HC Deb 20 May 2004 vol 421 cc1090-2
11. Mr. Andrew Turner (Isle of Wight) (Con)

If she will make a statement on milk prices. [174412]

The Minister for Rural Affairs and Local Environmental Quality (Alun Michael)

The most recent available figure shows that the average UK farm-gate price for milk delivered in March was 18.51p per litre, which is 1.14p per litre higher than last year. That is the highest figure for milk delivered in March since 1999.

Mr. Turner

I thank the Minister for his reply. Farmers in my constituency strive to get 10p a pint for milk, but the housewife in the supermarket has to pay 37p. How successful have the Government been in dealing with rip-off supermarkets and their oligopoly?

Alun Michael

We welcome the Office of Fair Trading decision to undertake a compliance audit of the supermarket code of practice to establish evidence for any further action. Furthermore, the work that has been done demonstrates that changes in farm-gate prices and supermarket prices are reflected one on the other. There was thought to be dissonance between the two, but that does not appear to be the case.

Mr. Lindsay Hoyle (Chorley) (Lab)

I am sure that my right hon. Friend is aware that some milk processors are going out of business at present. The supermarkets' cartel is putting on pressure, so farmers struggle to find someone to buy their milk and are then forced into selling it at a reduced price against the premium that they always had in the past. That is a worry and we need to look into it. The matter is urgent for dairy farmers, especially as they have nowhere else to turn if they produce milk alone.

Alun Michael

I understand my hon. Friend's concern, but we are trying to move to a situation where farmers produce what the market requires. In my initial reply, I referred to the work of the OFT, which is considering whether anything needs to be done to ensure that there is a level playing field. I encourage my hon. Friend to look at the available information, especially from the KPMG study on prices and profitability in the British dairy chain, which contains a number of lessons for us to learn in looking at the future of the dairy industry.

Mr. David Heath (Somerton and Frome) (LD)

Is it not still the case that the entire dairy chain is distorted from beginning to end, so that primary producers and processors are constantly squeezed to the point that there are unsustainable milk prices, which mean that many of them are going out of business? Do we not need if not a stronger code of conduct, one that is properly implemented and properly enforced so that supermarkets do not simply make profits while our dairy industry is being exported?

Alun Michael

I encourage the hon. Gentleman, too, to look at the detailed information about the industry. We have gone to some trouble to ensure that it is available—for example, on fluctuations, a 1p increase in the farm-gate price resulted in an increase of only 0.6p in the retail price of liquid milk, whereas a 1p decrease in farm-gate prices reduced the retail price by 0.7p. Clearly, there are fluctuations in the market and there are pressures, and supermarkets do things in order to try to keep their prices down. That is why the examination by the OFT, which is based on facts, not fears—although the fears are understandable—is the right way to approach the issue.