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The long-awaited new regulations were designed to ’promote fairness and transparency across the dairy sector’, Defra said

Dairy farmers will be able to challenge the price they are paid by processors and retailers for their milk for the first time as part of far-reaching reforms to the dairy sector announced by the government today.

The long-awaited new regulations – calls for which intensified in 2020 after milk prices crashed in the wake of the first Covid lockdown – were designed to “promote fairness and transparency across the dairy sector”, Defra said.

Farmers will be given clearer pricing terms, with contracts having to set out the factors which generate a milk price. And they will also be able to challenge prices “if they feel this process isn’t being followed”, Defra added, “in a major advance in transparency” that addressed “historical discrepancies” in the dairy industry.

Buyers will also be barred from making changes to contracts without the agreement of farmers, in a move that would encourage dialogue between the parties where changes do need to be made – improving trust within the supply chain, Defra claimed.

Contracts will include a straightforward way to raise concerns about their terms, promoting accountability and timely issue resolution, it added. There would also be clear rules on notice periods and contractual exclusivity – “protecting the rights of both buyers and sellers”.

This would remove any ambiguity from contracts and protect the rights of both buyers and sellers, Defra said.

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Additionally, an enforcement mechanism had been created in the new regulations to guarantee they would be followed, “ensuring a fully fair and transparent dairy industry on a solid foundation to thrive in the future”.

A statutory instrument enabling the new regulations is scheduled to be laid before parliament later this year.

The unveiling of the new regulations caps off several years of campaigning by farmers for government intervention over milk pricing and the regulation of contractual relations between milk buyers and sellers.

They will supersede a voluntary code of conduct long seen within the sector as not being fit for purpose. It follows a 12-week consultation into tackling unfair practices across the sector in 2020 that confirmed “imbalances of power within the dairy supply chain were believed to be causing instability for dairy farmers, such as where milk buyers have the ability to set and modify the terms of a contract at short notice”, Defra said at the time.

It added this week that it had taken on-board feedback from farmers and processors to ensure the reforms addressed previous concerns and provided tailored support for those in the industry.

“Farmers must be paid a fair price for their produce and these regulations will provide price certainty and stability for farmers by establishing written milk purchase agreements with clear and unambiguous terms,” said farming minister Mark Spencer.

“This represents a key milestone in our commitment to promote fairness and transparency across food supply chains to support farmers and build a stronger future for the industry, and will be followed by reviews into the egg and horticulture sector supply chains this autumn.”

Defra unveiled similar regulations promoting fairness in the pig supply chain in April.

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“These new regulations mark a significant step forward in the government’s efforts to increase fairness and transparency in the dairy supply chain,” said NFU dairy board chair Michael Oakes.

“For a long time, unfair milk contracts have held British dairy businesses back, and these changes will give dairy farmers much-needed business security and confidence, as well as helping to share risk along the dairy supply chain.

“This announcement signals that we are on the right path to building a stronger, more resilient future for the British dairy sector. We will continue to work with the government and wider industry to not only benefit farm businesses and the supply chain, but the millions of people who value access to quality, sustainable, nutritious British milk.”

A Dairy UK spokesperson said the industry body had “always believed regulation should strike the right balance between greater transparency and maintaining the flexibility the industry needs to compete in a volatile and increasingly competitive marketplace”.

It “appreciated the engagement provided by Defra during the development of the regulation” and looked forward to seeing the final statutory instrument “and to continuing to work with Defra on the implementation of the regulation”.