Dairy prices

Worldwide pressure on milk prices has resulted from a combination of rising supply and falling demand, partly because of reduced demand from China and a Russian trade ban with the EU. Rapid and wide fluctuations in milk price bring pressure to bear on the UK dairy industry, and farmers have been leaving it in significant numbers in recent years.

While there is no single solution to the problems created by these rapid changes in milk prices, it is incumbent on the Government, and Defra in particular, to promote UK dairy produce domestically and in growing export markets. Action to encourage the spread of Producer Organisations, a review of the EU intervention price for milk and clearer regulation on the labelling of dairy products could all assist a struggling industry.

The voluntary code of best practice in the dairy industry, introduced after similar price difficulties in 2012, has been adopted by about 85 per cent of dairy producers and welcomed in improving matters as far as it goes. Closer attention is required, however, to the sharpness and frequency of price changes in the dairy market, which affect investment and financial planning.

The Groceries Code Adjudicator’s role, concerning the relationship between direct suppliers and major retailers, is too restricted to be of assistance to the vast majority of dairy producers, as they are indirect suppliers. The Government should urgently consider extending this role to provide more reassurance to farmers. The Adjudicator should also have the power to launch investigations instead of only responding to complaints, and the Government has been slow to provide the Adjudicator with the practical powers required to fine companies which break that code.