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3 REVIEW OF THE YEAR | Review of the Year Dairy farming is the single largest agricultural sector in the UK. It is worth £3.7 billion and accounts for 16% of UK agricultural production by value. Yet, it is arguably the most volatile. Against the backdrop of post-war food shortages, the 1957 Treaty of Rome paved the way for the establishment of Europe's Common Agricultural Policy (CAP). The initial goal of the CAP was to increase food production, and it sought to do this by offering farmers guaranteed prices for their produce by managing supply. In the 1970s and early 1980s, policy makers faced another problem: mountains of grain, and lakes of milk and wine. Their solution was to introduce supply-management measures. For example, milk quotas were introduced in 1984. This measure will come to an end in 2015. The dairy sector has, therefore, been subject to some form of policy intervention for decades, which has had an influence on the milk price. As milk became a commodity on the global market, the price became increasingly volatile. A quick trawl through the parliamentary and newspaper archives reveals that concerns over milk prices have long been part of the political landscape. Long-standing cost pressures on UK dairy farmers came to a head in the summer of 2012, when processors announced a series of milk price reductions to be implemented at short notice. The processors said the price cut was necessary to reflect a collapse in the global price of cream, which had fallen from £1800 to £1000 per tonne in just 12 months. Some of the price cuts were rescinded following public and political pressure. Ministers from the various UK administrations worked with industry representatives in an attempt to break the deadlock. In September 2012, a voluntary code of practice for contractual relationships between dairy processors and producers was signed. At the beginning of the 2013–2014 parliamentary session, an estimated 85% of British milk was bound by the code. The code of practice for future contracts for milk supplies aimed to restore trust between farmers and processors. A report by the Welsh Affairs Select Committee said that voluntary measures designed to ensure that dairy farmers got a fair deal for their product needed to be given time to work but, they added, if no improvement was forthcoming then the government had to be prepared to legislate. The Welsh herd of 224,000 dairy cattle accounted for about 12% Milk prices As milk has become a commodity on the global market, the price has become increasingly volatile