The paper, The sustainable competitiveness of the British dairy industry, addresses its future following its struggles with oversupply, plummeting milk prices and Russia’s ban on dairy imports from the EU in 2014.
At the launch, Eustice, parliamentary under-secretary of state for the Department for Environment, Food and Rural Affairs (DEFRA), said: “The past year has been a rollercoaster ride. It started as a record year for most dairy farmers. It was the most confident I had seen the industry ever. Then to have such a sharp fall in prices was a blow.”
Eustice echoed the paper’s recommendations to explore futures markets to help stabilise farmgate milk prices, to improve competitiveness and to promote dairy products’ health benefits.
He praised the Nurseries Milk Scheme and the School Milk Scheme for pumping cash into encouraging children to drink milk and said more should be done to promote dairy products’ nutritious nature.
In terms of competitiveness, he said more should be done to boost skills in the industry and increase producer power. The next wave of Rural Development Grants for businesses operating in the countryside would help and would be announced next week, he said.
On the subject of futures markets, Eustice said: “In the US, farmers will fix at least 40% of their milk on fixed contracts.”
That provided much-needed stability for the sector, which couldn’t immediately deliver output growth because cows took about three years to reach milking age, he said: “There’s always a time lag to scale up. Futures could help manage some volatility.”
The report set out nine key recommendations to help strengthen the industry.
Nine recommendations to boost dairy industry
1: Raise the base milk price below which the EU pumps cash into the market to support producers;
2: Explore hedging milk price by using futures markets;
3: Extend the Groceries Code Adjudicator’s remit to smaller suppliers further down the supply chain;
4: Explore new export markets;
5: Overcome high tariffs and trade barriers;
6: The Department of Health should recognise the nutritional value of dairy products;
7: Promote positive messages about dairy consumption in school food standards;
8: Introduce mandatory Country of Origin Labelling to back British products;
9: Public procurement guidelines should support the purchase of British dairy products.
Commenting on the launch of the report, Neil Parish, MP for Tiverton and Honiton, said: “Volatility has been an inherent feature of the dairy market for years and it is one of the greatest challenges facing the dairy industry. Therefore, it is vital that the whole supply chain works together to try and mitigate volatility as efficiently as possible.
“We must not forget that the long-term prospects for the British dairy industry are positive. The global demand for dairy is on the rise and the UK has an important role to play when it comes to meeting this demand.”
Ian Macalpine, chairman of the Rural Association of British Dairy Farmers, said: “We have been very encouraged by the positive responses delivered by a range of experts at our evidence sessions whilst compiling this report. While they unanimously agreed we should be aware that the current downturn in milk price trends may be repeated, their long-term prognosis was very positive.”
Billy Keane, chairman of Dairy UK, said: “Dairy UK welcomes this report which recognises some of the crucial steps the government needs to take to support one of the UK’s most essential industries.”
National Farmers Union dairy board chairman Rob Harrison, who gave evidence to the APPG, said: “While I welcome [the report’s] recommendations we now need to work together as an industry to deliver on these actions.”