Futures markets, longer term relationships and formulaic pricing mechanisms should be the future for dairy farming contracts, the working group said yesterday.
The Country Land and Business Association (CLA), Farmers for Action, National Farmers Unions of Scotland, England and Cymru, the Royal Association of British Dairy Farmers and the Tenant Farmers Association said it is “vital” that risk is shared within the supply chain.
The group said “A and B contracts” had been touted as a possible solution.
In a joint statement the group accused processors of dictating prices that had “been brought in with little or no discussion with farmers themselves.”
The statement added: “All dairy contracts should help develop long-term relationships and not be undermined by speculative market manoeuvring by certain processors making opportunistic purchases of milk on the spot market.
“We also need to develop other ways of managing risk including formulaic pricing mechanisms, longer term fixed price contracts and the ability to utilise futures markets and prices.”
All parties acknowledged the UK was becoming increasingly exposed to “incredibly weak” global commodity markets which they said looked “increasingly unreliable” for the rest of 2015. Reasons for the downturn were given as Russian unrest and purchasing declines from large buyers.
The statement concluded: “Clearly, what is needed is a proper discussion within the industry on how all these mechanisms can be used to best effect and the organisations listed above will meet again towards the end of the month to assess this further.”
