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6.31 pm
Mr. Alan Hurst (Braintree): I am pleased to be called to speak--albeit it latterly and speedily--in this very important debate. This morning, I was speaking to a dairy farmer in my constituency, Nick Loftus, who told me of his grandfather, who had farmed a dairy farm in the Fylde, near Blackpool, in the 1920s--when, he said, similar problems existed in the dairy industry. Local dairy farmers had been threatened with a reduction in the milk price from 1¾d to 1½d per gallon. Those local farmers took it into their hands to fight the local dairy by feeding the milk to pigs or pouring it into the drains.
At that time, that method worked, and the dairy backed down. I suspect, however, that such methods would not work now, as the cartel of dairy processing companies would have milk from other locations on site within hours. Over the years, the position of producers has been weakened considerably.
I should say that one is often confused when giving examples from the dairy industry, as some people talk in litres, whereas others talk in pints. Nevertheless, Nick Loftus farms about 1,000 acres, employing five men. Those who are familiar with arable farming will realise that five men are about five times as many as one would have on a comparable-sized arable farm. His farm is in Essex, near Finchingfield, which is alleged to be the most beautiful village in Essex, if not in East Anglia. Nevertheless, although the aspect may be pleasing, the economic returns are very poor indeed.
Nick Loftus's view is quite simply that, if producers are to be strong in the market, they have to combine and to have a processing arm. Throughout history, producers have been in a weak position, but processors and retailers have been in a strong one.
Recently, we received the Monopolies and Mergers Commission's report on Milk Marque. If Milk Marque is a monopoly, it is a very poor one--as its market share has now been reduced to less than 40 per cent. I should much prefer the whole matter to be referred to a body, if there were one, called the cartel commission, so that those who are really milking the system--the producing dairy companies, and perhaps even our friends the supermarkets--might be dealt with. The retail price remains constant, but the producer price falls, and that pattern is occurring not only in the dairy sector.
Whatever faults Milk Marque might have in some aspects of its operation, it is not the key to the problem. It is very surprising to hear suggestions that it would be quite wrong for producers to have a processing arm. As we have heard in the debate, Denmark's milk co-operative has more than 90 per cent. of the Danish market, and it not only produces, but processes.
Moreover, the Danish co-operative--which is now the owner, or part owner of M and D Foods--is processing not only in Denmark, but in my own constituency. Therefore, it is vertically integrating not only in Denmark, but in the United Kingdom. Our own producers are being discouraged from vertically integrating, from adding value and--to put it into English--from going into a profitable part of the sector, so that they might be able to spread their costs and risk.
Mr. Dafydd Wigley (Caernarfon):
I should first declare an interest, as I am the president of a creamery in my constituency. However, I am an unpaid president, with no pecuniary interest in the business.
I follow the hon. Member for Braintree (Mr. Hurst) in saying that, currently, we should be concerned primarily about producers, who are going through a very difficult time. If there are no producers, there will be no consumers. I do not have to remind the House how important the dairy sector is to Wales, as it constitutes 30 per cent. of Wales's agricultural gross domestic product. In the past 20 years, the number of dairy holdings has been more than halved, from 9,000 to 4,000. Two years ago, there were 4,576 such holdings; now, there are 4,078.
Unquestionably, there is a crisis in the dairy sector. Last year, the sector's net farm income fell by 25 per cent. In the past two years--combining the dairy and livestock sectors--average annual net farm income has dropped from £18,527, to £11,524 in 1997-98, and, now, to a mere £6,854. Needless to say, some farmers must be below that average.
The average weekly net farm income is only £130. We cannot build an industry--or expect young people to go into an industry--with those figures. Something has to be done. The net margin per cow is a telling figure--from £333 in 1995-96, to £93 in 1998-99.
At the South Caernarfonshire Creamery, we are concerned that, recently, the market value of our cheddar has decreased by £500--or 20 per cent.--per tonne. The decrease is a consequence partly of imports, and partly of our inability to export because of the value of the pound, which has already been mentioned by other hon. Members. Ironically, in dealing with United Kingdom agriculture's difficulty in competing with Europe's agriculture, only the United Kingdom dairy sector is receiving no European Union agrimonetary compensation.
Plaid Cymru Members welcome the fact that, yesterday, at long last, the Monopolies and Mergers Commission report was issued. I am not sure what delayed the report, but at least we have it now. Our reaction to the report must be mixed. We welcome the fact that Ministers will not split up Milk Marque, as now is not the time to add additional uncertainty. Although there may be arguments for considering the matter in the future, we should not consider them now.
We regret very much that the report seems to favour denying Milk Marque the right to develop new processing plant, as such plant is greatly needed. A two-year scheme is about to proceed in Felinfach, investing millions of pounds and creating 70 new jobs, but it seems likely that that scheme will be undermined by the Government's decision. We should very much regret that.
A number of issues have to be addressed urgently. We all understand the problems caused by the high value of the pound--it is hitting not only the dairy sector, but others--but something has to be done about it. We also have to extend processing capacity. We therefore believe that that matter will have to be rethought by both the Secretary of State for Trade and Industry and the Minister of Agriculture, Fisheries and Food.
Mrs. Angela Browning (Tiverton and Honiton):
Ihave two unremunerated interests to declare. I am a vice-president of Devon young farmers--[Interruption.] The Secretary of State for Trade and Industry may laugh, but there is youth in me yet. Secondly, six months ago Milk Marque put into the public domain an application for a processing plant in Cullompton, giving me a keen constituency interest in the report.
Given the report's importance and the number of questions tabled by both sides of the House, a statement from the Secretary of State would have enabled him to answer questions, and that would have been better than tagging himself on to the end of a Conservative debate on the dairy trade. I shall listen carefully to what he has to say.
We have sought to persuade the Minister of Agriculture, Fisheries and Food of the urgent situation facing the dairy trade. The Minister has a reputation for listening, and I felt that he was trying to respond to the crisis when he spoke. My right hon. Friend the Member
for Bridgwater (Mr. King) and my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) testified to the devastating experiences of their constituents, and I could add to what they said. My first Trade and Industry question from the Dispatch Box flagged up the urgency of the problems facing dairy farmers, many of whom see this month's selling round as the time at which to decide whether to stay in business or call it a day.
Mr. Geoffrey Clifton-Brown (Cotswold):
Does my hon. Friend accept that dairy farmers hanging on by their fingernails and preparing to decide during the next week or two whether to remain in business will be dismayed by the Monopolies and Mergers Commission report, which creates another six months of uncertainty over the structure of Milk Marque?
Mrs. Browning:
Indeed; my hon. Friend is right. The Government's response to the report is inconsistent, and further delay faces farmers. The Secretary of State for Trade and Industry should take the opportunity provided by the debate to unlock the grip on the industry and to set some fears to rest. I hope that his response will be long on action and short on rhetoric.
Raw milk processing is a large industry, but we have been slow to change in favour of the culture of farmer co-operatives adopted in many European countries. Labour Members may think it strange that mere Conservatives should praise co-operative movements, but my advocacy is not new. My background is in marketing, and in considering how value can be added to products brought to market, I have admired examples from across the channel of farmers coming together to invest in packaging, marketing and transport in order to take a larger share of the single market. Lessons can be learned from those examples, and my hon. Friend the Member for Congleton (Mrs. Winterton) was right to say that farmers in the dairy trade are increasingly prepared to work that way.
The Minister of Agriculture said that vertical integration should be encouraged at the core of industry. I agree. Milk Marque makes a good case for wanting to process. A presentation in support of Milk Marque notes that there is no UK dairy processor in Europe's top 10, despite the UK position as the third largest milk-producing country in the EU behind France and Germany. Of the top 10 EU processors, six are farmer-controlled co-operatives. It is a tried and tested path.
The UK produces 14 billion litres of milk a year, but no UK company processes even 2 billion litres. By contrast, in Holland, a country that produces only 11 billion litres of milk a year, two companies--Friesland Coberco and Campina Melkunie--dominate the scene. Both are co-operatives, vertically integrated from farm to factory. In Denmark, the same pattern applies, with 90 per cent. of milk produced on Danish farms and processed and marketed in that way. Our sector is asking to operate on the same level playing field, and it is unbelievable that we must wait to find out whether the Secretary of State for Trade and Industry will let British farmers and companies take their product to market. If the single market is to mean anything, our farmers must have the same opportunities as others.
The Minister of Agriculture questioned our motion's desire to strengthen Milk Marque. There is nothing ambiguous in that. My hon. Friend the Member for South
Suffolk (Mr. Yeo) has pointed out, and I shall reiterate, that Milk Marque wants to process so that it can take products to market with value added. The Government's amendment says that
"the industry itself must help shape its own future".
What more can it do? It has not come to the Government with a begging bowl, but is asking to be allowed to compete and to develop its product in the same way as its competitors.
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