In a report published today, the House of Commons Welsh Affairs Committee says the voluntary code of practice for the dairy farming sector must be given a chance to work, but if tangible improvements in the current situation are not forthcoming, the Government must also be prepared to legislate.
Dairy farming is of considerable economic and social importance to Wales, accounting for a third of all agricultural production by value and employing thousands of people.
The dairy industry in Wales has an estimated total economic output of about £420m, one third (30%) of all Welsh agricultural production. There are 1,901 dairy farmers in Wales who produce 1.5 billion litres of milk per year, 12% of the total UK milk volume.
The 224,000 dairy cattle in Wales constitute about 12% of the UK dairy herd.
Long-standing cost pressures on dairy farmers came to a head in a crisis in summer last year, 2012, when processors announced a series of milk price reductions to be implemented at short notice. Some of the price cuts were rescinded following public and political pressure.
Ministers from the UK administrations worked with industry representatives to help secure an industry-led solution, which resulted in September 2012 in the signing of a voluntary code of practice for contractual relationships between dairy processors and producers.
As of March 2013, an estimated 85% of British milk was bound by the principles of the voluntary code.
The Committee’s key conclusions are:
- The new voluntary code of practice is an important step forward to redress the balance in the contractual relationship between dairy producer and purchaser. The Committee urges all dairy processors who have not yet signed the voluntary code to do so.
- The code must be given time to work. The UK Government should set out precisely when and how it intends to measure the success or failure of the voluntary code.
- Should the voluntary code fail in its objectives, the UK Government must legislate for a statutory code of contracts in the dairy industry.
The Committee prefers such a measure to be taken in co-operation with the Welsh Government, in the spirit of the joint working that has taken place since the summer 2012 crisis.
Chair of the Committee
David Davies MP, Chair of the Committee, said:
“The events of the summer of 2012 brought to public attention the difficulties that have been faced by dairy farmers for some time now, particularly their powerlessness in the face of severe milk price reductions announced with little warning.
“This was a particular concern in Wales where the dairy sector employs thousands of people and accounts for a third of all agricultural output. Dairy farmers, the public and politicians—including, crucially, ministers from the UK administrations—were galvanised to pressurise the industry to find a fairer arrangement.
“The people within the industry that we heard from in this short inquiry mostly welcome the voluntary code and want to give it time to work. We believe adherence a voluntary code is the best option. To give it the best chance to be effective, we urge all dairy processors who have not yet signed the voluntary code to do so.
“However, many also believe it would be right for government to legislate if the code does not lead to tangible improvements, and we have seen examples in other industries where a voluntary code is not always enough.
"We hope that this Report will maintain pressure on the industry to ensure the voluntary code is a success and provides a fairer deal for our dairy farmers. However, if it does not work, Government should stand ready to ensure that fairer deal through a mandatory code.”