Co-op derogation from mandatory supply contracts welcomed by ICOS

The granting of a derogation for co-ops from new EU regulations that require food processors to provide mandatory supply contracts to farmers, has been welcomed by the Irish Co-operative Organisation Society (ICOS).

The co-op derogation – from the new common market organisation (CMO) regulations – was agreed last week in Brussels.

Ireland’s dairy co-ops had sought a total exemption from the CMO requirement to provide mandatory supply contracts to farmers, but this was rejected by Brussels.

“We welcome the fact that this regulation gives a derogation to co-operatives which already have a robust model of milk supply in place, determined by democratically elected co-operative boards,” said ICOS chair Edward Carr.

“We could not contemplate a situation where the Commission would impose another layer of contract where the existing model is transparent and works well,” he added.

The derogation from the CMO rules around supply contracts will only apply to co-ops that have mechanisms in place that achieve the same results as mandatory contracts.

Other changes

In other changes to the CMO regulations, member states can apply for an opt-out on the indicators used to determine milk price.

The regulations proposed that product prices should be set by combining objective indicators or using methods of calculation that are easily understandable.

“Price calculation methods should also be capable of reflecting changes in market conditions and the production costs of the agricultural products,” it states.

It is not known as yet whether Ireland will seek an opt-out from the CMO rules on pricing.

The CMO requirement on mandatory supply contracts was strongly opposed by ICOS.

“The imposition of mandatory contracts on co-operatives would have added more red-tape and bureaucracy where there is already a well-functioning model of milk supply including existing milk supply agreements,” Carr maintained.

However, those who supported the CMO changes argued that the measures will strengthen the position of farmers in the food chain.