Owen Speaks at the SEMEX Dairy Conference

Rt Hon Owen Paterson MP Speech to 2014 SEMEX DAIRY Conference: ‘Making the Right Moves’ - 13 January 2014

 

Introduction

It’s great to be in Glasgow. I am delighted to be speaking at this year’s conference.

I have set out four clear priorities for my Department - to grow the rural economy, improve the environment, and safeguard both animal and plant health. The dairy industry has a key part to play in all of these.

My philosophy is simple, where there are opportunities we must grasp them, where there are difficulties, we must overcome them and where there are barriers, we must work together to break them down.

 

 

 

 

The dairy industry

The UK dairy industry has a long and proud history. It is world famous. It is also one of the largest sectors in the food industry – worth £10 billion a year and employing 5,300 people.

There are 1.8 million dairy cows in the UK, producing 13.2 billion litres of milk a year. Each cow produces 7,400 litres a year – a 12% rise in productivity over the last 10 years. The industry is consolidating and becoming more and more efficient.

I know firsthand about dairying because of my family background, and because north Shropshire has one of the highest concentrations of dairy cattle in the UK.

I also understand how difficult the last few years have been. Bad weather, high feed costs and low prices put pressure on everyone. During this tough period you all showed great resilience, commitment and dedication. We are now moving to a much more positive position, with farm gate prices for milk at an all-time high and global demand increasing at an unprecedented rate.

I firmly believe that the UK dairy industry has a strong future. The dairy strategy that the industry is developing is vital to achieve this. It will create a common set of goals and actions to enable the dairy industry to compete successfully in the global market and at home. Trust and collaboration are key for generating confidence. The industry needs to find more ways to add value through the supply chain. The sector is making progress. Now is the time to really build on this and drive the industry forward.

 

Exports

UK dairying has an excellent international reputation due to its robust traceability, rigorous production standards and top quality produce. This means there are great opportunities for exporting our excellent products.

Last year, UK food and drink exports were worth £18.2 billion, nearly 50% higher than a decade ago and there is room to grow even further.

The Scottish Dairy review commissioned by the Scottish Government highlighted that exploiting export opportunities is essential for growth in the industry – currently only 8 per cent of Scottish dairy products are sold outside the UK.

I have been to numerous trade shows recently – Shanghai, Moscow, New York and Cologne. These are some of the largest food fairs in the world. At each of them I was banging the drum for UK products and working to break down market access barriers.

For example many of the 700 cheeses we produce are household names overseas – Dairy Crest's Cathedral City now sells a quarter of a million packets a year to France.

As diets become westernised and the middle classes grow, demand for quality dairy products has never been higher. The UK has an excellent reputation for traceability and production standards which puts our industry at an advantage, particularly in markets, like China that have suffered food scares.

Belton Cheese in Whitchurch, Shropshire has increased its exports by 50% this year selling their regional British cheeses to Canada, Russia, South Africa, and the USA, They are developing a foothold in Australia and Japan.

Mackie’s ice cream is produced on-farm in Aberdeenshire, but you can now buy it in Dubai, Singapore and South Korea.

These examples show that opportunities lie in adding value to quality raw material and selling innovative products in growing markets.

That is why we developed a joint industry and Government Exports Action Plan in 2012. It has been updated to reflect Government and industry’s ambitious commitment to increase exports even further.

 

 

 

My department is also working with UKTI and the industry to create the first-ever Dairy Exporters Group, to focus on the massive opportunities in the sector.  We’re going to work with hundreds of dairy companies to take their produce to trade fairs globally, getting it into supermarkets and on plates from Glasgow to Guangzhou.

This is something that has to be done together – you, the industry have the entrepreneurial spirit to go out and find new customers.  Government can help introduce you to new markets and break down official barriers.

 

Import Substitution

Of course, it’s not just about promoting exports. UK consumers are increasingly interested in the provenance of their food and recognise the quality of British food and drink.  24 per cent of food eaten in this country is imported when it could have been produced here.  We need to make a significant dent in this.

 

We have a £1.2 billion dairy trade deficit. Each year we import 115,000 tonnes of ice cream. This is more than double the 50,000 tonnes we export.  We import 150,000 tonnes of yoghurt – six times the 25,000 tonnes we export.

We are lucky to have a ready market for fresh, liquid milk on our doorstep. But the biggest growth opportunities are in premium, added-value, non-liquid products. And the best way to seize those opportunities and get out of the hole we were left in by the Milk Marketing Board is to innovate, add value and market our products cleverly.

Müller in my constituency opened their Market Drayton dairy in 1992 and now they are one of the biggest yogurt brands in the UK – they’ve gone from zero to 1.7 billion pots a year. And because consumers want low fat yogurt, there’s lots of cream leftover. They used to sell this as a raw commodity, but decided it would be better to add value to it themselves...    **[cont. overleaf…]**

…So they’ve invested £17 million in a new butter plant that I opened in early December. By adding value, they will be substituting imports at home and benefiting from a new product for export.  

We are working with farmers, manufacturers and retailers to ensure that the UK has the right climate to attract increased inward investment and enable UK producers to grow and compete.  This includes supporting activities by industry to develop a skilled workforce, increase innovation and help UK consumers select products on grounds of provenance through country of origin labelling. 

I am also looking at how we can improve the way public procurement policy operates for food and catering services so that it can contribute to a competitive UK food and farming sector. I’ve asked Peter Bonfield to lead our drive on this.  The public sector bought £2.1 billion worth of food and drink last year. That’s an astonishing amount of money. Government purchasers should be taking advantage of our top quality products.

The Cornwall Food Programme, which supplies the Royal Cornwall Hospital as well as St Michaels and the West of Cornwall Hospital, is a great example. They have increased the amount of fresh, local food they use. They have started serving a local clotted cream ice-cream, which not only tempts patients to eat, but actually saves money as fewer elderly patients need powdered drink supplements to make sure they get enough calories.

 

Science and innovation

Science and innovation have an important role in helping our agricultural industry, including the dairy sector, to become more competitive, sustainable and resilient. The Roslin Institute is a great example, leading the way on livestock and cropping biosciences.

Average milk yields per cow have increased at an extraordinary rate in the last 50 years through a combination of breeding, feeding and management expertise.

But the pressure for ever-greater levels of productivity will continue and we need to capitalise on the very latest research findings and improvement techniques to maximise efficiency and profitability.

In July we published the first ever Agri-Tech Strategy. It sets out the need to improve our ability to translate our world class research into practical applications that will make us world leaders not only in agriculture but also in the science and technology that supports it.

We have committed £160 million of which £70 million will help to commercialise new agricultural technologies and £90 million will establish world class Centres for Agricultural Innovation. There’s a new unit in UK Trade & Investment to boost inward investment and exports in the sector. There will be an Agri-Tech Business Ambassador to drive forward exports in agricultural technologies.

 

 

We are asking industry to co-invest in this exciting initiative, with the aim of transforming our farming sector, using the latest technologies to produce more whilst protecting our environment and its natural resources.

Government is also funding research to see if farmers could lower protein levels in dairy rations to reduce nitrogen emissions and improve economic performance without affecting dairy cow productivity. And we are putting £16 million into work to find alternative, sustainable sources of domestically produced vegetable proteins for our farmed livestock to reduce our reliance on soya imports.

Together we need to find creative and innovative ways of harnessing science and technology to build a competitive UK dairy industry, and I know that there are many of us here today that can make this happen.

 

 

 

Regulations

Farmers will not, however, be able to make the most of these opportunities if we don’t get out of their hair. That’s why there is a drive across Government to cut red tape.

I start from the position of trusting farmers. We’re working on making the most of earned recognition on farm inspections. 14 out of 31 on-farm inspection regimes now allow farmers and food producers to earn recognition.

The FSA has already made a 75% reduction in the frequency of official hygiene inspections on dairy farms to make the system more proportionate to the food safety risks.

Now the FSA is working to implement earned recognition on animal feed from April 2014 – a scheme that could reduce on-farm inspections by 10,000 a year.

 

Many of you would like us to move faster on Livestock Identification and the complex rules governing animal movements. Considerable progress has been made. But it’s difficult to prove a negative. It’s easy not to notice the reduced number of inspections but there is of course more to do.

As we implement the CAP in England, I will not risk the smooth running of the RPA which we’ve worked so hard to turn around. By 31 December they had exceeded their payment targets for the single payment scheme. 99,200 customers – 95.9 per cent of all those eligible – had received their payment from the fund of over £1.5 billion. That’s a great achievement. That’s why despite wanting to move as quickly as possible on Livestock Identification and movement controls I will not make any changes that jeopardise the successful delivery of CAP reform in 2015.

 

 

Last week I announced my intention to implement the recommendations made by the Farming Regulation Task Force to simplify how we define   livestock holdings in England to avoid confusion around the rules. We will also phase out cattle tracing links and Sole Occupancy Authorities to further streamline the regime, reduce red tape, and improve our disease capabilities. These changes will be rolled out during 2016 and 2017.

Once we have completed the much needed simplification of livestock movements we will review the rules on Standstill.

We are being responsible by moving at a pace that will deliver what we want without risking our animal health or disallowance from the EU.

Dairy Code of Practice

When Sir Jim Paice spoke at this conference in 2012, he touched on the elements of the EU Dairy Package that are significant to the UK dairy industry. The industry’s Voluntary Code of Practice is a key part of this. 

A voluntary approach delivers quicker and broader results than a mandatory one. It means that industry is in control rather than being burdened by extra regulation.

I am extremely encouraged by the progress made to date with over 90 per cent of milk production now covered by the Code.

I fully support industry’s review process. It is important to know if the Code is having a positive impact for dairy farmers and processors.

 

Implementation of the CAP

Turning to the CAP, as part of the negotiations we got agreement that the CAP should be implemented at a regional level according to local circumstances. That means that in Scotland, Wales and Northern Ireland their Agriculture Ministers are responsible for how they implement the CAP.

Just before Christmas I announced a package of measures that is fair to English farmers, delivers better value for taxpayers and supports this Government’s commitment to improving our natural environment.

I am determined to use the CAP in England to enhance our landscapes, and the wildlife, plants and pollinators they support. At the same time, this deal will enable us to build on the strong foundations we already have to make English farming one of the most competitive and innovative industries in the world.  

We need to keep the delivery of both direct payment and rural development as simple as possible. We must not introduce the same degree of complexity as in the last round of CAP reform which led to us having to pay back £600 million in fines.

We will ensure that the implementation of the CAP in England is as simple as possible.  We will continue to work with the industry to ensure this is the case.

 

Overall the reform did not go anywhere as far as we would have liked. But we did defend the UK dairy industry from a number of proposals that would have been damaging. 

Milk Quotas

There has been much debate about milk quota removal in 2015. It’s important to focus our efforts on the opportunities this brings.

When quotas end we can expect to see a modest increase in EU production. But the global market place is forecast to grow at a rate of 2.3% per year for the next 10 years. To meet such an enormous increase will require the equivalent of bringing on-stream an extra New Zealand dairy industry every year.

Looking ahead, we must focus on being competitive, efficient and innovative. What is really needed is a clear strategy for the future and this is what industry and Government are working towards.

 

Plant and Animal Health

The industry won’t be able to take advantage of any of the available opportunities without also tackling plant and animal diseases. I’ve made this a key priority.

Bovine TB

Bovine TB is devastating the cattle and dairy industries and will cost taxpayers £1 billion over the next 10 years if we don’t take action. In the 10 years up to last January 305,000 otherwise perfectly healthy cattle were destroyed. The latest figures show that from January to September last year a further 24,618 cattle had to be destroyed, that’s an average of over 90 cattle a day.

We are using every tool available including tougher movement controls for cattle, better biosecurity on farms and working to develop effective and usable cattle and badger vaccines.  Our ambition, as set out in the draft TB Strategy, is to achieve official TB freedom for all of England within 25 years.  

We are investing over £1 million this year in cattle vaccine safety trials and other development work to design field trials and the DIVA test. Even if the trials go according to plan, the EU Commission has said that it will be at least 10 years before we would be allowed to use it.

That’s why we also need to address the disease in wildlife. This is and will remain a key part of our TB Strategy. No country has successfully dealt with TB without tackling the disease in both wildlife and cattle. That is the clear lesson from countries like Australia, New Zealand and Ireland.

We have always been clear that the culls in Gloucestershire and Somerset were pilots from which we would learn lessons.

The purpose of the pilots was to find out whether controlled shooting is safe, effective and humane. Detailed monitoring was carried out during the pilots. We will wait for the Independent Expert Panel to report before making a decision on wider roll out.

The pilots were a difficult undertaking. I pay tribute to the NFU nationally and locally and the farmers and landowners who undertook the cull, often in the face of intimidation by a small minority who are determined to stop this disease control policy.

The experience from the pilot culls shows that when Government and industry work together we can begin to tackle this terrible disease. Contrary to many reports, significant numbers of diseased badgers have been removed. And farmers in those areas are confident that they will see a reduction in the disease in their cattle.

This Government will not shy away from the difficult decisions required to stop this disease. Last year we took the first steps on the road to TB free status. I want to see healthy badgers living alongside healthy cattle.

 

 

 

 

Concluding remarks

To conclude, there are enormous opportunities available for the industry to grow. The world’s population is rising, diets and tastes are changing. That means that our export opportunities are growing.

And at home, there’s a lot we can all do to encourage UK consumers to buy our excellent local produce.

I am determined to do everything I can to support you to make the most of these opportunities. We’re opening new markets. We’re cutting red tape. We’re tackling animal disease.

I look forward to working with you to make the UK dairy industry as successful and robust as possible.