Breakthrough on code for dairy contracts

THE DAIRY industry will soon have a long-awaited voluntary code of practice. 


Arla, the UK’s biggest milk processor, announced late last night it would reverse its planned cut price it pays dairy farmers for milk. The company said earlier this month it would need to reduce the price due to a fall in market returns. Arla said it was now able to maintain a standard litre price of .27p.


Earlier in the day, Dairy Crest became the first milk supplier to reverse the price cuts. The group will postpone the 1.65p per litre reduction in what it pays to farmers, due from August 1st, for two months while it talks to them about a way forward. Dairy Crest processes about 15 per cent of British milk. There is growing pressure on Muller Wiseman to follow suit.


Earlier this week talks took place at the Royal Welsh Show in Powys. They followed days of protests, including blockades at several dairy factories, over proposed cuts to the price of milk with some supermarkets and processors paying below the price of production.


The new code will mean firms buying milk would provide a “sensible” notice period when changing their prices – so farmers could opt out of any deals. Currently, they are tied into contracts with buyers able to change prices almost at will.


The Environment, Food and Rural Affairs Committee first proposed a voluntary code of conduct over a year ago. A report into the future of the dairy industry concluded that “contracts should provide certainty and clarity to give both parties the confidence to invest – the current system fails to do this”.


The Committee wrote to Farming Minister Jim Paice, expressing its disappointment that only one processor had moved on contracts. It also called the delays to the code “unacceptable”, warning that legislation “must be considered” if a code cannot be agreed.


Commenting on the letter, Committee chair Anne McIntosh MP said: “It is frustrating that for the last 14 months the Government have been saying that a voluntary code is the best way forward for the dairy industry but have yet to secure an agreement on its content.


“In evidence to our Committee last week we heard firsthand how time is running out for many dairy farmers. We urge the Government to secure the voluntary code as a matter of priority. If it cannot then legislation must be considered.”


The letter also called for the code to include the four elements referred to in the Committee’s report last year: volume, timing of deliveries, duration and price.


The progress in the talks was given a cautious welcomed with no real detail yet on price. The dairy coalition, which is being led by the NFU, reaffirmed its commitment to reverse the planned milk price cuts on August 1, as well as ensure the price cuts already in place are rescinded.


Morrisons and the Co-operative have both committed to increasing their milk price to cover the cost of production in recent days. The coalition’s attentions remain focussed on Asda, which increased its milk price last week but still falls below the cost of production.


There is also mounting pressure on all supermarket discounters and other major buyers of milk, including caterers, to ensure they pay a fair milk price, said the NFU.