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UK dairy contract code of best practice agreed

By Mark Astley , 06-Sep-2012

UK dairy contract code of best practice agreed

UK processor and farmer representatives have settled on a code of best practice relating to milk supply contracts – the latest effort by the British dairy industry to rebuild relations tainted by this summer’s milk price protests.

Dairy UK, the National Farmers Union (NFU) and the National Farmers Union Scotland (NFUS) representatives began discussions in July 2012, following protests relating to processor-planned milk price reductions.

They met last week to iron out the final details of the document, which is designed to provide greater transparency and give farmers assurances that their contracts are not putting them at a disadvantage in the marketplace.

Dairy UK, which represents the interests of the UK dairy supply chain, has relayed hopes that the agreement will help to rebuild “relationships of trust and mutual understanding” between farmers and the processors that buy their milk.

In recent days, UK-based dairy processors Arla Foods UK and Robert Wiseman Dairies have announced similar plans in an effort to regain the confidence of their milk suppliers.

Minimum requirements

Dairy UK, NFU and NFUS settled on a number of heads of terms for minimum requirements and new provisions when they first met in July 2012.

During the July discussions, the representatives outlined a number of basic principles.

They stipulated that farmers must receive at least 30 days’ notice prior to a price change and that retrospective price changes were no longer acceptable. They also specified that if a milk supplier disagrees with a price change, they should have the right to exit the contract with three months’ notice.

Publication of the document’s exact details has been delayed while lawyers study it for possible competition rule implications.

According to Dairy UK director general, Jim Begg, the agreed-on principles will enable the repair of farmer-processor relations.

“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,” said Begg.

Build confidence

Earlier this month, Scotland-based Robert Wiseman Dairies announced the launch of its MilkWise Initiative – a plan under which it would collaborate with farmers on how raw milk should be valued by the company in future.

Arla Foods UK has since increased the standard price it pays to farmers for their milk. It also adopted a new milk sourcing and pricing model. It has called this an effort to “build confidence in the British dairy industry.”

Farmer for Action (FFA) – the campaign group behind this summer’s milk price protests – has welcomed the new dairy industry code of best practice and the efforts of Arla Foods UK.  However, it has raised concerns about the reluctance of other processors to improve their offerings.

“The Arla move, we obviously welcome,” said FFA chairman David Handley. “But we are disappointed that the others haven’t done anything yet.  We are deeply concerned by Dairy Crest and Robert Wiseman at the moment; they keep on saying that they don’t have the money.”

“But we’d like to think that in time we will get something back from Dairy Crest and Robert Wiseman,” said Handley.

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