Farming minister George Eustice has said there is no need for more binding regulations to protect dairy farmers in a meeting about the ongoing dairy crisis.

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Giving evidence on the current dairy price crash to the Environment Food and Rural Affairs (EFRA) Select Committee on Tuesday, Mr Eustice claimed the voluntary code of practice governing the dairy sector remains fit for purpose and said Defra sees no need to extend the remit of the Grocery Adjudicator to cover the relationships between farmers and processors.  

On 25th November, the Committee took evidence from dairy company representatives and farmers' groups on the crisis. On Tuesday (2nd December), Mr Eustice faced questions about the outlook for farmers and the government's reaction to the crisis.

The value of milk on international markets has fallen rapidly over the second half of this year. Though processors maintain that the steep falls mean they have been forced to reduce payments to their suppliers, repeated cuts have led some farmers' groups to believe they are being unfairly targeted, and have been forced to bear the brunt of the downturn.

On Tuesday, Mr Eustice said there are opportunities to add value to dairy products in the UK. He said producing more cheeses domestically could help farmers' returns, and claimed more rigorous country of origin labelling could stand dairy farmers in better stead. He added that global demand for dairy is increasing 2 percent per year, and claimed this will put the industry right in time.  

The minister also claimed a futures market for dairy could yield some benefits for producers, pointing out that though milk products have traditionally not been considered suitable for such instruments, the market for skimmed milk powder shows non-perishable items could be appropriate, and the development of futures markets could offer some security for dairy farmers.

Eustice said "Although two years ago the industry was in dire straits… last year was a good year for the dairy industry" in which incomes rose. However, he acknowledged that consolidation in the sector has continued apace, noting that though milk output has remained almost level the number of producers in the UK continues to shrink, and farms to get larger.    

Short-term blip

On the subject of the recent downturn, Mr Eustice claimed, "A spike in production over the summer led to a short term blip" in returns for dairy producers, adding that in February, when the NFU released its dairy road map, the industry was looking to the future with a degree of optimism.

Anne McIntosh, who chairs the EFRA Committee, asked Mr Eustice if he was concerned that "people think the Grocery Adjudicator has teeth, when in fact she does not?" She also suggested that the public believe the ombudsperson, who was appointed in January 2013 at the recommendation of the competition commission, is already policing the grocery supply chain when this isn't the case.

Giving evidence to the Committee at an earlier date, adjudicator Christine Tacon said that, though she is technically able to conduct two investigations per year, she has not undertaken any so far. McIntosh added that the Department for Business has yet to set a level for fines the adjudicator can dole out to unscrupulous retailers.

The Defra minister responded that the supermarket ombudsperson was only appointed last year, and a period of time is needed before any further decisions are taken on her remit.

Eustice said the ombudsperson, who was appointed to uphold the grocery supply chain's code of practice, in response to evidence of retailers exploiting their suppliers, is not responsible for governing relationships between dairy producers and processors. He claimed the voluntary code introduced in the dairy sector after the protests of 2012 is having a positive effect, citing a recent report by MSP Alex Ferguson.

He went on to say that the EU milk plan has not had "a huge impact" on the situation in the UK, as the country's voluntary code "goes further and achieves more than the EU milk package."

Ms McIntosh pointed out that the voluntary code fails to match up to recommendations produced by the EFRA committee in 2011, which Mr Eustice helped to write.

On the subject of direct action protests against processors, which resumed in October, Mr Eustice said he understands farmers' frustration but that "it's not necessarily processors' fault they're paying low prices." He continued, "Aggressive protests don't send the right signal."

However, David Handley, Chair of Farmers for Action, which has spearheaded the renewed campaign of blockades against processors and retailers in recent months, disagreed with Mr Eustice. FFA were part of a coalition that won concessions from the industry by using similar tactics during the disputes of 2012.

Handley, who spoke at the EFRA Committee's evidence gathering session in late November, told Farming Online, "It's all very well when you're on £80,000 a year to tell everybody that everything's fine and that these protests aren't the way forward.

"It seems to me that [these protests] are the only tool in our armoury that gets the media involved and gets the public to realise the situation we're in. There are still some people who believe you can make a difference through peaceful protest."

He continued, "We need the adjudicator to look into the dairy industry. She needs the power to investigate retailers' paper chain and follow it back to the processors. We believe this is in her remit."

On the subject of the voluntary code, Handley said, "The voluntary code doesn’t achieve anything. When markets were in a strong position, the code was holding back prices. Not fit for purpose was the phrase I used to the EFRA Committee."

Speaking at Devon NFU's annual meeting this week, environment secretary Liz Truss said Defra would release funds to help farmers form producer organisations, to give them better organisation and representation to negotiate with milk buyers higher up the supply chain.