UK FARM unions have been pushing hard for the introduction of compulsory contracts setting out terms between milk producers and processors – but some within the industry have warned that forcing the issue could lead to 'disaster' for dairy farmers.

The contract call was kicked-started by dairy representatives from NFU Scotland, NFU England and Wales, the Ulster Farmers Union and NFU Cymru at a meeting Birmingham. NFUS milk committee chairman John Smith told The Scottish Farmer: “Scotland and the rest of the UK is a good place for dairying for all involved, but the current situation with regard to pricing is far from fair.

“We have to redress the balance of influence and power of the milk buyers and supermarkets, and we believe the way to do this is having compulsory milk contracts which we would like to see in place by the end of this year.

“Last year Lactalis gave its farmers a contract for a year in advance which was well accepted," noted Mr Smith. "It’s all about farmers knowing what their price will be, while at the same time buyers need to know what volumes they can expect."

All four UK farming unions have welcomed the fact that the government had listened to their call, in the Grocery Code Adjudicator consultation, for a fairer supply chain, alongside Defra’s recognition of the need for more balanced contracts between farmers and first purchasers.

“That said, the blunt wording of the current EU regulation on milk contracts isn’t suitable for our diverse UK dairy industry – this is one of the reasons the UK opted for the voluntary code of conduct for contracts when the EU regulation first came into force," said Mr Smith.

"Rather than rush through a text developed for the whole EU dairy sector, we would rather work with government on improving this text to achieve better results for UK dairy farmers and dairy processors. This needs to go hand in hand with better farmer representation and better market data. These are three corners of a triangle that will help ensure more fairness in the supply chain – the ultimate goal of government and the farming unions. Regulating on one of these areas isn’t sufficient."

But dairy industry analyst Ian Potter suggested the idea of compulsory contracts was a non-starter. Mr Potter said: “Compulsory contracts forced through at short notice with minimal consultation will in my opinion be a disaster for UK dairy farmers.

“The notion that Muller, Arla or any of our milk purchasers will be able to operate on either a transparent formula, or a fixed price with the condition that if either changes it will require agreement or a new contract is almost farcical," he said.

“In fact I can’t even imagine the dairy contract missionaries within any of the NFUs seriously think this would be of benefit to dairy farmers. It is madness, ill conceived and should be binned as soon as possible before it inflicts financial damage.”

A spokesman for Dairy UK said: “Dairy processors want to see the dairy sector work with governments of the UK to ensure any regulatory framework meets the needs of the industry. Any future framework has to give purchasers the flexibility to operate effectively in a dynamic and competitive market place whilst addressing producer concerns over stability within contract terms.

“The post-Brexit environment will be a challenging time for the sector and it cannot afford to be disadvantaged by an EU regulatory framework that is not compatible with its needs," added the spokesman.