British lawmakers call for more protection for dairy farmers

By Sarah Young

LONDON, Jan 20 (Reuters) - British dairy farmers should be better protected from falls in the price of milk, lawmakers said on Tuesday in a report warning of a crisis which could damage the country's dairy industry in the long-term.

A price war between supermarkets in Britain has led to milk being sold at rock-bottom prices, at a time when lower global demand has also caused the price to fall, pushing many dairy farmers out of business.

The report said the number of British dairy farmers had fallen below 10,000 for the first time in recent history, with the BBC reporting that farmers are being paid 20 pence for a litre of milk which costs 30p to produce. Around 2 litres of milk costs around 89p in some supermarkets.

"Farmers are not covering the cost of their production, it's unsustainable," Anne McIntosh, chairwoman of the Environment, Food and Rural Affairs Committee, told the BBC.

"What we don't want to see is mass numbers of dairy farmers leaving production, and maybe in five or 10 years time, we then are short of milk production and we have to import," McIntosh said.

The report said the government should expand the power of the Groceries Code Adjudicator (GCA), who oversees the country's grocery market, to also cover small-scale suppliers such as individual dairy farmers, so their complaints can be investigated.

Currently the GCA can only probe the relationship between Britain's top 10 retailers such as Tesco (Xetra: 852647 - news) and Sainsbury and their direct suppliers, while small farmers are indirect suppliers.

With supermarkets involved in a price war intensified by the increasing popularity of discounters such as Aldi and Lidl, there have been complaints from farmers that prices of everyday items such as milk have been pushed ever lower.

Separately on Tuesday Britain's largest dairy food company Dairy Crest (LSE: DCG.L - news) said it had retained a contract with the country's no.4 grocer WM Morrison. (Editing by David Holmes)