Dairy farmers should enter into franchise agreements in order to share the risks involved in milk production, Defra minister George Eustice has said.
Speaking during a meeting at the Conservative Party conference in Birmingham, Mr Eustice said farmers too often bear the brunt of the risk.
"Franchise farming creates an opportunity for new entrants, but also shares risks more fairly in the system," he said.
"There are some interesting models out there that share risk more fairly, so farmers don’t end up being the tail-end Charlie who bears the brunt of taking all the risk in a downturn.
"What happens at the moment is that the processor still gets their margin and the retailer still gets their margin and it is the farmers who take the brunt.
"We have to start thinking creatively about how we deal with that."
Mr Eustice also hinted in 2015 of a 'futures market' for the industry to control price fluctuations.
He made the example of US farmers who have used futures markets to insure themselves over the last 20 years.
Huge concern
After two years of turmoil in the dairy sector, during which time milk prices fell to their lowest point for a generation, commodity markets have very quickly turned.
"Disappointingly, all milk buyers in Scotland are lagging behind in passing on the huge lifts in market prices to their suppliers with the scale and speed that the current market merits," NFU Scotland said.
"That is a huge concern as producers enter the winter period when costs of feeding and housing dairy cows escalates.
"To illustrate the disappointing response of milk purchasers to date, figures produced by the milk levy body AHDB Dairy indicate that, in 2007, when prices for commodities such as butter and cream last reached the levels being seen today, the average farmgate milk price was in excess of 25p per litre."
