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Time to treat farmers fairly on milk prices
Date 29/07/2012 23:23  Author webmaster  Hits 2728  Language Global
A long-term solution to the dispute over milk prices in the United Kingdom would be for the country to free itself from the Common Agricultural Policy by leaving the EU – but in the meantime wholesalers and retailers should treat farmers fairly, argues UKIP MEP Stuart Agnew.

By Stuart Agnew MEP | PSEurope

Britain's dairy sector has long been very different from the rest of Europe. From the moment railways began bringing it into the country's growing industrial towns and cities, the British began consuming fresh milk. Out of this grew the doorstep delivery system which put fresh milk on Britain's breakfast. This milk was supplied by farmers, generally but not always tenants, who produced for themselves rather than being part of a co-operative, after the pattern that developed in Europe. Even when a milk marketing board was created, British producers retained their independence.

The British dairy farmer achieved a reliable buyer and a reasonable price through the Milk Marketing Board, created in 1933 out of the Great Depression. It came to the rescue of dairy farms that were at risk of going out of business. Over time, the board grew top-heavy. Running an organisation of that size is not the same as running a small farm. Producers on the continent were receiving better prices and the National Farmers Union gave the board the thumbs down. European Union legislation on monopolies was another nail in the coffin.

After the marketing board was abolished, there followed a short-term wave of euphoria as producers found themselves being courted by processors and farmers would not back 'milk marque' – the successor to the board – in large enough numbers. The various processors were played off against one another by the retailers and the race to the bottom got underway. The supermarket retailers, meanwhile, were using their ever-growing power as buyers to drive down the price, often selling fresh milk as a loss-leader, precisely because it had become a staple product in the British shopping basket.

Although it may not have been the original intention, this has, over the last 20 years, effectively killed off doorstep delivery. These are the roots of the current crisis and how we have arrived at a situation where Britain's dairy farmers cannot get an economically viable price for their milk. The EU and its Common Agricultural Policy do not help the situation. This is not because they are antagonistic to us but simply because, as so often happens, the British market is just too different from what works elsewhere in Europe. What is right for the Limousin, Bavaria or Frisia is not the solution or way forward for the Lake District, Staffordshire, Central Wales or the dairy farmers of Essex.

Most people know about monopolies and why they are economically damaging. Far fewer people are familiar with the term oligopoly. An oligopoly is dominance by a small group of firms. Leading British retailers are oligopolistic. They tend to make their suppliers that way too as their sharp pricing drives more and more of the smaller and weaker wholesalers out of business. The outcome of this process is what Britain's dairy farmers are struggling with and protesting about right now.

Farmers for Action and the National Farmers Union have combined to create a synergy that is hugely impressive and is well and truly educating our citizens into understanding that milk has a value. However, I urge milk producers not to overdo the direct action. They are winning the argument and retailers now know how vulnerable their entire 'just in time' national operations are to a few tractors milling around at distribution centres. Looking for a more long term solution to these problems is complex. The immediate difficulty is asymmetric contracts. It cannot be fair, for example, that the notice periods are different for farmers, who have to give 12 months' notice, when wholesalers do not. Wholesalers need to re-write these contracts, so that both sides get fair terms.

How do we make them do that? Public pressure will help but consumers, especially at this particular time, are very mindful of their wallets. To ask them to protest in support of actions which probably mean they will have to pay higher prices is asking a lot. My solution and the only way the government can actually make a difference, bearing in mind just how much power now resides in Brussels, is to threaten retailers and wholesalers with being referred to the competition authorities.

Although British competition law has fallen behind modern markets and needs to be updated, we do have competition authorities and they can be used. I would ask wholesalers and retailers to treat Britain's dairy farmers fairly. They would be wise to take this suggestion seriously as the terms that might be inflicted upon them by the competition authorities would be very disadvantageous. Naturally, another longer term solution would be for Britain to leave the EU, which would give our government much greater scope for effectively dealing with the milk price problem, once and for all.

Stuart Agnew MEP is a member of the UK Independence Party, the European Parliament's agriculture and rural development committee, and the National Farmers Union