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Levy spend called into question as MPs investigate fall in farmgate prices

A raft of measures will be required to help the farming industry fight the current cash flow crisis, a committee of MPs has warned

Olivia   Midgley

Olivia   Midgley
 The National Sheep Association highlighted the importance of promotion as part of its evidence
The National Sheep Association highlighted the importance of promotion as part of its evidence

A committee of MPs has raised questions over the way red meat levy is collected in the UK and has asked if Defra should have the final say on levy expenditure.


The Environment, Food and Rural Affairs (EFRA) committee report published today, (March 2) laid bare the cash flow crisis currently circling agriculture and proposed a series of measures to help farmers bounce back.


Delays to BPS, plummeting farm gate prices, supermarket price wars, short term contracts and the regulatory burden on farmers have all added to the turmoil faced by the British agricultural industry, MPs found.


The EFRA committee, which has been collating evidence from across the industry for several weeks, said it was disappointed about the delay to the start of the lamb and beef promotional campaign in 2015, and called on Defra and AHDB to ensure any future problems were identified and resolved sooner.


Read more: Roberts resigns as AHDB Beef and Lamb chair over concerns about levy money use


The report said: “There must be no repeat of this delay in the future. It may also be timely for wider questions to be asked about the role of Government in signing off AHDB expenditure, and whether farmers and other levy payers should have the final say on expenditure.”


Read more: AHDB refutes accusation it could become Defra puppet


The committee highlighted a Farmers Guardian survey, which showed 60 per cent of respondents wanted more money spent on consumer promotion.


The National Pig Association and National Sheep Association also highlighted the importance of promotion and the positive impact it had on sales, in the evidence they gave to the committee.


“We were surprised when AHDB seemed to downplay the impact that a successful marketing campaign can have on stimulating demand,” the MPs said, adding products should be promoted at the peak period of production.


“We recommend that the Agriculture and Horticulture Development Board increase the proportion of its income spent on marketing, and work closely with levy payers to consider their views.”


AHDB Beef and Lamb board chairman Adam Quinney and the board’s strategy director Laura Ryan both told the livestock session at last week’s NFU Conference that promotion would be important going forward.


Mr Quinney said research and development in order to understand what consumers want would be a vital part of this.

The committee urged Defra to amend current legislation to ensure red meat levy funds were fed back to the regions in which the livestock were reared, not, as at present, those in which they are slaughtered.


The report also found current legislation surrounding origin labelling had the potential to mislead consumers and cause confusion.


MPs found a growing interest in the provenance of food and in British products required a move towards clearer labelling.


EFRA chairman Neil Parish said: “Many people in Britain want to support a British agricultural industry. But Defra’s current guidance on origin labelling allows for companies to sell products such as cheese and butter as British when the raw product is being sourced oversees.


“As a result consumers are given a false impression that they are supporting a home industry when in fact their money is not supporting UK farmers at all.


“The British public deserve to buy British in confidence. Defra must strengthen its guidelines around country of origin labelling and continue to press for EU support in establishing clearer and better labelling requirements.


A Defra spokesman said: “We recognise that many farmers are suffering financial difficulty in the face of volatile global prices. We want to help find ways through this difficult time to build a thriving, resilient industry that is able to take advantage of the growing demand for British produce both at home and overseas.


“That’s why we’re pursuing a host of measures including introducing a fairer tax system, backing a futures market and the creation of producer organisations, and opening up new export markets.


“We’re also continuing to push for mandatory labelling for dairy products so consumers are clear where the food they buy comes from.”


Commenting on the wider report, NFU president Meurig Raymond said the fall in prices and associated cash flow problems were the biggest challenges currently facing farmers.


“Pricing models, long term relationships, contracts, producer organisations and a greater emphasis on export opportunities for British agriculture are all tools which can be used by government and the supply chain,” said Mr Raymond.


“Using these tools will help the agri-food sector through this period of uncertainty and the whole supply chain better combat volatility.”



Phil Stocker, chief executive of the National Sheep Association, said the report ‘clearly shows that the structure of the farming and food sector does not generally support adequate farmgate prices, despite the fundamental role agriculture plays in the UK economy’.


“The report outlines some valuable recommendations that could work to address this, including several based on evidence NSA gave during the enquiry,” added Mr Stocker.


“These include further development of export opportunities, as well as displacing imports through greater domestic trade, setting up producer organisations and establishing futures markets for red meat as well dairy produce.”


Dr Judith Bryans, chief executive of Dairy UK, said the entire dairy industry was taking positive steps forward but needed government support to achieve long-lasting success.


"From farm to fridge, the industry is affected by harsh market conditions and we must continue to work with Government and its agencies to facilitate and stimulate demand at home as well as in key export markets," Dr Bryans said.


“We welcome the Committee’s recommendation to promote exports with the help of Defra and AHDB."


Ash Amirahmadi, head of milk and member services, Arla Foods UK, added: "Arla recognise the importance of working closely with the Government to boost exports, drive innovation within our sector and to highlight the dietary and nutritional benefits of dairy.


"As the report points out, it’s also about highlighting the importance of collective working amongst the farming community."



Read More

AHDB and Dairy UK discussing promotional campaign as milk outlook remains bleak AHDB and Dairy UK discussing promotional campaign as milk outlook remains bleak
AHDB levy spending under fire again AHDB levy spending under fire again
AHDB to meet levy payers to discuss funding priorities AHDB to meet levy payers to discuss funding priorities
AHDB turns down Ladies in Beef's £50k promotional call AHDB turns down Ladies in Beef's £50k promotional call
Farmers demand new approach by AHDB after promotion 'fiasco' Farmers demand new approach by AHDB after promotion 'fiasco'

Other key recommendations from the report

  • The committee questions assurance from the retail sector that there is no link between the price at which supermarkets sell to their customers and the price supermarkets pay to farmers. While farmers engaged in contractual arrangements with supermarkets, directly or otherwise, are guaranteed a price for their milk for specific periods, the chronic low price of milk sold through supermarkets inevitably disadvantages farmers in the longer term. Supermarkets may choose to sell milk cheaply as a loss leader, but farmers must not be the victims of the supermarket wars currently taking place in the UK. Progress is uneven amongst supermarkets and assurances must be met with action.
  • More effective co-ordination between Defra and the devolved administrations is necessary to prevent unsustainable price inequalities emerging at a national level.
  • Farmers must recognise the strength they can achieve through being part of a Producer Organisation.
  • The committee encourages the industry to work with Defra to take forward work on futures markets.
  • Defra should encourage farmers, processors and retailers to agree more long-term contracts that provide predicable income levels to encourage secure financial planning and investment decisions.
  • British farmers and producers must seize opportunities for domestic and global market growth. To be able to trade in a global economy, the agricultural industry needs to look at developing global products or adapting traditional products to meet changing demands.
  • The committee is concerned the majority of the 25-year strategy for food and farming will be about developing a plan for England, while also including an export strategy for the UK as a whole. For the sake of clarity, MPs recommend that the Government publish its export strategy separately.
  • The Department for Business, Innovation and Skills should consider urgently how to extend the Groceries Code Adjudicator's remit to incorporate, and thereby protect, both direct and indirect suppliers to the major UK retailers. The committee asks Defra to include this in their recommendations to the review of the role of the Groceries Code Adjudicator later this year.


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