The NFU said the actions of some buyers meant they had ’no choice but to call for the regulation of dairy contracts’.
Some milk buyers ‘cannot be trusted’ to deliver fair contract terms and have left the industry with no choice but to call for the regulation of dairy contracts.
Back in 2012, then Farming Minister Sir Jim Paice told the industry he would regulate dairy contracts using the EU Commission’s ‘dairy package’ in the Common Market Organisation Regulation (CMO) unless the industry tackled contracts without intervention.
But NFU dairy board chairman Michael Oakes said while the union had originally supported the voluntary code of practice and some buyers had ‘made great strides’ towards fairer contracts there was still bad practice from others.
He said the crashes over the last few years had shown how buyers will use contracts to their advantage to maintain their own margins.
“Dairy farmers have shouldered the burden of risk in the dairy market for too long," said Mr Oakes.
"We gave the voluntary code a good shot but it is clear some buyers just cannot be trusted to deliver fair contract terms and they continue to use and abuse farmers as a tool to manage their own business risk.
“So we have no choice but to call for the regulation of dairy contracts.”
The board has analysed the terms of more than 40 contracts given to them anonymously by producers which had ’some really strange things’ contained in them.
Mr Oakes added CMO provisions on dairy contracts at first glance read as ‘prescriptive and inflexible’.
But he wanted Defra to use these provisions as a framework, with clauses sitting below it delivering fair and equitable contract terms, not as a prescriptive list of what a contract should say.
He added buyers may say now finding a mechanism to prove contracts are fair was ’impossible’ but if it was law, they would find a way, as had happened in other European countries.
“As we leave the EU, the UK dairy market needs to be commercially focused, innovative and competitive,” he added.
“We are not going to get a properly operating dairy market while buyers live in the dark ages using unfair contracts to manage risk.”
He called on buyers to look to the future, operate ’proper commercial businesses’ and deal with farmers fairly.