NFU Tells MPs Dairy Pricing System Is 'Exploitative'
UK - The NFU's Director of Corporate Affairs has told MPs that many UK milk contracts are 'exploitative' and added that recent EU proposals would go some way to addressing unfairness.
3 May 2011
2 minute read
An hour-long evidence session took place on 27 April as part of an inquiry by the House of Commons EFRA select committee into the recent package of measures proposed by the EU Commission to strengthen the position of farmers.
In its written evidence, the NFU argued that dairy contracts were unbalanced and unfair in requiring farmers to sell all their milk to one buyer typically for no less than 12 months and without any clarity of the base price they would receive.
As such, the system exploited the weakness of farmers as sellers of raw milk. Despite efforts to improve things, milk purchasers have generally been reluctant to concede their dominant position, which allows them to adjust prices.
Consequently regulation was needed in order to bring more balance to contracts and give farmers some predictability in terms of pricing arrangements.
The NFU's Tom Hind added that the phasing out of milk quotas, while welcome, could lead to a further transfer of bargaining power to milk purchasers. He added that proposals to allow farmer groups to form producer organisations to negotiate contracts collectively may also bring some opportunities, but that the EU proposals were no panacea.
The role of government, he said, was in setting the policy framework and in supporting contractual codes, improving negotiating skills and improving the labelling of dairy products.
Also giving evidence, Dairy UK countered the NFU's argument that the dairy market in the UK demonstrated a systemic failure, arguing that prices reflect markets, yet neglecting the fact that UK milk prices languish 23 out of 27 countries and are some way behind current commodity market indicators.
They also argued that the EU's proposals would harm innovation and reduce flexibility.
This week, the Committee will hear evidence from the EU Commission and the Co-op. The evidence comes just as the NFU has launched a major campaign to encourage the British government to get behind the EU's desire to see fairer contracts.
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