UPDATE: UK: Farmers cautious on dairy code deal

By Dean Best | 23 July 2012

The NFU suggested the deal would not solve immediate problems in sector

The NFU suggested the deal would not solve immediate problems in sector

The National Farmers Union has expressed caution over the code of practice agreed today (23 July) to govern relations between UK dairy producers and processors.

NFU president Peter Kendall said the initial agreement for a code struck this afternoon "gave some hope" for the long-term future of the sector.

The deal was struck after weeks of anger from farmers at plans from the major dairy processors to cut the price they pay for milk from 1 August.

The NFU and dairy industry body Dairy UK agreed to what the farming union called "heads of terms" for a code of practice. The initial agreement sets minimum requirements for contracts between farmers and processors.

Kendall expressed his belief the deal would help prevent similar situations happening in the future but was less sure of its immediate benefit.

"This agreement will give us the architecture we need to make sure that we don't end up with the same dysfunctional markets that are responsible for the dairy crisis we have today," Kendall said. However, he added it "did not solve the dairy farming issues of today".

The deal means farmers must receive at least 30 days notice of a change to the price they get for milk. Under the agreement, retrospective changes to price will no longer be acceptable.

Should a processor wish to "use their discretion" to set farmgate milk prices, the NFU said, they must hold talks with farmers and commit to maintain prices within "mutually-agreed parameters".

If a farmer disagrees with a price change, he has the right to quit the contract with three months' notice. Further conditions include the ability for farmers to supply more than one processor.

The UK's Department for the Environment, Farming and Rural Affairs, which brokered the talks, said the "main points" of a code of practice had been agreed. The "finer details" would be finalised by the end of August, it added.

Farming minister Jim Paice said: "The Government will continue to work with all parts of the industry to secure its long-term future, including promoting farmers working together in producer organisations."

There has been no indication that processors will reverse the cuts that are set for next month. Processors have blamed a slump in cream prices on international markets for the reductions. 

Farmers' anger has not just been directed at processors. Blockades and protests have also been aimed at retailers. The NFU suggested last week the reversal of recent price cuts implemented by processors should be funded "from retailers margins".

In the last week, three of the retailers that have faced criticism for the price they pay - Asda, The Co-operative Group and Morrisons - have announced price increases.

Paice plans to meet retailers on Wednesday to discuss the future of the UK dairy sector. Greater sourcing and promotion of UK dairy products is on the agenda, Defra said.

Sectors: Dairy, Private label, Retail

Companies: Asda, The Co-operative Group, Morrisons

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