Government consults on dairy contracts

The government has launched the consultation after looking at the issue for two years, since a review of supply chain fairness by the Grocery Code Adjudicator found an uneven distribution of power within the dairy supply chain.

NFU dairy board chairman Michael Oakes said: “Dairy farmers want to place themselves in a more sustainable position for the long term and dairy contracts are at the heart of this. We want to see flexible and innovative regulation that not only delivers fair terms for farmers but an equitable balancing of risk between farmers and buyers.

“During the Covid-19 pandemic, we have seen a significant number of cases where farmers have borne a disproportionate amount of the cost in the supply chain, as the risks within the market place were shunted down to farm level at an alarming pace.

“As we leave the EU, the UK dairy market needs to be commercially focused, innovative and resilient in order to tackle the challenges and opportunities that the change will bring. At times when the market is under pressure, milk buyers often have the discretion to change contracts terms and pricing mechanisms, even to introduce retrospective penalties and price cuts without negotiation. A headline milk price is of no value whatsoever if a buyer has the sole right to change it at will. We need to be able to share risk along the supply chain much more effectively than we currently do. At the moment, there is no incentive for a milk buyer to look up the supply chain to manage their risk, as they know much of it can be managed by pushing the risk down to a farm level.  

"The NFU has been working with all the UK farming unions to improve dairy contracts, and we will be consulting widely with our members to get a range of views that will form the basis of our submission to government. Farmers can either contact us directly or respond to the consultation individually. This is a once in a lifetime opportunity to build a better future for the UK dairy sector."