Minister of State George Eustice MP

This was the Minister's third successive visit to the NFUS AGM.

In the last two years because of the referendum the content has been limited but he felt this year there was an opportunity to talk about areas of common interest, so working together closely to tackle common challenges and where they really ought to engage in common endeavour to deal with some of the problems faced in farming.

“There is no doubt that at the moment farming is in a very difficult position. We are now going into a third year of very low commodity prices in some areas and particularly in the dairy industry. There are a number of factors that have driven this. You have got global oversupply, disruption to markets with the Russian trade ban having a particularly strong impact on pork, the Chinese market has faltered and that has had a big impact on the dairy sector and also has meant that a lot of lamb from New Zealand that would have gone to the Chinese market is now on the European market and that has depressed lamb prices.

“We have also had two quite good years in terms of weather and good harvest over the summer which has depressed cereal prices and also led to a god flush of grass again leading to an overproduction of milk. There are a lot of problems there and there is also another one that we suffered in the UK which is the strength of the pound against the Euro, or should I say weakness of the Euro given all the turbulence in Greece and concerns around the Eurozone. That has also exacerbated all of these problems.

“There is always a limit to what Government can do to address these problems when the fundamental problem is global oversupply and depression in the global commodity market. But we pushed very hard with the Commission to get a Dairy support right across Europe. The RPA made direct payments to Scottish Dairy farmers last November and December. We have also been supporting private storage aid schemes, notably on dairy, so that we can take out some of that surplus capacity out. We are arguing the case at the European Union for measures that will help support our agricultural industry.

“There is another area where we have a common concern. That is we may have this reality of price volatility for some time to come. At the moment we are doing quite a lot of work really exploring in depth how we can make a futures market work. This has been talked about for the last few years and I really want to knuckle down and see how it can be made a reality. I have a team of people in Defra looking at lessons from Chicago where they have a successful futures market – a cash settled futures market, a derivative that is linked to a Dairy price index rather than linked to the physical delivery of skimmed milk powder.

“We are keen to learn the lessons of that. One of the things that we have identified is that in the US there are regulatory requirements on dairy companies to publish certain bits of market data so that the market can have absolute confidence in what the correct and true price of the market for milk is. Unless they have confidence in the index on which any market is linked, you will not get people to play ball.

“So we have made some good progress on that and I really think that London with its world role as a financial sector and where we already do huge amounts of commodities trading, London is the right place to set up a futures market that can serve the whole European Union and definitely a UK wide system. We really want to engage Scotland on that work.”

Another area of common concern was around animal disease surveillance and managing disease outbreaks. The Minister discussed managing disease outbreaks referencing avian flu, new virulent strains of FMD in Turkey, continued threat from African Swine Fever coming from Eastern Europe. Bluetongue outbreak is possible in England this year and because of all these threats the Minister said:-

“These serve as a reminder for the concordat that we have always had between all of the devolved administrations to work jointly on disease surveillance and crucially as well fighting disease outbreaks.”

The Food and Farming plan intends to open new export markets and promote the British brand overseas. A UK wide Agritech strategy is worth £160m and it supports a number of projects in Scotland.

“I am not in denial about the fact that there remain areas that you will be very interested in where we still have so differences that we need to work out. One is on the Red Meat levy which as you know the level boards have been in discussion about now for well over a year to try and find a resolution.

“I am pleased to say that they appear to have come up with a recommendation that might have solved some of the difficulties and tensions that there have been. They put a proposal to us that we are looking at now. In principle what they are saying is that there are areas of work that the AHDB do on the Red Meat Levy which is UK wide – export work, some of their work on market data – but a recognition that when it comes to promotion and the marketing element of their work different parts of the devolved administrations approach things differently.

“They have come up with a proposal that broadly looks at the cattle and sheep movement records that we have and try and identify where sheep spend their life, how much of it is in each part of the UK. It is potentially quite a complex system but the principle of it is logical and we are working through now that to see if we can move to a resolution.”

The Minister also made comment on CAP and the review he had promised. Comparison of land types will be one of the crucial elements of any new formula.

In Questions and Answers the Minister said that he was pushing for mandatory Country of Origin labelling on dairy products. Commissioner Phil Hogan has pushed that back considering it too costly and too complicated.

“We strongly disagree and whenever we have the opportunity we make the case for mandatory Country of Origin labelling. In the absence of that I have talked to a number of supermarkets about how we might strengthen the voluntary code that we have on dairy so that we can try and improve it. We should not have misleading labelling. It is an offence but then I am aware of some concerns where you maybe have Union Jacks in the aisle of a supermarkets but then New Zealand lamb on the shelf. There are always going to be areas like that where it is not technically an offence provided they have New Zealand on the label. This is where the supermarkets need to tighten up their own codes of practice.”

Jim McLaren reassured the Minister that the repatriation of levy was a priority even though it was ten years on from the first discussions. He pressed the Minister because this now sits with him and his department, to engage on a consultation and we need to have three consultations, in England, Scotland and Wales running simultaneously. He said that he would hate for Defra to be the roadblock for that being expediently carried out. He urged for this to the pressed along as quickly as possible to allow this agreed position by the three nations to be implemented.

George Eustice commented:- “In 2008 the system was changed to collection by each devolved administration from their respective meat processors. That all makes it complicated, there will be lots of cross payments going on that makes it potentially more complicated than we have got now. It is possible to have a formula that looks at cattle movements across a reference period of a year and use that as a basis for going forward.”