Unravel the complexities of new UK dairy industry regulations with our guide. Will your contracts need changes? Find out now.
Imagine, new regulations are going to be your shield against unfair contracts if you’re a milk producer or purchaser in the UK. These measures have been brewing for a while, and they are set to come into effect in three months. Originating from the Voluntary Dairy Code of Best Practice on Contractual Relationships introduced in 2012, the new legislation addresses concerns over contractual arrangements in the dairy sector, particularly those susceptible to shifts in market conditions.
Whether you are a dairy farmer subjected to whimsical contract alterations or a purchaser struggling with pricing mechanisms in uncertain business conditions, these regulations promise a breath of fresh air. In recent history, instances like the COVID-19 crisis magnified these issues, as reported by the National Farmers’ Union. From unwarranted price cuts to delayed payments and a lack of transparency in pricing – you might have seen them all.
In the wake of these challenges, the government drew up the Fair Dealing Obligations (Milk) Regulations 2024, enforcing mandatory minimum terms for dairy contracts and significantly altering the contractual climate of the dairy industry.
Curious about the areas covered by this legislation? Here they are:
- Price Transparency: Transparency in milk pricing, ensured by the new regulations, offers immense value to you as a farmer. With a variety of pricing mechanisms now at your disposal, you have the flexibility to set the price of milk in various ways. So, if you’re dealing with a variable price contract, mechanisms have been established under the law to ensure that the price can only fluctuate based on pre-agreed factors. Rest assured, these legal protections allow you to challenge prices if you believe they have been set unfairly or without following due process. However, remember that these laws only facilitate transparency and fairness rather than regulating the exact prices. They don’t imply minimum price mandates, hence, preserving the sanctity of market dynamics.
- Cooling-off Periods: Talking specifically about cooling-off periods, these are set to become a game changer in the dairy farmer’s contract game. The introduction of a mandatory 21-day “cooling-off” period within the Fair Dealing Obligations (Milk) Regulations 2024 for the UK dairy sector empowers farmers like never before. This provision gives you a free ticket to walk away from a contract within the first 21 days, without any repercussions or financial commitments. It’s a significant shift in power dynamics, tipping the scale in favor of the dairy farmers, ushering a period of increased flexibility, and minimized contractual risk. What’s more, this provision has been designed to guarantee you ample time to review your contract, get independent advice, discuss with relevant stakeholders, and only then decide to commit fully, thereby avoiding any hastily made decisions. Imagine the weight off your shoulders with this ability to deliberate and make informed decisions without the fear of contractual penalties! Therefore, the cooling-off period is an apt demonstration of the industry’s shift towards enhanced fairness, transparency and equilibrium between the dairy farmers and the milk buyers.
- Notice Periods: Your contracts are becoming more flexible with the introduction of clearly defined notice periods. Under these new regulations, if you opt for a contract of more than 12 months, the processor has to provide you with at least a year’s notice for contract termination. On the flip side, should you choose to exit the contract, you’re empowered to do so, provided you give a maximum notice of 12 months. But, that’s not all. Special provisions in these new laws have your back under certain circumstances. For example, if your milk buyer fails to stay current on their payments to you or becomes insolvent, they’ve ensured you have the flexibility to terminate the contract much faster. This enhanced level of security not only aids your business’s financial stability but also lends you a strong negotiating hand when you’re crafting your future contracts within the UK dairy industry.
- Variation: Secure yourself against unilateral contract changes with the newly defined variation rules. The responsibility and control over any changes to your dairy contracts are now shared between you and the milk buyers. What this translates into is an absolute veto power for you if you do not agree with any alterations proposed by the milk buyer. Say goodbye to the former times, when changes could be enforced without mutual agreement. Now, the consent of both parties – you, the farmer, and the milk buyer- is an absolute requirement for any modifications to the contract. Not only does this embolden your negotiating position, but it also ensures that your interests continue to be defended even after the contract is signed off. And there’s more – if you’re a member of a representative organisation, it can also aid in safeguarding your interests by disallowing changes unless they give their nod. So rest assured, the variation clause in these new regulations sees to it that any changes are not just fair but also mutually agreed, thereby creating a more balanced and respectful contractual environment in the dairy industry.
- Exclusivity: The new regulations ride the wave of sweeping changes, unleashing revolutionary modifications to the exclusivity clause in dairy contracts. Catering to your interests as a dairy farmer, these laws forbid exclusive contracts if you’re dealing with a fixed volume milk contract. Why does this matter? Picture this – if a processor offers to pay 40ppl for the first million litres of your milk, and then brings down the price to 30ppl for any milk produced over this amount, this will now be deemed as tiered pricing. And this is precisely where the regulations shed their protective light on your dealings. In such situations, you are granted the liberty to spread your wings and take your milk to any buyer you choose. The National Farmers’ Union (NFU) interprets this as a significant leap towards market fairness, giving you the freedom to seek the best value for your produce without being tethered to one buyer. These changes echo the industry’s motivation to level the playing field, lending greater negotiating power and choice to you. Say goodbye
- Farmer Representation: Voicing the needs of every dairy farmer, these regulations champion fair representation, providing you, along with your co-ops and producer organizations, a more dynamic platform for contract negotiations. The new rules favor structures where you have an ownership interest, such as co-operatives or producer groups, fostering more flexibility and promoting safer trading conditions. These groups can enjoy special treatment, ensuring their members are not subjected to certain obligations that others face under the new laws. Whether it comes to negotiating contracts, choosing your milk buyer, or offering your milk to the market, these organizations are expected to provide greater freedom, security, and influence. This amendment serves as a clear testament to the desire to bolster the bargaining power of individual dairy farmers like you, shifting the balance towards a more member-centric approach, thereby redefining farmer representation in the UK dairy industry.
But who will enforce these regulations? DEFRA plans to introduce an Agricultural Supply Chain Adjudicator for this purpose, while the National Farmers’ Union is gearing up to spread awareness about these regulations through briefings and webinars.
Expectations are high that these regulations will lay a solid foundation for selling milk across Great Britain. As the acting chair of the Farmers Union of Wales Milk and Dairy Produce Committee, Brian Walters, hopes, it’s about creating a fairer dairy industry for all.
