Farmers hail code of practice deal over milk price

Following months of negotiations, the code of practice was given the seal of approval after legal experts signed off the terms.

It will mean farmers must now be given 30 days notice of change to prices or other contractual terms, allowing them to exit contracts with a month’s notice if they disagree with the alterations. It encourages processors to engage more with producers and their representatives over changes.

The NFU’s dairy board chairman, Mansel Raymond, said: “I am delighted that this important initiative is ready to use following months of hard work on all sides. The NFU has championed the need for improving dairy contracts and we’re very pleased that at long last there is light at the end of the tunnel so we can move forward with the industry on a robust and ambitious strategy for the dairy sector.

“We will now be pressing ahead with a number of briefings up and down the country so dairy farmers and processors can see the many beneficial terms of this code translated into beneficial terms in milk supply contracts.”

Industry leaders agreed to the voluntary code at the end of August following months of talks with processors and farmers’ representatives and in the wake of a summer of protests against retailers and processors over low farmgate prices which were falling well short of the cost of production.

The protests, which saw the Arla depot in Leeds targeted as well as other venues nationwide, led to most processors and retailers agreeing to increase their farmgate rate, but industry body The Dairy Group said these prices will need to increase further if production levels of milk are to remain the same.

Production levels are falling due to producer confidence being damaged by both the summer’s milk price cuts and the heavy rain seen in recent months, leading farmers to reduce the feed they used or instead opt for lower-quality feed. Feed costs are set to remain high due to poor harvests in both the UK and the United States of America.

“The decision to arbitrarily cut milk prices in July in spite of weakening milk supply and poor summer weather has done irreparable damage to producer confidence,” said Nick Holt-Martyn of The Dairy Group.

“This has been compounded by the rocketing feed prices as summer progressed into autumn.

“The January 2013 farmgate milk price needs to rise by another 10 per cent to ensure there is sufficient production capacity left in April to take advantage of an improved set of weather and market conditions.

“We said last month that processors should get on and pay 29 pence per litre without prevarication as an absolute minimum.

“Now we are saying by January 1 that figure needs to be 32 ppl just to stand still, with market returns almost 30 pence per litre and rising there will be no excuses.”

However, farming leaders are hopeful that some long-term improvement can be seen in the industry following the introduction of the new code.

Dairy UK director General Jim Begg said: “The code should also enable dairy farmers and processors to build relationships of trust and mutual understanding.

“Only on this basis can the industry create the added value that will protect it from price volatility.

“We would hope that the spirit of co-operation that has resulted in this agreement can be carried forward into the future.”

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