Code of practice deal gives farmers hope of ‘sensible’ milk prices

By Alistair Munro
Published on 23/07/2012 22:46

SCOTTISH dairy farmers may have a better deal for their produce after a “code of practice” was agreed between producers and processors.

• Balance of relationship between farmers, producers and retailers needs addressing with either a code of practice or, failing that, new laws, say ministers

The agreement relates to a voluntary code of practice designed to give farmers more bargaining power.

It means firms buying milk, such as big supermarkets, would give a “sensible” notice period when changing their prices – so farmers would have enough time to opt out of any deals.

Government officials said they could still bring in legislation at a later date if the code failed to work, but admitted ministers would still not be able to dictate prices.

National Farming Union (NFU) president Peter Kendall said while the announcement gave some hope for the long term, it did not solve the issues farmers faced on a daily basis.

He added: “This agreement will give us the architecture we need to make sure that we don’t end up with the same dysfunctional markets that are responsible for the dairy crisis we have today.”

Farmers say they need at least 32p per litre to meet cost of production.

Some supermarkets, such as Asda, are only paying 27p per litre.

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.”

UK farming minister Jim Paice yesterday chaired a meeting between the National Farmers Union and Dairy UK, at the Royal Welsh Show, in Powys.

The meeting followed protests over the price farmers are being paid for milk.

Dairy UK said it was “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,” it said.

The farmers’ anger centred on cuts of up to 2p per litre in the amount they receive from major milk processors, set to come in from 1 August.

The processors had said they had no choice because the price they could sell certain dairy products for on the commodities market had fallen sharply in the past 12 to 18 months.

Prior to yesterday’s “agreement”, Mr Lochhead said that legislation should be considered to protect dairy farmers from exploitation by processors and supermarkets.

Dairy industry expert Ian Potter says farmers lose money on milk production as many are often locked into fixed-term contracts with processing firms – effectively middlemen selling the milk on to customers including retailers and food production companies.

Supermarkets assess how much it costs farmers to produce milk and then decide how much to pay above that as a premium, taking into account factors such as rising feed prices.

Campaign group Farmers for Action has warned that cuts in the price paid to suppliers by dairy processors, combined with rising feed costs, could force hundreds of dairy farmers out of business.