APPENDIX 19
Memorandum submitted by the Royal Agricultural
College, Cirencester (Q30)
The Royal Agricultural College is pleased to be given
the opportunity to comment on the Marketing of Milk in the UK.
In many parts of the world the dairy processing industry
is based on a co-operative structure, owned by farmer suppliers.
One of the most powerful reasons for this is that co-operatives
can operate with very low overheads (ie they do not need to reward
shareholders outside the supplier base). Thus farmer suppliers
"capture" both the production and processing margins
and for, well documented, reasons the UK market has not developed
in this way. However it remains that farmer suppliers in the UK
face essentially the same problems as those in other parts of
the world and therefore it is reasonable to expect that they should
have recourse to the same structures as competitors elsewhere.
Thus allowing farmer owned and operated processing capacity should
be seen as restoring some parity with these competitors.
Since deregulation much has been made of the systems
for selling milk and their fairness or otherwise. It is however
true that the base prices available to farmer suppliers of Milk
Marque represents no effective premium to the Intervention Milk
Price Equivalent. There is therefore in our opinion no case for
the supply industry to answer regarding manipulation of markets
and prices. Furthermore, the retail prices for milk and milk products
have not fallen in line with the fall in producer prices (which
are now in excess of 25 per cent). Milk Marque gives a benchmark
price to which all other prices to producers are based. Without
Milk Marque giving this lead it is expected that prices would
fall still lower.
The dairy industry is structured so that production
is in the areas of the UK where grass grows best because of rainfall
and topography. The requirements for the milk produced is where
the population density is highest and this is not usually in the
same area as milk production. It is therefore important to allow
the marketing of milk to reflect this structure. Only a strong
organisation can do this. As an educational college the Royal
Agricultural College is concerned that the future of the dairy
industry needs to be strong so that the next generation of young
people can be attracted to an employment that is long-term and
rewarding.
Recent pressures on the price of milk to the producer
demonstrate how important it is for producers to be able to process
milk and to be involved in the "added value" industry.
Both individual producers and Milk Marque have recognised the
importance of this and are progressively moving towards more involvement
in these activities. In this way the legitimate interests of consumers
for lower prices and for farmers higher returns can be reconciled.
The lack of profitability in the agricultural industry
is a serious concern to all of us and as an educational college
the Royal is concerned that the future of the dairy industry needs
to be strong. Only in this situation will the next generation
of young workers be attracted to an employment that is long-term,
thus maintaining the fabric of the rural community and producing
high quality products under production conditions unmatched (in
terms of food safety and animal welfare) in Western Europe let
alone the world. In the current climate of change it is essential
that we develop a positive relationship between industry and government
so that we can supply appropriately trained people to meet the
demands of the future.
1 July 1999
| 
