Dairy contracts put to parliament in quest for fairer treatment
© Mulderphoto/Adobe Stock Legislation on fairer contracts for dairy farmers will be laid in parliament today (Wednesday 21 February) after more than a decade of campaigning by farming groups.
The Statutory Instrument (SI) for Dairy Contracts will also help lead the way for possible reform in other sectors, including pigs, poultry and horticulture.
It is hoped the new legislation will create more transparent contracts between dairy processors and producers, and put an end to unfair practices in the supply chain.
See also: Surge in global dairy trade offers uplift for UK milk prices
An industry-wide consultation in 2020 found a power imbalance between processors and producers, with buyers able to modify agreement terms with little or no negotiation.
The new legislation is expected to provide a route to arbitration for producers, and it could lead to the introduction of a new adjudicator looking at contracts.
It is also likely to provide a way for farmers to check how variable prices are calculated.
Penalties
The Defra secretary at the time will be able to enforce “substantial” financial penalties for contract breaches.
A rough timeframe suggests that, if the legislation passes through parliament as expected, the new contracts could begin to come into force later this year, and then become commonplace for all contracts towards the end of 2025.
The NFU, NFU Cymru, NFU Scotland and the Ulster Farmers Union have worked together to help drive the introduction of fairer dairy contracts.
These four UK farming unions developed five key asks for the new legislation, relating to relationships and farmer representation, exclusivity and volume management, elimination of unilateral changes and one-sided contract terms, consequences of breach, and pricing mechanisms.
While there have been some minor concessions, the unions said they were broadly happy with the legislation put forward and will continue to work closely with the government on its implementation.
Farming unions welcome legislation
NFU dairy board chairman Michael Oakes said the legislation marked a significant step in a long road to improving fairness across the supply chain.
Mr Oakes said: “For a long time, unfair milk contracts have held back many UK dairy businesses, and these changes will help give farmers much-needed business security and confidence.
“While progress has taken far longer than any of us hoped and expected, I am confident that, from today, we are finally on the right path to building a stronger, more resilient future for the UK dairy sector.
“The NFU believes that representative groups, such as producer organisations, will play an important role in helping farmers negotiate contracts within the dairy sector, and we will continue to support the development of representative structures like these to help improve trust and collaboration across the supply chain.”
Ulster Farmers Union dairy chairman Kenny Hawkes said: “It is a major milestone following years of immense lobbying alongside the UK unions, that new legislation is being laid in parliament today to achieve more fairness and transparency in the dairy supply chain.
“The new regulations will go a long way to enhancing the position of the primary producer by establishing legally binding minimum standards of contractual practice, while also providing businesses with much-needed certainty in terms of their supply agreement with processors.
“It will help to build a stronger, more resilient future for the Northern Ireland dairy sector, so farming families can continue to produce high-quality milk.”
NFU Scotland milk committee chairman Bruce Mackie also welcomed legislation to regulate dairy contracts.
He said: “This has been a key ask of the industry for many years. There will be a long road ahead and statutory contract legislation on its own will not solve all our problems.
“However, for too long, dairy farmers have had very little influence or power with regards to the terms under which they sell their milk, but they now have an opportunity to come together and make the most of what this legislation offers by way of strengthening their hand.”
NFU Cymru dairy board chairman Jonathan Wilkinson concluded: “The introduction of this legislation represents a massive step forward and is a once-in-a-generation opportunity to change the way the dairy supply chain operates.
“The additional transparency and accountability introduced by these regulations will benefit the whole supply chain and provide additional certainty to farmers as to the terms under which they sell their milk.”