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EU plans for the dairy sector don’t do enough for UK farmers, say MPs.

The European Commission’s proposed package of measures for the dairy sector is not sufficient on its own to redress the problems facing the UK industry, warn MPs in a report published on Friday 29 July 2011 evaluating the Commission’s ‘Milk Package’.

The Environment Food and Rural Affairs Committee warns that farm-gate milk prices remain below the average cost of production and calls on the Government to set out its strategy to improve the state of the UK dairy sector.

MPs call on the Government to ensure that UK dairy farmers are offered written contracts by processors that specify either the raw milk price or the principles underpinning the price, the volume and timing of deliveries, as well as duration of the agreement. “Unless such contracts are made compulsory, we believe there will be no improvement in the system that currently means our dairy farmers have little certainty over the price they will receive for their milk,” says Committee chair Anne McIntosh MP.

"Without Government action many more UK dairy producers will simply go to the wall, with highly undesirable consequences for rural communities, landscapes, tourism, and consumer choice. We found Defra’s lack of an action plan disappointing,” says McIntosh.

The Committee also argues that the forthcoming abolition of EU milk quotas coupled with growing global demand for dairy products creates a significant window of opportunity for UK dairy production.

"To capitalise on this opportunity,” says McIntosh, “some core issues that lead to low profitability must be resolved, not least the imbalance of bargaining power between dairy farmers and buyers. Effort is also required to drive up investment in milk processing to increase capacity and develop new lines of value-added products.

"Dedicated supply groups have benefitted the industry and the same principles should be extended to processed dairy products. Retailers must recognise that the current distribution of margins along the supply chain is unsustainable. We have called on the Government to exert influence on retailers to establish dedicated supply chains for processed dairy products” adds McIntosh.

The Committee supports the European Commission’s proposal to allow dairy producer organisations to jointly set prices but warned that without greater safeguards this could lead to competitive distortions. “Greater oversight by the Office of Fair Trading is needed to protect consumers from milk price rises” adds McIntosh.

In addition, the Committee calls on DEFRA to promptly establish its position on large-scale dairy farming.

McIntosh says "These developments have potential, but further research is needed to establish what impacts such systems have on the environment and animal health or welfare".

"DEFRA has an essential role to play in enabling a reasoned public debate about new technologies in food and agriculture. The Government must not shirk its responsibility to set out an informed rationale for whatever position it adopts on super-dairies," adds McIntosh.

MPs also urge DEFRA to provide greater support for innovative research and development in the dairy sector that is focussed on novel uses and processes that add value.