UK dairy processors and farmers have formally agreed a deal on a code of practice to govern relations in the sector.

A tentative “heads of agreement” on a voluntary code of practice was agreed in July after talks with the UK government. The discussions were held amid anger from farmers at cuts to the price of milk from the UK’s largest processors.

Formal agreement between Dairy UK, the NFU and the NFUS on the voluntary code of best practice on contractual relationships between milk buyers and dairy farmers was confirmed today (3 September).

“The code should also enable dairy farmers and processors to build relationships of trust and mutual understanding,” said Dairy UK director general Jim Begg. “Only on this basis can the industry create the added value that will protect it from price volatility. We would hope that the spirit of co-operation that has resulted in this agreement can be carried forward into the future.”

NFU dairy board chairman Mansel Raymond said the code is the culmination of “many months of hard work by all parties”.

“Getting this code agreed is the right footing to move forward with the industry on a robust and ambitious strategy for the dairy sector, which is a priority for us,” he said.

The code 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.

Final implementation of the voluntary code of practice is subject to legal approval.