Archive: Voluntary Code can benefit both producer and processor, according to review

Published 8 October 14

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A review of the Voluntary Code of Practice has identified a high degree of commitment to the continuation of the code, which was introduced in 2012. It stated that, where the Code has been used most effectively, it has benefitted both the producer and processor. However, more needs to be done to get the wider industry to appreciate all of the potential benefits.

The Dairy Industry Code of Best Practice for Contractual Relations, known as the Voluntary Code, was launched shortly after numerous reductions in milk prices. It was designed to allow individual farmers to negotiate contracts covering issues including pricing and notice periods. A specified period of time in which farmers have the ability to leave contracts was also introduced.

The review, chaired by Alex Fergusson, Member of the Scottish Parliament, put forward seven recommendations. These were:

  1. The current notice of termination should remain unchanged.
  2. The Code should clarify that a 30 day notification of a price change is only required in the case of a price decrease.
  3. A good practice clause should be written into the code to ensure that the producer is fully aware of the details of any new contract they are considering. 
  4. The wording in the Code, regarding early termination/payment of liquidated damages, should be changed.
  5. Contracts should allow a producer to supply other purchasers where they wish to expand their production and the purchaser does not want to purchase the additional milk under the contractual terms and conditions, or where there is a ceiling on total volume of milk to be delivered within a 12 month period.
  6. There should be wider adoption of the Code, with the possibility of expanding it to include retailers, whilst maintaining the voluntary nature of the code.
  7. The Code should include a requirement for Dairy UK, NFU and NFUS to meet at least every 6 months to review progress and engage in an on-going dialogue on any code-related issues.