§ Mr. DrewTo ask the Secretary of State for Environment, Food and Rural Affairs what forecast she has made of the price of milk per litre in the first three years after the Common Agricultural Policy mid-term review takes effect. [156441]
§ Alun MichaelIf milk prices fully reflected the reductions in intervention prices for butter and skimmed milk powder in the period 2004–07, there would be a decrease of 4.5 pence per litre, assuming current exchange rates. The Commission in its economic assessment of the reform proposals concluded that prices would not fall to the full extent of any support price cuts. Colman and Harvey in their recent study for the Dairy Supply Chain Forum concluded that the average farm gate price in the UK could fall to just above 15 pence per litre. However, the effects of these lower prices on farm incomes will be, at least in part, offset by the introduction of direct payments. Furthermore, decoupling should lead to some improvement in prices and incomes as farmers produce for the market, rather than subsidy.