Dairy Sector (Hansard, 19 December 2002)

§ Mr. Morley

The profitability of the dairy sector in the UK has been adversely affected by low farmgate milk prices. The reasons for these low prices are complex, but include high levels of production earlier in the year combined with the effects of low world prices for dairy commodities. The average farmgate price of milk has recovered from its seasonal low in May, but it is still too low for many dairy farmers to be able to maintain the level of investment required to sustain their businesses.

The prices negotiated between farmers and purchasers, or indeed processors and retailers, are private commercial matters in which the Government cannot get involved. Nevertheless, I do welcome the recent price rises announced by major retailers and dairy processors and hope that these will help alleviate some of the difficulties faced by dairy farmers. The Government can influence the environment in which price negotiations take place through the mechanisms of the dairy CAP and, during the period of lowest prices, we actively supported measures taken in Brussels to support Community markets and encourage exports.

For the longer term we believe that a sustainable future for dairy farming is best secured through taking forward the recommendations in the Report of the Policy Commission on the Future of Food and 930W Farming, together with the Milk Task Force Report, and this is reflected in our Sustainable Farming and Food Strategy, launched on 12 December. My noble Friend, the Lord Whitty, has convened a number of meetings of an informal dairy supply chain group, including representatives of dairy farmers, which has addressed issues of concern to those in the dairy supply chain that came out of these reports. This group is also likely to consider how the industry can best address any lessons that emerge from the ongoing KPMG study on the structure of the UK dairy sector and milk pricing, commissioned by the Milk Development Council.