The government said evidence gathered during the Groceries Code Adjudicator Call for Evidence in 2016 highlighted how unfair practices have persisted in the dairy industry. This consultation will explore whether regulations could be introduced to ensure farmers are treated fairly.
This evidence suggests unfairness in the supply chain has sometimes been caused by milk buyers having the power to set and modify the milk price in a contract, often with little notification, the government said. This leads to uncertainty and pricing that can be unfair to dairy farming businesses, the government said in announcing the consultation.
Proposals include an option to introduce a mandatory pricing mechanism within all contracts between dairy farmers and processors. This would ensure the price paid for milk produced by the farmer is formally agreed within the contract, and that contract negotiations take place in a clear and transparent way.
Farming Minister Victoria Prentis said, “It is absolutely vital that our dairy farmers are paid fairly for their high quality produce and I am committed to cracking down on any unfair practices within the UK dairy industry.
“I welcome all views to this consultation to determine how best we can guarantee fairness across the supply chain. This will help the industry continue its vital role in feeding the nation and ensure our dairy farmers can continue to be competitive in the future.”
Scottish Rural Economy Secretary, Fergus Ewing, also encouraged participation in the consultation.
“Milk prices can vary and are often changed at short notice for a variety of reasons which can cause major issues for farmers in Scotland and across the UK,” Ewing said.
“It is vital that we look at any opportunity to address any potential imbalance that exists between buyers and producers and bring our supply chains closer together.”
Welsh Government Rural Affairs Minister, Lesley Griffiths, said, “The proposals we are consulting on today aim to ensure our dairy farmers get the fair price for their high quality produce they deserve and have fairer conditions for their milk contracts. I urge the sector, farmers and anyone with an interest to get involved and have their say.
“Today’s consultation is just the latest action we are taking to support the sector during the challenging times of this pandemic. We will continue to work with the sector during these unprecedented times, so together we can ensure a resilient future for our Welsh dairy industry.”
Northern Ireland Agriculture, Environment and Rural Affairs Minister, Edwin Poots MLA, said, “I am committed to raising the issue of fairness for dairy farmers in the marketplace in the strongest possible terms. I am pleased that Northern Ireland stakeholders will have the opportunity to take part in this UK-wide consultation and I strongly encourage all Northern Ireland stakeholders to respond accordingly.”
Today’s announcement is the latest action from UK governments to support dairy farmers, following the Dairy Response Fund in England, which opened for applications on Thursday 18 June and a similar support scheme in Wales last month, which enables eligible English and Welsh dairy farmers to access up to £10,000 each to help them overcome the impact of the coronavirus outbreak.
Dairy UK response
Dairy UK has welcomed the opportunity to provide evidence as part of the consultation process and to work collaboratively in finding a solution.
Dr Judith Bryans, chief executive of Dairy UK, said, “We’ve been expecting the launch of this consultation for some time now, and so today’s announcement did not come as a surprise. We are in a good position to begin inputting to and collaboratively engaging with these policy proposals.
“Ultimately the best outcome for both processors and farmers will be a decision based on the totality of the evidence provided, and not one based only on emotion.
“Whilst ready to and keen to respond, we’re still mindful that the sector is still working its way through the ongoing the Covid-19 pandemic; that as a nation we continue to move quickly towards the end of the Brexit transition period; and we will see a step change in agricultural and environmental policies not seen for generations. There is already a lot on the plates of food businesses, to which regulation of contracts could significantly add to, if introduced.
“Nonetheless, we are looking forward to having constructive and evidence-based discussions with our members, our colleagues within farming representative organizations and Government as we respond to this consultation.”
NFU urges engagement
The NFU is urging dairy farmers to engage with the consultation and speak up for a more effective dairy supply chain, with fairer terms for farmers.
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.
“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 market place 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.”
Oakes said 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.”