Next steps needed for Dairy Contracts

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“We need to move forward from Voluntary Code of Practices (VCoP) after a patchy uptake over the last six years.” This was the message from Gareth Richards, NFU Cymru Milk Board Chairman at today’s Welsh Dairy Show.

VCoP were introduced for the milk industry following a meeting with Government, milk producers and processors during the Royal Welsh Show six years ago and were seen as a positive step forward at the time

Gareth Richards said: “We are approaching an opportune time to move forward from the VCoP, as the Government consultation on Common Organisation Regulations (CMO) of dairy markets is imminent. This means we will be able to create a bespoke set of contractual rules for the dairy industry after the UK leaves the European Union in March next year.

“While I am pleased that we have Government’s support on this issue, the process is sadly being delayed as they are awaiting legal decisions on devolved issues relating to its implementation.”

Gareth told press at the Welsh Dairy Show, that NFU Cymru will be consulting fully with its members when the consultation is issued. He said: “We will be taking the views of all our members but in the end it all comes down to fairness in the supply chain, and a fairer sharing of the risk between producers and processors.

“We believe that regulation should apply to all milk contracts for the purchase and sale of raw milk between farmers, and the milk processor, whether they are a private company or a cooperative.

“Areas in particular we would like to see covered are milk pricing, exclusivity, volume, duration of contracts , rights to terminate, exceptional circumstances provisions, which will be especially important to those farms hit by Bovine TB, negotiation, dispute resolutions, which will require a role for the Grocery Code Adjudicator, consequences of breach and anti-circumvention provisions. There would need to be a reasonable introduction period with 12 months suggested for new contracts and 24 months for existing contracts.”

Gareth added that although milk prices will still go up and down, statutory contracts would give more fairness and openness to producers. “Statutory contracts will take away the current buyers discretion when setting a monthly milk price. It will also bring in more flexibility for farmers allowing more choice including fixed price, basket price, length of contract etc. This will also mean that a tailored contract gives farmers more certainty on price and the processor will also benefit with more certainty on volume and security of supply. This is already starting to happen, but a firmer approach will bring more fairness across the board.

“NFU Cymru supported plans for Dairy Producer Organisations (DPO) at last year’s Royal Welsh Show, and a CMO may be the kick-start required to allow this process to begin.”

Gareth concluded: “We are all in the dairy industry together so let’s work together collaboratively for mutual benefit. I firmly believe it can be done and proof of this has been the recent, very successful, Dairy UK/AHDB campaign on promoting the virtues of milk, and milk products, to our consumers.”

Last edited: 11:00 on October 30, 2018

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