Government pledges to crack down on ‘unfair’ milk prices for dairy farmers

PUBLISHED: 05:56 26 June 2020 | UPDATED: 05:56 26 June 2020

A government consultation has been launched aiming to end 'unfair practices' in contracts between milk buyers and dairy farms. Picture: Matthew Usher.

A government consultation has been launched aiming to end 'unfair practices' in contracts between milk buyers and dairy farms. Picture: Matthew Usher.

© Archant Norfolk 2014

Farmers have been urged to make their voices heard in a long-awaited government consultation seeking to end “unfair practices” in the UK’s dairy sector.

Defra’s consultation was launched after a review by the Groceries Code Adjudicator, which found evidence of unfairness in the supply chain caused by milk buyers having the power to set and modify the milk price in a contract, often with little notification.

Views are now being sought from dairy farmers and processors on whether future regulation could be used to strengthen fairness and transparency.

Proposals include an option to introduce a mandatory pricing mechanism within all contracts between dairy farmers and processors, to ensure the price paid for milk is formally agreed within the contract.

National Farmers’ Union (NFU) dairy board chairman Michael Oakes said: “This is a once-in-a-lifetime opportunity to build a better future for the UK dairy sector.

“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.

“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.

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“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.”

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.”

• The consultation can be found at the Defra website.

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