Progress on milk contracts and milk prices needed in 2022

By Jim Cornall

- Last updated on GMT

NFU Scotland said the first quarter of 2022 will be pivotal.
NFU Scotland said the first quarter of 2022 will be pivotal.

Related tags Milk Dairy NFU

The National Farmers’ Union (NFU) Scotland is calling on the dairy supply chain to deliver positive price messages in 2022 that fully reflect tightening supplies and soaring costs.

Next year the NFU said it will continue to press Defra and work with other UK farming unions to make the statutory Milk Purchasing Code and new dairy contracts a reality.

Progress on both price and contracts are essential if dairy farmer numbers are to stabilize, NFU Scotland said.  AHDB released its October 2021 producer figures based on the number of levy-paying farmers and only 8,000 herds remain in Great Britain with 310 dairy farmers having quit in the past 12 months. This is against the backdrop that Scotland now has only 836 herds, and this figure may reduce further when the Scottish Dairy Cattle Association releases its end-of-year figures soon.

The union said the recent dairy report from Kite Consultancy, Project Reset, stressed input cost price rises in the dairy industry are rampant from primary farm level through to dairy processors, and it is unreasonable to expect that these costs should be sucked up by processors and farmers.

NFU Scotland Vice President Andrew Connon said, “The first quarter of 2022 will be a pivotal time for all.  While we welcome the fact that milk prices have increased across the board in the last few weeks of 2021, the reality is that on farm costs have matched and, in some cases, outstripped these increases.  Feed, fertilizer, fuel, and labor costs are escalating at an alarming rate of knots.

“We have consistently stated that the supply chain from consumer to cow must change.  A fair on-shelf price for milk will deliver for all including the retailer, processor, and primary producer.

“Tightening supplies also support the drive for milk prices to be closer to 40p ($0.53) per liter than 30p ($0.40). AHDB report that GB milk deliveries are now running 3.6% below the same week last year – equivalent to 1.21m liters. With spot milk currently trading at above 45p ($0.59) per liter, the signals are clearly there for all to see.”

Connon said the situation is notunique to GB.  He said dairy markets in the EU-27 have seen strong price increases in recent months, as limited growth in milk supplies has constrained production of most dairy products.

On statutory milk contracts, the UK Government and Devolved Administrations have published their response to last year’s consultation seeking views from dairy farmers and processors about how contracts and relationships could be improved.

Defra is now working towards a UK Milk Purchasing Code, which will be made by regulation using the powers under section 29 of the Agriculture Act 2020.

Connon said, “Our milk committee subgroup for contracts continues to spend a huge amount of time on this, working in conjunction with stakeholders including Defra and Scottish Government.  Our collaboration with the other farming unions ensures we keep moving forward with the ambition to get this to a favourable position for all.

“The introduction of well-considered, appropriate legislation regarding dairy contracts between dairy farmers and milk buyers is essential. It will create the foundations of a modern, thriving dairy industry based on contracts that, through free and equal negotiation and in good faith, have been agreed by all for the benefit of all in the supply chain.”