8 March 1996

Ditch quotas, says Crest man

MILK quotas should be abolished, along with all CAP dairy support, and EU milk producer prices should be allowed to fall to the average world price.

The recommendation was made to MPs on Wednesday by Dairy Crest chairman, Mike Dowdall. Giving evidence to the select committee investigation into the UK dairy industry and CAP dairy regime, Mr Dowdall described the CAP regime as protectionist.

With quotas limiting production, and high tariffs on imports, the policy led to high prices for consumers and inefficient EU dairy industries.

Mr Dowdall said the UK would benefit if the protectionism was lifted. "More milk production would move to the UK because of our natural advantages of climate and grass growth." The expansion would allow both farmers and manufacturers to cut costs, and more of the UKs demand for milk and dairy products could be supplied from domestic production.

Mr Dowdall was unable to answer MPs questions about when Dairy Crest might be floated. "That decision is not in our hands. It is up to the residuary MMB and its chairman, Sir Derek Andrews." But, he added, the DC management team was extremely keen to proceed with flotation.

Closure questions

Quizzed on the closure of the Whitland creamery in November 1994, Mr Dowdall refused to accept that Dairy Crest should sell the mothballed plant. And he rejected as "purely theoretical" the independent analysis done for the Whitland creamery action group which said the factory could be operated profitably.

Whitland had always produced low margin products like butter oil and milk powder. It did operate profitably when the milk price was 21p/litre before market deregulation. But the subsequent 20% price rise meant such products could no longer produce any profit for the company.

And Mr Dowdall suggested that if Whitland had been kept open it could have driven the milk prices up even higher. The first Milk Marque selling round was oversubscribed and had to go through three further rounds.

"If we had been trying to secure an extra 500m litres for Whitland then that could have forced a fourth round of bidding."

Shelley Wright

Mr Dowdall added that he was uncomfortable that Dairy Crest still sourced 80% of its raw material from Milk Marque. It was in any companys interest to source from a number of suppliers and he anticipated that such heavy reliance on MM would be reduced in future.