51AVÊÓƵ

Defra has outlined more detail on regulations set to come into force later this year on dairy contracts.

It follows detailed discussions with NFU and Dairy UK and other key industry players. Farmers have faced a long wait for the results after the consultation took place in 2020.

The department said it delivered on a ‘key commitment' set out at the Prime Minister's 51AVÊÓƵto Fork Summit earlier this year.

Contract regulations

Farming Minister Mark Spencer said: "Farmers must be paid a fair price for their produce and these regulations will provide price certainty and stability for farmers by establishing written milk purchase agreements with clear and unambiguous terms.

"This represents a key milestone in our commitment to promote fairness and transparency across food supply chains to support farmers and build a stronger future for the industry, andÌý will be followed by reviews into the egg and horticulture sector supply chains this Autumn."

But dairy analyst Chris Walkland said while Defra have announced ‘more detail' it has not announced ‘the detail' despite the industry having waited for several years now.

Mr Walkland said: "It is, frankly, a joke that the statutory instrument on which the legislation will be laid is still not ready, and the continual delay must mean there is something fundamentally wrong between what is desirable, and what is practical, and legal.

Disingenuous and misleading

"In terms of the specifics in the announcement, it is disingenuous and misleading of the Minister to state that these regulations will provide price certainty and stability for farmers because those are entirely market related, and the dairy market is neither certain, nor stable.

"In fact, it is one of the most volatile of all commodities. Certainty and stability might be achieved if DEFRA were to underwrite a minimum selling price for milk, but that simply is not going to happen."

He added the language such as to promote fairness and transparency implied there was none, which Mr Walkland questioned.

"Prices are transparent if you know where to look, and there is no need for legislation to set out the factors which generate the milk price. They are widely available, and have been for years.

"On the positive side, though, the legislation will tighten up the rules on notice periods, and there are other aspects of the farmer-processor relationship that might improve on the back of it, so they are welcome," he said.

But he added it should be noted that the press release does not include any mention of potential caps on milk production.

"In other words, the right to produce as much milk as a farmer likes, when he wants to produce it, in the knowledge that he has a guaranteed buyer for all of that milk, could well disappear.

"As a result it should not be taken for granted that milk contract reform will result in farmers being better off. They could well end up being worse off."

Defra said the regulations will mean:

• Clearer pricing terms with contracts setting out the factors which generate the milk price and allow farmers to challenge prices if they feel the process is not being followed
• Changes to contracts cannot be imposed without farmer agreement
• Contracts will include a straightforward way to raise concerns about their contracts
• ÌýClear rules on notice periods and contractual exclusivity
• An enforcement mechanism to guarantee the regulations are followed

The regulations are the first in a series of supply chain interventions confirmed by Government, with reviews into the egg and horticulture sectors as well as the pig supply chain.

NFU dairy board chair Michael Oakes said: "These new regulations mark a significant step forward in the government's efforts to increase fairness and transparency in the dairy supply chain.

51AVÊÓƵto fork summit

"For a long time, unfair milk contracts have held British dairy businesses back, and these changes will give dairy farmers much needed business security and confidence, as well as helping to share risk along the dairy supply chain.

"This announcement signals that we are on the right path to building a stronger, more resilient future for the British dairy sector. We will continue to work with the government and wider industry to not only benefit farm businesses and the supply chain, but the millions of people who value access to quality, sustainable, nutritious British milk."

NFU Scotland believed this announcement puts down a marker in terms of how the UK Agriculture Act 2020 could be used effectively to deliver fairness, certainty and equity in other supply chains.

NFUS president Martin Kennedy said: "This is a significant step forward to drive fairness and transparency into the dairy supply chain and deliver a more robust future for the dairy sector. We will study the Statutory Instrument, once published, in detail to ensure that this important legislation delivers for Scottish dairy farmers.

"For too long, dairy farmers have borne far too much of the risk in the dairy supply chain and inappropriate contract terms are often at the root of the problems.ÌýThese statutory contractual changes have the potential to give greater confidence to all those producing milk as well ensuring that burden of risk associated with producing milk is shared more evenly across the whole supply chain.

"It is appropriate to pay tribute to the hard work of many within NFU Scotland in getting us to this point but would make particular mention of the efforts put in by our Milk Committee's Milk Contracts sub-group, backed by the dedicated milk policy staff at NFU Scotland.

"For more than six years, we have been actively talking to all parts of the dairy supply chain in Scotland, UK and abroad on the introduction of a statutory code of conduct for contracts and we would like to take this opportunity to thank all the farmers and stakeholders that interacted with NFUS during the process."

Processor reaction

A Dairy UK spokesperson said: "Dairy UK has always believed that this regulation should strike the right balance between greater transparency and maintaining the flexibility the industry needs to compete in a volatile and increasingly competitive marketplace.

"We have appreciated the engagement provided by Defra during the development of the regulation. We look forward to seeing the final SI and to continuing to work with Defra on the implementation of the regulation."

An Arla spokesperson said:Ìý"As a farmer-owned cooperative we naturally support and promote fairness across the dairy supply chain, and we look forward to seeing the detail behind the Minister's announcement today.

"We are grateful to Defra for listening throughout this process to our points about how this proposal will impact on our farmers."

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