Farming Minister Jim Paice has condemned large milk processors for slashing prices paid for milk with little notice. Mr Paice went so far as to say some price cuts are hard to justify.

Last month processors Dairy Crest sparked a series of price cuts in the UK dairy industry by announcing it would slash farm gate prices paid to its farmer suppliers by 2 pence per litre, effective just four days after the company’s announcement; other major industry players Robert Wiseman, Arla and Muller followed suit, with farmer owned cooperative First Milk left with little option but to cut prices itself, this time by 1.5ppl.

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However, the minister would only commit himself to calling for a voluntary code for the dairy sector. He said this would help establish a more balanced relationship between dairy processors, retailers and their suppliers. However, without a watchdog to investigate and react to abuses, critics fear that a voluntary code would prove ineffectual.

This has been the case in the fresh produce sector, and has led to the government agreeing to instate a Groceries Adjudicator to police the supply chain this year, after abuses of suppliers by large retailers continue to be observed and documented by investigators including the NFU, despite a code of practice having been in place for a number of years.

Speaking at the Dairy UK annual dinner, Paice said, "A voluntary code of practice will mean people having to do things slightly differently – but it will ultimately benefit the industry as a whole – and I implore all sides to make a final push and agree a workable compromise."

Having stated that the nature of the cuts is difficult to justify, Mr Paice seemed to absolve the producers somewhat, saying, "In a volatile market everybody knows prices will go up and down. The key is for us to build trust and transparency, so that farmers and processors can work together and take advantage of the huge business opportunities both here and abroad."

There have been calls from farming groups and government advisory committees to establish long-term contracts in the sector to offer more stability. Farmers’ organisations have demanded the inclusion of break out clauses if such contracts are drawn up, to prevent a repeat of last month’s fiasco, which in some cases saw producers who would have to give 12 months’ notice before ending their contract given under a week to deal with a ten per cent pay cut.

Mr Paice today lent his support to calls made by the NFU and others for break out clauses.

Farmers have received verbal support from politicians across the political spectrum, who recognise the imbalances inherent in the supply chain. Conservative MP and member of the Rural Affairs Select Committee George Eustace recently said, "Many farmers end up exploited and find that processors are quick to cut prices but slow to increase them when the market moves in the other direction," but in the absence of a willingness to act, any hope of a reprieve for struggling producers may be distant.

Dairy Crest this week announced that it would give farmers one months’ notice of any further price changes, after the company’s announcement in April caused widespread indignation and anger. A company spokesperson offered the reminder that, under the current system, the processing giant is only obliged to give suppliers 24 hours notification of changes.

Farm gate milk prices in the UK remain below the cost of production and 4 pence per litre below the European average. Following the latest round of cuts, prices for some suppliers will drop more than 2ppl below the cost of production.

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