Spanish dairy producers and processors have overcome initial caution and concerns over their mandatory contracts – and can show the UK industry how to make them a success.
NFU Scotland vice-president Gary Mitchell travelled to Madrid to see how they work, as the UK moves towards its own mandatory contracts.
While the UK opted for a voluntary code on contracts, the Spanish government had encouraged uptake of all three measures allowable under the 2012 EU Dairy Package.
These allowed for compulsory regulated contracts, increasing the scale and effectiveness of Dairy Producer Organisations (DPOs) and developing cross sector bodies including producers, processors and retailers known as Interbranch Organisations.
It comes after Dairy UK chairman Paul Vernon raised concerns the contracts would create less certainty and more volatility for farmers.
Mr Mitchell said the UK’s voluntary code had underachieved, with DPOs not developed in the UK and no interbranch organisations.
“All parties in Spain have overcome initial caution and concerns and see the introduction of mandatory contracts as a positive step,” he said.
“The result is that all milk sold in Spain is now under a contract that has been agreed and overseen.”
He added there was still friction but it had increased stability and clarity as well as creating meaningful dialogue.
And progress in the UK could be able to be made with George Eustace reportedly in favour of mandatory contracts supported by better producer collaboration and Groceries Code Adjudicator (GCA) Christine Tacon calling for their adoption.
Mr Mitchell said: “These may be the most significant initiatives in the UK dairy sector for a generation. Our plea is that farmers and processors engage with them seriously.”