The possible role of the supermarket watchdog, otherwise known as the Groceries Code Adjudicator (GCA), in sorting out the market failure of the dairy sector yesterday became a matter of controversy.
A report by the House of Commons’ Environment Food and Rural Affairs (EFRA) committee saw a need to extend the powers of Christine Tacon, the first holder of the post of GCA to allow her to protect farmers and small scale producers.
That view was not, however, endorsed by Dr Judith Bryans, chief executive of levy body Dairy UK.
Responding to the EFRA report, she said: “We do not believe that extending the powers of the Grocery Code Adjudicator would help to address the challenge of volatility, and contractual relationships between farmers and processors that are already covered by the voluntary code.”
Making her case, EFRA committee chairwoman Anne McIntosh MP said: “Frequent, sharp and unpredictable rises and falls in milk price are driving dairy farmers out of business every week.
“The volatility of worldwide and domestic milk markets is making financial planning and investment impossible for small-scale producers unable to hedge against changes beyond their control.
“The vast majority of dairy farmers fall outside the protection offered by the Groceries Code Adjudicator.
“She can only investigate complaints involving direct suppliers to the big 10 supermarkets and retailers, and as most milk production is small-scale, that excludes most dairy farmers.”
The committee has also called on government to activate the adjudicator’s powers to fine retailers.
Ms McIntosh said: “We were shocked to learn in evidence that the Government have spent more than a year failing to set the level of fine the GCA can seek when she finds against a retailer.
“This leaves her unable to use her main power, and we call on the Government to set that fine immediately, and before the general election in May.”
Mrs Tacon, who previously headed up the Co-operative’s farming operations, was appointed to the role of GCA in 2013.
She has been tasked with ensuring the UK’s biggest 10 supermarkets, with a turnover of more than £1 billion, abide by the grocery code.
The code, which became law in February 2010, prohibits any change in supply agreements without notice.
This includes payment terms, limits on payments for shrinkage or wastage, compensation for forecasting errors and demanding a lump sum after a deal has been agreed.
Apart from the disagreement over the GCA, Dr Bryans welcomed many other aspects of the report, especially those which pointed to a more market orientated solution to the dairy crisis.
She said: “The committee clearly recognised the fact that the main driver for the downturn in milk prices is volatility in global markets and there should be greater promotion of UK dairy produce.
“In particular, we support the committee’s recommendation that Defra explore practical steps to help the export of UK dairy products, and there are clearly identifiable areas where government can help, such as the simplification of export documentation and the funding of foreign inspection visits.
“We also believe that longer-term country of origin labelling will be of benefit to the industry and to the British consumer.
“We agree with the committee that the industry’s future lies largely in its own hands and its development is the most effective mechanism to protect farmers from price volatility.
“However, as present private mechanisms to help smooth volatility are not well developed, we asked for and strongly support the recommendation that Defra seek a commitment from the European Commission to review the intervention price for milk.”
NFU dairy board chairman Rob Harrison took a different view to Dairy UK, saying: “I’m extremely encouraged by the focus in EFRA’s report on the role of the Groceries Code Adjudicator.
“The NFU has always believed that the GCA’s remit should be extended to cover primary producers and I’m glad to see that EFRA believes that the code needs extending to include small scale producers.”
Top of the agenda, he said, is a push for a review of the EU intervention price for dairy products.
“I’m glad that committee members agreed with me that 17 pence per litre is not a safety net of any sort and this could help the current dairy situation immediately.”
farming@thecourier.co.uk