Leaders of organisations from across the dairy supply chain have agreed to a range of broad principles during talks at the Royal Welsh Show. A deal was brokered by UK farming minister Jim Paice, who had previously said he would “bang heads together” to end the row over milk prices.

Cuts by major processors inflicted over the past three months have brought down ex-farm milk prices by around 4 pence per litre. Farming groups claim prices have dropped well below the cost of production and have mounted a series of protests and a ‘name and shame’ campaign, drawing attention to retailers who are not supporting their farmer suppliers.

Defra today announced that, over course of today’s meetings, the basic governing principals of a dairy industry code of practice had been agreed upon. However, other ministers, including those on the Efra Committee which evaluates Defra’s work, have said legislation may be required before the dairy supply chain can truly become more equal.

According to Defra, the Code negotiated today means that “In future, contracts between farmers and dairy processors will be freely negotiated, fairer and more transparent.” The government department has condemned protests and blockades by farmers, who have picketed plants owned by major processors and retailers’ stalls at country fairs over the past week. The protests continue nonetheless, with supermarkets and plants in Essex and Scotland targeted today.

Under the agreed arrangement, individual farmers will negotiate contracts covering issues including pricing and notice periods; farmers will be allowed to leave contracts more easily if they are unhappy with the price they receive. However, at a meeting yesterday the UK’s agriculture ministers agreed that cooperatives and producer organisations must be encouraged to better represent farmers’ interests.

Processors will be required to give dairy farmers at least 30 days’ notice of a price change and retrospective price adjustments are no longer acceptable. The code will also introduce a set of conditions that processors or retailers must meet if they wish to set farm gate milk prices.

Speaking at the Royal Welsh Show where the agreement was reached, Farming Minister Jim Paice today said, “I welcome the commitment all sides have shown to reaching an agreement. The Government will continue to work with all parts of the industry to secure its long-term future, including promoting farmers working together in Producer Organisations.”

However, NFU president Peter Kendall said that, although the agreements reached today give some hope for the long-term, problems currently facing the dairy sector remain unsolved. He added, “This agreement will give us the architecture we need to make sure that we don’t end up with the same dysfunctional markets that are responsible for the dairy crisis we have today.”

Protesting farmers have demanded milk processors rescind all cuts inflicted since April by 1st August, the date on which the latest round of price reductions were set to come into effect.

After the protesting farmers, supported by farming unions and interest groups, promised to turn their attention to discount supermarkets and retailers who they believe are selling milk at unsustainable prices this week, supermarket Aldi announced it would be introducing a 2 pence per litre premium for its farmer suppliers from August.

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