MPs in the Environment Food and Rural Affairs (EFRA) Committee have slammed the European Commission’s proposed package of measures for the dairy sector. The MPs said the EC proposals were insufficient to redress the problems facing the UK industry and that it was up to the government to add to it.

In a report published today (29th July), which evaluates the Commission’s 'Milk Package', the EFRA committee warned that farm-gate milk prices remain below the average cost of production and called on the Government to set out its strategy to improve the state of the UK dairy sector.

The MPs called on the Government to ensure that UK dairy farmers are offered detailed written contracts by processors. They believe these contracts should specify either the raw milk price or the principles underpinning the price, the volume and timing of deliveries and the duration of the agreement.

Anne McIntosh, chair of the EFRA committee, said, "Unless such contracts are made compulsory, we believe there will be no improvement in the system that currently means our dairy farmers have little certainty over the price they will receive for their milk."

Having taken evidence from representatives of the UK dairy industry during its evaluation, Ms McIntosh concluded that "Without Government action many more UK dairy producers will simply go to the wall, with highly undesirable consequences for rural communities, landscapes, tourism, and consumer choice. We found Defra’s lack of an action plan disappointing,"

Committee welcomes abolition of milk quotas

The Committee also welcomed the forthcoming abolition of EU milk quotas; it argued that, coupled with growing global demand for dairy products, this would create a significant window of opportunity for UK dairy production.

It called for imbalances in bargaining power between producers and buyers to be dealt with in order to "To capitalise on this opportunity" and for better prices for milk supplied for processing, such as in cheese making.

Ms McIntosh explained, "Some core issues that lead to low profitability must be resolved, not least the imbalance of bargaining power between dairy farmers and buyers. Retailers must recognise that the current distribution of margins along the supply chain is unsustainable. We have called on the Government to exert influence on retailers to establish dedicated supply chains for processed dairy products."

EFRA's view is supported by a report released by UK milk promotion organisation DairyCo earlier this week, which highlights the discrepancies in time it takes for changes in the market to be felt by producers. The report shows that when the end price rises, it takes a long time for the financial benefit to trickle down to the producer, whereas if the end price for milk falls, it rapidly rattles back along the supply chain and suppliers feel the effects much sooner.

EFRA report supports forming cooperatives

The Committee supported the European Commission's proposal to allow dairy producer organisations to jointly set prices but warned that without greater safeguards this could lead to competitive distortions. It claimed, "Greater oversight by the Office of Fair Trading is needed to protect consumers from milk price rises."

Jim Paice, the UK farming minister, had said the EFRA committees wishes would be difficult to achieve; he said making contracts which secure a fair price instead of the bare minimum would be difficult. The EFRA MPs revealed that, "When we questioned the Minister on what he could do to improve farm-gate dairy prices, he answered 'Not a lot'."

However, the MPs criticised Paice's scepticism, "We are surprised and disappointed that the Minister was not able to offer more concrete and proactive suggestions." They have said he must find a way to secure a better future for dairy farmers, whose numbers have halved in the last decade.

Committee seeks clarification of stance on large-scale dairies

The report called for further investigation into the environmental and animal welfare implications of large-scale dairy farming, a controversial subject on which it has asked Defra to clarify its position. Ms McIntosh said, "These developments have potential, but further research is needed to establish what impacts such systems have on the environment and animal health or welfare".

"DEFRA has an essential role to play in enabling a reasoned public debate about new technologies in food and agriculture. The Government must not shirk its responsibility to set out an informed rationale for whatever position it adopts on super-dairies."

The industry has been quick to welcome the committee's findings. NFU Scotland vice-president Allan Bowie welcomed EFRA's report, which he said, along with the DairyCo report published on Thursday, showed "There is an overwhelming need for change in the way that chain operates and these latest reports fully endorse calls for transparent, market-related pricing mechanisms to be a compulsory part of all dairy contracts between producer and milk buyer."