James Heappey is the Conservative candidate for Wells. A former officer in the Rifles, he is now a self-employed project manager.
In most supermarkets at the moment two litres of milk is about the same price as two litres of mineral water or cheap cola. This is great news for those of us with toddlers who drink gallons of the stuff each week but behind it is a slump in milk prices that threatens to put thousands of small dairy farms out of business.
The fall in prices stems from the general decline in global commodity prices, alongside the loss of the Russian market, leading to over-supply in Europe. For once, therefore, it is not just the aggressive price strategies of our supermarkets that are threatening the livelihood of British farmers. However, as yet another price war breaks out, farm gate prices have come under even greater pressure in an industry where a few pence a litre is the difference between scraping by and giving up.
Fixing prices or indulging in protectionism will not work. A minimum price in store guarantees nothing to the farmer, a minimum price at the farm gate risks pricing our dairies out of the market, whilst protecting UK producers from cheaper imports risks retaliatory measures which would impact on other parts of our agricultural industry.
So often the villain, Tesco sets a good example though their Sustainable Dairy Group where aligned dairies benefit from slightly better prices than those farms that sell to co-operatives and processors. It may be coincidence but at the time of writing, this appears to be reflected in Tesco selling milk at a few pence a litre more than their major competitors. Short circuiting the supply chain ensures that in an industry where margins are small, the farmer isn’t just getting what’s left from an already small pot of cash. Tesco’s is an example we should encourage other supermarkets to follow.
Reform and innovation within the industry is needed too. Neighbouring farmers with similar sized herds grazing adjoining fields can have remarkable differences in the price at which they break even. Some milking parlours are out of date whilst skill in husbandry and general business acumen varies significantly. Yet making big improvements at a time when there is no real profit is unrealistic for small dairy farmers. However, in an industry that is not really competing within itself the sharing of best practice costs nothing and could shave an important penny or two off the production cost per litre. The NFU must continue to take a lead here.
Free market purists would argue for the survival of the fittest but the industry has already reduced from around 30,000 farms 15 years ago to less than 10,000 now. Many in the industry expect low prices over the next 12 months to see that number drop further meaning that in Somerset – and, I suspect, elsewhere – dairy herds are being replaced by photovoltaic solar energy cells at an alarming rate.
A futures market would provide farmers with some of the security enjoyed by those in the arable sector. But with most of the industry’s product perishable, it might only be whey powder that can be traded in such a way and this does not represent a significant chunk of the dairy business. Equally, new export markets are opening up and the industry will need Government support in accessing them and getting through any barriers. It is an area in which the TTIP will be helpful.
Ultimately it is a change to our habits and expectations as consumers that will make the biggest difference for our dairy farmers. Consumer awareness over the plight of battery hens has changed the fortunes of the free range egg industry and many of us look for labels on packaging indicating the quality of life led by an animal when buying meat or poultry too. Such discerning behaviour has changed the fortunes of farmers in those sectors.
The low prices we have been paying means we undervalue dairy products especially when British milk – coming from small herds grazing on lush green grass – is a vastly superior product to that produced by the production line mega-dairies of other countries. Surely it must be worth more than a bottle of water or Coke? Supermarkets should be encouraged to label British milk as British and we should recognise its value by being willing to pay what it is worth.