Farmers are milking it through state subsidies


Milk is now cheaper than bottled water in some UK supermarkets. So of course there is much wailing that our dairy industry is in terminal trouble and needs subsidy and protection from foreign imports. Wrong. One reason why milk is so cheap right now is that supermarkets are using it as a loss leader. They hope that while customers are buying cheap milk, they might be tempted by less cheap other stuff. They are not actually paying farmers any less.

The dairy industry is indeed in a sorry state, but not because of the lack of state support. Rather, the problem is too much of it. When you protect industries from foreign competition through tariffs (as EU countries like the UK do), and then go on to subsidise them, you kill off competition, both international and domestic. Subsidies and protections allow production to carry on in old, outdated, inefficient, expensive ways. The result is higher prices, lower quality and less choice for customers.

Cold, rainy Britain is not a good place to raise cattle. It's fine in the summer, but in the winter the cattle have to be brought into shelters and given heat, silage and hay, all of which adds to the cost. So other, warmer countries, inevitably have the competitive edge on us.

Dairy producers can compensate for this a bit by creating much larger farms, which can be sited in the sunnier parts of the country, and where large-scale winter housing can be run much more efficiently than countless small-farm cattle sheds. In large, modern facilities, new technology can be employed, such as dry bedding, using other farm by-products for feed, recycling heat, and recapturing methane. And while we are on the subject of greenhouse gases, how much more energy-efficient is it to collect milk from one 8,000-cow farm than from 100 with 80 cows?

But planning policy, that great UK obstacle to progress, is making it hard to build such facilities – a plan for one in Lincolnshire has recently been scrapped. And the existence of subsidies makes it less urgent for inefficient dairy farmers to leave the business, and for more efficient ones to replace them.

Some people argue that we should subsidise UK agriculture to cut down on 'food miles'. Tosh. 80% of food-related emissions are from production, only 4% from transport. So it is 20 times more important to make efficiencies in production. That means super-farms here, or importing products from countries where the climate is more suitable. We do that with wine, why not with other agricultural products? And in any case, domestic production is an environmental nightmare, what with the fertilisers, pesticides and heating that have to be used. DEFRA figured that the carbon footprint of Spanish-grown tomatoes is probably smaller than that of UK tomatoes grown under glass. Remember too that food is transported, efficiently, in bulk. Most 'food miles' are getting small quantities of the stuff from the supermarket to your fridge, which is not going to change even if it is grown locally.

If we scrapped the subsidies and protections, the market could do its stuff, weeding out inefficient production and diverting investment into something better. That would be good for the industry, good for customers in terms of lower prices, good for taxpayers in terms of lower taxes, and good for the planet.