Mandatory United Kingdom Dairy Code falls short on small producer protection

New rules governing food supply chain relationships introduced in the United Kingdom last Friday (16 February) have fallen short of delivering commercial equity and protection to small scale domestic milk producers, according to Dairy Connect in Australia.

Dairy Connect CEO Shaughn Morgan said today the new mandatory code may be a lost opportunity for the UK industry and would not be the optimum model for critical reforms required here in Australia.

The UK code will be administered by the Groceries Code Adjudicator (GCA), the independent regulator ensuring that the UK’s largest grocery retailers treat their direct suppliers lawfully and fairly.

“Critics in the UK say the regulator, the GCA, has the authority to regulate direct supply contracts proposed by the top 10 retailers in the grocery sector,” he said.

“While this is valuable at the top end of town, the GCA has no remit to protect smaller producers who might be locked into unfair supply contracts with processors.

“The UK’s mandatory code would not be an appropriate model for the Australian dairy industry as it is, in our view, deficient.

“Dairy Connect wants the Australian Consumer and Competition Commission to implement, at a minimum, the eight critical reform recommendations that we supported and were contained in their interim report into the dairy industry.”

These recommendations included the development of a Mandatory Dairy Code that provides appropriate safeguards, as illustrated by the ACCC’s interim report.

Dairy Connect supports the proposal that processor / supplier contracts, for instance, should not bar suppliers from switching processors to optimise farm-gate income.

Other recommendations included independent dispute resolution; full consideration by farmers of contracts they planned to enter; and processors should make available to producers improved price information.

The ACCC released its interim report on 30 November last year and is to submit its final report to the Federal Treasurer by 30 April 2018.

Dairy Connect continues to support the development of a commodity milk price index to allow producers to make better informed market decisions.

Back in the UK, a landholder lobby group, CLA Rural, said the government had ‘failed’ to extend the authority of the GCA to cover relationships between primary producers and processers or manufacturers.

"Farmers, who do not have contracts directly with the largest supermarkets, will continue to suffer from the imposition of unfavourable contract terms, delays in payments, and unreasonable notice of price reductions," according to spokesman Dr Charles Trotman.

The National Farmers’ Union of England & Wales indicated that more was needed to be done. NFU President Meurig Raymond said “Dairy farmers already have contracts; what we’d like to see is minimum standards in those milk contracts to ensure that farmers are protected against unfair clauses such as those requiring exclusivity, unbalanced variation of terms and short notice price changes.”