Farming organisations agree that work is needed to improve milk contracts

A working group of farming organisations has met to assess the current state of the dairy sector and to review areas where they can work collaboratively.

Representatives from NFU Scotland, CLA, Farmers for Action, NFU, NFU Cymru, the Royal Association of British Dairy Farmers and the Tenant Farmers’ Association agreed at a meeting held in Stoneleigh that in the current market situation, it is vital that risk is shared fairly within the supply chain.

Wholesale commodity markets are still incredibly weak and prospects of any recovery in 2015 are looking increasingly less reliable. The working group agreed that an upturn is desperately needed. However, the UK has become more exposed to global pricing, and any upturn has been hampered by political events including the Russian ban and a decline in purchasing from large markets.

All parties present acknowledged the need for better risk management tools in order to overcome these issues now and into the future.

The introduction of ‘A’ and ‘B’ contracts has been touted as one potential solution. However, it is clear from the range that has been thrust in front of farmers this spring that they have been brought in with little or no discussion with farmers themselves.

All dairy contracts should help develop long-term relationships and not be undermined by speculative market manoeuvring by certain processors making opportunistic purchases of milk on the spot market.

We also need to develop other ways of managing risk including formulaic pricing mechanisms, longer term fixed price contracts and the ability to utilise futures markets and prices.

Clearly, what is needed is a proper discussion within the industry on how all these mechanisms can be used to best effect and the organisations listed above will meet again towards the end of the month to assess this further.

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