The National Farmers Union (NFU) is urging dairy farmers to engage with the Government consultation on dairy contracts and speak up for a more effective dairy supply chain, with fairer terms for farmers.
The Government has launched the consultation after looking at the issue for two years since a review of supply chain fairness by the Grocery Code Adjudicator found an uneven distribution of power within the dairy supply chain.
NFU dairy board chairman, Michael Oakes, said: “Dairy farmers want to place themselves in a more sustainable position for the long term and dairy contracts are at the heart of this. We want to see flexible and innovative regulation that not only delivers fair terms for farmers but an equitable balancing of risk between farmers and buyers.
“As we leave the EU, the UK dairy market needs to be commercially focused, innovative and resilient in order to tackle the challenges and opportunities that the change will bring.”
“During the Covid-19 pandemic, we have seen a significant number of cases where farmers have borne a disproportionate amount of the cost in the supply chain, as the risks within the marketplace were shunted down to farm level at an alarming pace.
“As we leave the EU, the UK dairy market needs to be commercially focused, innovative and resilient in order to tackle the challenges and opportunities that the change will bring. At times when the market is under pressure, milk buyers often have the discretion to change contracts terms and pricing mechanisms, even to introduce retrospective penalties and price cuts without negotiation. A headline milk price is of no value whatsoever if a buyer has the sole right to change it at will. We need to be able to share risk along the supply chain much more effectively than we currently do. At the moment, there is no incentive for a milk buyer to look up the supply chain to manage their risk, as they know much of it can be managed by pushing the risk down to a farm level.
“The NFU has been working with all the UK farming unions to improve dairy contracts, and we will be consulting widely with our members through our website and in virtual meetings to get a range of views that will form the basis of our submission to Government. Farmers can either contact us directly from today or respond to the consultation individually. This is a once in a lifetime opportunity to build a better future for the UK dairy sector.”
The National Farmers Union Scotland (NFUS) has also welcomed the launch of the consultation on the Government’s proposal to introduce legislation for reform in the dairy sector.
Gary Mitchell, milk committee chair, said; “This consultation could provide a pathway to a future for a dairy sector that is more resilient and innovative, something that is paramount at a time where we are moving out of a global pandemic, through the EU exit implementation period and significant changes in farm support.
“A rebalance of risk and power in the dairy supply chain would offer stabilisation in the face of increased risk and volatility in markets. This is of fundamental importance to dairy farmers and to the entire supply chain, as the vast majority of dairy farmers income comes via the milk cheque and not from farm support. While global and national market forces will dominate market sentiment, the contract a farmer has with his milk buyer will dictate how the market value is shared.
“There is great diversity in our supply chain and farmer base, with a range of contractual arrangements that are varying in favourability and fairness. However, most milk contracts in their current form do not create mutually balanced business relationships between buyers and sellers.
“The contract sits at the heart of the future of the British dairy sector and we are pleased that Government is consulting on this. We urge any dairy farmers to get involved in the discussion and feedback to the consultation either directly or via your farming union. This is a once in a generation opportunity to gain some real change and secure the future of the British Dairy Sector.”
“Indeed, rights and obligations are often heavily biased in favour of buyers. The efforts to address the issues such as the Voluntary Code of Practice, whilst being very welcome, have not served to achieve increased transparency or fairness.
“In 2018, the Grocery Code Adjudicator review found very clearly that there was an uneven distribution of power within the dairy sector and changes need to be made now, more than ever.
“NFUS recognise that the relationship between farmers and processors has improved in the last few years. Co-op and Producer Organisation structures are leading to better co-operation and putting farmers in a stronger position.
“We do not want to fix things which are not broken, but we also need to address the many examples where farmers are in a desperately poor position because of their milk contract and relationship with buyers.
“We see that there is a huge opportunity to change the structure of the dairy industry to make it more sustainable, progressive and improve the way farmers and processors work together for common goals.
“The contract sits at the heart of the future of the British dairy sector and we are pleased that Government is consulting on this. We urge any dairy farmers to get involved in the discussion and feedback to the consultation either directly or via your farming union. This is a once in a generation opportunity to gain some real change and secure the future of the British Dairy Sector.
“NFUS continues to work very closely with the other UK farming Unions who all believe this to be of great significance.
“We will be holding virtual meetings on the week beginning 27th July, to allow Scotland’s dairy farmers to play a full and constructive role in this consultation. NFUS also welcomes any requests for discussions, meetings, in groups or one to one. This is potentially of significant importance to the dairy and other sectors and supply chains.”