Over three years after the British government undertook a UK-wide public consultation on mandatory contracts in the dairy industry, legislation has finally been put before Parliament.

The Fair Dealing Obligations (Milk) Regulations 2024 were published last Wednesday, although the legislation will have to pass through both Houses of Parliament before being made into law.

The legislation applies across the UK and will mean existing contracts between farmers and processors in NI will have to be reviewed and updated in many cases. Every processor collecting milk must have a contract in place with individual producers.

The background to this legislation goes back to 2012, when a voluntary code set out minimum standards of good practice for contracts in the dairy sector. However, the main UK farming unions continued to highlight concerns around the weak position of farmers in the supply chain, which ultimately has led to this point.

For those already with a milk contract, the regulations do not apply until 12 months after they commence, so there is a lead-in time for contracts to be amended.

Not relevant to NI

Some of the main detail covered in the regulations is not that relevant to NI, which underlines the fact a different purchasing model is often used in Britain. For example, Part 5 of the regulations deals with fixed volume contracts. Where a farmer supplies one processor, it will no longer be possible to specify a fixed volume of milk in the contract. If the farmer has agreements to supply more than one processor, the contract can specify the fixed amount of milk, but must also include the “acceptable supply volumes” above or below this volume.

Some processors in Britain have also traditionally operated A and B pricing, where milk delivered in excess of an agreed volume (A) is paid at a different price (B). However, under this new legislation it will not be allowed where a farmer supplies a single processor in an “exclusive milk purchase contract”.


Unlike Britain, where private companies dominate, in NI most milk is purchased by farmer-owned co-ops. There has been a valid argument that this legislation should not apply to them.

However, that is not the case and co-ops will have to put formal contracts in place – although there are some exemptions around rules relating to milk pricing for businesses with “an internal democratic structure” who purchase milk from a “producer member”.

A “producer member” is defined as someone with “an ownership interest in the business purchaser in question”. So where a farmer is a shareholder in a co-op, the contract does not have to go into detail around pricing.

That will work for the likes of Dale Farm where all suppliers have a shareholding. But other co-ops have NI suppliers that are not shareholders, while there are also private companies, such as Leprino Foods and Strathroy.

For these businesses, the contract with non-shareholder suppliers will have to provide information on fixed and variable milk prices. In the case of fixed prices, the contract must set out a procedure to review the price “where exceptional market conditions occur”. For variable prices, these should be determined each month “with reference to factors set out in the milk purchase contract”.

There must also be a “third-party verification procedure” for monthly milk prices. This procedure allows farmers to ask for a written explanation from the processor (received within seven days) around how the monthly milk price was determined.

If they are not satisfied with the response, the explanation can be referred to an independent person to confirm that it is supported by “business-sensitive data”. The processor must cooperate with this independent person and provide relevant information. Costs of this are to be shared between both parties.

Variation in terms

There is also a requirement in the legislation that processors can only vary the terms of the contract on agreement in writing between both parties. However, this also does not apply to co-ops supplied by producer members.

All contracts

Whether a farmer supplier is a shareholder or not, there are a number of requirements that must be included in all contracts.

The contract must be in writing and signed by both parties. The contract must either be for a fixed duration or be an “evergreen” contract that continues until one party terminates it. In that scenario, a processor must give at least 12 months’ notice to terminate, unless the contract was breached by the producer. The contract must not be set up in a way that requires producers to give more than 12 months’ notice.

The contract must specify when, and how frequently, milk collections are made, as well as what might constitute a force majeure event. There should also be a procedure set out to resolve disputes.


Where a processor has failed to put in place a contract compliant with the regulations, or has failed to respond to a farmer asking for a written explanation as to a how a price was determined, then a complaint can be referred to the Secretary of State.

However, this complaint must have been initially referred to the processor and 28 days have passed.

After receiving a complaint, the Secretary of State can investigate and can ultimately require the processor to pay a civil penalty and/or compensate the producer. A civil penalty can be up to 1% of turnover, which for a large processor is a significant financial deterrent.