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

A “heads of agreement” on a voluntary code of practice was agreed today (23 July) after talks with the UK government.

The talks were held amid anger from farmers at recent cuts to the price of milk from the UK’s largest processors. 

Farmers, who say the cuts will mean they will lose money from producing milk, have blockaded processors’ depots and retail distribution sites in protest and threatened disruption to supplies of the cuts were not reversed by the start of next month.

Dairy UK, the organisation representing dairy processors in the country, said: “We are very pleased that Heads of Agreement have been reached on the voluntary code of practice. There is now a lot of work to be done in taking the code to the implementation stage and we are committed to doing this.”

UK farming minister Jim Paice consulted with his counterparts within Scotland’s and Wales’ devolved administrations ahead of the talks.

Reflecting on the agreement, Scotland’s Farming Secretary Richard Lochhead said: “Today’s agreement is a good step forward which addresses some of the most important issues, but our dairy sector is not out of the woods just yet. The test of success for our farmers will be when we see them being paid a decent return – and certainly one that is above the cost of production. There is still much work to do and we will continue with our plans to consult on legislation, the opportunity for which stems from the recent EU dairy package.”

The catalyst for the protests was a series of price cuts from the UK’s largest dairy processors. Dairy Crest, Arla Foods and Robert Wiseman have announced a series of price cuts that are set to take the farmgate price of milk down by 3.65 to four pence per litre on 1 August.

Farmers have blockaded processors’ depots, as well as retail distribution sites and stores in protest.

The processors are yet to reverse their cuts. Dairy Crest told just-food last week it was struggling to make its dairies business profitable amid a slump in the price of cream on international markets.

The National Farmers Union has called on any prices increases to be funded from retailers’ margins, as farmers concede milk processors are also facing significant margin pressure and struggling to turn a profit.

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.