Following a debate in London last week, which was attended by UK agriculture minister Jim Paice, farming unions have begun to call for the introduction of break clauses to inequitable milk supply contracts, so long as processors are allowed to dictate the terms of the agreements.

The calls come after milk processors embarked upon a ‘follow the leader’ round of price cuts between the end of April and beginning of May. Many major processors cut their prices by 2 pence per litre, before their farmers suppliers were able to feel the benefits of recent increases in the profitability of milk last year. This ignominy led to calls for radical change in the milk supply chain, where farmers are slow to see reimbursements, but feel shocks with depressing rapidity.  

Following price cuts by Arla, Robert Wiseman, Dairy Crest and now farmer-owned businesses First Milk and Milk Link, farm gate prices have dropped back below the price of production for liquid milk.

At the Dairy Supply Chain Forum, which took place on Thursday, representatives from NFU Scotland stated that Defra’s forthcoming ‘code of practice’ for the dairy sector will present an opportunity to rectify the significant imbalances in the dairy supply chain by promoting more meaningful, balanced contracts. Union representatives said that, if milk buyers fail to come forward with positive proposals, politicians should step in to prevent exploitation.

Speaking after last week’s forum, NFU Scotland Vice President Allan Bowie said, "Without more balanced contractual arrangements between dairy farmers and their milk buyers, many processors will continue to take the easy route to managing their own margins by simply lowering the price they pay to farmers rather than looking to their customers.

"It would be far more positive for our dairy sector if our milk buyers were to react to changing markets by looking for alternative customers or developing alternative products. However, rather than having a long-term vision, too many processors revert to the old habit of seeking short-term gain by cutting the price paid for milk.”

Farming leaders also said that, if it is to provide any benefit to farmers, the sector Code of Practice must include substantial contractual improvements that bring better balance and fairness to arrangements between farmers and their milk buyers. Mr Bowie continued, “Where processors drop the price of milk without proper negotiation, justification or agreement – as has happened in recent days - then suppliers should have the option to resign under a shorter notice period. If this is not acceptable to processors, then we have urged our politicians to legislate.”

Under EU rules, new milk contracts will be compulsorily introduced if agreements cannt be made voluntarily.

Farming representatives used the event to call for the development of more “meaningful and constructive relationships” within the supply chain and promote the formation of cooperatives and other producer organisations to improve producers’ influence.

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