Fairer and more transparent contracts

News Posted 01/03/21
Plans to shake up the dairy industry to ensure farmers benefit from fairer and more transparent contracts have been warmly welcomed across the board.

Following a three month consultation last summer, the Government announced at the beginning of February that it would introduce regulations “to require certain standards for contracts between those producing and buying milk for processing”.

And with Dairy UK Chief Executive Dr Judith Bryans welcoming the proposal from DEFRA and the devolved administrations, the path to a fairer deal for dairy farmers across the UK seems set to be reasonably bump free.

NFU national dairy advisor James Osman told South East Farmer that processors and farmers were “all heading in the same direction” and were keen to tackle a few areas of bad practice without changing what was already working. “I don’t think it will be a battle,” he said. “We’ve already had the debate – now we just need to work together on the detail.”

A voluntary code agreed between farmers and processors in 2012 generated “some positive changes” but had unravelled over time, Mr Osman said. “Some processors followed the code but other didn’t, and over time the good guys found themselves undercut by others, and because the code was voluntary it could be ignored.

“The NFU and other farming organisations have been lobbying for the past decade for better regulation and we are delighted with this announcement. Now we need to work on the detail and we need to make sure that there is an effective way of enforcing the new regulations.

“The Covid-19 lockdown in March last year highlighted weaknesses in the system and showed how quickly the pressure and all the risk could be passed on to the farmer. Within a couple of days of coffee shops and pubs being closed, farmers saw the milk price drop dramatically and once again found themselves at the bottom of the pile.

“We need transparency and we need to see the risk shared more fairly, and that is what we need the new regulations to achieve. It is important, though, that farmers are involved in deciding the final shape of the new approach.”

Farming Minister Victoria Prentis told the Dairy-Tech Online event that the Government would use the Agriculture Act 2020 to develop a new statutory Code of Conduct that would seek to provide a guiding framework, establishing minimum standards but also providing businesses with the flexibility to adapt contracts to their individual circumstances.

DEFRA blamed “imbalances of power within the dairy supply chain” for causing instability for dairy farmers, quoting as an example the ability of milk buyers to set and modify the terms of a contract at short notice.

Ms Prentis said it was “only right that any contracts drawn up between farmers and processors deliver fair conditions across the board, for an industry that works hard year-round to provide the dairy products for which we are world-renowned.

“This new Code of Conduct will crack down on unfair practices within the supply chain, supporting the dairy sector and ensuring that our dairy farmers remain competitive as they look to the future.”

Dairy UK’s Dr Bryans said the processor-led organisation that represents farmer-owned co-ops and private dairy companies welcomed the news, adding: “Dairy UK is supportive of the introduction of a mandatory Code of Conduct to ensure a level playing field on contracts, as we set out in our consultation response. “We therefore welcome the commitment made today, particularly the need for flexibility and transparency within the supply chain. We look forward to seeing more detail on the code…and to playing our part in helping to ensure its successful implementation into the market.”

On enforcement, James Osman stressed that the regulations would “need teeth”. While the Tenant Farmers’ Association has said this could be done by expanding the role and remit of the Groceries Code Adjudicator, Mr Osman said there needed to be a broader system in place that could deal with ‘lower level’ issues, together with a GCA-style regulator at its head.

Royal Association of British Dairy Farmers (RABDF) Chairman Peter Alvis commented: “Increasing fairness in the dairy supply chain is paramount. The statutory Code of Conduct is a positive and necessary step in ensuring farmers can sign contracts that are fair and provide them with much needed stability.”

DEFRA has said officials will continue to engage with industry representatives of both producers and processors as they design the new code to ensure it delivers fairness and transparency for the entire supply chain across the UK.

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