APPENDIX 20
Supplementary Memorandum submitted by
the Tenant Farmers' Association (Q31)
INTRODUCTION
The TFA has already provided the Agriculture Committee
with written evidence for its inquiry into the marketing of milk.
As a result of the publication of the Monopolies and Mergers Commission
report on the supply of milk in Great Britain and the Government
response, the TFA felt it was appropriate to provide supplementary
evidence to the Committee.
CONTENT OF
THE MMC REPORT
It is disappointing that after a lengthy inquiry,
the MMC failed to grasp the real issues at the centre of the debate.
The TFA believes that there is no evidence to suggest that producers
of milk are benefiting at the expense of consumers of milk as
the price received by producers can be some 25 per cent less than
the price paid by consumers in retail outlets or on the doorstep.
It is also alarming that the conclusions of the report were based
on out of date statistics and the TFA feels that further consideration
should have been given to the conclusions once Milk Marque's market
coverage dropped below the 40 per cent level.
The report also failed to consider appropriately
why when prices to milk producers had fallen by some 25 per cent,
prices to consumers had altered very little. From this observation
alone it appears that the expense to consumers is not caused at
the producer end but at the retail end of the food chain.
RECOMMENDATIONS FOR
CHANGE
The TFA is at least pleased that the Government decided
not to follow the recommendation of the MMC to divide Milk Marque
into a number of smaller bodies. This would certainly have signalled
the demise of Milk Marque and many of the small family farms that
rely upon the company to take their milk.
Nevertheless, the TFA believes that it is farcical
for the Government on one hand to be encouraging the agricultural
industry to be more co-operative and to find ways of adding value
to their raw products when on the other it criticises the industry's
best co-operative, Milk Marque, for being successful in co-operation
and adding value. However, the TFA looks forward to inclusive
discussions about the future for auctions and direct sales of
milk through Milk Marque.
PROCESSING
All UK dairy farmer co-operatives must be allowed
to process their own milk without any further hindrance. The UK
is the only major dairy producing nation where producers are being
denied the right to invest in processing. For example, Denmark,
a near neighbour to the UK, has 95 per cent of its dairy processing
and production controlled by one company.
All over the European Union producer prices for milk
have risen by between 1 per cent and 6 per cent between 1997 and
1998. However, in the UK producers have seen a 24 per cent fall.
Under Agenda 2000 we are shortly to see increasing quotas for
some European countries including Ireland and Northern Ireland.
The UK itself will get extra quota along with other member states
later in the reform process. Without extra processing capacity
this extra milk will only serve to reduce prices to the producer
even more. The Dairy Industry Federation has already stated that
investment in capital to increase or replace outdated dairy processing
equipment is not in the long term interests of the shareholders
or their members. Producer organisations must therefore be able
to invest in processing capacity.
The TFA would urge the Director General of Fair Trading
not to unduly stifle further investment in processing by Milk
Marque as this is a key part in ensuring the survival of many
dairy farm families up and down the whole of Great Britain.
THE RELEVANCE
OF THE
COMPETITION COMMISSION
The TFA believes that there is a much wider debate
to be held about the relevance of a Competition Commission which
necessarily takes a UK-only approach. Whilst there will be instances
where this will continue to be appropriate, where markets are
at least European and often global the ability of a UK-only competition
authority to make relevant proposals is greatly reduced. In the
dairy sector particularly the UK competes against other European
member states with much higher degrees of concentration in milk
production. The implementation of any recommendations of a competition
authority for the UK-only will be severely undermined given the
activities of close trading neighbours.
CONCLUSION
Dairy farmers are already selling their milk below
the costs of production and this cannot continue. For the tenant,
his only assets are cows and machinery which are now worth very
little. Tenants are unable to sell land and would find it almost
impossible to realise in cash terms their portion of the milk
quota on a holding without relinquishing their tenancy. The conclusions
of the MMC report are not borne out by the facts. Producers are
not unduly benefiting at the expense of consumers. Indeed, there
is a real crisis in production which could be made very much worse
in the process of implementing some of the recommendations of
the MMC report.
15 July 1999
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