Bullet point outline for speech by Jeff Rooker at the Women's Institute/National Farmers' Union Great Milk Debate, Local Government House, London, Tuesday 24 April 2007
Introduction
- English farming is in transition – dairy sector clearly going through a challenging time.
- Changes in climate, world markets, consumer tastes are already taking place.
- Will be challenges but also opportunities – especially for the innovative, the determined, and the efficient.
What Government wants to see
- An increasingly professional, 21st century farming industry – rewarded by consumers for the quality and innovation of its products; and by the taxpayer for producing public goods which the market cannot deliver (e.g. environmental benefits).
- Dairy industry is a really important part of UK agricultural sector and the food chain. Contributes to economy, rural areas and is increasingly adapting its practices to deliver sensitive management of our environment.
Issues affecting dairy farmers
Milk Prices
- Important for sector to be realistic about future farmgate prices – unlikely to see a return to past levels.
- Accept that farmgate prices are not high enough for some to be able to sustain their businesses and that costs have increased across the supply chain. Acknowledgement of this has recently resulted in some positive moves by some of the major retailers, which have been very welcome.
- An increasing number of retailers have initiatives to encourage closer working relationships with their suppliers, some of which attract a price premium. Have also been some positive developments in the contractual arrangements between processors and producers. Should encourage these relationships, which can help develop greater transparency and trust.
- But - need to be realistic and appreciate that only 25% of liquid milk is sold through supermarkets and only 51% of raw milk goes into liquid milk market, so these moves will not benefit all in the dairy sector.
- Considerable proportion of milk and dairy products sold through middle ground retailers, catering establishments, as a food ingredient, or is internationally traded as a commodity. Major supermarkets clearly have a very important role to play and can send out powerful signals, but others need to play their part too.
- Govt believes that it is in buyers own long term interest to establish fair and sustainable arrangements for dealing with their suppliers.
Profitability
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Supply chain relationships not whole story – issues of profitability have a range of causes. Still a worrying gap between the production costs of the most and least efficient dairy farmers – as much as 12 pence per litre in some cases. Means that some farmers will inevitably find their businesses unsustainable.
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Welcome moves to encourage more awareness of production costs (e.g. Defra part-funding a number of benchmarking projects) – should help producers to improve their business planning and decision-making.
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Some dairy farmers do make a profit. We rarely hear of them, but they deserve our encouragement and praise. All producers have to be realistic and work at reducing costs and becoming more efficient.
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Rest of supply chain also has part to play in cutting costs and maximising competitiveness and efficiency. Defra part-funding a study seeking to benchmark processor efficiency internationally – through the Dairy Supply Chain Forum. We have also granted over £1.3m through the Agricultural Development Scheme to help the dairy sector address issues of efficiency.
Number of producers leaving industry
- Know there is concern about numbers of dairy farmers leaving the sector – and the loss of skilled operators.
- But this is part of a long-term trend, and the rate has hardly changed over past 5 years (Milk Development Council report “Dairy Supply Chain Margins 2005-06”)
- This trend is not restricted to the UK – reflects an international pattern of fewer, larger herds in developed economies – e.g. rationalisation driven by economies of scale, an important ingredient for successful futures.
Decline in milk production
- Concern, too, about apparent decline in milk production. UK production is lower than for some time, but we’re still producing well over 13 billion litres of milk a year. And remember – milk quotas are a ceiling on production, not a target. Producers should produce for the market.
- Don’t doubt there are problems – especially for producers struggling with changing circumstances and reduced profitability. But important to remember that current process of restructuring is essential to the industry’s sustainable future.
Food security
- People also worried what these changes mean for security of UK’s milk supply.
- This country has long been a net importer of food. But, with low farmgate prices in UK, higher imports of liquid milk seem unlikely at present – especially with the cost and logistical barriers involved.
- Most important element is for our industry to improve its ability to produce what the domestic market requires. Not easy – but this is what is needed to ensure a sustainable future.
The way forward
- Dairy sector has important environmental and economic impact on the countryside. 14,000 producers in England and Wales managing 150,000 km2 of land (75% of the total land area of the country), and milking 1.7 million cows. Milk production = 18% of total UK agricultural output.
- Big environmental impacts of food production and consumption – these account for 20-30% of overall household impacts.
- Market drivers are changing – people (i.e. customers) much more interested in sustainable consumption and production. Chance to show that modern innovative farming is really delivering for the environment and animal welfare.
- Govt also working to support industry through challenges it faces and help it have a sustainable future. (e.g Dairy Supply Chain Forum).
- Shape and structure of the Forum has been revised to help it focus on real priorities for the industry – e.g. Forum now has separate Task Forces to work on Sustainable Consumption and Production issues, and CAP reform.
- Forum is a very important vehicle for industry to come together and discuss collaborative approaches to challenges it faces.
- Up and down the supply chain, with Govt and across the dairy sector, all need to work together towards a brighter future – Forum is a great vehicle for promoting that.
Industry concerns
- Bovine TB is a real issue – most serious animal disease the country faces.
- Want to see a mature debate about this. Need to understand downward trends in incidence. Need to move beyond an either/or debate on merits of badger culling versus cattle testing or biosecurity. Good husbandry essential – need to consider in what circumstances (and how) additional local badger management could help tackle the problem – instead of making it worse).
Conclusion
- Important to have considered debate on future of dairy industry. Challenges to be faced. But need to be careful not to talk the sector down. There are plenty of efficient and technically gifted dairy farmers out there too, working hard to generate a positive “can do” image of their sector.
- Essential for supply chain to build on the way it works together; for producers to become closer to markets and respond to demand to build successful businesses.
- Despite concerns, dairy sector can have a positive future.
Page published: 26 April 2007