Milk buyers will oppose end of discretionary payments

Milk processors have revealed their opposition to ending discretionary payments as part of forthcoming reform of contracts in the dairy sector.

Dairy UK, an umbrella group for an unknown number of processors, said its members are wholly opposed to moves that would end purchaser discretion (through mandatory fixed prices or the introduction of formulas).

Defra’s consultation on how to regulate contracts in the dairy industry closed this week.

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Dairy UK chief executive Judith Bryans said: “Removing price discretion will simply lead to more instability, risk, and insecurity for farmers as well as processors, creating a potential lose-lose scenario.

“It also risks causing a number of serious issues in terms of administration and investment for PLC’s and farmer co-ops.”

Dr Bryans said Dairy UK would support regulations to enforce the requirement for written contracts and an examination of issues such as termination clauses and dispute resolutions.

Prior to the Dairy UK statement, NFU dairy board chairman Michael Oakes said he had been encouraged by extracts the union had seen from some processors’ consultation submissions.

He said parts of the industry had moved in the past two years from outright opposition to change to acceptance that it was highly likely and they needed to be a part of it.

“We are getting processors that are not opposing legislation but want to work with us,” he said. “It is very hard to argue that the situation we have now is perfect.”

The NFU says discretionary pricing should be replaced by a fixed price for the duration of a contract, or a pricing mechanism based on objective and verifiable criteria, which have been clearly communicated to the dairy farmer before a contract is signed.

This will allow risk to be shared and drive investment in the industry, it said.

Defra is obliged to publish a summary of responses to the consultation within 12 weeks.

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