Farming groups have hit out at proposals to water down legislation to improve fairness in dairy supply chains – just three months after its introduction.
The Fair Dealing Obligations (Milk) Regulations 2024 legislation and the creation of an Agricultural Supply Chain Adjudicator to oversee the regulations came into force in July, and includes mechanisms to introduce greater transparency on pricing, while giving farmers more protection from unfair practices.
The legislation seeks to tackle an “uneven” distribution of power in the dairy sector and followed a 10-year campaign for regulated dairy contracts to ensure farmers had better protection in their dealings with milk processors.
However, the new Labour government is considering amending a key clause to allow processors to offer tiered pricing to producers, dependent on seasonality.
Such a practice was inherently unfair, said NFU Dairy Board chair Paul Tompkins, and meant a milk purchaser had exclusive rights over “every drop of milk” even when it did not require that milk (for example in a period of high supply), and could decrease its milk price accordingly.
“A cornerstone of the new legislation was designed to sever this control over both price and volume, allowing a dairy farmer access to a non-exclusive agreement enabling them to be able to market some of their milk elsewhere when it is not desired by the primary purchaser,” said the UK’s four main farming unions in a letter to farming minister Daniel Zeichner last week.
Potential changes to the new rules could now effectively allow the milk buyer to discount certain litres of a farm’s milk, even where a contract was exclusive – abandoning a key measure in the legislation.
This went “against the principles of fair dealing”, behind the formulation of the legislation, suggested Tompkins, who also bemoaned the lack of consultation from Defra on the potential changes.
Read more: What will change under regulated dairy contracts?
“They’ve identified a problem and come up with a solution. But where is the discussion?” Tompkins asked.
Making such changes so soon after the legislation came into force – and while it was still being rolled out to those on newer contracts – did not “build confidence in the legislative process”, he added.
And with other sectors set to have fair dealing regulations imposed on them in the future, it could “instil nervousness” in the effectiveness of the regulations and the prospect they could also be watered down, Tompkins told The Grocer.
His comments were echoed in the letter to Zeichner, which added: “The UK farming unions have always believed that the ability for milk buyers to control both price and volumes of milk on a dairy farm should be separated.
“We cannot see any reason why anyone would object to a farmer being free to market their excess milk to a third party should their primary purchaser be discounting it,” it said.
“We share the minister’s desire to improve fairness in the dairy supply chain, but these proposed changes would act against the best interests of dairy farmers. That is why we have written to him seeking further clarification and a proposed solution without delay.”
In response, Defra said government was “listening to the farming community”, adding some commonplace practices, including a number of approaches to seasonal payments and volume efficiency bonuses “are currently affected by the regulations”.
Defra was “discussing an amendment with the industry, producers and purchasers and will provide more information in due course”, a spokeswoman said.
Processor industry body Dairy UK, meanwhile, told The Grocer it “welcomes the decision by Defra to amend the regulation” to address the use of seasonality payment systems and volume bonuses in the dairy sector.
“We’re pleased Defra has recognised that these practices are mutually beneficial to both farmers and processors, and we look forward to working closely with officials to bring clarity to this area as soon as possible,” said CEO Judith Bryans.
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