In 2012, a voluntary code was agreed by the UK dairy industry which set out minimum standards for contracts between producers and processors.Over the next few years, it became clear that the code was not working as intended and in 2018, the UK government committed to consult on a mandatory system of written contracts.
In 2012, a voluntary code was agreed by the UK dairy industry which set out minimum standards for contracts between producers and processors.
Over the next few years, it became clear that the code was not working as intended and in 2018, the UK government committed to consult on a mandatory system of written contracts.
That has finally morphed into The Fair Dealing Obligations (Milk) Regulations 2024, which came into force from 9 July 2024.
The regulations do not deal with a key long-term ask from the Ulster Farmers’ Union (UFU) for an end to the system of retrospective pricing in NI. There are also other parts of the new legislation not relevant to here, including a ban on two-tier pricing, where a processor pays a certain price for a fixed volume of milk and a different price for any milk over this volume.
However, there are two parts to the legislation that will significantly impact NI.
The first relates to a requirement that contracts clearly set out the factors that are used to determine the price paid for milk. Once a monthly price is set, a supplier can then ask for a written explanation as to how the price was determined and subsequently refer this explanation to an independent third party for a professional opinion.
None of this applies when a supplier to a processor is a “producer member”, so the likes of Dale Farm won’t have to include details around pricing and payment in their contract. However, other co-ops have a mix of members and non-members, which potentially creates a much greater administrative burden.
The second issue applies to everyone and relates to termination of contracts. A supplier does not have to give more than 12 months’ notice to terminate a contract. In addition, once a notice to terminate has been given, a processor cannot “alter the pricing method or price per unit of milk”.
In NI, various processors have “encouraged” suppliers to remain loyal by withholding certain bonuses from those who put a notice in to leave. That looks set to be illegal in the future (ultimately, it might have to be tested in a court of law).
The new legislation came into effect on 9 July 2024, but there is a 12-month transition period for existing contracts – everyone must be compliant with the rules by 9 July 2025.
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