Alyn Smith welcomes renewal of European aid for dairy sector

A CONTINUATION of emergency funding for the EU dairy sector was welcomed this week by Scottish MEP Alyn Smith, who described it as a "small step forward in the EU putting money towards ensuring farmers get a fair return on produce".

The deal agreed by the EU agricultural committee of which Smith is a member extended the Dairy Fund by €300 million so that it could continue to assist the EU's dairy sector in marketing and restructuring.

The extra cash will also help provide for more research into new milk products.

Smith backed the increase, arguing that while the Dairy Fund is not the final answer to the problems in the EU's milk market, it was certainly a useful tool to tackle some of the worst impacts. The committee also backed an increase in the EU school milk budget from €80m to €90m.

Meanwhile NFU Scotland made it clear they are putting a great deal of faith in the EU High Level Group which is looking into failings within the dairy supply chain. This group has already identified the need for effective milk contracts along with a more equitable distribution along the supply chain as well as a more transparent distribution of margins.

A union spokesman said they fully supported the group's view that milk contracts should include what is called price formulation which is euro speak for ensuring that prices are based on actual costs of production.

He added that the union is working with both the Scottish Government and Defra in trying to produce tangible results from the EU group's recommendations. "This is in the long term interest of the entire supply chain and the consumer."

There was an acceptance that the big problem was ensuring that neither the buyer nor seller of milk was disadvantaged through relative weakness in negotiating strength.

And this was where the recent announcement of the establishment of an adjudicator under the Grocery Supply Code of Practice could be very important.

Draft legislation on this appointment is due in November with a draft bill timetabled for Westminster parliamentary progress in April 2011 and completion in 12 months time.

The union spokesman admitted that this timescale would not cope with the more immediate problems facing the Scottish dairy industry with rapidly rising input costs such as feed, fertilisers and fuel.

A recent estimate by a leading milk producer reckoned that rises in these essential inputs could raise his milk production costs by up to 3p per litre.

Even before this surge in costs , figures show the average sales price for the first six months of the year levelled at 24p per litre. Meanwhile production costs worked out by marketing company Promar on behalf of Tesco, were 26.4p per litre.

The union credited Tesco as the only major buyer who have a pricing formula based on both the costs of production and dairy market indicators.