NFU Scotland is calling for legislation to introduce compulsory milk contracts following what it calls the continued “procrastination” of milk processors in failing to implement the voluntary code of practice agreed in July.
The code allows dairy farmers to terminate a contract on three months’ notice but the union claims to have evidence that at least three major processors are refusing to release producers from longer-term contracts to allow them to switch to another processor.
Details of the voluntary code were thrashed out at an emergency meeting between producer and processor representatives chaired by the then minister of agriculture, Jim Paice, at the Royal Welsh Show. This followed weeks of protests, including a blockade of milk processing plants, by angry dairy farmers up in arms over planned cuts in the farmgate price of milk.
Paice formally announced agreement on the code at the Livestock Event at the NEC in Birmingham in September in his last act before being unceremoniously dumped by Prime Minister David Cameron in his government re-shuffle.
But NFU Scotland, who signed up to the agreement along with the NFU in England and Wales and DairyCo, is incensed that milk processors are “failing to honour their side of the bargain”.
The union wants the Scottish Government to set up an industry working group to consider options for compulsory milk contracts under the EU dairy package which is currently under consultation.
“Although the code of practice is voluntary, we believe it is agreed and in place and producers and processors must now honour it without procrastination,” said union vice-president Allan Bowie.
“We need real and transparent commitment from the vast majority of processors and leadership on the code from their organisation, Dairy UK. It has signed up to the code, which took well over a year to negotiate, and it is unacceptable if the code’s uptake stalls at the first hurdle.”
Bowie added: “The EU dairy package allows for the introduction of compulsory contracts between milk producer and buyer. We believe it is prudent that measures are taken now to look at the legislative basis for compulsory contracts should the voluntary approach fail. The code of practice is not off to a good start and we must be in a position to fully understand the options if it does not deliver.”
A key element of the code is that, where milk purchasers retain the right to set prices, then producers have the option of giving three months’ notice in the event of a price change.
With milk production in Scotland down 6 per cent, processors are becoming increasingly concerned about future milk supplies and will be reluctant to release producers from supply contracts.
Farmgate milk prices have recovered since the summer and further price rises are in the pipeline. Producers are looking for the upward trend to continue with milk production at its lowest level for 15 years and cream, butter and cheese prices recovering strongly.
The union has welcomed moves by Müller Wiseman and Dairy Crest to adopt a more objective pricing formula based on dairy market indicators and production costs.
Last month, the Scottish Government announced a strategic review of Scotland’s dairy sector which is being led by James Withers, chief executive of Scotland Food and Drink and former chief executive of NFU Scotland.
The aim is to achieve sustainable economic growth by exploring ways of adding value to dairy products and exploit market potential both at home and abroad.