NFU Scotland has called on milk processors and their representative body, Dairy UK, to recognise and operate to the voluntary Code of Practice (vCoP) for milk contracts.

The voluntary code was agreed by the whole industry in August and signed by key parties, including NFU Scotland, in September.  However, NFU Scotland is concerned that, when challenged by individual producers under the terms of the code, some processors are procrastinating over its use of the code.

The Union views that as unacceptable and deeply frustrating.

NFU Scotland has also spoken to the Scottish Government about the creation of an industry working group to consider the options for compulsory milk contracts in the dairy sector.  The Scottish Government is currently consulting on the EU Dairy Package, agreed last year.  Part of that package allows for the introduction of compulsory contracts between a milk producer and his buyer.

NFUS is committed to the delivery of vCoP but believes it is prudent that measures are taken now to look at a legislative basis should the voluntary approach fail.

Speaking in Edinburgh at the NFU Scotland Christmas Press Briefing, Vice President Allan Bowie said:
“NFU Scotland and others committed a great deal of time and effort into negotiating the voluntary Code of Practice for contractual relationships between a dairy farmer and their milk buyer.   Although the vCoP is voluntary, we believe it is agreed and in place and producers and processors must now honour it without procrastination.

“We need real and transparent commitment from the vast majority of processors and leadership on the code from their organisation, Dairy UK.  It has signed up to the code, which took well over a year in negotiation, and it is unacceptable if the code’s uptake stalls at the first hurdle.

“In particular, it was agreed that where milk purchasers retain the right to set prices then producers have the option of three months resignation in the event of a price change. Producers should not, in our view, take this step lightly but processors also have every opportunity to convince their suppliers of the justification for a price change and that their strategies will deliver for contracted producers.

“Given where production costs and milk supplies are heading, there is real and legitimate frustration amongst dairy farmers over price but we believe that dialogue and the code can be the route to resolve the issues and diffuse the tension. Processors have the opportunity to convince suppliers on strategy and price but, if unsatisfied, producers should be allowed to invoke the early termination clause within the code.

“VCoP is a well negotiated code that all parties have agreed to.  We are committed to making it work but we have stated on several occasions that we need to consider a legislative approach if the voluntary code is not taken up satisfactorily. If the vCoP delivers then we have lost nothing by examining the compulsory contract option, but if the vCoP does not deliver, we will at least be in a position to have a clear idea of the alternatives.

“The Scottish Government’s consultation on implementing the EU dairy package gives us the opportunity to put a working group in place now to consider contract options to provide a safety net and the basis of a legislative solution to milk contracts in the future should vCoP fail.

“NFU Scotland has been involved in the EU dairy package from its inception and while there are risks to the final text there are also opportunities. Both must be examined, as the vCoP is not off to a good start, and we must be in a position to fully understand the options if it does not deliver.

“We believe that an industry shift towards a formula approach to milk pricing goes hand-in-hand with adoption of vCoP and here there is genuine progress. There is encouraging signs that objective pricing formula’s looking at dairy market indicators and production costs could be delivered by Muller Wiseman and Dairy Crest in the near future.  That is real progress and vindication of NFU Scotland’s long campaign for these types of formula.

“The change can’t come quick enough.  Going into the New Year there is a realistic expectation that prices can and must rise further. The commodity market remains steady with gains in all products, including cream, butter and cheese.  Production is estimated to be at its lowest in 15 years. While the market must drive price rises, the supply chain must react urgently to the market and to the short and long term risk to supply.” 

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Contact Bob Carruth/Sarah Anderson on 0131 472 4006/4108