October 21, 2011


Defra: Compulsory contracts cannot solve UK's dairy woes



Defra has again stated its unwillingness to adopt EU proposals requiring compulsory milk contracts, asserting that a voluntary, industry-led approach will deliver better results.


In a report in July, the Environment, Food and Rural Affairs Committee (EFRA) recommended that Defra should make it compulsory for producers to be offered a written contract.


It said the contracts should include the four elements specified by the Commission - price, volume, timing of deliveries, and duration - as well as making it clear under what conditions contracts can be terminated by either party and discouraging exclusivity clauses.


However, in its response published today, Defra said the Government would be unable to add any conditions to those set out by the Commission, under the proposals.


"The Government could not, therefore, prescribe in any way how elements such as price should be determined. We could not, under the proposals, address through regulation the issue of exclusivity clauses, nor could we determine that notice periods should be longer or shorter," Defra said.


Defra said it would, as required, consult on the policy if the Commission ultimately gives member states the option of making contracts compulsory.


However, Farming Minister Jim Paice is 'strongly encouraging' the industry to produce its own voluntary code of practice on contractual relationships.


The two industry organisations leading the process, the NFU and Dairy UK, representing processors, are set to update Mr Paice on progress at a Dairy Supply Chain Forum meeting in November.


In its EFRA response, Defra said this voluntary approach 'should offer quicker and more substantial results than relying on the EU regulation'.


Defra said the Government was taking a number of other steps to 'support a sustainable UK dairy industry', including 'generating voluntary principles for labelling', supporting industry collaboration through the Dairy 2020 project, investing in relevant research and addressing the regulatory burden through the red tape task force.


"However, regulation and Government intervention cannot and should not form the whole solution and the industry has a crucial part to play," Defra said.


Mr Paice said Defra was "working with farmers, suppliers and processors to maximise the potential of UK dairying".


"But the industry itself is ultimately responsible for its own future," he said. "The industry should be constantly on the lookout for new ways to grow - increasing the amount of British milk used in products consumed here, chasing new opportunities to increase the amount we export and spotting gaps in the market."


NFU chief dairy adviser, Rob Newbery, said, "The NFU is committed to giving the voluntary code a chance, but if it doesn't deliver the balance in contracts that farmers need, a balance the EFRA select committee recognised was needed, the Government must not rule out legislation."

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