The NFU has called for flexible and innovative regulation of dairy contracts in its response to the government consultation on the future of dairy contracts that has presented the dairy industry with ‘its most important conversation in a quarter of a century.’
The government launched the consultation after looking at the issue for two years when a review by the Grocery Code Adjudicator found an uneven distribution of power within the dairy supply chain.
NFU dairy board chairman Michael Oakes said that it is time to change for the better to make the structure of the dairy industry more sustainable, progressive and improve the way farmers and processors work together.
“For far too long, dairy farmers have borne the brunt of contracts that are weighted heavily in favour of the milk buyer who can change contract terms and pricing mechanisms, and even introduce retrospective penalties and price cuts without negotiation,” aid Mr Oakes.
“We want to see freely negotiated and flexible contracts which are tailored to the needs of both buyers and dairy farmers. Fairer contracts should increase transparency and trust, that benefits both sides, and mean that any changes need to be mutually agreed.
“The consultation process with our dairy farmer members and industry has raised a number of concerns which we also address in great detail as part of our consultation response.”
He said the areas the NFU is calling for change are:
- Outlining changes to the system of ‘buyer’s discretion’ which is used very rarely in other countries or sectors of agriculture, instead giving farmers transparency and influence over the mechanism which sets their price rather than it being dictated to them
- Giving farmers the option to supply more than one milk buyer
- improved powers or structures such as the Grocery Code Adjudicator to ensure compliance
Mr Oakes added: “We recognise the good practice and collaboration which already occurs in the British dairy sector. We have spoken to a number of co-operative businesses to understand their concerns and ensure that regulation does not create any unintended consequences. There are many private and PLC dairy companies who operate well in partnership with their dairy farmers. We feel very strongly that regulation should only help to improve the situation of those who share our principles, not adversely impact them.
“Post-Brexit, the UK dairy market needs to be commercially focused, innovative and resilient in order to tackle the challenges and opportunities that leaving the EU will bring. We believe this vital consultation can help the industry find a successful way forward.”