Farming organisations agree that work needed to improve milk contracts

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A working group of farming organisations has met to assess the current state of the dairy sector and to review areas where they can work collaboratively.

Representatives from the NFU, CLA, Farmers for Action, National Farmers’ Union of Scotland, NFU Cymru, the Royal Association of British Dairy Farmers and the Tenant Farmers’ Association agreed that in the current market situation, it is vital that risk is shared fairly within the supply chain.

A spokesperson added: “Wholesale commodity markets are still incredibly weak and prospects of any recovery in 2015 are looking increasingly less reliable and the working group agreed that an upturn is desperately needed. But the UK has become more exposed to global pricing, which has been hampered by political events including the Russian ban and a decline in purchasing from large markets. All parties present acknowledged the need for better risk management tools in order to overcome these issues now and into the future.

“A and B contracts have been touted as one potential solution. However, it is clear from the range that we have seen thrust in front of farmers this spring that they have been brought in with little or no discussion with farmers themselves. All dairy contracts should help develop long-term relationships and not be undermined by speculative market manoeuvring by certain processors making opportunistic purchases of milk on the spot market. We also need to develop other ways of managing risk including formulaic pricing mechanisms, longer term fixed price contracts and the ability to utilise futures markets and prices.

“Clearly, what is needed is a proper discussion within the industry on how all these mechanisms can be used to best effect and the organisations listed above will meet again towards the end of the month to assess this further,” the spokesperson concluded.