Advancing Equity: Transforming Dairy Contracts in the UK
Source: The DairyNews
In three months' time, the UK dairy industry will undergo a significant transformation with the implementation of new regulations aimed at rectifying imbalances in contractual agreements between milk producers and purchasers.
Scheduled to take effect in early July, these regulations mark a departure from the voluntary dairy code of best practice introduced in 2012, evolving in response to the pressing need for legislative intervention to safeguard farmers from market volatility and unfair practices.
Despite partial support from processors, the absence of statutory measures left farmers vulnerable to abrupt changes in contract terms and pricing mechanisms, exacerbating challenges during periods of market downturns or business instability. The COVID-19 crisis laid bare these vulnerabilities, with farmers experiencing sudden price cuts, unilateral quota implementations, opaque pricing structures, and delayed payments.
Responding to mounting pressure from all four UK farming unions, the government initiated consultations leading to the formulation of the Fair Dealing Obligations (Milk) Regulations 2024. These regulations introduce mandatory minimum terms for dairy contracts, applicable to all cow's milk transactions, with future considerations for goats milk.
Key provisions of the legislation include:
Brian Walters, acting chair of the Farmers Union of Wales Milk and Dairy Produce committee, expressed optimism about the regulations, anticipating a fairer marketplace for milk sales across Great Britain, devoid of any disparities between regions.
Despite partial support from processors, the absence of statutory measures left farmers vulnerable to abrupt changes in contract terms and pricing mechanisms, exacerbating challenges during periods of market downturns or business instability. The COVID-19 crisis laid bare these vulnerabilities, with farmers experiencing sudden price cuts, unilateral quota implementations, opaque pricing structures, and delayed payments.
Responding to mounting pressure from all four UK farming unions, the government initiated consultations leading to the formulation of the Fair Dealing Obligations (Milk) Regulations 2024. These regulations introduce mandatory minimum terms for dairy contracts, applicable to all cow's milk transactions, with future considerations for goats milk.
Key provisions of the legislation include:
- Price Transparency: Farmers will benefit from enhanced clarity on pricing, with provisions allowing for various pricing mechanisms while ensuring that price adjustments align with agreed-upon factors. Additionally, farmers gain the authority to challenge pricing discrepancies through established processes, although the legislation refrains from dictating minimum prices.
- Cooling-off Periods: Contracts must incorporate a 21-day cooling-off period, enabling farmers to terminate agreements without penalty or liability, affording them adequate time for careful consideration and independent advice.
- Notice Periods: Defined notice periods are stipulated, mandating processors to provide farmers with a minimum of 12 months' notice for contract termination, reciprocated by farmers with a maximum of 12 months' notice. Flexibility is granted for expedited terminations under specific circumstances, such as payment defaults or insolvency.
- Contract Variations: Any alterations to the contract require mutual consent, preventing unilateral changes by milk buyers without farmer approval or representation.
- Exclusivity: Exclusive contracts, especially those with tiered pricing based on volume, are prohibited, granting farmers the freedom to engage with multiple buyers without restriction.
Brian Walters, acting chair of the Farmers Union of Wales Milk and Dairy Produce committee, expressed optimism about the regulations, anticipating a fairer marketplace for milk sales across Great Britain, devoid of any disparities between regions.
