Farm minister calls for action on milk
10:00 14 June 2012
© ARCHANT NORFOLK 2011
Farming minister Jim Paice will today call for speedy action to protect farmers from sudden cuts in the price of milk which, it is claimed, pushed some dairy farmers to the brink of bankruptcy.
Mr Paice’s comments, to be made in a speech to industry figures at the Dairy UK annual dinner in London, come weeks after the region’s dairy farmers were left furious at being given just four days’ notice by food firm Dairy Crest of a 10pc cut in the price they would be paid for milk.
The minister will praise the industry for making progress in negotiations to establish a voluntary code of practice which aims to give milk producers certainty about future income, but will say a last push is needed to reach a final agreement.
He will say: “The dairy industry is important to Britain’s rural economy and the manner of recent cuts to farm gate milk prices has been a real concern for many people.
“However, in a volatile market everybody knows prices will go up and down. The key is for us to build trust and transparency, so that farmers and processors can work together and take advantage of the huge business opportunities both here and abroad.
The minister will add: “A voluntary code of practice will mean people having to do things slightly differently, but it will ultimately benefit the industry as a whole and I implore all sides to make a final push and agree a workable compromise.”
Mr Paice will say it is hard to justify giving farmers such short notice of price changes, especially when they are locked into the new price for another year.
But he will also state that in an unstable market farmers must understand that prices go up and down. To that end, he will say, the key issue is about changing the way the industry works to build trust.
While the number of dairy herds in Norfolk has fallen in recent times the annual production of milk is about 60m litres, down from 70m five years ago.
The National Farmers’ Union (NFU) has previously accused food processors of “atrocious behaviour” in imposing sudden cuts in the price they will pay for milk, pointing out that farmers are often locked into a contract and have no choice but to accept less money.
The organisation claimed the cut by Dairy Crest and other processors last month would cost farmers some £20,000 a year.
The normal cost of production for a litre of milk is between 28p and 30p taking into account feed and veterinary bills, but this latest cut will see the income per litre drop to 26p.
NFU East Anglia regional policy advisor Alex Butler-Zagni told the Eastern Daily Press that a voluntary code would help ease the pressure on farmers.
“We recently saw a raft of near identical price cuts of up to 2p a litre; no farmer can run a business faced with cuts of this severity and immediacy.
But he added that it must include a measure that would see ‘break clauses’ put in contracts to allow farmers more freedom to find different buyers if a price drop is forced upon them.
“A voluntary code is the way to go and we want to work with processors to develop that, but where processors have the ability to determine price, there must also be a break clause,” he said.
Meanwhile processors also claimed they were making efforts to reach an agreement and were working more closely with milk suppliers to improve the situation.
A spokeswoman for food producer Dairy Crest told the Eastern Daily Press the firm was working with suppliers to improve the situation.
She said progress was being made to reach an agreement through the Dairy Supply Chain Forum, a body set up to help different players in the industry work in partnership more.
Meanwhile she pointed out that Dairy Crest had also pledged to give its suppliers one month’s notice of price changes in the future.
The move to agree a code of conduct for the dairy industry follows the government’s creation of a groceries code adjudicator earlier this year, which will have the power ‘name and shame’ big supermarkets that use their market might to treat small suppliers unfairly.