Efra demands fairer deal for dairy farmers

2 August 2011

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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.”

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