Has the dairy code made a difference?
The establishment of a dairy industry voluntary code of practice was hailed by some as a historic breakthrough for the British dairy industry. Six months down the line, has it made a difference and are farmers any better off?
For British dairy farmers 2012 will go down as the year the industry fought back. The SOS Dairy campaign united producers from across the country on one key issue – milk contracts. And born from that, the dairy industry voluntary code of practice emerged with promises of improved relations between producers and milk buyers, and a more transparent, fairer supply chain.
Six months on, as we approach the 1 April deadline for implementation, Farmers Weekly quizzed 10 key milk buyers about their commitment to the code.
Many will argue implementation has been slow so far, while others will hail it as a triumphant success. Those who have committed should be commended, but it needs to be made clear that unless there is universal adoption of the code, legislation still remains an option with DEFRA secretary Owen Paterson set to decide on the matter in the coming weeks.
The only way this code will work and bring real benefit to producers, is if every British dairy farmer familiarises themselves with the code. Be ready to ask your buyer if they have signed up and make sure you are clear on what they have committed to do.
Let’s not kid ourselves, the code was never designed to deliver better prices and anyone who thought it would add an extra 5p/litre on to their milk price will be deeply disappointed. The market will always drive price.
But more notice of price changes, the ability to leave at three months’ notice (following a price or schedule change) and the option to sign up to a formula-based contract, albeit for 12 months, are all positive steps forward, above all giving British dairy farmers more choice.
It would be a shame to get this far and not finish the race – keep the pressure on buyers and question those who haven’t signed up. Let 2013 go down in memory as the year dairy contracts changed.
Gemma Mackenzie
Deputy business editor
To see how the 10 key milk buyers stack up against the code of practice click here.
Principal components of the code
- For non-co-ops, including groups in transition to co-op status, where the buyer sets the milk price at their discretion:
- Gives producers the option of resigning with three months’ notice following a change to the base price, price adjustments or any contract clause that has a significant commercial implication on the producer.
- Puts in place a mechanism to engage in dialogue or consultation on price changes.
- For all purchasers, including co-ops, the code requires purchasers to:
- Give producers 30 days’ notice of any downward movement in the base price, variation to price adjustments or any contract clauses.
- Not to use retrospective price changes.
- When the buyer has more than 250 contracted farmers, they must provide a choice of contracts with different pricing mechanisms.
- Offer expanding producers a non-exclusive contract when the purchaser does not wish to take the additional milk on the same terms.
- Include an early termination clause which would enable producers to leave on not less than four weeks’ notice on payment of a penalty.
Source: Dairy UK
Dairy code – verdict
“There is a lot of work to do in the next few months which will define the success or failure of the code. It is essential the vast majority of processors commit, and just as importantly that their contracts and initiatives adhere to both the detail and spirit of the code. There is also commitment to ensure co-ops, who have a derogation freeing them from a three-month notice, have the democratic governance to justify the derogation.”
George Jamieson
NFU Scotland milk policy manager
“It’s a crunch period but so far it’s positive. At the end of the day we have effected real change in dairy contracts and it’s a confirmation that the policy is right and that dairy contracts need to change. The next step is to see farmers enjoying better conditions with the contractual relationships.”
Rob Newbery
NFU chief dairy adviser
“All the major companies are complying with the code but many are going way beyond that. A lot have not physically announced it and most are applying from 1 April. There will be a period of testing, asking is this right, are the farmers taking up the options? But where people are not implementing the code they say they have discussed it with farmers who want to continue with the way they are going. It has moved much further than I would have expected given the scale of what’s involved, and much further than any other country in the EU.”
Jim Begg
Dairy UK director general
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