Dairy Crest farmers have officially launched the UK’s first dairy producer organisation (DPO), which will let them collectively bargain milk contracts and prices with the processor.
Suppliers’ group Dairy Crest Direct unveiled final details of the plan at the Farmers Club on Wednesday (20 May), explaining it would take its new form from July.
The DPO gives legal backing to the representative body, which works with Dairy Crest on behalf of its 1,050 farmers and is fully independent.
DPOs have been heralded as a way of helping producers who sell to private processors by exempting an elected organisation from competition laws to negotiate milk contracts and prices.
The groups are allowed to cover as much as one-third of the UK’s milk, about 4.5bn litres.
But none has been set up in the country until now, despite the EU introducing the structure back in 2012.
DCD chairman David Herdman said the new structure would build on his group’s current advantages.
It would also work on new contract options for farmers, such as building elements of futures pricing into deals.
“The DPO will provide the authority and strengthen the negotiating process,” he said.
“It provides farmers within the DPO with accountability. And it helps to future-proof farmer representation in an evolving market. We all accept there are extreme pressures on farms today as we experience the roller-coaster of market volatility.”
DCD, which was formed in 2004, started work on converting to the new structure last year, when it was awarded £110,000 grant funding from the government’s £5m dairy fund.
Final approval was granted from the RPA on 26 February, after months of back-room work.
The next hurdle will be getting farmers to sign up to the DPO, which will start with member meetings in the coming weeks.
Further ahead, more than two-thirds of Dairy Crest farmers will switch to Muller Wiseman if the purchase of its rival’s dairies division is approved by the competition authorities.
Processors are not legally obliged to recognise DPOs and negotiate through them, though Dairy Crest has worked closely with DCD on their development in the past year.
Defra head of dairy policy Mark Filley said DCD were building on strong foundations and a good track record.
“This is a very interesting step forward in the development of the industry,” he said.
“It is able to provide a bit more structure and support for farmers, particularly in difficult times.”