The Farmers’ Union of Wales today renewed its call for processors and supermarkets to stand by the dairy industry following a further spate of farmgate milk price cuts.

The union’s milk and dairy produce committee chairman Eifion Huws expressed his bitter disappointment, stating that for some farmers the big reductions in price could be the last straw.

"During the last month we have seen processor after processor announcing price cuts and today’s announcement by the Dairy Farmers of Britain (DFB) co-operative that they are cutting 2.2ppl off their milk price from April 1 will shatter confidence for many producers.

"Farmers are at the end of their tether and it is therefore vitally important that processors and supermarkets stand by the industry at this difficult time."

A new DairyCo report disclosed worrying statistics with 14% of dairy farmers stating they intend to leave the industry within the next two years and only 18% stating they have the confidence to expand their businesses.

"The gap between farmgate prices and the price consumers pay at the supermarket is ever growing and this is undermining farmers’ confidence in the industry," added Mr Huws.

"UK milk production is at its lowest level for 34 years and therefore processors and supermarkets alike must pay a fair price to farmers in order to avoid a further fall in milk production.

"I believe that in the absence of an ombudsman it is imperative that the government meets with supermarkets and large retailers to ensure that farmers receive a fair price for their produce in order to bring stability back to the industry.

"As the DairyCo report indicates there is a need for all parts of the dairy supply chain to recognise the vulnerability of the supply base and work together to build farmer confidence."

The cost of implementing sheep and goat EID in just four of the EU’s 27 Member States could total an astonishing £109 million, the Farmers’ Union of Wales revealed today.

The startling figure was disclosed in a report by the Joint Research Centre, the body that advises the EU on technical issues, which compares costings for numerous EID implementation options in the UK, the Netherlands, Cyprus and Spain.

"Even the estimate of the cost of full EID implementation for the UK alone is more than £65 million," said FUW’s hill farming committee chairman Derek Morgan, who represents the union on the Welsh Assembly’s sheep EID group.

"This is a cost that will not be borne by our competitors from outside the EU and, once again, highlights the completely disproportionate expense of implementing a technology that can have major technical problems associated with it.

"I dread to think what the full costs to the EU sheep industry will be."

Even the cheapest option, which involves market reporting rather than on-farm reporting, would represent a cost of £31.024 million for the UK.

The study, requested by the EU’s Directorate General for Health and Consumer Affairs (DG SANCO), involved an economic analysis of EID for different production forms present in the Community from 2010.

The costs of equipment, tagging, and reading were calculated for different implementation options applied in Cyprus, the Netherlands, Spain and the UK.

The options studied were: full implementation for all animals born after 2009; implementation with a slaughter lamb derogation; full implementation with all movements being reported by markets and slaughterhouses; and options that included EID for animals born before 2010.

The cost of the various options in the UK, which has the largest flock in the EU, ranged between £31 million and £90 million, while costs for the Spanish industry were between £16 million and £55 million.

"This report simply adds to the already overwhelming evidence that shows that the costs of EID are completely disproportionate, while the benefits are negligible, and could actually be negative in the case of a disease outbreak," said Mr Morgan, who has tested EID on his Llangurig sheep farm.

"We are committed to fighting this ridiculous legislation to the bitter end and this is yet more evidence that totally undermines the basis upon which the Council of Ministers has made its decisions.

"However, the industry must also brace itself and start planning on the assumption that it will come in next year, because the majority of Member States are hell bent on ignoring the evidence."

Farmers’ Union of Wales president Gareth Vaughan today called for a national debate on the impact abolishing milk quotas will have on the Welsh dairy sector.

Last November the 27 EU agriculture ministers agreed to lift quotas by one per cent per year before scrapping them altogether in 2014-2015.

Mr Vaughan has written to Assembly rural affairs minister Elin Jones informing her the issue has attracted growing attention on the Continent during recent months, and prompted significant debate at last week's meeting of the EU Council of Ministers.

"There is growing concern amongst many farmers in Wales, and in other parts of the EU, that the full implications of the abandonment of the quota regime have not been properly recognised by the European Commission and others," Mr Vaughan wrote.

"Many believe that such a change would have a destabilising effect on an industry that is already suffering as a result of market volatility, and would have a particularly adverse impact for family farms."

Mr Vaughan told Ms Jones the FUW recognises the restrictions the current regime places on the industry’s ability to react to market demands and believes a more flexible approach to such challenges is needed, rather than the wholesale liberalisation of the current regime.

These concerns were discussed at a meeting last April between the FUW and EU Agriculture Commissioner Fischer Boel and, while the Commissioner was "resolute in her belief that the quota regime should be abolished" by 2015, she also made it clear the matter would be revisited in 2010.

"Given this and the recent volatility of milk prices, there is a real need for the Welsh Assembly Government to engage in further discussions on the impact that abolishing the quota regime will have for the Welsh dairy sector.

"I believe this should happen as soon as possible in order to inform next year's review," Mr Vaughan added.

"It seems perverse that, while the global economy is reeling as a result of under-regulation of the financial sector, and the G20 are proposing far stricter controls, the Commission seems hell-bent on deregulating the milk regime.

"We do not want to find ourselves in a similar situation to the one we now face with regards to sheep EID, with Member States only realising the serious repercussions of what they have agreed to when it is all but too late."

The Farmers’ Union of Wales revealed today it is preparing a case for the European Ombudsman to investigate the EC’s handling of the introduction of compulsory electronic identification (EID) of sheep.

Chairman of the FUW’s hill farming committee, Llangurig sheep farmer Derek Morgan, told the Assembly’s rural development sub-committee of the union’s intentions to contact the Ombudsman during a meeting at Lampeter University.

"I made it perfectly clear to the sub-committee that the union is leaving no stone unturned regarding this ridiculous regulation, and that we believe there are sufficient grounds for the EU Ombudsman to investigate the fact that we will next year be forced to use a technology that has been shown to have major flaws.

"I have first hand experience of EID, having used it on a small proportion of my Welsh Mountain sheep for the past six years, and found that the technology is not sufficiently developed to be practical for the average Welsh flock. This has also been the experience of the vast majority of farmers and slaughterhouses taking part in the latest trials.

"Even when dealing with a small number of sheep that are electronically identified, we are forced to manually record information on paper due to reliability issues with the technology. It's all very well using it to record and monitor a small specialist flock, but scaling its use up for every sheep in the country is madness."

In a written submission to the sub-committee’s EID inquiry, the FUW emphasised the particular problems the regulation would bring for Welsh farmers, highlighting the fact that 80% of Wales comprises Less Favoured land, and that Welsh farms are therefore dependent upon moving animals from the mountains into the lowlands for wintering.

"The impracticality of recording such movements individually on paper means that Welsh farmers are likely to have to invest more heavily in the technology than those in other countries.

"Wales’ largely Less Favoured status also means that Welsh farms are particularly reliant on livestock markets in terms of selling animals to finishers from the lowlands, and the cost of implementing the regulation in markets is likely to either be passed on to farmers, or result in market closures.

"The FUW maintains that the current system of recording and reporting sheep movements represents a more than adequate method of sheep traceability for the purposes of disease control.

"Moreover, the experiences of industry and government during the 2007 Foot and Mouth disease outbreak clearly demonstrated the effectiveness of existing controls in terms of limiting the spread of a virulent animal disease, and problems encountered by the authorities were not related to the absence of a system of recording individual sheep movements.

"The FUW believes that it is unacceptable that the EU intends to impose the costs and impracticalities of EID on farmers within some Member States, while not requiring Third Countries, against which we compete to comply with similar systems of traceability.

"In conclusion, the FUW believes that there is overwhelming evidence to support the withdrawal of the current regulation regarding sheep EID, and that the Ombudsman must investigate this matter thoroughly."