Agricultural Blog

Dispute over regulated milk supply contracts

The National Farmers Union (NFU) and dairy processors cannot agree over the Government’s proposal to regulate milk supply contracts, and Dairy UK has said this could have a “detrimental impact” on the long-term health of the dairy sector.

In the New Year, the Government is expected to launch a consultation into the introduction of compulsory contracts between milk suppliers and buyers as part of its plan to create new rules on fair dealing with agricultural producers.

According to Farming Minister George Eustice, replacing the sector’s current voluntary contract code with regulated contracts would improve transparency in the sector. Speaking to the Commons Environmental, Food and Rural Affairs (EFRA) Committee last month, the Minister added that the voluntary code, “had not worked”.

However, Dairy UK has warned that there is an urgent need to ensure differing viewpoints from the farming community are heard by the Government and any regulation has the potential to reduce flexibility in contracts between farmers and processors in a way that could be “detrimental to both”.

The industry body also pointed out that the introduction of regulated contracts would herald the end of ad-hoc pricing initiatives, which are often used to address short-term market circumstances. Also, any regulation launched before the end of the proposed Brexit transition in 2020 would come under the EU’s Common Market Organisation regulation, which requires contracts to be based on a fixed price or formula.

However, all regional NFU boards agreed that there must be regulated contract terms because the sector has traditional “shouldered too much of the risk” in the dairy market.

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