Examination of Witnesses (Questions 120-134)
MR HUGH RICHARDS, MRS MARGOT BATEMAN, MRS MARY JAMES, MR BRIAN WALTERS, MR TERRY BAYLISS AND MR SIOÔN ARON JONES
TUESDAY 4 DECEMBER 2001
120. Has that differential diminished or expanded over the last five years?
(Mr Richards) The differential has diminished in the big way. I read the daily industry newsletter and it is a collapsing market. They were talking of taking off, two or three pence again on 1 November.
(Mr Walters) My organic milk price for November is 25 pence, I was 281/2 all summer.
(Mr Bayliss) When the transitional period ends and the farmers stop having the grants to transfer into organic, the big danger then is having had to reduce his livestock to not so intensive because of the nature of organic, he is not going to be able to survive because he is not deriving enough from the market again to survive from this. We have had inquiries about killing organic lambs because they are having a struggle getting them killed and the problem is the rules and regulations which once again the Soil Association set which make it too expensive to be able to go into it, so I wonder whether the food that is coming from abroad is produced up to the standards we are expected to do in this country.
(Mr Richards) One of the dangers is we have a gold-plated scheme in the United Kingdom that does not apply in Europe. I met a collection of organic producers over from Holland at a function some two years ago and they call it "biological farming" and I thought to myself, "Hello, is he getting round this one?" They were still using sprays and every sort of thing.
121. Just quickly on this. I take your point that percentages are being picked out of the air but there does seem to be a very real and growing demand for organic produce and a large part of that market is being filled by imports at the moment. I think the Soil Association but I may be wrong, certainly some people in the organic sector are arguing that instead of just having a transitional subsidy to shift from traditional methods to organic there should be an on-going subsidy to create that level playing field with organic producers in some other countries. How do you as organisations that represent both organic and traditional farmers feel about that sort of proposal?
(Mr Walters) We are in a disadvantage there in relation to Europe because most of Europe's organic farmers are getting aid twice, not only in the conversion but on-going aid. I am on a five-year scheme and once that scheme finishes, under the present system, there will not be any more aid coming to me as an organic farmer.
(Mr Jones) That is where the market return is the key for the industry. I think that is an important point to make. The industry will react to a market which offers a high level of income or a premium on their produce but that should not mean a detraction from subsidy to other farmers.
(Mrs James) I think we have all seen as a result of WTO the pressure that there is on subsidies and on support. Every single farmer would far prefer to get his realisation from the market-place and not from a subsidy which clearly makes you vulnerable.
122. Can I go on to foot and mouth. Is the FUW saying in their memorandum (para 14) that supermarkets have profited out of the foot and mouth outbreak with lower prices to the farmer and increased meat prices in the supermarket?
(Mr Jones) We question what exactly is the basis of arguments to change the price of lamb, beef, bacon, and other products, in response to a situation which arose in the UK which was the foot and mouth disease crisis which struck the industry. It says very clearly that the prices quoted to farmers were in many instances lower than they were prior to the FMD outbreak, however, subsequently imports were sucked in on the basis of price. We just question what is the basis of the argument of the move that took place, the fact which we can relay to you about the change in prices, and what is the basis of that change in price that the consumer was asked to pay?
(Mr Richards) The big problem isand we go back to our structurewe are price takers and not price makers. The only way we can become price makers is to collaborate, work together, to become bigger selling groups. However big you are, Mr Tesco and Mr Sainsbury are very big out there, so we have to be in formidable groups to be able to offer commodities to them.
Chairman: There are also economies of scale, they want deliveries in large numbers anyway, there is a point about that.
123. Since 1997 the Welsh agri-food strategy and agri-food partnership have been in existence. How effective do you think they have been in achieving their aims?
(Mr Jones) It has been a first step on the ladder. We were obviously involved in the establishment of the agri-food partnership and in supporting the Welsh food strategy per se. As I mentioned earlier, we are in an evolving situation whereby we are now taking steps to assist both the primary producers and processors to add value to the products which we have in Wales. In the past we have stopped at the farm gate. No marketing or very little marketing has taken place but there has been a great change within Welsh agriculture and also within the Government of Wales to recognise the need for farmers to become part of the food chain and to add value to their products.
(Mr Richards) As far as I am concerned, the jury is still out. When I see value being added back to a price that the producers gets that is when I will judge it because at this point in time it is not coming through. The reaction I am having from producers whenever I go to functions or the launch of a flagship here or a launch there, it is people in grey suits turning up employed by these agencies and they appear to be very good but what we have seen is the price of our basic raw materials going down constantly and that is what I mean all the time, it goes back to my opening speech, we have got to find a way of giving us a fair return. I do not see the housewife paying more, it is a fair return to the producer that has got to be part of it.
124. Since 1997, as Mr Williams was just referring to, have Government policies helped or hindered progress toward that level and fairer playing field that you are looking for?
(Mrs James) We have been through Agenda 2000, one of the conditions of which was that we were supposed to be simplifying the CAP. There has been a determination on the part of the Government to simplify and reduce red tape and bureaucracy in the industry, but I have to say with every inch of red tape that is removed we seem to get another two inches at the other end in its place with the result we never seem to be making any real progress in simplifying the situation.
(Mr Richards) I quote a small example to do with foot and mouth, it is something that came to me last night. Somebody phoned me last night and wanted to take 50 lambs from Llanpumpsaint to Llanybydder to Oriel Jones, he could not take them all in one box, he had to use two separate boxes. He had to have it sealed first of all, took 25 in, and he had to have it resealed then. It cost him 60 quid just to have it sealed twice. I know it is an effect of foot and mouth but that is the sort of bureaucracy where farmers come to me and say, "What the hell are you doing about this. Look at the costs you are adding to our industry." I know it is a foot and mouth effect but that is symptomatic.
(Mr Bayliss) We are back, Mr Caton, to what I said early days about practical people and having people on the ground that understand the farmers' situation. It is a rather different industry to others. It is not nuts and bolts where we can say we are going to charge ten pence a piece for them, and we know we are going to make a penny profit. We cannot say we are going to make them in July and August. We are controlled by the weather, controlled by the seasons and controlled by the bureaucrats. I think the seasons are easier on us than bureaucrats. We need less red tape.
125. That is another thing that worries me. I realise you are busy people but if you felt able to and if you want to give us some hard and fast examples of red tape being taken away with one hand and added to in the other, I think that would be useful for us when we take this up with Government.
(Mr Walters) I can give you an example of taking cows into OTMS now. I am taking them just to a local market collection centre and I have got about 15 forms for three cows and they are all going for burning and I have to have a slaughter licenceI know it is in relation to foot and mouth but, still, they are not going into the food chain.
126. I think if we could put foot and mouth on one side because obviously that is under review, but do you think there is anything the Government could do to help raise farm gate prices?
(Mrs James) Sorry to keep plugging it but the fundamental problem is the value of sterling against the euro. I say no more, we have rehearsed it.
(Mr Bayliss) We could also go back to helping us to get closer to the housewife by supporting us, even if it is only on a loan basis, to be able to put up our own processing plants to be able to process this product properly for the supermarkets. To give you an instance of the supermarkets in a product we are trying to bring in, they are demanding 40 per cent profit out of that product and we cannot make that sort of profit.
(Mrs James) Perhaps I could add one thing and that is about the issue of procurement, the Ministry of Defence, public services, etcetera, should be supporting local production.
Chairman: Good point.
127. We have touched upon my last question to you really off and on throughout the discussion this morning. What further policies would you like to see the Government pursuing in relation to the retailers?
(Mr Jones) We once again reiterate the point with regard to a review of the supermarkets and their dominance in the market. We believe that the Code of Conduct has been watered down and is ineffective in assisting suppliers to make a reasonable return which they can then pass further down the food chain. I think that the dominant theme is that we in Wales have started to change as an agricultural food supply industry and we have quoted different scales of food suppliers in our evidence, but we need the assistance to enable us to progress further up the ladder to large scale co-operatives which will be able to compete with the supermarkets on a level basis.
(Mrs James) We agree.
128. What do you think the Assembly could do to encourage the public sector in Wales to source locally and what sort of reductions in bureaucracy would you like to see? I agree with Mr Caton that it would be helpful if you went away and thought a little bit about that and gave us a list. It is easy to say there is too much red tape. What we want to hear from you is how do we reduce this. We would welcome a memorandum on that from both organisations.
(Mr Jones) The National Assembly and MLC have recently undertaken a campaign with regard to local authorities and with regard to the Prison Service and the Health Service and the Ministry of Defence that Mary was referring to, in order to try and persuade them in favour of Welsh products. There was a recent announcement that the Ministry of Defence have procured 25 tonnes of Welsh lamb but we are talking of a drop in the ocean compared with what the Government could be doing in supporting farmers, which I believe the Prime Minister once said that he wished to do. This is a perfect example of how Government could support local produce and Welsh produce in particular. We would be more than willing to supply you with the information which you require.
129. What are you doing yourselves by way of lobbying the MoD, local government departments within Wales, health trusts?
(Mr Jones) We are constantly in contact with local authorities and both the FUW and NFU wrote a letter to local authorities in support of the MLC's recent campaign. We are also constantly, in support of the MLC, meeting with the Ministry of Defence to try and persuade them through their suppliers 3663 to support Welsh produce. Therefore we are trying to work on all fronts in order to try and persuade the procurement departments of the various government departments to work together and to take an approach in favour of Welsh produce.
(Mrs James) You referred, Mrs Williams, to the Carwyn Jones' initiative. During the foot and mouth disease epidemic, Mr Carwyn Jones made an appeal to all local authorities by video link and CD-rom to try and get them to procure products. Only three out of 22 local authorities in Wales actually took that up.
130. I was aware of what the Assembly were doing. I wanted to know what you yourselves were doing.
(Mrs James) We are in constant dialogue with the local authorities, with the Ministry of Defence. Having said that, the progress we are making, I am afraid, as Siôn has said, is very limited.
(Mr Richards) We look at the flagship building in Wales, the National Stadium, and there is no Welsh product being sold there. They turn round and tell you for the simple fact they have these long-standing contracts. You talk to local authorities and they come back with this phrase "best value". We talk to the MoD. We have been up to see Lewis Moonie and everybody that has been involved there. It is all best value. I had a talk a fortnight ago with the Brigadier in Brecon. We are doing all we can to support you. "All we can"? We are looking for these markets. We are desperate for these markets yet we are prevented because of sterling and also because of various practices.
(Mr Walters) There is a good example of First Milk. They have been involved in putting milk bars in schools. They have got 1,100 of them in Scotland. They have started doing that since they joined with Axis, and I should say that as a Union we are supporting that. I will not say the local authorities are opposing it but it can be very difficult at times to get these milk bars into schools. It is wonderful opportunity. We are selling more milk. There was an example of one school where only two pints a week were out and then it shot up to 70 pints a week. I do not know how big the school was or anything. It is self funding and also it is helpful to the health of children. Young children need the calcium in the milk and it is certainly better than other fizzy drinks that are available.
131. I was interested in Hugh's comment that the best value framework may be impeding local procurement because of course that is a government responsibility. Are there specific examples where a local authority may be minded or indeed a public sector organisation may be minded to source locally but is prevented from doing so by the fairly rigid framework of best value?
(Mr Richards) All local authorities that you have an opportunity to talk to will tell you that they will support you but when it comes to the world of contracts you lose out due to the simple fact you cannot compete. You are at a disadvantage immediately once you start going into the competitive straight out costs.
(Mrs James) The only way round it is to build assurance requirements into the protocol, and that is certainly something that we have been looking to introduce protocols that we can fulfil that others cannot clearly would enable us to get into these outlets.
132. Of course, the framework was deliberately aimed at best value because it was an attempt to move away from simple cost/price decisions. Would it be possible to build in some proxy indicators for things like sustainability and of course the environmental value of local production for local consumption?
(Mrs James) That is what I had in mind in terms of the protocols.
(Mr Jones) We are in support of that but we have to be very careful as an industry because we are very concerned in health terms that the meat products which are currently being provided to our school children may put them off meat for the rest of their lives. That is where best value is a laughable situation in the way we consider it. We believe we have got the best produce and best value to us is high quality produce which has animal welfare conditions, traceability and farm assurance conditions associated with it. Whether they are soldiers or our children, they deserve the best and we believe that we can supply it at a competitive price, bearing in mind all those issues which are associated with the quality of the product.
133. Any more questions from my colleagues? Is there anything we have not covered?.
(Mr Bayliss) How long do you want to stay?
(Mr Richards) How long do you want to go for?
134. I do not want to talk about foot and mouth but if there is anything on a specific issue about the Competition Commission that you would like us to mention, succinctly, is there anything we have not touched on?
(Mr Richards) Both organisations will be in contact with yourselves with the extra evidence you have asked for4.
Chairman: Thank you very much indeed for your time. Like you, I would rather have been in Wales today as well but unfortunately we are stuck here in murky London. I think we have learned a lot about what we need to ask the Competition Commission.
4 See supplementary notes pages 39 and 42.