Dairy farmers should be given more power to negotiate contract terms and the whole supply chain should react better to market signals, according to an EU report published this week.

The High Level Group on milk identified a number of areas that the European Commission should address in order to support the long-term future of the dairy sector.

It acknowledged there was an imbalance in bargaining power between farmers and dairies and advised the EC to consider new laws that allowed producer organisations to negotiate contract terms, including price, jointly for some or all of its members’ production.

It also said price transparency and price transmission in the dairy sector were “not functioning optimally” and the dairy supply chain should react better to supply and demand – a key point made by the NFU recently when it called for processors to pass on higher commodity prices.

Existing market support measures (intervention, private storage for butter and export refunds) were appropriate safety nets, the HLG said, but it invited the Commission to explore new “WTO green box compatible” instruments, such as futures markets, for reducing income volatility post-CAP reform.

European farmers’ body COPA broadly welcomed the recommendations and urged the EU Commission to rapidly come forward with concrete proposals.

Dairy UK director general Jim Begg called the report a “defining document” but warned that the Commission should not introduce “retrograde measures” on the UK that could harm the dairy industry or distort the market.

“A lot of the recommendations of the HLEG, such as those on contracts and producer organisations, are intended to address issues in other member states.

“We have some of the most sophisticated and advanced contractual relationships in Europe and it would be quite wrong to jeopardise the growing spirit of co-operation and dialogue throughout the supply chain.”