Michael Oakes, chair of the NFU England dairy board, says that the soon-to-be-implemented Dairy Purchasing Code will make the industry more open and fair.
The dairy farmer in the West Midlands hoped that after years of talks and the 2020 Defra consultation, the new law would make the dairy industry stronger by spreading the risk more evenly between the farmer, the processor, and the retailers.
Mr. Oakes said, “Right now, the farmers are taking on more risk than the rest of the supply chain.” “And I hope that the new laws will make things fair again. Most dairy farmers take on a lot more risk than they should.
“Over the past few years, we’ve seen processors and retailers keep taking a profit from milk and dairy products, even though the farmer has sometimes made nothing at all. We need processors to do more than just cut the price at the farm gate to deal with risk. This could happen through different relationships with their customers or new markets.
Mr. Oakes told The Scottish Farmer that he also wanted the new rules to make things more clear. He said, “We’re not talking about setting prices, but farmers and processors are free to do that if they want to.” At the end of the day, I hope we’ll have a clear idea of what affects and moves the price of milk at the farm gate.
Many of these issues have been talked about for a long time, and negotiations have been tougher when the price of milk is low. Many people remember the “SOS Dairy” crisis of 2012 and the “Voluntary Code of Practice” for dairy contracts that came out of it. This code was meant to improve the contracts between farmers and people who buy milk.
Even though a lot of people signed up for the voluntary code, it only made small changes, and farmers still thought there were unfair trade practises. Then, in 2020, the government started a discussion about regulating dairy contracts, which called for change. In early 2021, the government said it would regulate dairy contracts using the powers in the Agriculture Bill.
After Defra has listened to what people have to say, the next step is for a “SI” to go before Parliament. After the Agriculture Act was passed, the government already had the power to make the regulation. Now, all that needs to happen is for the SI to pass through Parliament, which is a bit easier, but MPs will still vote on it.
Once the law is passed, it is expected that it will take two years to put it into effect. This will give farmers and dairy processors time to change contracts if they need to and set up new groups to represent them. In the next few years, it’s likely that most dairy farmers will need to sit down with their processor and make sure that their relationship meets the new rules.
Even though the details haven’t been made public yet, Mr. Oakes has seen the plans and said they are “99% there.”
He told her, “We’re almost there. I’ve seen it, and I’m happy about it, as are the people who represent Scotland and the other devolved nations. The way prices are set is the obvious sticking point in all of this, but the industry is working through it.
“We can’t afford to put processors out of business, but we want to be in a better place with more fairness and better farmer representation.”
This year, dairy farmers got record prices for their milk, but they also had record business costs. Mr. Oakes was quick to point out that the situation was complicated. He said, “Some of your readers will have had the best summer ever if they bought their fertiliser last year and feed before prices went up.”
“However, I know that some other people didn’t buy early enough, and then they had a drought, so they’ve had a very hard year. If the predictions of a drop in the market this spring come true, it will be hard for dairy farmers again.
“But if farmers don’t have faith in a margin, production will go down, as we saw this summer. It was the first time that the industry worked together to raise the price and restore confidence in the sector since I became dairy chair six years ago.
Mr. Oakes said that people’s spending habits would change because of the rising prices. But he was sure that milk and other dairy products would continue to be important for feeding the country.
“We might see a little bit of a shift away from branded milk or cheese and toward own label,” he said. “But 98% of homes have milk, and I don’t think that will change. It can be one of the least expensive ways to get nutrients and food.
“This is true for milk, cheese, and all other dairy products. With a block of Cheddar, you can make a lot of tasty, healthy meals.
The dairy chair said that there are also growing opportunities abroad. He said that 30–50% of Cheddar was already being exported at a higher margin than sales in the United States. Most of these high-value markets are outside of Europe, where business has slowed down since Brexit. However, many EU buyers still buy UK goods at a discount.
“There are more and more export opportunities, and we need to make sure that processors are ready to take advantage of them,” Mr. Oakes said. In the past, we haven’t been able to take advantage of market opportunities because we focused too much on the domestic market. If these markets want more milk, this industry has shown that it can deliver, as long as there is a profit margin.
Mr. Oakes says that balancing a growing dairy industry with climate change goals depends on where you draw the line. He said, “Our summer wasn’t easy, but compared to other European countries like the Netherlands or Spain, at least we were able to grow some feed.”
“And using phosphorus as a fertiliser doesn’t give us the same problems. The dairy industry’s dairy roadmap is helping us prove our environmental credentials and carbon footprint, which is good on a global scale.
