Reviewing your contracts given shortcomings of the Dairy Hardship Fund

With restaurants and cafes closed across the UK during the Covid-19 lockdown the dairy industry took an almost immediate ‘hit’ in sales and revenue, with the price per litre plummeting, milk uncollected and a significant drop in demand resulting in dairy farms reducing production and pouring away large volumes of milk that had become almost worthless without an outlet.

While the government listened to concerns and created the Dairy Hardship Fund to support struggling dairy farmers, with applications opening on 18 June 2020, many stakeholders have raised concerns that the eligibility criteria has left many dairy farms disappointed and without much needed support.

The Scheme is based purely on the reduction in pence per litre of milk sold. It therefore does not provide any support for those producers that were forced to dump large volumes of milk or reduced production due to the dramatic decrease in demand from producers and retailers.

Both the NFU and the Royal Association of British Dairy Farmers have issued comments expressing their disappointment at the funds narrow scope but urged farmers to continue to submit their applications as they press the government for further support for the industry.

With increased overheads due to lack of rainfall; difficulties securing a high quality and consistent workforce following the Brexit vote; and the potential for increased regulatory costs over the coming years (not only because of the uncertainty of Brexit but from environmental pressures as well) struggling dairy farmers will once again be questioning the profitability of long term contracts and the balance of risk from large customers that can reduce demand with short notice. With the debate over the benefits and viability of ‘Cost of Production’ contracts for the dairy market generally still raging those without these ‘aligned contracts’ will be concerned about their existing contractual arrangements and the ever increasing costs of production from regulatory and market pressures.

If you are impacted by the current crisis in the dairy industry, need to review your contracts or are looking to enter into new contracts in order to mitigate your losses and find another outlet for your milk, please contact a member of our Agricultural team.