The future of the dairy sector in Wales

10 April 2015

Article by Katy Orford, National Assembly for Wales Research Service

picture of milk bottle

Image from Flickr by Nic McPhee. Licensed under Creative Commons.

Welsh dairy plays an important role in the UK-wide dairy industry. Wales produced 1,670 million litres in the last milk year (2013/14) which amounted to 12% of the UK’s total milk yield. However, the industry has faced volatility in the past and prices paid to dairy farmers for milk decreased significantly over the autumn of last year.

Following concerns around the future of the Welsh dairy sector, the Welsh Government commissioned an independent review of the sector in October 2014. The recently published review presents recommendations for the future of the industry. Our previous blog post, Dairy Prices, provides a background to this review.

The review

The Independent Review of the Dairy Sector in Wales was conducted by Andy Richardson, Volac’s head of corporate affairs and a member of the Welsh Government’s Dairy Task Force, and involved more than 100 interviews with industry stakeholders. The report sets out 26 recommendations for developing the industry, presented in a five point plan:

  • Leadership;
  • Market Focus;
  • Efficiency;
  • Knowledge and Skills;
  • Environment.

Mr. Richardson remained optimistic in his review about the future of the Welsh dairy sector stating that “I genuinely believe the Welsh dairy industry has the potential to be one of the best, most iconic and efficient in the world.”

Welsh Government response

On 24 March 2015, the Deputy Minister for Farming and Food, Rebecca Evans, announced she had accepted 19 of the recommendations in full, four in principle and three in part. The response to the recommendations comes in the form of an action plan which lays out what action should be taken to address each of the recommendations, who should take responsibility, and a timeframe for action.

Recommendations carried forward include establishing a new Welsh Dairy Leadership Board to take forward work carried out by the Dairy Task Force to date. The Deputy Minister said she would work with the new Board to:

  • Carry out a feasibility study into the potential market for a milk processing facility in Wales.
  • Identify potential industry leadership talent and implement a mentoring and training scheme.
  • Seek to ensure that the work of all ‘steering’ groups is coordinated and focused on the needs of the industry.

The Board will be closely linked to the Food and Drink Wales Industry Board. This Board has been set up to be the ‘voice of the food and drink industry’ and will take shared ownership, with the Welsh Government, of the Action Plan for the Food and Drink Industry (2014-2020).

The Deputy Minister also said she would review the dairy sector Voluntary Code of Practice annually. The Code governs the contractual relationship between dairy producers and the processors they sell to.

In terms of funding support, the Deputy Minister accepted the recommendation to ensure the Rural Development Programme (RDP) is used to encourage and facilitate improved ‘primary milk production, dairy processing, product marketing and innovation’. She also agreed to focus RDP spending on improving animal health and welfare.

The Deputy Minister also accepted the recommendation to improve the uptake of Glastir by making the scheme more attractive to dairy farmers.

Recommendations only ‘accepted in part’ include; establishing a new Welsh Dairy Knowledge and Skills Group (the Deputy Minister says such a group is not currently needed); and establishing a dairy centre of excellence (the Deputy Minister argues there are a number of centres already established).

Responses to the action plan

Assembly Members

Several Assembly Members welcomed Andy Richardson’s review and its findings. The Welsh Government’s decision to accept the recommendation to establish a new Welsh Dairy Leadership Board was welcomed as well as the agreement to review the voluntary code annually. However, there was a common concern about the existing tight budget and the fact that the Welsh Government was leaning too heavily on the RDP. There was also disappointment that the Deputy Minister did not refer to the imminent end to milk quotas which were identified in the review as both an ‘opportunity and a threat’. One AM suggested that now was the time for the Welsh Government to create a levy board for Wales that would deliver services for Wales to improve the ‘efficiency, market support and industry support that they very much require’. More detail on changes to animal welfare was also called for.

NFU

NFU welcomed the review and identified the recommendations it considers ‘strategically vital’ for the Welsh dairy industry, including:

  • Establishing the Welsh Dairy Leadership Board;
  • The feasibility study into the potential for a market driven dairy processing facility in south west Wales;
  • Ensuring that the next round of European Structural Funds, including the future RDP, is used to encourage and facilitate improved primary milk production, dairy processing, product marketing and innovation in Wales.
  • Since the review was commissioned, the global market has shown signs of recovery with the Fonterra Global Dairy Trade auctions showing a rise in prices since November 2014. Global consumption of dairy products is expected to rise by 36%  over the next decade. However the volatility in the market is expected to continue.

Further information on the Welsh dairy sector can be found in the Dairy Sector Research Note (PDF, 562.8KB).

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