Mr Heath today also launched a separate scheme allowing English dairy farmers to apply for £5 million-worth of grants to develop new market opportunities through co-operation.

Defra is consulting on new rules allowing English dairy farmers to come together and form producer organisations to sell their combined milk to processing companies rather than negotiate as individuals.

It will mean that alongside the new industry code of practice, producers could have more influence over contractual terms, conditions and prices.

Mr Heath said:

“England’s dairy industry is world-leading yet still has so much potential to expand, and I’m convinced that better industry collaboration is the key.

“We’ve already got the industry code of practice, and negotiating as groups rather than individuals will give dairy farmers an even louder voice to get their just rewards from the marketplace.

“Our £5 million dairy fund will also allow producers to develop other means of cooperation and grab business opportunities with both hands.”

The two schemes follow a critical year for the industry in which the Government helped to secure an industry agreement on a voluntary code of practice on contracts between farmers and processors.

The plans on producer organisations are part of a six-week consultation on how to implement the European Union’s Dairy Package in England. Scotland, Wales and Northern Ireland will hold their own consultations.

Currently farmers negotiate with processors as individuals, but under the new plans, producer organisations, which are already widespread in other European countries, could cover up to a third of UK production and would negotiate on behalf of members.

The UK currently imports £1.2 billion more dairy produce than it exports, and there is huge potential for growth in domestic and export markets.

To help business growth, the £5 million dairy fund, offered through the Rural Development Programme for England, will allow farmers to apply for £25,000 minimum grants to support groups of dairy farmers.

These could cover costs to establish new cooperation structures, such as producer groups and cooperatives, and invest in technology to take advantage of new market opportunities.

David Heath will make today’s announcement on a Rural Roadshow to the Isle of Wight.  He will visit the Isle of Wight Dairy Group, which has led the way in the industry following funding from Defra’s Rural Development Programme for England to set up an innovative farm cooperative.

The cooperative, which is the first of its kind in the country, brings together 17 of the island’s dairy farmers to produce and market Isle of Wight branded milk to around 30 retailers across the Isle of Wight, including supermarkets and local shops. 

All Defra ministers are going on a series of Rural Roadshows all around the country. The Rural Roadshows allow ministers to hear firsthand about rural issues from communities and businesses, learning about successes and challenges and discovering what help is needed in order to support rural growth and jobs.

The direct access to ministers will help ensure that rural England has a strong voice at the heart of Government.