The use of aligned contracts in dairying is ‘pitching farmer against farmer’ and should serve as a warning to other sectors mooting the introduction of a similar system.
NFU Scotland’s AGM heard aligned contracts had caused ‘rifts’ among the dairy farming community, due to the fact some producers received a milk price 50 per cent higher or lower than their neighbours.
Dairy producers used the AGM to warn those in the beef and lamb sector to think carefully about whether aligned contract agreements could cause more harm than good.
Ayr dairy farmer Alan Hutton said: “I am fortunate to be on an aligned contract. My friends and neighbours on non-aligned contracts are being shafted. If you change to the aligned contract system we have in the dairy sector, you will lose out like we have.”
Mr Hutton said it often meant only 5 per cent of producers received the ‘top price’, for example 30ppl for milk, and the rest ‘scraped by’ with 13ppl or less.
Kenneth Campbell, Dumfries and Galloway, highlighted Tesco’s decision last month to move a significant volume of milk supply from Arla to Muller, adding ‘it was all about price’.
He said: “Whoever puts milk into the store cheapest will get it.
“Some [dairy producers] are getting 30ppl and some are getting 13ppl. You could not have designed it any better to split the industry in two.”
Dairy farmer Willy Kerr added: “The pressure of 30ppl against 13ppl is causing a complete rift among farmers. It is pitching farmers against farmers.”
Ben Jack, Fife, who supplies Sainsbury’s, said he did not think farmers had ‘any choice’ but to sign up to agreements with supermarkets.
He added: “If Tesco and Sainsbury’s shut up the aligned contracts, we would all be on 13ppl. I do not see how knocking everyone down to the bottom helps anybody.”
Dairy farmer Douglas Kerr said he was concerned supermarkets could use the system to dominate farmers and ‘continue to put the squeeze on you and only give you just enough to survive.’
Scottish Beef Association chairman Scott Henderson said what was happening in the dairy sector ‘should serve as a warning’ to the red meat industry, but added it was in producers’ interest to look into the aligned contract model.