Fairer Deal for Dairy Contracts Supported by EU

From the outset, it has recognised that contractual relationships between milk producers and purchasers are fundamental to ensuring fairness in the dairy supply chain, particularly with quotas being phased out by 2015.

18 Jun 2010 --- NFU calls for improved contracts for dairy farmers, specifically ones that offer greater clarity and transparency on milk price, have been echoed by the EU Commission’s High Level Group on Milk.

The final report of the HLG has also highlighted an imbalance in bargaining power in the supply chain between farmers and dairies, which leaves dairy famers at a disadvantage when negotiating milk prices. A recent NFU investigation revealed that millions of pounds in earned revenue is not being passed back to dairy farmers despite substantial rises in wholesale prices of major dairy commodities such as cheese and cream in the UK.

Commenting on the HLG findings, NFU dairy board chairman Mansel Raymond said: “The Commission will now decide on the most appropriate measures to improve milk contracts – be it a Code of Practice or legislation. I believe there is a need for both if we are to raise the bar for everyone and introduce changes that will benefit farmers, without creating competitive distortions in the market.

“Importantly, and something the NFU has long called for, the HLG states that the milk price should be written into the contract and, by definition, this means a method of varying that price must also be agreed between the two parties. This will represent a major step-change in milk contracts across the EU.”

The HLG was created by the EU Commission to examine the long-term future of the EU dairy sector. From the outset, it has recognised that contractual relationships between milk producers and purchasers are fundamental to ensuring fairness in the dairy supply chain, particularly with quotas being phased out by 2015. The report, published on June 15, also concluded that the EU dairy supply chain does not function efficiently and states that a lack of comprehensive and reliable data on prices and margins in the whole food chain needs to be addressed.

“We would also welcome greater transparency for margins, profits and pricing arrangements throughout the supply chain,” said Mr Raymond. “Information and data at farm level is already widely available so we see no legitimate reason why this can’t be replicated to some degree in the rest of the supply chain.

“Measures to strengthen the position of farmers in the supply chain should also be supported but we need to ensure that we protect the single market. And we need to study more closely the implications of the report’s recommendations on producer organisations and interbranch bodies.

“The question now is how the Commission will act on these recommendations.  In the meantime, I will be convening a meeting with dairy farmer representatives from co-operatives and private dairies this summer to discuss the outcome and potential impacts of the HLG report in more detail.”

The Agriculture Council will take a decision on the HLG recommendations on July 12. Substantive work on the recommendations is thought likely to have begun by September.