Unions challenge Defra on milk contract changes

Major industry concerns have been raised over proposed changes to dairy contracts, which, if enacted, could allow milk processors to purchase surplus milk from producers exclusively and at a discount.

Defra has proposed changes to wording around exclusivity contracts and tiered pricing within the Fair Dealings Obligations (Milk) Regulations 2024, despite the new legislation only coming into force three months ago.

New regulations first introduced in July this year were designed to provide more transparency for the dairy sector, however, a lack of clarity on these changes by Defra could undermine this.

See also: Concerns raised on rowing back of new milk contract rules

The NFU, NFU Cymru, NFU Scotland and Ulster Farmers’ Union have written a joint letter to Defra farming minister Daniel Zeichner outlining concerns with the proposed changes.

The UK farming unions said the legislation had been designed to allow dairy farmers to access non-exclusive agreements, enabling them to market some of their milk elsewhere when it is not desired by the primary purchaser.

They said: “We understand government is proposing to change this to allow for a specific interpretation of tiered pricing that encompasses both a price bonus and penalty linked to seasonal milk volumes.

“This would effectively allow the milk buyer to discount certain litres of a farm’s milk, even where a contract is exclusive.

“The UK farming unions have always believed that the ability for milk buyers to control both price and volumes of milk on a dairy farm should be separated.

“We cannot see any reason why anyone would object to a farmer being free to market their excess milk to a third party, should their primary purchaser be discounting it.”

Call for clarity

Farming unions have called for further clarity on the proposed changes by Defra and more participation in discussions moving forward.

NFU Dairy Board chairman Paul Tompkins told Farmers Weekly there were concerns that the latest changes to wording in the regulations had still not been shared with industry.

He said: “This has come just three months into a new piece of legislation, which is not really good governance.

“I appreciate there are some complexities behind that, but when we are looking at fair dealing obligations for other sectors, it doesn’t exactly build confidence in the process or in the ultimate piece of legislation.”

Mr Tompkins added that the NFU wanted dialogue with government to be more open on this and to ensure that devolved stakeholders were also included in discussions.

Independent dairy analyst Chris Walkand said that, when it comes to seasonality, the contracts can work both for and against farmers.

He added: “This clause about exclusivity is only going to affect a small number of farmers who have sufficient volume and sufficient time to be able to market their own surplus milk.”

Defra response

A Defra spokesperson said: “For too long, our dairy farmers have got a poor deal in the supply chain, which is why this government will champion British farming to boost rural economic growth and strengthen food security.

“The Fair Dealing Obligations (Milk) Regulations in July give our great dairy farmers greater contractual transparency and protection from unfair practices.

“In our conversations with farmers, it has been raised that some commonplace practices, including a number of approaches to seasonal payments and volume efficiency bonuses, are currently affected by the regulations.

“We are discussing an amendment with the industry, producers and purchasers and will provide more information in due course.”