Welsh dairy farmers are being encouraged to establish a network of producer organisations (DPOs), across Wales, to bolster their negotiating strength.
But producers who gathered in Aberystwyth this week for a special summit were warned DPOs were not a short-term fix for low milk prices.
As is typical between a milk producer and a buyer, contracts between existing DPOs and processors exclude milk prices. Prices have to be negotiated separately between both parties on a regular basis, which is usually explained in a schedule attached to the contract.
The push to encourage Welsh milk producers to form DPOs aligned to their own buyer is being led by an organisation known as DPO Cymru, a group of farmers who supply several processors across Wales.
Group member Aled Jones, who is also chairman of the NFU Cymru Dairy Board, believed that, with milk in short supply, now was the time for farmers to act. Members of the group were facilitated and suppported by Farming Connect's Agrisgôp programme, and were also successful in obtaining funding from ADHB Dairy to commission a report looking at the feasability of establishing DPOs in Wales.
“It is farmers themselves that can make producer organisations a reality and it rests on the individual to have the courage and the passion to bring about change,” he insisted.
“Having gone through such a terrible crisis in the past 18 months, producer organisations offer an opportunity for farmers to create a more stable future. Are we up for change or are we going to bow down and accept what’s to come?”
Questions
The meeting at Aberystwyth, hosted by Farming Connect, gave farmers an opportunity to question Rory Christie, chairman of the Stranraer-based Lactalis DPO, and Steve Bone, chairman of Dairy Crest Direct (DCD) DPO.
Mr Christie cautioned that DPOs could not remove price volatility.
“You will continue to get price shocks because everything is tied to the butter and powder markets, you can’t get away from that.”
“But a DPO can provide stability between the peaks and troughs.”
"A well functioning DPO can generate added value to all partners in the chain, from the farmer to the processor right through to the retailer."
“A producer organisation is about much more than price. It’s about getting terms and conditions, and the negotiating power to secure the best possible price that your buyer can pay.”
By pooling resources, farmers could afford to pay for better legal advice to analyse contracts than they could individually.
“If the terms of a contract are bad, DPOs can negotiate for change,” said Mr Bone.
Regional meetings will now be held across Wales to give farmers advice on how they can form DPOs with their own buyers.