TFA calls for get-out clause for dairy farmers

The Tenant Farmers Association has called for dairy farmers to have a mandatory two month get-out clause from milk supply contracts.

TFA National Vice-Chairman Stephen Wyrill said "The situation is totally unacceptable. Dairy farmers should have the ability of cancelling contracts with only two months notice. We understand that the processors might be prepared to offer a six-month notice period which is still far too long”.

“The mantra of recent years has been all about building relationships within the supply chain but it is clear that when push comes to shove retailers and processors, with dominant power in the marketplace, have little regard for the primary producer and it all comes down to price. This is not in the long-term interests of consumers. Dairy farmers are already being forced to give up milking at an alarming rate and the current situation, if allowed to continue, will only cause this to accelerate," said Mr Wyrill.

"If processors are not prepared to move then the Government must step in to require them to move. If rigging interest rates for corporate gain is wrong in the banking sector, rigging milk prices for corporate gain must also be wrong," said Mr Wyrill.

"There must also be greater scrutiny upon how the operators in the supply chain go about their daily business. There is little point in reducing the notice periods if we do not also ensure that there is no collusion between processors and retailers in setting prices which must be a job for the soon-to-be appointed Groceries Code Adjudicator," said Mr Wyrill.

Recently, sharp price reductions announced by dairy processors have left many dairy farmers imprisoned by huge losses as they are normally unable to serve notice on their milk purchasers for at least 12 months.

The major dairies supply fresh liquid milk into the UK market place and have issued notices for price reductions.

“This price slash comes at the expense of the average dairy farmer who is now making a significant loss for every litre they produce”, said NFU dairy board chairman Mansel Raymond.

“I echo the call made by one major producer group, Dairy Crest Direct, that this now amounts to a combined profit warning for the overwhelming majority of dairy farmers in this country. All producer representatives must now stand together and fight to restore profitability.”

In the past seven days Robert Wiseman Dairies, owned by Müller Dairies, Arla Foods UK, the UK subsidiary of Arla Foods Amba, as well as Dairy Crest, announced cuts to their milk prices paid to farmers as of August 1 of 1.7ppl, 2.0ppl and 1.65ppl respectively, following further significant cuts in recent months.

Chairman of Dairy Crest Direct David Herdman said: “This latest 1.65ppl cut to our members, which comes on top of a 2.0ppl cut in May, will deliver a completely unsustainable milk price. In fact we estimate the deficit between milk price and production cost to be £53,000 a year for our liquid suppliers. It is for this reason that we are issuing a profit warning loss of £35million, for non-aligned DCD producers.”

Chairman of the Arla Foods Milk Partnership, Jonathan Ovens, said: “Farmers simply cannot afford to go into the winter making a loss of 5ppl.”