Export: the long-standing political answer

Michael Hart: in reply to views expressed by MP Neil Parish in the Western Morning News & the Conservative home website

michael hart 3Neil Parish was once a farmer but now, like most MPs, is out of touch with real life in saying the way forward for UK dairy farmers is to export – the long-standing political answer to the problem of low farm gate prices in all sectors, not just here but worldwide.

Rather than looking at and dealing with the real cause of the problems, the answer is always, “it’s all your fault as farmers for not exporting more, for failing to take advantage of new markets in countries like Russia, China, India and Brazil”.

As Neil Parish himself says, British milk and its products are some of the finest in the world, produced to the highest welfare standards; however, that means that UK dairy farms have a higher cost of production than other milk producing countries.

But in order to compete on world markets you need to have a lower cost of production than the other supplier countries, so how are we going to compete in such a market?

Parish says that India is an emerging market for dairy products – however that ignores the fact that India is, in fact, the largest milk producing country in the world and – as an emerging country – will increase home production as skills and knowledge to produce more become available. The UK is number nine in the world production league.

Australasian and south-central America will import from their neighbours

China is third in the world milk production table and while imports are increasing, so is home production of milk which has risen rapidly over the last eight years and will continue to increase I suspect, as they import genetics and knowledge to enable them to do so. They may also import more milk products over the coming years from countries like New Zealand most likely based on price, with which we will be unable to compete.

Brazil, another country he mentions as a possible market, is number five in the world production league, producing more than twice as much as we do. In 2011 the neighbouring milk exporting country of Argentina increased production by 12.6% and cost of production is much lower there than here. Other southern hemisphere milk exporting countries have also increased production: Chile up by 5.6%, New Zealand 10.4%, Uruguay 19.5% and the USA, Australia (both exporting countries) have increased production as well. So who is more likely to supply the emerging markets of the southern hemisphere – those countries already there or close by or us in the UK thousands of miles away?

Neil Parish also names Russia as another possible market for UK dairy exports, but this ignores the fact that a few years ago Russia attempted to block imports of milk products from the UK due to the high level of bovine TB in the UK cattle herd, this included any product containing milk or milk products from the UK. It was clear that this was really a marketing tool to protect the Russian milk price, but given the ongoing problem we have with bovine TB it could not only by used by Russia again but by other countries too – regardless of the fact the products are safe.

Middlemen benefit from exports – farmers don’t

The big problem with export markets as an answer is that farmers never export anything, they produce the raw material, like milk, which they sell to a processor to process the product for the consumer to buy – whether that is for the home market or for export markets.

It is processors and exporters who export – and they benefit, not farmers, hence the need for fairtrade products so that farmers are not abused and get a fair price. When I was producing milk and before the BSE export ban in 1996, I was surprised to find out – due to its quality – my milk was going for export to Belgium for use in chocolate. While I assume that the exporter was getting a good price, which made it worth the exporting the milk, I, as the producer of that milk, received no more than I would have done for use here in the UK.

Will producers reduce their margins and pay a fair price, above the cost of production? 

Export markets are affected by world market prices and global competition which mean a more unstable price for milk at the farm gate, as the processor tries to maintain their market share and the profits for their shareholders. In order to do that, will they pay a fair price and above the cost of production?

The only time that farmers can benefit from exports is when they control the processing as well as production, a processing company in which they are the shareholders benefiting from the profits of the finished products. However British farmers and their co-ops do not have a good record, sometimes not their fault like the break up of Milk Marque.  Mr Parish says that farmers from Denmark, France and Netherlands have products on the shelves of those emerging nation markets but those three milk producing countries have a good record with farmer co-ops and farmer owned processors supported by their governments.

We are not even self sufficient in milk products and import to make up the difference and while we do export some milk products we import much more. So why, given the above facts, would exporting milk products help to solve the problem facing the British dairy farmer?

While I am well aware that the milk market is far more complex than I have outlined here, as are the answers to the problems, but equally the simple “export markets” message from Neil Parish as the way to solve the problem is not the answer either – unless he is thinking of using export subsidies so we can dump our higher price products elsewhere in the world.

While I agree there may be a possible export market for speciality cheese, for example, it is for the few, not the many who cannot compete on world markets due to their production costs. I suspect that government will fail to help dairy farmers with real solutions claiming it can not do so, due to WTO or EU rules or that it can not interfere with the “market” when in fact it is afraid of the large companies who control the food chain at the expense of both producers and consumers.

And indeed to do so would fly in the face of the current thinking by governments that big, or better still even bigger, is best and small is inefficient and out-dated, that food should be cheap and that, like all governments worldwide, they see export markets as “the answer” for farming’s low farmgate prices.

Michael is a sheep and beef farmer in Cornwall, and also an ex dairy farmer. He has travelled widely, speaking on and researching agricultural issues.



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s