Arla Foods claims to have introduced the first milk contracts which fully comply with the code of practice signed by farming organisations, retailers and milk processors last summer, in the wake of widespread protests over prices and conditions in the dairy supply chain.

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Although farming groups in the UK are currently threatening to launch another wave of protests, claiming that milk buyers have failed to uphold their part of the bargain, Arla announced on Monday that its new direct supply contract is responsive to the points made in the Code.

The new 'Arla Direct' contract is available for farmers preferring a direct supply option, as opposed to those wanting to become a member of the Arla cooperative, who can supply milk through the Arla Foods Milk Partnership (AFMP).

Arla announced on Monday that its new contract "features liquid and compositional variations, a volume bonus for larger producers, seasonality options and a 12 month notice period with the three month trigger as specified in the Code… and is being offered at a standard litre* price of 30.02ppl." The direct contract has been launched as part of the cooperative's recruitment drive to secure an additional 500 million litres of milk in the UK.

Last year, Arla Foods became the UK's largest dairy company when it orchestrated a merger with Milk Link. As a result of the merger, the Danish cooperative will have an estimated turnover of £2 billion in the UK alone and be responsible for a quarter of all UK milk production.

The move was welcomed by NFU, whose dairy board chair Mansel Raymond said, "This is an important and positive step for Arla Amba's UK dairy business. It is vital that the Arla shows strong leadership and a commitment to equitable contractual relations with farmers suppliers.

"Much now rests on the discussions that are set to take place in the spring with farmer representatives in Arla Milk Link and Arla Foods Milk Partnership. Within the Dairy Contract Code, there are specific exemptions for potential and existing co-operative members, for instance the right to terminate a contract on three months' notice does not apply. The NFU firmly believe that producers should be offered the freedom of choice between the commitment and longer term benefits of being a co-operative member or a direct supply relationship, as defined by this important new contract."

Mr Raymond urged "all other milk buyers to fundamentally review their milk supply contracts to ensure full compliance with the Dairy Contract Code."