In preparation to a response to Defra dairy contract consultation, the National Farmers Union Scotland (NFUS), alongside stakeholders from AHDB and Scotland’s Rural College (SRUC) travelled to Spain where compulsory regulated milk contracts are in operation.

In the UK, the recommendation by the Grocery Chain Adjudicator (GCA), is to introduce a regulated compulsory contract specific to the dairy sector.

“This may be the most significant initiative in the UK dairy sector for a generation, and our plea is that all farmers and processors engage seriously,” said Gary Mitchell, NFUS vice president who was on the trip.

The 2012 EU Dairy Package included three key areas that member states could adopt; compulsory regulated contracts, increase the scale and effectiveness of Dairy Producer Organisations (DPOs) and develop interbranch organisations. While the UK choose a voluntary code on contracts, Spain chose to adopt all three options according to Mitchell.

“The Spanish government had four main aims (all in line with the 2012 EU Dairy Package); stabilise the dairy market, balance bargaining power, and improve both coordination and management of contracts,” he said.

The result is that all milk now sold in Spain is done so under contract. While the contracts have led to an increased stability and clarity in the sector according to Gary Mitchell, ultimately this has not necessarily increased farm gate price.

The Spanish agreements are not seen as perfect, with friction still existing between parties, but the Spanish government is engaged and the interbranch organisations allow for meaningful dialogue and an agreed process to oversee contracts.