Food and the Economy - Dairy

This week at Stoneleigh was the National Dairy Show, an agricultural show that is geared directly to the Dairy industry. As I have reported here previously, the British dairy industry is in serious decline. Each and every day over one million litres of liquid milk is imported into Britain. That is the milk that is poured on the corn flakes or added to your tea. This is only happening because the major retailers, the supermarkets are refusing to pay British farmers a price that matches the cost of production. On average farmers are getting three pence per litre less than it costs to produce the milk.

While there is an argument that says the retailers are helping keep the price for cash strapped consumers low, this will not always be the case. As if in Britain we loose all the significant dairy production, and have to rely upon imports, there will come a time when the sellers, the overseas dairy farmers, will be able to dictate the price. The British Dairy Industry believes that this will happen in less than ten years.

Even just putting my economists hat on, this is a bad idea as every time you import basic foods like milk, it is a flow of cash out of the UK economy. While it is possible that some of that money could then be used to buy British goods, that is unlikely. The problem is that the British government and the major retailers just do not seem to understand that. Add into the mix the costs that the taxpayer has to now find to pay for the cost of bailing out the banks, and the cash outflow for basic food stuffs, and the cheap food policy of the major retailers is harming the UK economy.

The long term costs go far beyond the price we pay for the imported milk, as the loss of a meaningful dairy industry in Britain will impact the way that the countryside looks and is managed. We could loose the grass meadows and all the associated species, or it could mean that we have to pay to maintain these, when traditional dairy farming maintained them naturally.

The chaos caused by the banking collapse will be mirrored in the food and farming sector if the government continues to allow the major retailers to dictate food policy. Already over forty percent of the food Britain consumes is imported. This is not just the foods we can not grow or produce here, but staples imported from places where the cost of production (wages) are cheaper. This is driving down the farm gate price, the price the farmer gets, but often just to boost the profits of the major retailers. Therefore when something happens to disrupt the flow of imports or production the only logical expectation will be higher prices at best. At worst it will cause shortages and empty shelves in the shops.

If we allow a situation where farmers have left the land to occur, we will become hostage to the major retailers and overseas agriculture. None of this makes sense, as every state needs a mixed economy, this has to include all aspects of Agriculture and Horticulture. But the Governments response is simply that its up to the market. Just as they were saying about the banks before the collapse. When will they learn?