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2 August 2011 | Angeline Albert
MPs are calling on the UK government to ensure buyers
offer dairy farmers written contracts that specify the milk price, volume and
timing of deliveries.
The demands came from the Environment, Food and Rural Affairs committee
(Efra),which published EU proposals for the dairy sectorand the future of the dairy industry last week. Nearly all UK milk producers
have a written contract with their buyer, but the Efra
committee said these generally do not meet the standards stipulated in the
European Commission’s (EC’s) milk package.
The MPs’ report identified a number of problems
with the vast majority of existing contracts. These included: confusing
pricing; buyers being able to change prices at short notice, or even
retrospectively, while farmers are locked in by long notice periods; and
volumes not being specified, which reduces the predictability of supply for
processors. MPs said farmers felt their existing contracts
allowed dairy processors to transfer the risks of market competition and price
volatility onto them.
The EC’s proposals for the sector, called The Milk
Package, contain “some good ideas”, but “offer
considerable scope for Defra [the Department for the Environment, Food and Rural Affairs] and
the industry to jointly establish a more effective system of raw milk
contracts”, according to the report.
The European Parliament Agriculture and
Rural Development committee discussed and amended the EC’s Milk Package on 27
June. Following this, Efra said Defra should make ensure raw
milk contracts include the four elements specified by the EC: price, volume,
timing of deliveries and duration. It also said the contract should make clear
under what conditions the agreement can be terminated by either party.
“Unless such contracts are made compulsory, we
believe there will be no improvement in the system that currently means our
dairy farmers have little certainty over the price they will receive for their
milk,” said Committee chairwoman Anne McIntosh MP. “Some core issues that lead
to low profitability must be resolved, not least the imbalance of bargaining
power between dairy farmers and buyers.”