Speaking at the Royal Welsh Show, Alun Davies said:
“The dairy sector is a key part of our food and farming industry in Wales, and the Welsh Government is working to ensure it has a prosperous and sustainable future. Our Programme for Government specifically identifies dairy as a priority sector for attention and support. I now want to say what this means.
"I hosted a Welsh dairy ‘summit’ last month which involved the industry in discussions about what support it needs from the Welsh Government and how this and other interventions might best be delivered. The event was attended by representatives from across the sector - producers, purchasers, processors and retailers - and will inform the decisions I will make in developing support for the dairy industry. I will make a further statement on this in the autumn.
"I recognise that the sector needs both to resolve the immediate issues around the price paid for milk, but at the same time also to put in place structures and mechanisms that will help underpin its long-term viability.
"The Welsh Government supported the process that led to this week's welcome agreement within the industry to a voluntary Code of Conduct on milk supply contracts. The Government believes that in the first instance this will help provide greater fairness and transparency in contractual arrangements across the sector. It will be important that the operation of the new Code is kept under review. The Welsh Government will continue to be fully engaged in the process to help reach final agreement on this initiative in the coming weeks, and I want to see the Code deliver real change in the industry as soon as is practicable.
"However, the Welsh Government also appreciates that the Code alone will not resolve all of the issues currently facing the dairy supply chain, and we support the strengthening of an appropriate statutory framework to help regulate the market.
"The legislation currently before the UK Parliament to establish a Groceries Code Adjudicator to monitor the operation of the Grocery Supply Code of Practice, which applies to large retailers, needs to be strengthened. The Adjudicator must have real power and the ability to levy fines. I have written twice to the UK Government since the Queen’s Speech making the case to strengthen the powers of the Adjudicator. I will continue to press the argument and I welcome Defra's commitment to look again at these issues. I believe that it would be appropriatefor the Adjudicator to play a role in reviewing the effectiveness of the voluntary Code of Conduct in future.
"The Welsh Government believed that the best way to address the contractual issues in the dairy industry was for supply chain partners to agree on voluntary, GB-wide measures to help ensure a level playing field across the domestic dairy market. This week’s industry agreement of Heads of Terms on a code was therefore an important first step. If implemented effectively I hope that the Code will avoid the need for legislation in this area.
"However, I have asked my officials to review the legislative options available to us under the EU ‘dairy package’, and we will prepare draft legislation that would enable the Welsh Government to intervene, if necessary, on the form and coverage of contracts within the milk sector. In addition, I will also be seeking further substantive discussions with the industry with a view to strengthening the position of farmers in the supply chain, including considering the introduction of formal producer organisations in Wales. I will be consulting on possible options in the autumn.
"I am well aware that the recent proposed cuts in the price paid for milk have come in parallel with substantially increased input costs for many parts of agriculture, not least the dairy sector. The Welsh Government’s Farming Connect programme has been very popular with farmers and can provide easy-to-access and bespoke advice on how to cut costs and increase profitability. We will now be introducing tailored components into Farming Connect’s work to offer Welsh dairy farmers targeted advice on how to cut their costs of production.
"I am also conscious that improvements in the sustainability of the dairy industry need to be underpinned by responsible behaviour by retailers and other ‘downstream’ parties in the supply chain. Here at the Royal Welsh Show I have been meeting with the multiple retailers to emphasise this point; over the course of the coming weeks and months I will be taking a similar message to representatives of other milk retailers based in Wales, including those in the discount sectors of the market.
"Earlier this month I published an update on progress being made on the ‘Working Smarter’ initiative. This represents a fundamental re-working of how regulation of agriculture works in Wales. It is not simply about "red tape" but is far more ambitious and seeks to reduce not only the burden of regulation but also to introduce a system that is appropriate and fair, and more readily balances risks and outcomes.
"The Welsh Government continues to support CAP Pillar 1 direct payments to farmers at current levels, which form a vital part of many producers’ income and help strengthen the fabric of rural Wales. We will continue to make a strong case for substantial Pillar I and Pillar II CAP support, at both UK and EU level.
“I believe that these measures demonstrate that the Welsh Government is taking both a practical and long-sighted approach to ensuring the Welsh dairy industry emerges from its current difficulties in a stronger position to succeed in the future. We believe in “chwarae teg”: a fairness to all in the milk supply chain – from the farm-gate to the consumer – it is vital to the long-term interests of all concerned.”