Friday, 20 July 2012

Dairy Farmers

Last week dairy farmers from across the country came to Westminster to highlight the plight of their industry in the face of a further cut of 2p per litre in the price they receive from processors which will push tens of thousands of farmers into heavy losses for the coming financial year.

One of my roles in parliament is as a member of the Select Committee on Environment and Rural Affairs and we took an emergency evidence session on Tuesday of this week to get to the bottom of the problem.

I grew up on a farm and spent ten years working in the farming industry before going in to politics and have therefore had first-hand experience of the problems that the industry faces. In a nutshell, farmers all too often end up being “price takers”: effectively given whatever price large dominant processors or supermarkets decide to pay them and with far too little clout to demand better. Nowhere is this problem more acute than in the dairy industry.

As a Conservative, I do not have a problem with market forces coming in to play but I do object to the anti-competitive, market fixing behaviour of many large processors in the dairy sector. These companies frequently force farmers into contract arrangements where the farmer is required to supply all of his production to a single firm for often as long as a year at a time, but with no guarantee about the price he will receive or even the basis on which the price he is paid will be calculated. That is wrong and it goes against all the principles of a free and fair market economy.

We need a situation where farmers are free to shop around week to week or, at the very least, month to month to ensure that they are getting the best possible price for their produce. This would force processors to compete for their supply and pay farmers what their production is worth.

The government will shortly bring forward its legislation to introduce a tough new Groceries Adjudicator which will police the behaviour of supermarkets and prevent them from breaking their code of practice and engaging in anti-competitive behaviour which is unfair on their suppliers. This is an important step forward but it will be of little help to dairy farmers because their problem is not so much with the supermarkets but with the middle men who process their milk. That is why I have argued that the Office for Fair Trading should step in to deal with market failure between the producer and the processor, not just between the consumer and retailer. It is time for them to take a look at the way some of these contracts operate.

George Eustice can be contacted at george.eustice.mp@parliament.uk or 1 Trevenson Street, Camborne, Cornwall TR14 8JD or by telephone on 020 72197032.