§ Mr. HoyleTo ask the Secretary of State for Environment, Food and Rural Affairs what measures she is taking to support dairy farmers in(a) Lancashire and (b) the UK. [136036]
§ Mr. BradshawDairy farmers in Lancashire, in common with the rest of the UK, benefit from expenditure on the dairy CAP worth nearly 2 billion euros across the EU15. This expenditure will increase with the introduction of direct payments to dairy farmers from 2004.
We believe that in the long term the future of the dairy sector is best secured through pursuing the objectives of our Strategy for Sustainable Farming and Food. We have made a grant of nearly £0.5 million to the Food Chain and we have supported the establishment of English Food and Farming Partnerships, a new industry led body that has been set up specifically to support and encourage collaborative activity across all agricultural sectors. Furthermore my noble friend Lord Whitty has been chairing meetings of a Dairy Supply Chain Forum made up of senior figures from across the diary sector. This Forum and its sub-groups have been examining ways in which collaborative action can promote supply chain efficiency, and how levels of innovation and new 625W products development might be increased, and considering the likely impact of the CAP reform package on the dairy sector. It also intends to consider the kinds of changes that the sector might need to make to adjust to the new environment created by the reforms.
§ Gregory BarkerTo ask the Secretary of State for Environment, Food and Rural Affairs how many dairy firms went out of business in the last year; and what assessment she has made of the causes. [137285]
§ Mr. BradshawData from the Office for National Statistics shows that in 2002, 50 enterprises classified as manufacturers of dairy products were de-registered for VAT. This compares to 525 enterprises under this classification registered for VAT at the end of 2002. Although these figures may be indicative of the number of firms which went out of business, the Government have made no assessment of the reasons for these de-registrations, and it should be noted that de-registration can occur for reasons other than an enterprise ceasing to trade, such as its turnover falling below the VAT threshold.
§ Mr. HayesTo ask the Secretary of State for Environment, Food and Rural Affairs (1) what arrangements she has put in place to evaluate the effect of the farm gate price of raw milk on average net(a) income and (b) profit of dairy farms in the United Kingdom; [137893]
(2) what estimate she has made of the threshold of the farm gate price of raw milk that would enable dairy farming to be economically viable. [137894]
§ Mr. BradshawThe Department monitors incomes on dairy farms through the annual Farm Business Survey and also, from time to time, via special studies into the economics of milk production. Incomes for the years ended February 2002 and February 2003 on a range of farm types, including dairy farms, will be published by the Department at the end of this month. Forecast incomes for the year ending February 2004 will be published in January 2004. In regard to economic viability, there are a number of factors that influence economic performance, including milk yield, milk price and efficiency of input use and these all vary from farm to farm. The wide range in economic performance across dairy farms is reflected in the wide range in the break even ex-farm milk price.
§ Mr. HayesTo ask the Secretary of State for Environment, Food and Rural Affairs what assessment she has made of the likely effect of the current proposals for Common Agricultural Policy reform on the farm gate price of milk. [137895]
§ Mr. BradshawWhen fully implemented, the reforms agreed in June in Luxembourg will reduce the support price for butter by 10 per cent. more than the 15 per cent. reduction originally agreed for both butter and skimmed milk powder under Agenda 2000 (i.e. a 25 per cent. cut in the support price for butter). If farm gate prices were to fall to the same extent, the price per litre might be reduced by a further 0.95p beyond the impact of Agenda 2000. However, we share the European Commission's assessment that farm gate prices are unlikely to settle at this level: indeed, the overall package of compensation agreed reflects this. (Producers will be compensated through an increase in626W the level of direct payments of a further 0.74ppl over and above the compensation originally agreed in Agenda 2000.) The figures quoted above are based on an exchange rate of 70p/euro.
Our economic assessment indicates that decoupling of direct payments from production will have a beneficial effect on farm incomes; we would expect the main dairy-specific price impact to be in relation to the value of milk quota.
§ Gregory BarkerTo ask the Secretary of State for Environment, Food and Rural Affairs what assessment she has made of the competitive position of the dairy processing industry in each EU member state. [137246]
§ Mr. BradshawKPMG, in its report on "Prices and Profitability in the British Dairy Chain", which was commissioned by the Milk Development Council and published earlier this year, found that in 1997 (the most recent year for which UK data was available), apparent labour productivity in the UK dairy processing sector was somewhat below the EU average and significantly lower than in the Netherlands, Ireland, Austria and France. However, there has been significant investment in larger, more efficient, dairy plant in the UK since 1997 and this gap may well have closed.
§ Mr. HoyleTo ask the Secretary of State for Environment, Food and Rural Affairs what recent discussions she has had with(a) supermarkets and (b) dairy farmers regarding the price of milk. [136035]
§ Mr. BradshawWhile the Government share producers' concerns over the low farmgate price of milk, price negotiations between producers and processors, or processors and supermarkets, are a private commercial matter in which the Government cannot and should not get involved, as long as competition rules are respected.
The Secretary of State has had no formal meetings with representatives of the dairy industry or retailers to discuss milk prices. However, Ministers frequently meet with representatives from all parts of the dairy supply chain and are therefore aware of the issues. Matters affecting the whole dairy supply chain are regularly discussed at the forum chaired by my noble friend Lord Whitty.
§ Gregory BarkerTo ask the Secretary of State for Environment, Food and Rural Affairs what estimate she has made of the growth of the United Kingdom milk and milk products industry over the next(a) five, (b) 10 and (c) 15 years. [137292]
§ Mr. BradshawA study commission by Defra, the Scottish Executive, the National Assembly for Wales and the Department for Agriculture and Rural Development, Northern Ireland by the Centre for Agriculture, Food and Resource Economics at the University of Manchester, which was published in April 2002, concluded that on balance the elimination of dairy market support and milk quotas, together with compensating decoupled direct payments would not result in a significant change in UK milk production. It also concluded that such a reform of the dairy CAP would result in dynamic benefits to the processing sector as it moved from the production of commodity products to value-added products. Nevertheless, this study could not predict and could therefore not consider the actual 627W outcome of the agreement reached on CAP reform in June. Under the umbrella of the Dairy Supply Chain Forum, which is chaired by my noble Friend Lord Whitty, Defra is co-funding with the Milk Development Council and the Dairy Industry Association, supported by the National Farmers Union, a study on the impacts of the agreement on Dairy CAP reform and some of the options available to the UK. Preliminary results for this work should be available in December, with a final report published in January. Once this is complete, we intend to work with the industry through the Forum to consider the long-term implications and the adjustments the sector will need to make to the new environment.