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Paice Challenged to Tackle Milk Pricing Debacle

NFU Scotland has written to Defra Minister Jim Paice and urged him to consider a legislative route to tackle the damage that the discretionary pricing policy adopted by milk processors is having on the sector.

Current milk contract arrangements mean that milk processors can alter the price paid to their dairy farmer suppliers virtually overnight and with little or no consultation or justification.  That discretionary approach to milk pricing has given milk processors the power to announce cumulative price cuts that could, by August 1, wipe up to 4p per litre off the price received by many dairy farmers.

The recent round of milk price cuts has heightened pressures on dairy farmers and, unless reversed, will create real economic problems for many producers.   More than 350 Scottish dairy farmers attended a crisis meeting in Lanark last week and other Scottish farmers made the trip to a national demonstration at Westminster last Wednesday to vent their anger on the cuts.

NFUS, along with others, have called for milk prices to be reinstated before August 1 and for an effective code of practice for the sector to be nailed down.  If the way milk prices are set isn’t included within the code, then NFUS is adamant that legislation must be considered.

In his letter to Defra Minister Jim Paice, NFUS President Nigel Miller said:
 
“The pricing mechanism is the fundamental basis of the contract between producer and processor and is at the heart of the present crisis.  

“Discretionary pricing is a barrier to a better future and, in a supply chain where any residual trust has been cut away over recent weeks, it is now imperative that the discretionary pricing power held by the processor is addressed.  

“I appreciate that pricing has been excluded from the discussion that has developed the voluntary code of practice in an effort to secure progress.   That approach is no longer viable unless determining price is subject to a legislative solution.

“In the present economic and political environment discretionary pricing is no longer a viable foundation for the future.   There is an opportunity now to adopt agreed transparent, objective pricing formulae as part of a robust voluntary code; if that route is not possible then it is essential to action the European dairy package to require compulsory contracts based on agreed pricing formulae.  
 
“Defra has a pivotal role in facilitating this process and determining which route plan is adopted in moving the industry to an agreed objective formula based pricing.   That change can provide the foundation for a positive future and growth of both primary production and the processing sector while providing a route out of the present conflict.” 

Ends

Contact Bob Carruth on 0131 472 4006

Date Published:

News Article No.: 69/12


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