Wednesday, July 6, 2022

UK dairy industry code of conduct reviewed

A review of the UK dairy industry’s voluntary code has recently been published. The code was first put into place after the milk crisis in late 2012, and aims to deliver greater transparency and predictability in milk pricing arrangements, as well as to deepen supply relationships. 

The recent review was led by the Rt. Hon. Alex Fergusson MSP. It is reported that the outcome of the review was minor. One of the additions was of a 'good practice' clause where producers should be made fully aware of their contract details.

While the code has been hailed as a positive development, it has not had significant uptake. Mr Fergusson recently stated that the code's 'major weakness' is that it has not been utilised enough, by dairy farmers or milk buyers and processors.

DairyUK summarizes the code's contents as giving dairy farmers:

  • Thirty days notice of any price change.
  • A non-exclusive contract if they want to expand their businesses when the purchaser did not want to take the additional milk.
  • A choice of different price mechanisms that they could choose from when the purchaser is obtaining milk from more than 250 farmers.
  • The opportunity to terminate their relationship with their purchasers early on payment of a penalty.
  • Automatic release from insolvent purchasers.
  • No retrospective price changes.

It is reported that points raised in the recent review include:

  • 30 days’ notice of a price change should only be required in the case of a price decrease
  • A “good practice clause” should be added that says producers should be made fully aware of the details of their contract
  • Payment of liquidated damages when a contract is terminated should be set out in the contract if it is allowed
  • If a farmer wants to up production, the current processor should have the first chance to buy that milk, as long as it is under the same terms and conditions.

Click here to visit Dairy UK's website to learn more about the code.

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