Consultation to address issues in the Dairy Sector Supply Chain

A consultation by the 4 UK Governments has just been launched to review relationships in the sector and to try to bring to an end unfair practices in the supply chain.

Many dairy farmers have recently found themselves in extremely difficult positions due to the huge impact Covid-19 restrictions have had on the normal consumption patterns of dairy products.  The situation has highlighted the lack of influence and power farmers have in these situations and how some milk buyers have insulated themselves from losses, while passing them on to the producer wholesale.  For some, this is just the latest illustration of the difficult nature of the producer-processor relationship.

The consultation comes following the Grocery Code Adjudicator’s Call for Evidence in 2016, which highlighted a pattern of unfair practices and lack of transparency within the industry.  As many will be only too aware, milk buyers currently have the power to set milk prices and change them, often with very little notice.  The role of retailers in dictating the price is also a concern.  Combined with long notice periods, there was sufficient concern about the operation of the market which led to this consultation.  There is a Voluntary Code in operation at the moment but, as the name suggests, not every milk buyer is signed up to the minimum standards.

The consultation will be open for 12 weeks and will seek contributions from dairy farmers to examine whether regulations or mandatory contracts could be introduced to improve the way the market operates.  One of the proposals is for a mandatory pricing mechanism in all contracts to ensure that the price paid is formally agreed and the calculations are transparent.

Whether you would support mandatory contract terms or not, this is an extremely important time to have your view heard.  2021 will be the start of a new era for agriculture in the UK as we fully leave the EU and farmers need to do all they can to ensure that the markets in which they operate are functioning well and are fit for purpose.

You can express your views at https://consult.defra.gov.uk/agri-food-chain-directorate/contractual-relationships-in-the-uk-dairy-industry/

Remember, if you need any advice in relation to your milk contract or any other legal matter relating to your business, please get in touch.