dairy crest lorry© Rex

The representative group for Dairy Crest farmers has passed a key inspection on the road to becoming the UK’s first dairy producer organisation (PO).

The RPA has confirmed Dairy Crest Direct (DCD), which represents 1,100 milk suppliers, meets the standards required.

Now DCD will draw up the actual shape of the new structure and propose the changes to its members.

See also: Dairy Crest formula price slides for March

A Westminster report into the dairy crisis in January recommended farmers take a stronger position in the supply chain by forming POs – legally constituted groups of producers.

In a similar report published last month, Scottish MSPs said the benefits of POs had not been “fully assessed”, suggesting government work with farming unions to help farmers break down any barriers to setting up groups.

DCD secretary Michael Masters said a producer organisation provided “rigour” and “structure” to support farmers, especially when market conditions were tough.

“It won’t make a massive change to any dairy farmers, but it enshrines aspects of the work we do and also that we are completely inside competition law.”

The rules around producer organisations were brought in with the EU “milk package”, a raft of measures introduced in 2012 ahead of quota abolition this year.

Every EU country could have one-third of its milk managed by POs, groups of at least 10 farmers or 6m litres.

Through an exemption from usual competition law, the PO can negotiate milk contracts or prices on behalf of its members.

It would not require investment like a co-op, but farmers would have to pay some kind of membership fee or levy to fund its operations.

While the structure has a long history in the UK fresh produce and fisheries sectors, no dairy POs have so far been set up.

The collective strength and independence of a PO could become important for Dairy Crest liquid suppliers, who will switch to Muller Wiseman if the proposed sale of Dairy Crest’s dairies division is approved by the competition authorities.