Farm minister Jim Paice has called for a “final push” for a voluntary code of practice between milk producers and dairy processors.
The manner of recent cuts to farm gate milk prices has been a real concern, Mr Paice will tell delegates at a Dairy UK dinner in London on Thursday (14 June).
“In a volatile market everybody knows prices will go up and down,” Mr Paice will say.
“The key is for us to build trust and transparency, so that farmers and processors can work together and take advantage of the huge business opportunities both here and abroad.”
Mr Paice will say he has been “extremely impressed” by progress in negotiations since he challenged the dairy sector to agree a voluntary code at the same event a year ago.
But farmers must be allowed to resign from contracts within a more reasonable timeframe – especially when price changes are out of kilter with the prevailing market place.
It is hard for buyers to justify giving farmers such short notice of recent price cuts, especially when many producers were locked into the new price for another year, Mr Paice will say.
A round of cuts initiated by Dairy Crest has seen milk prices slashed by some 2ppl this spring. Some producers are typically receiving 27ppl for milk which costs 30ppl to produce.
But Mr Paice will say that farmers should also realise that in a volatile market prices would and must go up and down.
The key issue should be about trust and the way the industry worked together, rather than a simplistic view of controlling prices, he will tell his audience.
“A voluntary code of practice will mean people having to do things slightly differently – but it will ultimately benefit the industry as a whole.
“I implore all sides to make a final push and agree a workable compromise.”
Rather than a formula or static milk price, Mr Paice believes farmers need a contract that oversees a fair relationship and a price that is explained to them transparently.
But he will also point out that this is a two way street and that processors need to be able to respond to market conditions such as changes in price or demand.
Therefore processors are seeking security of supply – so that farmers had no reason to stop supplying them even when prevailing market prices change.