The Government has continued to engage closely with representatives from all parts of the dairy supply chain throughout this difficult period to assess the challenges facing the industry and to ensure that appropriate financial support is provided. The vast majority of Britain’s dairy farmers continue to supply their contracts at or around the usual price. Approximately 5% of total milk production, however, goes to the service trade. A small proportion of farmers supplying milk to processors that sell into the food service sector have seen a reduction in demand with the closure of food service. A small proportion of suppliers have therefore seen a reduction in demand. We have provided a range of support to help these affected farmers.
At the outset of the pandemic, the Government announced a number of emergency measures to support farmers, processors and retailers. These include designating the food sector as critical to the response, with people working in the production, processing, sale, distribution or delivery of food categorised as key workers, and granting derogations on drivers’ hours limitations.
In addition, to support milk producers, the Government announced on 17 April a temporary easing of some elements of competition law to make it easier for the dairy industry to come together to maximise production, processing and storage efficiency and to ensure that as much product as possible can be processed into high quality dairy products. This Statutory Instrument was laid on 1 May and applies retrospectively from 1 April.
On 6 May we announced a new scheme specifically to provide support to eligible dairy farmers in England who have lost more than 25% of their income over April and May because of coronavirus disruptions. This will provide farmers with funding of up to £10,000 each to cover 70% of their lost income during the qualifying period, enabling them to continue to operate and to sustain production capacity without impacts on animal welfare.
Defra and the devolved administrations are also jointly contributing towards financing the new £1 million campaign by the Agriculture and Horticulture Development Board and Dairy UK to drive an increase in the consumption of milk. Running over 12 weeks, the campaign is highlighting the role that milk plays in supporting moments of personal connection during times of crisis.
Our Coronavirus Business Interruption Loans Scheme is available to farmers, milk buyers and processors. Responding to industry feedback on this scheme, Defra held urgent discussions with the major banks to ensure they understand that farmers, milk buyers and milk processors are eligible. In addition, the new Bounce Back Loan scheme, which applies to businesses operating in agriculture, ensures that the smallest businesses can access loans up to £50,000. To give lenders the confidence they need, we have provided them with a 100% guarantee on each loan and will cover the first 12 months of interest payments and fees.
Public intervention for skimmed milk powder (SMP) and butter continues to be available in the UK. Alongside this we have also ensured the availability to UK dairy processors of private storage aid for cheese, butter and SMP. These measures will help to underpin prices, providing a floor in the market by reducing the volume of product coming on to the market.
We will continue to engage with the dairy industry throughout this period of disruption to monitor the impact of the range of financial and other measures we have implemented, ensuring that the sector continues to have the support that it needs.