MPs urge action on milk price cuts

On average, milk costs about 30p per litre to produce

More needs to be done to protect dairy farmers from falls in milk prices - including new powers to fine supermarkets over disputes, MPs say.

The Environment, Food and Rural Affairs Committee said farmers were being forced out of business every week by factors beyond their control.

They said the groceries watchdog should be extended to cover dairy suppliers.

The government said it was doing all it could to help farmers cope with the "volatility of the global market".

Milk prices have come under pressure from a combination of rising supply and falling demand, particularly as a result of lower-than-expected demand from China and Russia's ban on food imports.

Moscow's decision to ban EU dairy products, taken in response to sanctions over the Ukraine conflict, had led to 2.5 billion litres of milk not being sold in Russia, the MPs said.

Falling numbers

BBC environment correspondent Claire Marshall said to keep cattle well fed and looked after costs a farmer about 30p for each litre of milk produced - but most were being paid just 20p a litre.

"Intense competition among supermarkets is also having an effect," she said. "In several supermarkets you can now buy four pints of milk for just 89p."

Farmers have held protests, urging supermarkets to pay more for their milk.

The report said farmers had been leaving the industry "in significant numbers in recent years".

The NFU said in December that the number of dairy farmers had dipped below 10,000 for the first time - a 50% fall since 2001.

The committee said there was no "single solution" but that it was incumbent on the government to "promote UK dairy produce domestically and in growing export markets".

And it told the government to "urgently" consider extending the role of the Groceries Code Adjudicator to include dairy farmers in the scheme.

The adjudicator was set up to investigate complaints and ensure suppliers to the 10 largest supermarkets are treated "lawfully and fairly" based on an established code of practice.

But because it investigates only complaints relating to the retailers' direct suppliers, the "vast majority" of dairy farmers are not covered, the report said.

The adjudicator also does not get involved with pricing disputes under its current remit.

In a separate point, the MPs said it was "extraordinary" that the adjudicator was still unable to levy fines because the government had not yet set a level for the maximum penalty that could be imposed, calling for action before the end of the current parliament.

'Greater clout'

The MPs said there should be an EU-wide review of milk prices and clearer "country of origin" labelling of products.

They said more dairy farmers could be helped by forming "producer organisations" to increase their market presence.

Committee chairwoman Anne McIntosh said: "The volatility of worldwide and domestic milk markets is making financial planning and investment impossible for small-scale producers unable to hedge against changes beyond their control."

'Very depressing'

Andrew Yarwood, 33, is a fourth generation dairy farmer at Medhurst Green Farm in Congleton, Cheshire.

"Things are dire at the moment. We're getting 27p a litre, and our cost of production is 28p a litre, so we're making a loss.

"That's not as bad as some - I heard of farmers getting 22p or 23p a litre over Christmas.

"We've got 400 animals here, and I work 14 or 15 hour days. It's hard work, but we're not making profit, so really you're just a busy fool.

"It's very depressing. You can't reinvest in your business and you can't plan for the future. We're not thinking of packing up just yet, but there will be farmers who can't withstand this.

"I think the government needs to step in to make sure the supermarkets pay a fair price. If they put the milk price up, consumers wouldn't bat an eyelid. It's pence, but it means the world to us."

Asked on BBC Radio 4's Today programme about the domestic situation, Anne McIntosh added: "I think the public would want to pay the going price of production for dairy, not the 89p for two litres that we are currently paying."

Rob Harrison of the National Farmers' Union told BBC News some dairy farmers were "really staring at the precipice now".

Warning of a "mass exodus" from the industry, he added: "There are others, which if things don't improve by the spring and summer, will not be able to go through another winter at these levels."

But Eamonn Butler, from free market think tank the Adam Smith Institute, said the industry was in need of modernisation.

"If you simply subsidise this industry, then all that happens is that older, outdated practices continue and new efficient practices don't get a start," he said.

"That's very bad for everybody - it's bad for taxpayers and it's bad for consumers."

The Liberal Democrat minister for rural affairs, Dan Rogerson, said he agreed the adjudicator should have more power "to take action where necessary".

The Department for Environment, Food and Rural Affairs said it had given farmers "greater clout in the marketplace" through forming producer organisations, while a code of practice to give farmers a "fairer deal" now covered 85% of UK dairy production.

A spokeswoman said the long-term prospects for the industry were good, and there would be a review of the Groceries Code Adjudicator next year.