The government has already relaxed competition rules to allow retailers, suppliers and logistic services to work together
Dairy UK and AHDB will now lead work to identify spare processing capacity
Defra has responded to mounting concerns over the crisis facing the dairy sector by confirming the government will temporarily relax elements of UK competition law.
The legislation would allow the industry to adapt to coronavirus-led changes in the dairy supply chain, Defra said, including a collapse in demand from the hospitality sector and reduced collection by retailers who have had to close.
This situation had driven many processors to cut the price they paid for their milk, while many dairy farmers have been forced to pour excess milk down the drain.
The government had already relaxed competition rules to allow retailers, suppliers and logistic services to work together during the coronavirus crisis.
While these changes had allowed the dairy industry to redirect some of their supplies to retailers, this latest announcement would “enable further collaboration between dairy farmers and producers so they can avoid their surplus milk going to waste and harming the environment”, Defra said.
“This could include sharing labour and facilities, co-operating to temporarily reduce production or identifying where there is hidden capacity in the supply chain for processing milk into other dairy products such as cheese and butter,” it added.
Dairy UK and AHDB will now lead work to identify spare processing capacity. They will also consider how to stimulate demand and how production could be temporarily reduced.
The announcement, made late on Friday evening, follows talks over a rescue package between industry and government last Wednesday, which reached “stalemate”.
Speaking to The Grocer on Thursday, NFU dairy board chairman Michael Oakes bemoaned the government’s response to industry-wide calls for a support package. Other industry sources who listened to the conference call spoke of their disappointment at Defra’s call for more information on how the sector was affected, amid claims officials were “unconvinced of the severity of the situation”.
Oakes welcomed Defra’s move today, however, it was “just a first step in terms of the support the dairy sector will need to help it get through this crisis, and we continue working with Defra on a number of other asks of Government that we need to see actioned urgently”, he added.
Another senior industry source agreed Defra’s measure had not yet gone far enough, stressing a financial bailout, similar to the government’s £10m support package for the fishing sector, was also desperately needed. “This is now about survival for as much as 2,000 dairy farmers,” they warned.
Environment secretary George Eustice said the government had heard “loud and clear” the concerns of dairy farmers. “I am also urging farm businesses to access the loans that are available from their bank to support them in this period,” he added.
It comes amid further turmoil at the farmgate, after mid-market milk processor Medina Dairy announced a further 3p per litre price cut for its milk on Friday, following a 2ppl cut at the start of the month – which means it will be paying its farmers just 20.75ppl from 1 May.
In a letter to farmers, seen by The Grocer, Medina director of processing Arfaiz Hussain said the processor had “agonised over this decision”, but with the loss of foodservice sales and the first signs of the spring flush appearing, there was simply “too much milk” on the market.