkets, which sell nearly 90 per cent of the nation’s milk, must not shirk their responsibility to help ensure the industry’s future.

We call on supermarkets to pay a fair price for all their dairy products, including their own-brand cheese and butter.

There are wider problems than just bargaining power. Despite having an excellent climate for dairy farming, the UK imports substantial quantities of dairy products.

Only 40 per cent of the cheese consumed here is made from British milk. The Government needs to improve dairy businesses’ access to capital to enable them to increase capacity and tap into expanding export markets, such as India and China.

It is staggering that Chinese consumers pay more for their milk than British shoppers. Defra should take more proactive steps to increase investment in processing, including supporting innovative, business-led research and development.

Large-scale dairy holdings are a significant future development for the industry, but the public is understandably concerned about their impact on animal health and welfare, and also the environment.

We call on Defra to establish its position on large-scale dairying and explain its rationale to facilitate a reasoned public debate.

I hope the Government will respond positively to our recommendations by not just signing up to the EU proposals for the dairy sector, but going that little bit further to enable dairy farmers to grasp the golden opportunity of quotas being abolished and rising world demand for dairy products.

This is a one off chance to end the systemic failure of the dairy sector and ensure a vibrant future for dairy farmers in North Yorkshire and beyond.