Written Statement - Independent review of the dairy industry in Wales

The dairy sector is a vitally important component of the overall agri-food industry in Wales with milk and milk products accounting for a third of agricultural production. There are 1,835 dairy farmers in Wales producing a total of 1,670 million litres in the last milk year (2013/14).

The cuts in milk prices this autumn are of significant concern to me.  They impact on the profitability and sustainability of the sector and reduce the confidence needed for new investment. Prior to the most recent cuts, higher milk prices and good weather were together helping to support increased levels of production and this had allowed dairy farmers to feel more secure in planning and investing for the future.

All the indications are that there needs to be an expansion in dairy production across the world. The global population is increasing and consumers are increasingly affluent resulting in a greater demand for milk and dairy products. I am aware there are some suggesting a reduction in milk output – to restrict supply in order to try to help increase milk price.  In my view this is not the solution.  Cutbacks on our own UK and Welsh dairy products will simply be met with further imports and we need to be able to compete at the level of export prices from other milk producing countries. If managed sustainably, Welsh dairying is well-placed to take advantage of the rising long-term trend in demand for diary products.  

We have made good use in Wales of the current Rural Development Programme  with Farming Connect tailoring a suite of packages to support dairy businesses. Dairy farmers have valued this support with more than three-quarters of our dairy farms having been supported through Farming Connect. The next Rural Development Programme from 2014 – 2020 will allow us to continue with this good work and I will be looking to fully utilise the tools available to us by offering a comprehensive package of advisory services, knowledge transfer activities, supply chain development as well as capital investments to support these activities.  The Dairy Task Force, which includes representatives from across the supply chain, has been advising us on how best to use the new RDP to support the development of the industry.

Nevertheless, as the industry is entering another period of change with milk supply and the demand for dairy products re-balancing, I feel that now is the time to take stock of the dairy industry here in Wales. The Plan for Milk and the Voluntary Code have been in place for two years and as promised by the previous Minister for Natural Resources and Food, I believe we need to review what impact there has been and what needs to be done next. To achieve this, I will be consulting with my Dairy Task Force to identify who best should help us undertake this work on my behalf and to scope out the associated terms of reference..

The UK’s independent review of the Voluntary Code, undertaken by Alex Ferguson MSP, was published last week. I agree with the report’s key recommendation that both farmers and milk buyers should fully understand and engage with the principles set out in the current Code. However, I would like to consider if there are any actions we can take in Wales which could further improve the way business is done between farmers and their milk buyers.

I am confident there is a secure and profitable future for this industry and through this review, working with the Dairy Task Force, I hope we can identify the key opportunities and work together to achieve those goals. We have the land, the cows, the climate, the labour and the infrastructure - and the collective will to make a positive difference.