Turning sour: the need to reform the dairy industry

The continuing demise of dairy farms in the United Kingdom is a situation we can no longer ignore, says Dr Daniel Poulter.

The declining number of British dairy units is due to rising fuel and other input costs, coupled with a lower per-litre price paid for liquid milk. Despite the outstanding animal-welfare standards that British milk producers adhere to, the number of registered dairy production holdings in the United Kingdom has halved since the year 2000, and Britain now has the third-lowest milk price in all of the European Union; only Slovenia and Romania have lower farm gate milk prices. It is clear that there is a deficiency in the dynamics of the dairy industry, and I am confident that the new government, with cross-party support, is taking steps to tackle it.

I believe that many of the problems in the dairy industry lie in the nature of contracts between producers and processors. It is quite common for producers to find themselves in contracts that allow for the price paid per litre to be changed at very short notice, as well as exclusive selling rights to processors and notice periods of up to 18 months. These contracts have ultimately sought to exploit the natural weaknesses of the dairy industry; as a perishable good, milk has a very limited amount of time in which it can stay on the farm, meaning that the bargaining power of the producer is reduced. I believe that this exploitation of the industry does not equate to a fair exchange from producer to retailer, resulting in low farm gate milk prices. At this critical juncture for the dairy industry, the question now remains of what can be done to address such imbalances.

I am pleased that the government has already made a commitment to support our food and drink producers throughout the UK by supporting honest food labelling initiatives, and the upcoming Food Labelling Regulations Bill is an opportunity to potentially facilitate a transition to fairer contractual arrangements between producers and processors. If the supermarket adjudicator (under this bill) was given scope to operate within the dairy industry, then I feel that it would provide a motivation for processors and retailers to engage in fairer market practices.

I wish to see the establishment of a voluntary code of honest contractual arrangements by processors and retailers, not an imposition of regulation. However, there does need to be more active intervention if processors and retailers continue to engage in such unfair methods. There are currently retailers that already adhere to fairer working practices with producers, and it is my desire to see them become that norm, rather than the exception.

I have been very encouraged by the commitment of the minister for agriculture and food to seeking fairer deals for British food and drink producers over the past year, and I believe that we have a unique opportunity to integrate the dairy industry into these legislative proposals. If we do not address the fundamental imbalance in the dairy supply chain fully, then the iconic dairy herds of our rural communities, and their outstanding produce, could become a thing of the past.

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