Consultation to tackle supply chain issues across UK dairy sector launched

A consultation to tackle supply chain issues across the UK dairy sector and provide new fairer conditions for milk contracts has today been launched by UK Governments.

The Welsh, UK, Scottish and Northern Ireland Governments have worked together to launch the 12 week consultation which seeks to end any unfair practices within the sector.

Dairy farmers and processors are being consulted to explore whether regulations could be introduced to strengthen fairness and transparency. This includes the possible introduction of mandatory contracts within the dairy industry.

Currently, milk contracts are subject to a Voluntary Code which sets out minimum standards of good practice for contracts between producers and purchasers.

Evidence gathered during the Groceries Code Adjudicator Call for Evidence in 2016 highlighted a pattern of unfair and unclear practices in the dairy industry.  

This suggested unfairness in the supply chain caused by milk buyers having the power to set and modify the milk price in a contract, often with little notice.   Cost pressures from retailers have been able to be passed onto farmers, who are locked into long and inflexible contracts.

Proposals launched in today’s consultation include an option to introduce a mandatory pricing mechanism within all contracts between dairy farmers and processors.  It would ensure the price paid for milk produced by the farmer is formally agreed within the contract, and that contract negotiations are agreed in a clear, fair and transparent way.

Rural Affairs Minister, Lesley Griffiths, said: “The proposals we are consulting on today aim to ensure our dairy farmers get the fair price for their high quality produce they deserve and have fairer conditions for their milk contracts.   I urge the sector, farmers and anyone with an interest to get involved and have their say.

“Today’s consultation is just the latest action we are taking to support the sector during the challenging times of this pandemic.  We will continue to work with the sector during these unprecedented times, so together we can ensure a resilient future for our Welsh dairy industry.”

The consultation is open until 15 September.

The consultation follows a series of announcements aimed at supporting the sector during these challenging times, including:

• Launch of a dairy support scheme to support farmers hardest hit by the recent exceptional market conditions, which opened for applications on 18 June;
• A new consumer campaign, led by AHDB, to increase consumer demand for milk by 3%;
• The temporary relaxation of competition laws to enable greater collaboration so the sector, including dairy farmers and processors, can work closer to solve the differences between supply and demand; and
• Opening of the EU Public intervention and private storage aid for skimmed milk, butter and cheese.