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Written Statement - Consultation responses to - Dairy Industry: Producer Organisations, the reporting of milk volumes and other EU Dairy Package options

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Alun Davies, Minister for Natural Resources and Food

The EU Milk Package Regulation is an important step in securing greater transparency in the milk supply chain. It enables milk producers to set up Dairy Producer Organisations (DPOs) and seek recognition for them to undertake specified activities, including reporting requirements on milk production.  Our recent consultation sought views on how the Welsh Government should implement EU Regulation No. 261/2012 in Wales, and I would like to thank all the respondents for their helpful contributions.

As a result of the consultation I have accepted the proposal that in order to be legally recognised, Dairy Producers Organisations (DPO) will have to have a minimum of 10 dairy farmers and the minimum volume of raw milk produced by farmers in the DPO must be at least 6 million litres per annum. I am pleased to announce that dairy producers who are now in a position to consider setting up a DPO can do so immediately. Further details on DPOs and registration can be found on the Welsh Government web site.

I was pleased to see the development of the industry’s voluntary code of practice which was published on 21 September 2012.  It was the unanimous response of those responding to the consultation that the voluntary code should be given time to work and that contracts should not be made compulsory at this time.  I share this view.

We must move to a position where every part of the supply chain receives a fair return for the contribution they make. The voluntary code and the move towards more transparent milk pricing contracts should help redress the balance and give more strength to those negotiating farm gate prices.  The work of Christine Tacon, the first Groceries Code Adjudicator, will begin in earnest and this should reassure farmers that large supermarkets will treat them fairly and within competition law.

I have agreed that a two year period is appropriate to give the voluntary code time to work. Following this period I will commission a review to see how effective the code is for producers and the associated supply chain but I will reserve the right to bring this review forward if it is apparent that the voluntary code is not working.

In a further move, I have established the Dairy Task Force for Wales to advise and support me on developing the strategic vision for the Welsh dairy industry and, in addition to its other duties; the Task Force will play an important role in monitoring how the voluntary code is operating.

The Task Force will consider the challenges faced by the dairy supply chain and will advise me on any structures or measures that need to be put in place. The next period of the Common Agricultural Policy and its Rural Development Plan will shape the industry as we move to 2020 and we must use this time to build resilience into the industry. We have to become world class milk producers and at processing milk into high value products that people want to buy and selling these products on a global market.

We are distant from many of our dairy consumers and milk is expensive to transport. About half of Welsh milk is processed in Wales and nearly all into cheese. Liquid milk is processed in England with some Welsh milk returned for Welsh consumers.  I want to know if we are making the right dairy products and what new products we could develop and sell. The message from the Dairy Summit last year was very clear; we should focus on substituting imports from outside the UK with our own dairy products. We have to stop importing the high value products that we can make ourselves.

Added Value to the primary product must be a priority for the Welsh Dairy industry. We have some excellent producers and I want to build on the successful PGI (Protected Geographical Indication) status we have in place for Welsh Beef and Welsh Lamb.  Currently no Welsh cheeses have a protected name designation. This is obviously something we need to put right in order to give Welsh cheeses the recognition they deserve.

There are many areas which I am keen to see progressed within the dairy industry in Wales and I am committed to ensuring that the next Rural Development Plan will ensure that our dairy producers have the tools and support they need. We need them to improve their competitiveness and profitability while ensuring that we have a system which is fair to all in the dairy supply chain. The Welsh Dairy industry must be innovative and market focused if it is to flourish, and I hope that producers and processors will fully and positively embrace the voluntary code on milk contracts.