NFU Dairy Board Appointee Paul Tompkins looks back at the NFU's Dairy Risk Management Conference which was held last week and considers what might be next:
Last week saw the NFU at its full potential, bringing together over 80 stakeholders from across the dairy supply chain and wider industry at its Considering Futures conference.
With Yew Tree Dairy already offering a fixed price, fixed term contract to its farmer suppliers and the recently announced, forthcoming Muller ingredients contract which offers forward pricing underpinned by futures markets, it is increasingly apparent that more options are opening up on the way we are paid for our milk, influenced by these emerging trading platforms.
The driving force behind this change is volatility. The stark reality is that our milk price is subject to forces beyond the UK and the state of denial is over, volatility is here to stay. Futures markets are simply one of the tools that can be used to manage that volatility, as they offer the opportunity to transfer some risk.
Delegates at the conference heard how farmers may one day be able to directly access futures markets, but for the opportunities to be maximised we need both sides of the supply chain to be working together and that means closer working relationships with our milk buyers. In the US every milk buyer, large or small offers their farmer suppliers access to a fixed price, fixed term contract in return for a guaranteed milk supply.
Here, exclusivity clauses in contracts means the processors have this luxury without offering such access, I believe now is the time to challenge our processors to earn our guaranteed milk supply. They have the opportunity to help their farmer suppliers meet the challenge of volatility and become more sustainable business by offering options such as access to contracts underpinned by futures markets.
The government must also play its part. To establish a functioning futures market we need timely and accurate data. The UK is currently not delivering and the NFU has long been lobbying and will redouble its efforts for Mandatory Price Reporting, an essential part of futures trading and bringing more transparency to the supply chain.
Futures markets may not currently feature on the endless list of skills needed to be a dairy farmer, nor excite us all when the lengthening days turn our attention to the growing list of jobs to be done. But I am left in no doubt, the way in which we sell our milk has the potential to fundamentally change and gazing at the certainty of future volatility, all the price management options we can make available to farmers cannot come soon enough.