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Westminster Hall

Tuesday 20 January 2009

[John Cummings in the Chair]

Agriculture (South-West)

Motion made, and Question proposed, That the sitting be now adjourned.—(Jane Kennedy.)

9.30 am

Mr. David Heath (Somerton and Frome) (LD): I welcome you to the Chair, Mr. Cummings, and thank you for finding the time to be here for our debate on the important subject of agriculture in the south-west. We must use this rare opportunity to discuss agriculture in Westminster Hall because debate on agriculture in the main Chamber has been almost extinguished. It is hard to remember the occasions on which we have talked about one of our major industries in the Chamber proper. I believe that there was a debate in July 2007, but that was on an estimates day on a Select Committee report. Before that, it was December 2002. Therefore, we are talking about seven years without a debate on agriculture in Government time in the Parliament of the United Kingdom. I find that quite extraordinary, not least because in the dim and distant past, when I was a spokesman on agriculture for my party, we seemed to talk about nothing else, but that was at a time of major political crisis due to the existence of various cattle diseases.

I want to cover a range of topics, none of which I will go into in any great depth. I hope that other colleagues will have the opportunity to do so. It is often the case that when I talk to farmers in my constituency, most of whom are dairy farmers—dairy is the predominant sector there—the main thing that they want to talk about, with good reason, is the weather. Last year, the weather was a significant factor in farming. It was the wettest harvest in living memory. Over the past few weeks, Somerset has had flash floods, one of which sadly took away my car in the process, about which I feel rather sore.

When farmers are not talking about the weather, they are talking about prices. Last year saw a small improvement in the general state of farm incomes in the south-west, which is very good news. None the less, it masks a deeper problem, which I will come on to in a moment. One of the difficulties is price volatility. Over the past year, wheat and cereal prices have yo-yoed. There has been a vast range of prices. They went up massively in the early part of the year and then plummeted towards the end of it. Was that because of weather conditions, the state of the harvest, or the agriculture industry? No, it was because speculators were playing the commodity market and distorting the realities of what is the genuine position of the state of production.

Mr. James Gray (North Wiltshire) (Con): I do not believe that so-called speculators on the commodity farming markets—I used to be a managing director of a company that was involved in such work—can affect prices in such a way. If they did, the realities would come back and bite them very quickly. Such people
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provide the liquidity for farmers and producers to avoid unpredictable moves in prices. We should not blame the speculators.

Mr. Heath: That is the hon. Gentleman’s view, but it will not necessarily be shared by many in the agriculture industry.

At the time, people said that biofuels were the reason why wheat prices suddenly escalated at such a fast rate. If that was the case, why on earth did we have a crash towards the end of the year when the price of wheat fell precipitately? It does not make sense unless we look at the actions of the market.

At the same time, we have had an increase in the price of milk—until very recently—and livestock. On the face of it, that is very good news for the producer. However, if we look at the other side of the equation—the input side—we can see that the costs have been very much inflated. Costs of feed, fertiliser and fuel are still higher than they were a year ago.

Farming generally has still been able to attract credit. That has been of great value to people running farm businesses. Up until now, they have been able to maintain their cash flow. At the same time—perhaps inevitably—we have had an increase in debt in the farming sector. Although that suggests that the farming industry is fairly healthy and that people are making investments, it also raises concerns about vulnerability in the future. The average dairy farm has a borrowing of about £210,000. That is sustainable only if the income is maintained, but it is not if credit lines cease and income is not maintained. I have a particular concern about tenant farmers. They do not always find the banks quite as sympathetic as those who are owners of their land.

I am concerned that we do not have sustainability in all senses of the word and stability, and that we still have degrees of volatility in the markets, which is evidenced by the fact that milk prices were cut by up to 2p a litre at the beginning of the year. That is not as a consequence of the market conditions, because there is still under-production of milk in this country, and the exchange rate for sterling against the euro is favourable. Therefore, under a free-market system, milk prices should be at a sustainably higher level. That begs the question about the fundamental relationship between the producer, the supermarkets and retailers, and the processors, which are squeezed in between.

Mr. David Drew (Stroud) (Lab/Co-op): I will pre-empt the hon. Member for St. Ives (Andrew George) and say that we need an ombudsman. An arbiter should examine the inadequacies of the milk market, and the pig market, and I was pleased to be involved with the report published by the Select Committee on Environment, Food and Rural Affairs last week.

Mr. Heath: The hon. Gentleman will discover later in my comments—if he does not know already—that I agree with him. I will come on to that very subject.

Mr. Jeremy Browne (Taunton) (LD): Will my hon. Friend touch on my concern that the middle organisations—those that buy the milk from the farmers and sell it on to the supermarkets and other retailers—have huge contractual advantages over the farmers that amount to restrictive practices? Such advantages include the
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ability to change the price mid-contract. Does that not need to be examined because all the power in that relationship is held by the middle men—the marketing organisations—and very little by the farmers themselves?

Mr. Heath: I agree with my hon. Friend up to a point. We need to look at the whole chain of supply—I am trying not to pre-empt myself by saying something that I intend to say later—because the processors are often caught in exactly the same difficulty as the primary producers in their relationship with the retailers. The real strength in the commercial relationship lies with the retailers and the oligopoly that the major supermarkets constitute in this country. I shall come back to that.

Andrew George (St. Ives) (LD): My hon. Friend will say something about his position on this later, but because of the decoupled world in which farmers exist, they are much more market sensitive. He correctly identified a serious problem in the relationship between farmers and supermarkets, and nearly a year ago the Competition Commission recommended the establishment of an ombudsman. However, the fear is that that proposal would involve examining only the relationship between the supermarkets and the final supplier, not the relationship between the supermarkets and the primary producer. Does he agree that officials in the Department for Environment, Food and Rural Affairs and the Minister need to talk about that with their colleagues in the Department for Business, Enterprise and Regulatory Reform?

Mr. Heath: I entirely agree with my hon. Friend, who has done a lot of work on this matter and who has very much led the way—and I will give up waiting till later in my speech to say what I think about it. We had a Competition Commission inquiry before the one he mentioned, the 2001 voluntary code of conduct for supermarkets, and the new, tougher code of practice in 2008, which the Competition Commission supposed would have some statutory bite. However, the commission cannot create the post of ombudsman. We need to take the responsibility for setting up a regulator who will be able to regulate the whole supply chain effectively, and ensure that the relationships are fair and transparent, which they patently are not at the moment. Contracts are often very unfair to primary producers. I am not talking only about the producers whom I represent in the west country, but about those overseas—this is a domestic and international issue. The sooner the Government are prepared to accept and act on that recommendation and establish an ombudsman with teeth, who can deal with the iniquities of the food supply chain, the better.

There are some positive things. There is a great deal of innovation in farming and there has been a great deal of improvement in farming practice, which includes things that were not even thought of a few years ago, including direct supply and using the internet to create niche markets for fresh, quality produce. The question is whether some of those innovations will survive the general economic downturn. For example, evidence is already in of a downturn in the veggie box market—many of us happily receive those each week—partly because people have been encouraged to grow their own produce,
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which is a good thing, but predominantly because the downturn in disposable income means that people feel that they cannot afford to make such commitments, which is unfortunate.

I want to deal with a series of serious issues that are on the minds of farmers in the south-west, which relate mainly to a fundamental question. The south-west is one of the key agricultural areas in this country and, actually, in Europe. Do we want a sustainable, profitable and self-maintaining agricultural industry that is capable of feeding the people of this country in future, or are we prepared to see it chipped away, constantly under threat and, eventually—this is my great concern—exported overseas to those who will not have the same commitment and values, and who will not be able to produce to the same standards?

If my dairy farmers were here, the first thing that they would want to talk about is bovine tuberculosis—I say that at the risk of provoking an intervention from the hon. Member for Stroud (Mr. Drew), who I know has strong views on this matter. The position in the south-west is completely unacceptable. In the first nine months of 2008—these are the latest figures that I have—12,383 dairy cattle were culled, so perhaps 16,000 cattle were culled in 2008 because they tested positive for bovine TB. That is absolutely scandalous. In 10 years, 200,000 cattle, at a cost of £600 million, have been culled. Whether we are talking about animal welfare, the health of the industry, the awful effect that the problem has on farms where reactors appear, the consequences for farming families or the cost to the taxpayer, a quite extraordinary thing is being allowed to happen. We in the south-west feel the effects of the problem, because half of all the cattle culled are in our area. It is very serious. We are seeing the front of bovine TB advance 10 miles a year, which is significant.

I cannot believe that it is right simply to wait and hope that something will happen. I have heard all the arguments and looked at the scientific data, and I maintain that it is important to act, not only for the welfare of the cattle population, but for the welfare of the badger, if we consider wildlife vectors. I find it inexplicable that we allow this situation to continue, especially when I go to closed farms where there has been no movement of cattle on or off the premises, and reactors appear in a previously healthy herd. Some say, “It’s all down to the farmers and how they move their cattle”, but that is not so. We must get past that barrier and start to deal effectively with the problem.

Mr. Drew: The hon. Gentleman will not be surprised that I am intervening on this subject. A badger vaccine will almost certainly be available next year. Does he agree—hopefully the Minister is listening—that, at the very least, we should roll that out as a major programme to dampen down the disease for other forms of vaccination? The debate, “To cull or not to cull?” is sterile, and it will not find the answer, as the Bourne report demonstrates. We need to get on and do something, but the answer has to lie with vaccination and probably, in the long run, with vaccinating cattle.

Mr. Heath: Waiting for a vaccine for so many years is like waiting for Godot. The hon. Gentleman is right that we might be nearly there with vaccines. If we are, vaccination needs to take place quickly. We cannot take
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half measures because the matter is too important and has too big an impact on the agricultural lives of our constituents to be delayed.

Mr. James Paice (South-East Cambridgeshire) (Con): Even if a vaccine becomes available next year, which I think is extremely optimistic, it will be injectable. Will the hon. Gentleman stand with me behind the hon. Member for Stroud (Mr. Drew) when he catches his badger to inject it?

Mr. Heath: Badger wrestling is a minority sport in Somerset, but I do not doubt that it goes on in some places. The reality is that a lot of badgers are being killed, whether we like it or not.

Whether that is legal or illegal, it is happening, and the sooner we find an effective, operable and practicable way to deal with the disease, the better.

Several hon. Members rose

Mr. Heath: I want to move on to nitrate vulnerable zones, but hon. Members want to intervene. I give way to the Minister.

The Minister of State, Department for Environment, Food and Rural Affairs (Jane Kennedy): This is a point of great interest to me. I was listening carefully, but I may have missed it. Would the hon. Gentleman have allowed the licensing of culling? He talks about finding effective measures to deal with disease. Can he bring any other measures to the table for us to consider?

Mr. Heath: The Minister has not been long in her post, so she will not have heard me say on a number of occasions that a targeted cull was the right thing to do and that it should have been done a long time ago, before bovine tuberculosis reached its present, almost endemic proportions. That has long been my view. It was in the interests of the badger population as well as the cattle population, and it would certainly have saved an awful lot of misery in a lot of places.

On nitrate vulnerable zones, I simply observe that after the massive expansion—although, of course, I have nothing against proper environmental controls—I wonder whether the scale of the enterprise is not having a deleterious effect on agriculture. Some 22,000 agricultural holdings are affected. The cost for a dairy farmer—an average of £50,000 a farm in cattle costs—is not insignificant. It may be a factor causing some dairy farmers to feel that enough is enough. I do not believe that we can afford to lose many more dairy farms. The herd has contracted and the number of holdings and of people working farms has decreased to the point where we are moving towards an unsustainable industry. That worries me, which is why we need to consider the matter carefully.

The sheep sector is not a big factor in my constituency, but there are concerns about electronic identification. I know how much electronic identification will cost, but the Department must answer the question of what it is supposed to achieve. Is it a reasonable and practical solution to the problems of traceability? I certainly understand the implications for responding to epidemics, but I, like a lot of people in the industry, am not convinced that it is a sensible way of dealing with the
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problem. Many people feel not only that the costs exceed the effectiveness but that the effectiveness is likely to be limited in any case because of the practical difficulties. Given his constituency, I am sure that my hon. Friend the Member for Brecon and Radnorshire (Mr. Williams) knows an awful lot more about sheep farming than me, so I shall not pretend to be an expert.

Nor shall I pretend to be an expert on the pig sector, although I have the distinction of having once been a pig breeder, albeit on a very small scale; I do not think four breeding Tamworth sows amount to a major agricultural undertaking. I have a great affection for pigs, which are wonderful creatures. I support the appropriately named hon. Member for South Norfolk (Mr. Bacon) and his Bill, which he introduced earlier this Session and which I was happy to co-sponsor, on food origin labelling. I am convinced that that is a big factor in the profitability of the pig sector and British pig products’ ability to compete effectively with imports.

We have extremely high welfare standards for our pigs. Thank goodness for that; it is something of which we should be proud and on which we, as a country, have taken the lead. If any domestic creature deserves proper welfare standards, it is the pig, which is almost the most intelligent of all four-legged animals—and of some two-legged ones—and a great delight. Given that we have such high welfare standards for pigs, we ought to let the consumer know that and not allow our excellent pig products, which are produced on welfare-friendly farms, to be undercut by those that do not conform to the same standards. It is long overdue, and it is time that we did something about it.

Mr. Jeremy Browne: I endorse what my hon. Friend is saying. A few months ago, I visited a pig farm in Thornfalcon in my constituency, and I was extremely impressed by the welfare standards maintained there. The farm also used two slaughterhouses in my constituency, so the pigs were taken only a short distance to slaughter. I urge the Minister to take on board that it is absolutely right that consumers buying pork products should know the difference between that sort of production technique and the mass production techniques that often take place, with lower welfare standards, in other countries.

Mr. Heath: My hon. Friend is absolutely right. Thornfalcon is only two or three miles from my constituency, and I am pleased that he has had the opportunity to visit a pig farm there. We should be trumpeting from the rooftops what excellent standards of pig production we have in this country. If we can get good standards on farms, local abattoirs and local sale—supermarkets should be persuaded to feature local produce, and the growth of farm shops is a significant factor in our part of the world, as in many others—we would have a much healthier industry to look forward to.

I want to deal with a couple more matters before I give others the opportunity to participate. The first is set-aside, which is a difficult issue. It was a way to reduce production, and then it became a good in itself, because of its environmental benefits. Set-aside has now ended, and a sort of son of set-aside is being developed. However, instead of being developed for the right reasons, it is being developed haphazardly and supplanting environmental stewardship schemes, which
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are surely the right way—identifying good environmental practice on farms and paying premiums for good stewardship—rather than adventitious growth or retention of set-aside land that may be valuable for cereal production.

I am concerned that the south-west as a region still imports a significant amount of cereal foodstuffs and straw, which does not seem environmentally sensible. Wildlife and habitat concerns aside, it does not make sense to bring in heavy goods from outside the region to maintain livestock, when we can produce them ourselves on land within the region. There is an equation that the Department has not yet figured out and that it would do well to consider.

Mr. Drew: I thank the hon. Gentleman for giving way once more; he is being generous. Does he agree that one of the uses for such land is community agriculture? Some people wish to keep their own animals or grow their own food. If that land could be leased to them, we would be more self-sufficient and could increase production sustainably. That seems a sensible way to go forward.

Mr. Heath: There is a lot in what the hon. Gentleman has said about community land, but I am not sure that I understand why it should be on set-aside land. When I was a county councillor many years ago, one of the great issues in Somerset was the county farms estate. Our predecessors tried to dispose of it en bloc, and we saved it. Since then, it has become much more difficult to maintain a viable county farms estate, but the principle behind it was a good one, because it allowed entrance into farming.

As the hon. Gentleman has said, even on a smaller scale, giving people access to produce on land is an excellent idea. However, I am not sure that I buy the thought that set-aside land should be used for that, as by definition it is not set aside after it has been brought into productive use. I will consider that suggestion further.

As the Minister knows, organics have suffered a terrible downturn in the past year or so, perhaps inevitably. I think that we are getting ourselves into a muddle on organics. A lot of people were encouraged to go into organics to obtain a premium on their products, a premium that has evaporated or is beginning to evaporate. I cannot see that the answer to that problem is to change the definition of “organics”, as some would argue. That is a self-defeating objective. Furthermore, I cannot believe that the answer is to import organically produced feedstuffs from the other side of the world to ensure that the whole scheme is productive. In environmental terms and in terms of the principles that underpin the organic movement, that also seems to be absolute nonsense. I do not have any answers to that problem. I simply point out that we have got ourselves into a terrible muddle on organics, at least in the short term.

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