Dairy farmer working in the parlour©Juice/Rex

The EU must push the dairy industry towards more long-term contracts, a report has urged.

Contracts that offer forward-pricing, fixed margins, A and B formulas and the chance to lock-in a certain milk price could help farmers ride out damaging volatility, it found.

The draft report, prepared by Northern Ireland MEP Jim Nicholson for the European parliament’s agriculture committee, called on the commission to explore the potential of such deals, especially with milk quotas ending in April.

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“Long-term planning and farm management to manage volatility is more important than ever and through contracts the competitiveness and sustainability of the sector for farmers and for supply could be strengthened,” the report said.

Mr Nicholson’s report said the implementation of the milk package, a raft of laws to help dairy farmers passed in 2012, was “uneven” and “disappointing”.

It said efforts should be made to explore why farmers were not keen to form producer organisations, groups who can negotiate milk contracts for their members.

The milk market observatory, a hub of dairy data from across Europe, should also be more user friendly and up to date, the report found. This would mean its information could be used in contracts or to create tradeable derivatives.

Other recommendations included raising the intervention milk price and putting extra effort into finding new export markets.

MEPs will now amend the report and Mr Nicholson is also calling for anyone interested to send in their suggestions, which could be included in the final document.

Mr Nicholson said he wanted to make sure there were “enough tools in the box” to cope with volatility in the post-quota era.

The report is available at www.jim-nicholson.eu and comments should be emailed to james.nicholson-office@europarl.europa.eu by 23 March.