NFU Cymru Dairy Board Chairman Jonathan Wilkinson explains the next steps necessary to implement the code and NFU Cymru's involvement in this process.
Jonathan writes...
For most dairy farms, the milk contract is our single most important piece of paper and governs the relationship we have with our milk buyer. The fairness of dairy contracts has been long debated and in Autumn 2020, the government held a consultation on dairy contract reform and since then, have been working to develop a new code of conduct for dairy contracts. This will set out in legislation mandatory minimum terms which all dairy contracts across the UK must comply, with the aim of improving fairness and transparency in the supply chain.
NFU Cymru has been supportive of this area of work, we don’t want to ‘fix anything which isn’t broken’ and there are many successful relationships that exist across Wales between farmers and milk buyers.
However, there are others which place a disproportionate amount of risk on the farmer and we saw during the Covid 19 pandemic, how contract terms and pricing mechanisms could be changed at the buyer’s discretion often at short notice without reasonable discussion, negotiation, or agreement.
Positive progress
NFU Cymru recently fed in views on the draft policy which will form the basis for the legislation necessary to implement the code. Positive progress is being made and there is now broad consensus across industry on the direction of travel. In our recent feedback we stress that we want to see greater sharing of risk between farmer and processors, suggesting that price become more market focused.
Relationships and trust are key to achieving fairness in the supply chain and we believe contracts should be negotiated and any variations should be agreed by both parties, rather than unilaterally forced through. We also suggest that farmers should be able to choose between exclusive (i.e. contracts which stipulate all milk must be sold to one company) and non-exclusive contracts, this would give farmers the option to supply milk to multiple businesses should they wish which could enable them to take advantage of new markets.
Consequences for breaches
Finally, we believe a mandatory code only works if there are measures in place to ensure it is being followed, so there must be clear consequences for any breaches.
We expect the necessary legislation to be laid in Parliament early next year and the code is likely to come into law late spring in 2023. There will then be a two-year transition period during which, all dairy contracts across the UK will need to be brought in line with the code.
Our vision is for a profitable, productive and progressive dairy sector in Wales, one which sees farmers and processors work together to make the most of the opportunities and share responsibility for the risk.
Once in a generation opportunity
In NFU Cymru we see the introduction of this code as a once in a generation opportunity to change the way the dairy supply chain operates and the NFU Cymru Dairy Board will continue to work to secure a fair future for the Welsh dairy sector.