Long-term contracts awarded by supermarkets to liquid milk processors mean there is no excuse for instability in the milk price paid to dairy farmers, according to the NFU.
In a new strategy document, A Vision for the Dairy Industry, the NFU suggests retailers could build in a guaranteed price for farmers when they negotiate deals with processors.
In the document,the NFU says: “We have concerns that with the advent of decoupling, many dairy farmers may choose not to produce milk unless they can receive some advance guarantee about returns.”
The NFU praised the single supplier arrangement between Arla Foods UK and Asda, which
draws its milk from a dedicated pool of farmers, for bringing the retailer closer to producers.
But it was still concerned that dairy farmers were excluded by processors and retailers from the decision making process when it came to determining milk prices. “All negotiations should be tripartite,” said chief dairy adviser Tom Hind.
The NFU said in future dairy farmers could organise themselves into groups to sell milk directly to retailers, with processors becoming little more than contract manufacturers.
The NFU criticised processors for showing a lack of interest in value chain analysis work being carried out by the Food Chain Centre. “Processors should seek to benchmark their costs against EU competitors,” said Hind.
In another paper, levy body the Milk Development Council outlined eight guiding principles it said should be considered by all parties before any contract between farmers and processors is drawn up.
The MDC said farmers should be paid a price that better reflected the end-use for the milk they were producing.
Richard Clarke