NFU dairy board chairman, Michael Oakes said: “We are concerned that the basis for returns from the liquid market seems to be entirely predicated on a single factor – the cream price.
"Structurally, this is amplifying volatility and disruption in the marketplace and cannot be sustainable.
“Frustratingly, it appears the core product of liquid milk no longer has a significant bearing on the value of milk leading to an over-reliance on cream returns. We want to see processors getting the maximum value out of the milk we produce, and that means getting the best returns for all dairy products and sharing those returns fairly across the whole supply chain.
“For years the NFU has argued that there needs to be greater fairness in dairy contracts. Contracts which are based on discretionary pricing – where the processor can unilaterally change the price paid – mean that farmers take all of the risk on the milk price, and that’s simply unfair.
“As it stands, farmers have no certainty and no clarity on the future price they will get for their milk; they know only what they will get paid today. How can a business function and plan for the future without knowing what it will get paid for its product tomorrow?
“We want to work together with the whole supply chain to create a more sustainable market for both farmers and processors. At the moment, it is clear that the liquid milk market, the one-time jewel in the crown of the UK market, is not functioning correctly.”
The NFU is supportive of the introduction of regulated terms for dairy contracts and feel it should apply between all purchaser and farmer relationships to:
- Rebalance the risk within the dairy supply chains specifically on price and volumes
- Eliminate unfair trading practises and one-sided contract terms from the dairy supply chain
- Place dairy farmers in a strong position to develop professional sustainable relationships with their buyer to be commercially focused, innovative and competitive
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