https://defrafarming.blog.gov.uk/transcript-defra-farming-podcast-episode-18-agricultural-supply-chain-adjudicator-asca/
Transcript: Defra Farming Podcast episode 18 Agricultural Supply Chain Adjudicator (ASCA)
Host: Richard Thompson, Agricultural Supply Chain Adjudicator (ASCA), Defra
Welcome to the Defra Farming Podcast.
I'm Richard Thompson and just over a year ago I was appointed as the government's first Agricultural Supply Chain Adjudicator (ASCA). My role is to oversee and enforce new fair dealing regulations across agricultural supply chains, starting with the dairy and pig sectors. I've just recently published my first annual review detailing our work over the past year.
Today, we're going to explore the purpose of the new regulations and how they can help to build a fairer, more transparent supply chain.
My own background is working as a regulator, independent adjudicator and ombudsman across financial services, electronic communications and professional services. I've always had a passion for ensuring fairness and helping to resolve disputes, which is what brought me to the role.
00.55
I'm delighted to be joined today by two guests who bring an absolute wealth of experience, expertise and on the ground insight into the dairy sector. Paul Tompkins, dairy farmer and Chair of the [National Farmers’ Union] NFU’s Dairy Board, and Michael Masters, Head of Milk Supply & Operations at Barber's Farmhouse Cheesemakers.
Paul and Michael, welcome to the podcast.
Guest: Michael Masters, Head of Milk Supply & Operations, Barber's Cheesemakers
Thank you, Richard. Thanks for the invitation to be part of this podcast.
Guest: Paul Tompkins, Dairy Board Chair, NFU
Yeah, great to be here, Richard. And hi, Michael. Nice to see you again. Yeah. Looking forward to a good discussion.
Richard: Would you both like to tell us a bit about your background in the dairy industry?
Paul: Great. Thanks, Richard. Yeah. My name's Paul Tompkins, and most of the time I can be found on my family farm here in the Vale of York, where I join you today on a bright winter's morning. The farm background and being involved in farming all of my life is what's inside me. It's what drives me every single day, looking after the cows, producing the great product that we do.
In more recent years, I've started to get involved in what happens on the other side of the farm gate, because I got increasingly frustrated, Richard, when I saw decisions being made by others outside of my farm that actually influenced what I could do.
So for that reason, I got involved in the National Farmers’ Union, and over time, that got me more and more involved until last year when I was elected as chair of our national board, where we look at a huge spectrum of issues that are faced by dairy farming. But of course, fairness in the supply chain being a key part of one of those.
Richard: Great. Thanks, Paul. And Michael?
02.39
Michael: Thank you, Richard. Like Paul, I have my roots very much firmly in the dairy industry for my entire life. I was taken out of active dairy farming about 35 years ago after a traumatic farming accident.
But during my time as a dairy farmer, I was a farmer representative, getting to know the industry, wanting to understand how milk was priced, from all those years ago. As time went on, I became deeply involved with the Dairy Crest Group, which at one stage had 1,700 dairy farmers, and I became the company secretary for what became DCD [Dairy Crest Direct].
DCD became the first DPO [Dairy Producer Organisation] back in 2014. Now, as all your listeners will know, Dairy Crest is no more. Part of it was sold off to Muller - the liquid side, and the other part was sold off to Saputo.
I stayed with the business for a while, and then I was recruited by Barber's cheesemakers here and in the southwest. So I've been very fortunate to work with this incredible farming and processing family for the last nine years.
So I have seen all parts of the chain from being a dairy farmer, producer rep, to now being responsible for buying milk. So that's me.
Richard: Fantastic. Thank you both.
03.51
Just giving a little bit of background, for those who may not be aware about the new Fair Dealings Obligations, regulations or FDOM for short, which came into force last year.
So these regulations are designed to ensure greater fairness and transparency in milk contracts, introducing obligations on milk purchasers about what can and can't be included in contracts for the purchase of cow's milk, and the core of my role as the agricultural supply chain adjudicator, and the team, is to investigate complaints and enforce the new regulations.
Farmers can bring a complaint to our free, impartial service and we will investigate to determine if there's been a breach of the new rules. If there has been a breach by a milk purchaser, I can impose a fine and or award compensation to the affected farmer.
But I see our role as a much broader one than that too. Fairness and transparency in supply chain relationships are in everyone's interests, for dairy processors, who need reliable, sustainable and high quality supplies of milk, just as much as for dairy farmers themselves, and a large part of our work is helping ensure that the foundations and building blocks are in place in contractual arrangements to ensure that this happens.
Now, for the first time since the new regulations came into force last year, we've seen some recent sharp falls in the milk price driven by high levels of milk production, not just in the UK, but in Europe and other countries across the globe too. And I know many dairy farmers will already have received unwelcome notice of price reductions in recent months.
And while the new rules don't regulate prices or set a minimum price for milk, they do introduce important new protections for farmers to ensure that the reasons for any price changes are clear and in line with agreed contractual terms.
Paul, perhaps you could start by giving us your insight into the current pressures in the dairy sector and for dairy farmers in particular.
06.00
Paul: Yeah, thanks, Richard, and I don’t need to give a history lesson here, but it's important, I guess, to start by reflecting on how far we have come in a relatively short space of time. Your listeners might remember back as far as the dairy wars. Sometimes there were even cows being taken into supermarkets and placards outside processors. And those really were the dark days of farmer and processor relationships, and I'm pleased to say we've come a long way. And the regulations, I think, have been a key part in achieving that.
It's not too far into my memory, when we saw some pretty unfair relationships between farmers and processors. Farmers were often subject to retrospective price changing, discretionary pricing, the price for which they paid for their milk could be changed at any time or, like I say, even backdated. And sometimes there were things like, farmers were given a fine if they wanted to enter into a notice period or leave their current process. So they were then fined for doing so.
But we have now got the regulations and like I say, we need to recognise that this has been a step in improving relations. And I would say now that farmers and processors work a lot closer together. But what both farmers and the NFU have always clearly understood in the regulations is this isn't about price intervention.
So we are still paid a price for our milk that is related to the market conditions and the customer behaviour and demand for the milk that we produce on farm. And that's quite an important thing to remember, especially as we face into a downward pressure on milk prices that we are seeing today.
So around the world there is increased milk production which has just overshot total global demand. And I can say we are very exposed to global prices in dairy. What that means is that farmers in the UK have seen significant cuts in their milk prices. So for example, on my farm, we've already seen a price reduction of around seven pence per litre, which is now charging on towards 18% of my income.
So within a very short space of time over two months, nearly 20% of my income has gone and I now face the prospect I would suggest for the next few months, looking at the markets ahead of us, I'll be producing milk for lower than the cost of production.
But when I speak to farmers about their milk price, and believe you me, farmers certainly make their views felt at times like this, the question I can now return to them is what does your milk contract say?
Because this is the first time, for a start, that it's a legal obligation for every farmer and their processor to have a contractual arrangement in place. And it is also the first time that it must be written inside that contract, unless you're inside a cooperative or other democratic structures, which we might talk a bit more about in a moment.
But it needs to be very clear inside the contract how a farmer's milk price is generated and therefore how it's generated also allows farmers to take a look at what factors will influence that milk price being generated in such a way, whether that's in an upward or downward movement. And that layer of transparency is really important.
Now, Richard, I hope you won't mind me saying, I think that in the infancy of the regulations now, I am seeing some milk pricing schedules are more explicit than others out there. And so those farmers that I'm speaking to, I'm saying, is your contract explicit in the way the milk price is generated?
But I think we do look into a period of time now where, like I say, unfortunately, and I'm feeling it myself, we’re struggling to find where we can meet all of the costs on my farm. And I know that's being shared across the country.
We are now able to show to farmers that they have a means to recognise exactly how that price is being generated. In turn, you can then have questions about: Is that the correct way to generate my milk price or not? And how was that milk price negotiated or not? And how could I perhaps set myself up better to understand market insights in the future?
So it builds on more questions, which I would hope in time allows farmers to build more resilience into their individual businesses, which is so key during market good times and also the current market depression.
10.56
Richard: So as you say, obviously a falling price is never welcome for a farmer at the farm gate and creates pressures. and as you recognise, the regulations themselves won't protect dairy farmers from global commodity prices for milk. So how does greater transparency about the milk price and the process for calculating that price? How does that help you as a dairy farmer, particularly when times are tough?
11.28
Paul: If it's explicit inside a milk contract that says this is how the milk price will be generated and those explicit factors are linked to markets or customer requirements, then I can take a look at what those markets are doing.
In my milk contract, my milk supplier has a heavy dependence on wholesale cream price. So the cream inside my milk is skimmed from the surface and sold on a wholesale basis. The current market price for wholesale milk is very transparent. It can quite easily be collected. You can use Google. And inside those findings, I will be able to have a look at what cream prices are at the moment, what influences them going up or down, and what they might be doing over the next few months.
That's how I could tell you a few minutes ago that I can probably foresee that my milk price is going to be under pressure for the next few months. That allows me to, in turn, try and make some business planning back at home, and try and find ways in which I can modify the farm business to see me through these tough times.
So that's how a good explicit factor can work. And also contractual regulation goes one step further because it encourages farmers to work together. Because where I see milk contracts, the very best ones, the ones that are the most explicit, market linked and responsive to what customers want, are the ones that have been designed when farmers come together as a group and work on them with their milk processor.
Where farmers aren't lucky enough to be inside those models and work individually with their processors, that's where I see the weakest factors. So I think over time this one small positive that might come from a depressed milk price at the moment might be that farmers recognise that actually by being inside groups where they work together with their processor on those factors that determine their ultimate milk price, will provide more market continuity in the longer term.
13.38
Richard: Thank you. So Michael, as a purchaser, I suppose you're on the other side of the contractual fence, so to speak, and of course, as a business, you'll have been going through the process probably this time last year of working out how you were going to put in place the requirements of the FDOM regulations into new contracts for your dairy farmers.
I know you've also been very vocal in your support for the new regulations throughout and in ensuring that dairy farmers are treated fairly. Perhaps you could tell us a little bit about why you supported the introduction of the new regulations, but also what you learned as a business and going through the process of introducing the new contracts and putting together the pricing matrix that Paul describes.
14.23
Michael: Thank you, Richard. Well, of course, I work for a processor that is actually owned by farmers themselves, so I'm in a very fortunate position. I don't have to explain in our boardroom about the difficulties that farmers have because Barbers are farmers themselves with seven of their own farms.
I’ve been here for nine years, and it became abundantly clear that for any dairy supply chain to work well and efficiently, we have to engage our farmers and we actively work really hard on those relationships. So communications is key, as Paul has already established, getting people to work together is critical.
So we launched our Barber's Assured contract nine years ago, and we use some of the founding principles of the 2012 voluntary code. So we've always ensured that we gave farmers at least a month's notice of price change, for example.
Now we're up against some of our competitors that provide only 12 hours notice of price change or some retrospective. So we'll be declaring our price at the end of this week for the first of January. But some of our competitors will be setting their price for January in the second week in February, if we're up against a cheese processor that's producing cheese in Northern Ireland, for example. All of that's embraced within the FDOM regulations.
So, yes, I understand and absolutely appreciate that farmers need fairness and they need some transparency. But also let's also remember that from a processors point of view, there are a very interesting set of dynamics going on there as well.
Now we're cheese makers. So we're buying milk to go into cheese today that we're not going to sell for a year potentially if it's a mature cheddar and if it's a vintage reserve, it's going to be two years. So we have absolutely no wish to see markets in freefall.
Indeed, every day in the last three months, the huge stocks of cheese that we have in store, that we've paid quite a lot of money for the milk that's gone into that cheese, is devaluing on a daily basis. So it's all parts of the chain that is facing into the headwinds of too much milk.
So when the new legislation was declared and announced from 2024, one of the key conditions of that was that any brand new contract that we made with a farmer would only be compliant with the new legislation if it was on an FDOM-compliant contract.
16.54
We are very keen to welcome brand new to the industry dairy farms. So there are still farmers in the South West converting beef farms to become dairy farmers. I know some of your listeners out there might be thinking, really? But that's absolutely true.
In fact, I've got a brand new farmer that we've been working with for two years as he's been converting his beef farm to a dairy farm, is looking to start his first supplies of milk to us next Monday, the first of December, against what we're all seeing at the moment with the milk price situation.
So I was really keen that we got on with our evolution of going on with our evolution of going from a voluntary code compliant contract, keeping the best of that structure and integrating that into a brand new FDOM contract, which we launched in October 2024. And so we're now, this November, in the thirteenth month of having FDOM compliance.
So we kept the voluntary code compliance. We still give at least a month's notice. We've provided all of our farmers a commitment to pay at least equal to or above a competitor bunch of prices. So that's liquid and cheese that we're actually offering in the marketplace. We always declare at the end of one month to give a farmer a month's notice. I also declare on our website each month how we're progressing with that commitment. So we are as transparent as we can.
One piece within this whole jigsaw of making this work is we have a group of six elected representatives. Each of these reps represent 25 farmers in their patch. They're elected by rotation, but it's not a DPO.
I have worked with DPOs in the past. In fact, I was responsible for setting up the first two DPOs. But that initiative to become a DPO must be at the request of the farmers themselves. I can't impose a DPO and if our guys wanted a DPO, they could have it. But we're a very much smaller pool of 150 farms within a 30-mile radius. So it's a different sort of being we've got here. But if our guys wanted to PO, they absolutely could.
So we launched what was called a non-exclusive contract. So I know that’s some of the jargon within the new FDOM regulations. But what that means is that a farmer has the right to sell milk to a second buyer if they wish.
Now, we had a good, long, hard think about whether we should offer a non-exclusive contract, because we want to be as transparent with our farmers as possible. But if we suddenly had a farmer that tripled in size and wished to go and sell that extra milk to a second buyer, we didn't think that it was something that we wanted to hold a farmer back.
So we have had an A and a B contract for nine years. So the B price is set using AHDB, Agriculture and Horticulture Development Board AMPE the Actual Milk Price Equivalent, which is set by the transparent indices of butter and skimmed milk powder.
So why did we use that? We used it because it was a transparent data set that farmers themselves had funded.
Indeed, I write to our farmers twice every month. At the end of each month, I'll record whatever AHDB report with regard to the wholesale prices, as Paul already alluded to, cream, butter and the cheddar prices. And if a farmer produces over 105% of their core volume they've said to us that they're going to produce, they get the AMPE-related price for any litre over that 105%.
Again, we want to be completely transparent. That AMPE price pays better than our prevailing price - we'll honour that commitment too, or a farmer, if he gets above that 105%, he can sell that litre to another milk buyer if he wishes.
So that's how our contract works. To date, it's worked well. But of course we are going through a tricky period now as the dairy markets are falling. Our mechanism that we have though, if farmers do produce way over the top of their A core volume, the B price now is falling as AMPE falls.
It's not set by us. It's not a discretionary price. It's set by an independent mechanism. So we're continuing to work with that. And we continue to work very closely with our producer reps through this period of change that we're going through.
And just to show also how we're working with the farmers, I've got six farmer meetings coming up in the second week in December. So they could be some interesting meetings. They're probably not going to be the cheeriest because of the market situation, but I want to talk to our farmers, work with them, and explain what we're trying to do to mitigate some of the volatility we're seeing.
21.36
Richard: Thanks very much, Michael. So I think one of the things that you’ve both spoken about is the importance of that farmer-processor relationship. And that where it works well is when that's a genuine two-way flow of information and communication on both sides, but conscious that not all farmers, perhaps some listeners to this podcast, may be in that situation where they feel they do have a voice in that supply relationship. And you both mentioned the role of producer organisations potentially here as well.
But for a farmer who may not be in a producer organisation and doesn't feel like their voice is heard, what would you recommend? How difficult is it to establish a producer organisation or to work together with other farmers and other suppliers to ensure that the farmer's perspective is taken into consideration?
22.35
Paul: Richard, you know, I recognise the difficulties, especially if we've got a processor that doesn't necessarily bring their farmers together. It requires somebody to do it.
And I'll give a shout out to our meeting that's happening on 8 December being hosted by the National Farmers Union, in which we're inviting farmers who aren't necessarily in groups and those that are already in groups to come together and learn best practice from one another.
So that's some of the work that we're doing. But this can start as simple as a WhatsApp group or a pub meet to start farmers thinking about what they could achieve if they communicated better amongst themselves.
And this is not an us versus them process of discussion, it’s how they can also help their process of delivering some of their outcomes too. As long as that remains at the heart of whatever farmers want to do, that this is about improved relationships, then there shouldn't be any friction towards them being established.
And I did want to give another quick shout out, Richard, in this part of the conversation to another acronym, as if we needed another one in our lives. And that's an ADPO. So in addition to a Dairy Producer Organisation that we've referenced, there are four in the country that the regulations recognise as a structure that gives them a bit more flexibility inside the regulations.
So there are four DPOs in the country that now contain something like 30% of the total farmers in the country between them. They've actually now formed an Association of Dairy Producer Organisations.
So that new acronym in your life is an ADPO, and an association of dairy producer organisations is designed to help professionalise the representation of farmers. It's only just been launched. You were there, Richard, earlier in September when this this ADPO was launched and one of its desirable outcomes is that it can become a go-to place for farmers, who are perhaps in informal groups, who are at the moment, like I say, either on a Facebook page or a WhatsApp group with other people that supply the same processor, to start formalising that process, helping them put some references around the group, some targets, perhaps even a legal structure if that's what they decide to do, to formalise and professionalise that representation.
Because, like I mentioned earlier, the best contracts that I see out there are the ones that are truly negotiated, best contracts for both processors and farmers, I would add. The best ones are the ones that have been negotiated between professional farmer groups and the processor.
So the more we can do to encourage people to be inside them, the better. But Michael’s got a longer history on this. You’ve helped many farmer groups come together in the past.
25.20
Michael: I think, when farmers first get together, they need to think, what could they offer their processor? What value do they have that they could offer as part of a proposition to their processors?
I remember when we started DCD back in 2004, this is 20 years ago, one of the first things this group of farmers did, the 1,700, was agree that they would coordinate the forecasted volumes likely to come from each farm. And then all of a sudden DCD then had a data set that was of value, they could then use with Dairy Crest to help them manage the milk volumes that was going to come in.
Now, obviously, it also meant there was some discipline required. Farmers needed to send a data set that bore some reality with actually the milk they were going to produce. It also enabled them the dairy processor, perhaps not to go and over recruit if there was milk that was going to come in, or conversely, be left with a massive great hole if they didn't have enough.
So that had to be some discipline on behalf of the farmers to actually supply the forecast on time and to do it quite regularly. And that was one of the first ways in that we had to encourage Dairy Crest to come to the table.
The current difficulties we are all facing in this industry today is because there is too much milk around. Now, per cow, there's probably not that much over the top, but there is certainly a differential between how processors can manage this wave of milk that's coming.
I know that we can't act in isolation in the UK because what happens in Germany and France and other markets obviously is also important. But the practicalities of a processor being able to manage the milk that is going to come through the front door is key. And it was this spring when lots of processors had some big problems. And yet because the rest of Europe was behind in production, actually we were all insulated from the effects of that.
But to my mind, that would be the first thing I would do if I was looking to set up a farmer group today. That's where I would concentrate my endeavours because you need to have something of value to take to your processor in the first instance.
Paul: Yeah, we've seen that borne out already haven't we, Michael? That, you know, some of those processors that work with a dairy producer organisation or a representative group have already looked ahead to next year and worked with those groups to say, okay, how are we going to curb production? And that works for the processor. But it also should deliver better outcomes for the farmer too...
Michael: ...for the farmers as well. Yeah. Every farmer should have had a new contract or a variation of a contract since this July. But I understand there are a lot of processors today reviewing again those contractual arrangements because of this amount of milk that's likely to come forward for next year.
So a large percentage of dairy farmers in the next few months will see further addendums and variations to contracts because volume management has become far more important going forward.
Paul: And wouldn't it be easier for those processors to negotiate those variations if there was a farmer group to work with rather than loads and loads of individuals? And I think that's why the regulations encourage that.
Michael: Yeah. We've always found it useful. Obviously, my background was encouraging that I worked with a group of farmers. With them, we were able to formulate the FDOM contract that we have, our Barber's assured agreement, and it continues to evolve working with them. So I quite agree, Paul.
28.45
Richard: Thanks both. so, one of the things I'm hearing very loud and clearly from both sides is that importance of communication, collaboration, working together. Ultimately, interests should be aligned in having a successful supply relationship in producing dairy products which are ultimately valued and consumed by consumers.
But with the best will in the world, that's not always the case. Relationships sometimes break down or don't work as well as they should. And in part, that's why my office and my role is here to investigate complaints where things do go wrong.
One of the things I've definitely heard often from farmers over the last year is where they might have an issue with their supply relationship, they may be afraid to raise things as a formal complaint or even just raise the issue to begin with, for fear that they might be blacklisted or dropped as a supplier.
That's obviously a very worrying thing to hear. What do you think the industry can do to help change that culture? And how do you think I and my office can make sure that farmers can have a voice and can be heard when something isn't happening as it should?
30.02
Paul: Yeah, as we face into a time of oversupply of milk, you're absolutely right. An individual farmer to raise a concern with a processor who they might have a distant relationship from also raises their vulnerability. The reality is that a processor will continue running their business if they lose the odd farmer. Whereas a farmer cannot continue in business if they lose their processor.
So that balance of power is very much shifted. If you have a problem, if you don't believe your milk price is being generated in the correct fashion, or there's another discrepancy inside it, the first thing you need to do is report that to your processor. Sometimes a farmer then says, I'm not so sure that's a good idea for my business.
In turn, I can say, well, raise that with the National Farmers Union and we can try and raise that issue either on your behalf or with others. Or of course, they do have the option to at least raise the issue with yourself, Richard, even if that doesn't necessarily come in the form of a formal complaint.
It does allow us to catalogue these issues. We do need to somehow, between us, address this underlying issue that farmers feel vulnerable and there's not a trusted pathway for them to raise a concern or a complaint, or a different way of working with their current milk buyer, and that can happen both inside democratic structures and out.
So why have we got ourselves into a place where farmers feel that vulnerable when they say, are you sure? Are you sure I'm being treated in the right way here, or are you sure we're collectively doing the right thing between us? How do we get over that?
And I think that is the question that is very much open for the industry to address, ahead of us perhaps reviewing future legislation. We thought about some sort of statement of principles, a code of conduct that processors agree to follow in the event that a concern or complaint is raised inside their own milk pool, how those farmers are fairly treated, should they want to go down that way.
But I know also some listeners won't perhaps be assured that a voluntary way of doing that will be sufficient enough. So I think this is the question that Michael, myself and all those others that work representing farmers and milk processors need to, first of all, collectively recognise that there is a level of fear out there amongst farmers when they want to raise an issue. And once we have collectively recognised that, how we are going to go about addressing it.
32.37
Michael: Yeah, I completely agree with you. I think also, if I was a farmer where there are very few alternatives, that's where I would be more concerned. We’re here in Somerset and there are eight milk processors buying milk in this part of the world. So if somebody wants an alternative, there are other places to go.
But if you're in the Vale of York, very difficult. And also at times where there's lots of milk around, there aren't the opportunities for farmers to move. However, Richard has some significant sanctions at his disposal. I’ve already witnessed some of the soft power that you've had and how that's been so influential to ensure that the regulations are adhered to.
You also have this big penalty, the 1% of turnover and the unlimited compensation that can be awarded. That should be enough to put the fear into the hearts of any finance director of any processor, because that's really significant.
33.29
Richard: Yeah, thanks, Michael. We've just actually published our first annual review, setting out the issues that have been raised with me and my office over the past year, and how we have gone about responding to those.
My role and my office is here to receive and resolve complaints under the regulations. And so over the past year, we've had a number of things come in to us. We've only had one to date which has proceeded as a formal complaint, and in that instance, we were able to speak directly both to the farmer and to the processor involved.
And positively, we were able to resolve that issue fairly swiftly, and the processor issued a revised contract to the farmer as a result, addressing the issues of concern that had been raised. So that was really positive to see a business responding in the right way.
We've also had 15 or so informal issues raised with us through our in-confidence channel, where for obvious reasons, our listeners will understand, I'm not able to go into a huge amount of detail because they were raised in confidence, but we've been able to use those to go back to dairy processors to raise concerns without revealing identity. And again, in the vast majority of cases, those have been received positively and thoughtfully, and have seen changes made as a result.
As I say, we may be here to resolve complaints, but I am very aware that by the time something's gone wrong, it may already be too late. So where I can work to influence the right behaviours in the first place will be a really important part of my work.
And over the past year, for example, I've talked with dairy producers introducing new contracts in particular around issues like whether that contract will be exclusive or non-exclusive, and had conversations about how those contracts can be implemented in a fair, transparent and of course, compliant manner with the regulations.
And we've seen some real success again in those conversations with dairy processors to move in the right direction and to do the right thing and ensure that farmers have a clear, transparent contract in place.
35.56
Paul: Richard, as a farmer, and I think others that are listening will be really enthused by the fact that you've been able to share there, that you have seen some real live cases and improvements on the back of them. You know, I've seen some behavioural change out there and put two and two together to see what the reasons for that might be.
So I guess, in the short term, what good looks like to me is more farmers are aware of your role and their ability to be able to raise any concerns, either with us or themselves, with their processors, or if it's felt necessary, with you.
And I guess, longer term, the success that turns into is, the need to do it becomes less obvious, and as farmers fall more into representative models and structures, issues become resolved there once we remove this culture of fear. So it's showing me that real change is happening.
36.51
Richard: I think you're right. Being able to tell the story of what the regulations and what my office supporting those regulations is able to do is going to be really important. That starts with farmers being prepared to come forward and tell us their stories. You don't have to wait until you've got a formal complaint to come and talk to us. Raise the issues as early as possible, direct with the processor, if you feel confident in doing so.
That’s feedback that as a business you welcome, and in fact need, to understand what might not be going as well as it could do in the relationship with your key suppliers. Without those suppliers producing good quality milk to the volumes that you want, your business isn't going to be well placed to survive.
If you're worried about something and you have concerns, we introduced a dedicated in-confidence channel earlier this year, so farmers can contact us about any problems they might be experiencing. We will guarantee that anything that's raised with us by a farmer or a third party won't go any further, and they'll remain completely anonymous unless they choose otherwise.
We may not be able to open a formal complaint or a formal investigation, but I and my team can do something with that information. We can raise it with an individual business without revealing someone's identity, or we can raise it with industry groups or the NFU to get industry thinking about what the problems and issues might be that need to be addressed.
You don't need to fill in any forms or anything like that. It's not an overly bureaucratic process. Drop us a quick email and one of the team will give you a call back and chat through the issues that you might be facing.
As Michael says, we have important powers that should incentivise any dairy processors who aren't doing the right thing and are acting unfairly to make sure that they do because the penalties can be quite severe. You can email us at our confidential mailbox, which is ASCA-in-confidence@defra.gov.uk
And as I say, you don't have to wait until you have something that you think of as a formal complaint to get in contact with us. I think it's in the best interests of all parties, including those dairy processors, to raise and try and resolve things as quickly as possible.
So if you think that's something we can help with, please do get in touch, and then we can start to share the stories and the information of what we're hearing, what's happening on the ground to better inform the whole marketplace, but importantly, continue to build that trust and confidence in supply chain relationships, which are so important.
39.36
Michael: Thank you very much, Richard. Have you also been contacted by processors who've wanted some clarity on how they should interpret FDOM? Because obviously, as you're the arbiter, you'll be able to give whilst you can't give advice, you can certainly provide expressions and thoughts as to how compliant a processor may be or or make sure that they face the right direction. Have you had examples of that as well?
40.01
Richard: Yes, absolutely. In the majority of cases I've seen a very positive response from the industry to the introduction of the new regulations, of businesses that want to do the right thing, in many cases were already doing the right thing, but I'm conscious that that may not be the case for all farmers out there in their daily experience.
And so it's really important that the regulations have the backstop of my office and my powers to be able to investigate when things have gone wrong. We've talked a lot about the importance of communication today, and in one sense, a complaint is just another form of communication. It's just when it's gone a bit wrong beforehand and could have been dealt with a bit better.
And I think collectively within the industry, a really important part of my role is to help people have those better conversations and communication earlier on so that in the future, hopefully I don't need to deal with a very large number of formal complaints because issues are being raised, aired and dealt with effectively much earlier on. And I think that's got to be the best outcome for both farmers and dairy processors in the future.
41.15
Michael: Richard, so we’ve bumped into one another at a number of industry events and agricultural shows. How do farmers get to know more about your work, what you've been doing, what you're planning to do, and who else works with you?
Richard: A really key thing for me is getting out and about and meeting as many farmers and industry representatives as possible. We’ve got a team of five, who are dispersed across the UK. What’s really important to me is that farmers, who may need us and may need to get in contact with us if they have an issue with their supply relationship, feel that we're people who they can talk to, who will listen, who will understand the issues that they're going through.
If you see me at a dairy show, come and have a word. I'm always happy to have a chat. You don't have to have an issue or complaint that you want to raise with me. I'm still fairly new to the sector, so I'm learning about all the fascinating things that are involved in being a dairy farmer. So come and have a word because it's really important to me that farmers feel that whether it's myself or one of my team, they're someone they can just pick up the phone to to have a chat about things.
It doesn't need to be a fully formed complaint. They don't need to talk in the language of the regulations. No one wants to do that. If they just want to tell us their story of what's happened to them, then we can think about where we may be able to help.
Paul: I might even get you milking one day, Richard.
Richard: I would love to and my two children in particular, I think that's their main ambition for when I took on this role last year to, yeah, have me involved in milking a cow.
Paul: Yeah, let's make it happen.
Michael: [Laughter] Yeah.
42.54
Richard: So obviously with recent falls in the price of dairy driven by, as we've discussed, oversupply in volumes of milk, not just in the UK but globally as well, one of the things that I've heard farmers express worries about is whether this will lead to processors no longer collecting their milk because of fears of the scale of oversupply and whether this is a feature of the new regulations and how they apply in the market. Is that something that you've heard concerns about, too, Paul?
Paul: Yeah, absolutely. It's something that farmers have picked up the phone to me to discuss, because we are facing into a pretty unique set of circumstances with really significant volumes predicted for next year, and that is a prediction at the moment, but everyone's thoughts are turning towards them.
So I think it's important that I respond to those farmers that ask me this question, that actually the means by which processors manage volume, both now and in the future, hasn't fundamentally changed as a result of the regulations. The way in which they perhaps discourage production could happen the same today as it did in the past.
The only difference that the regulation brings is that if you are not supplying a cooperative, a PLC, in the event that your processor does introduce or currently has a tiered pricing mechanism, that you are able to sell those litres elsewhere, which you've already referred to as a fundamental part of the regulation, Richard.
So, yeah, I am hearing farmers saying, has this changed as a result of the regulations? The answer is no. The behaviour could have happened now or in the past. The only difference is if you're not inside a cooperative, that tiered pricing, those non-exclusive litres, could be sold elsewhere, but I also recognise that, look, in the current market, that's looking unlikely.
45.02
Michael: All I would add to that, Paul, is with our own example here at Barber's, we've had an A and B contract now for nine years. The only difference since FDOM has come in, is that if a farmer wants to expand way over what they said they were going to supply, we'll still guarantee to collect that milk if they wish to sell it to us at the non-discretionary price. That non-discretionary price can be below or above our prevailing price, in our example. Or they now have the option, if they wish, to sell that milk to a third party.
So it hasn't really fundamentally altered the relationship we have with our farmers, except, first of all, we need to know, as all processors need to know, as accurately as they can, how much milk a farmer thinks they're going to supply. And that needs to be updated on a regular basis.
I would suggest that's not just a Barbers requirement, that would be every processor would be looking for that sort of information, and finding mechanisms to be able to ensure that that data can be pulled, and for a processor to work closely with their farmers to make that work as best they can, is going to be the crucial part of the relationship over the next few months.
Richard: That's the outcome we were after, really, wasn't it, Michael?
Michael: It is.
Paul: I would suggest that, you know, what's stuck in farmers’ throats was that we could have a tiered pricing, so a small part of your milk was paid a low market value, maybe reflective, but maybe low. But you had to still sell it to your same processor. And that principle has been taken away, in that you can now sell it elsewhere, but fundamentally it will still be a market-related price.
46.37
Richard: Clearly, there are challenges remaining ahead for the dairy industry, but it seems the need for collaboration between farmers and milk purchasers, clear communication and fair treatment remain as crucial and fundamental as ever.If anyone does feel they've been unfairly treated, they can contact me and my office in confidence. That email again is ASCA-in-confidence@defra.gov.uk
It's really important that I hear what's happening on the ground, so that we can target our efforts to tackle poor and unfair practices.
Paul and Michael, thank you very much for your time today. It's been really valuable and I hope it's given our listeners, especially dairy farmers, a clearer picture of how the new regulations are working and what support is available.
Paul: Yeah, thanks, Richard. Thanks, Michael as well. It's good to see you. The NFU recognises that fair dealings, the way in which farmers and processors work together, is really, really important, and your role, the Agricultural Supply Chain Adjudicator, has been such a significant step forward in that process. We look forward to working with you on that and perhaps one day even milking a cow together.
Michael: [Laughter] Thank you, Richard. Well, we need to have some photographs of Richard milking a cow, I think. Thank you very much for the invitation to be involved. I hope the listeners have found it interesting and useful.
The new regulations are there to help, and designed to help, in the relationship that we all have in this dairy sector that we all depend upon. So thanks very much, Richard, and thank you to everyone listening.
Richard: If you'd like to subscribe to the Defra Farming podcast, you can find us wherever you usually get your podcasts. And if you want to follow the work of Defra Farming and Countryside Programme in more detail, you can visit our blog at defrafarming.blog.gov.uk
Thanks again for listening and thanks once more to Paul and Michael for joining me today.
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