EU Proposals for the Dairy Industry

Written evidence submitted by Ulster Farmers’ Union (DRY 04)

The Ulster Farmers’ Union represents 12,000 farming families in Northern Ireland. Northern Ireland is the second largest milk producing region in the UK with 1.9 billion litres produced per year. Our industry is in a unique position since we export 85% of the milk we produce and on account of this product mix, we have differing exposures to those in GB.

In terms of the proposed EU legislation, we submitted our views to the High Level Group at all stages of the process, from the very beginning to the most recent consultations, through DARD, Defra and directly through COPA. Most recently we met with European Parliament Rapporteur Jim Nicholson and submitted our views on the report.

• Contracts

1. From the outset, the UFU have called for a soft-touch and non legislative approach to contracts as applied here in Northern Ireland. Statutory contracts would not be welcomed by our membership. Contracts are essentially already in place, with producers unable to switch between suppliers on the one hand and guaranteeing continuity of collection and supply on the other.

2. The NI Dairy Industry is dominated by co-operatives and farmers sit on the Boards of the main processors. The type of Contract which were being prescribed by the HLG would have favoured producers who supply multiple processors, and we stated that this would not be an issue in Northern Ireland with farms putting into only one processor.

3. Our unique Product Mix should be taken into consideration.

4. We are the only region in the UK which has an auction system and this determining price for a large percentage of our farmers. This will have knock-on effects to any possible contracts.

5. The Commission proposed a "non-paper" on the application of the proposals to different types of co-operatives and the UFU welcomes this.

In summary, the UFU welcomes Defra’s agreement that Member States should be free to choose whether to or not make contracts compulsory and the voluntary establishment of recognized producer organizations. The UFU calls for Defra to adopt this stance and to be applied regionally.

• Bargaining Power and Transparency

6. Producer-processor-retailer supply chain-within the report recognition is made that the producer processor-retailer supply chain is not functioning correctly. Moves to address each area are a step towards dealing with the producer-processor part, but the UFU expressed disappointment that retailer side is lacking.

7. On 8 February during the debate in the European Parliament, Jim Nicholson MEP (High Level Group Rapporteur) said that the EU must "push processors and producers to take responsibility, but retailers need to take responsibility-they need to be controlled."

8. Since late last year, the UFU have been holding meetings with all major retailers. We have cited the rapid rise in input costs and the impact upon on-farm production costs and the effect of non-functioning retailer returns. As stated in the opening paragraph, as 85% of the milk we produce is exported, NI farmers should be reaping the rewards of a booming commodity market. Yes despite this, the majority of our farmers are only breaking even.

9. In mid-2009, the retailers made it clear that the then poor milk price was the result of amongst other reasons, a depressed commodity market. Furthermore, the UN Food and Agriculture Organisation (FAO) confirmed last week that Global dairy prices leapt up more than any other group of food commodities in January.

10. This problem is not unique to NI and GB and should be reflected in the HLG Report. We stressed this in our input to the report compilation under a heading of calling for a supermarket adjudicator, but I feel that we draw more attention to it through the HLG report. The UFU believes that Contracts alone will not deliver the amount of transparency which is required. An amendment should be made to specifically refer to retail margins within the malfunctioning supply chain. Perhaps calling for greater transparency on retailer margins is a suggestion.

• Soft Landing Report

11. In 2008, when the transition to the abolition of quota and associated soft landing was discussed, the UFU were quoted as calling for the transition period to be properly managed, and done so in accordance with prevailing market conditions. Therefore, the Commission’s proposal to consider the use of further tools to stabilize the markets in the event of serious imbalances would be in line with our own policy.

• Production post-20I5

12. The UFU has concerns about the Republic of Ireland drive to increase milk production by 2020 by 50%, set out in the recent document Harvest 2020. Should contracts be used to control volumes in one member state and not in another, this could create a lack of uniformity which could impact upon NI in terms of competiveness. With NI being the only UK region having a land border with another Member State, we could be at a competitive disadvantage.

1 March 2011