3 October 2012

2 minute read

Europe

Industry leaders agreed to the voluntary code at the end of August following months of talks with processors and farmers’ representatives. The code is designed to ensure balance in contractual terms for all parties.

NFU dairy board chairman Mansel Raymond said: “I am delighted that this important initiative is ready to use following months of hard work on all sides. The NFU has championed the need for improving dairy contracts and we’re very pleased that at long last there is light at the end of the tunnel so we can move forward with the industry on a robust and ambitious strategy for the dairy sector.

“We will now be pressing ahead with a number of briefings up and down the country so dairy farmers and processors can see the many beneficial terms of this code translated into beneficial terms in milk supply contracts.”

Dairy UK Director General Jim Begg said: "I am delighted that Dairy UK, on behalf of its members, has been able to reach agreement with the farming unions on the voluntary code. This important initiative builds upon existing arrangements, which give farmers and processors security in business relationships, while adding additional safeguards that will assure farmers that their contracts are not putting them at a disadvantage in the marketplace.

"The code should also enable dairy farmers and processors to build relationships of trust and mutual understanding. Only on this basis can the industry create the added value that will protect it from price volatility. We would hope that the spirit of co-operation that has resulted in this agreement can be carried forward into the future."

The voluntary code of practice includes:

• 30 days’ notice of change to a farmer's price or other contractual terms;
• A provision that where the buyer exercises discretion to change a farmers’ price or other contractual terms, the farmer can exercise a right to terminate the contract on the months’ notice if they disagree with the change.
• Encouragement for processors to engage with producers via democratically accountable and representative producer groups.
• Terms to ensure that where a producer wishes to expand production, if the buyer refuses to take the additional volume on the same/existing terms, then an option to supply to another buyer on a non-exclusive contract should be made.
• A review process to consider all aspects of the code, after 12 months. This will assess its efficacy in delivering better contracts. Defra will have access to the outcome of this review, when considering the need to implement the EU Commission package legislation on dairy contracts.

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