Scotland to get its first Dairy Producer Organisation

Members of the Milk Supply Association (MSA), which formed in January 2013, agreed at their recent AGM to complete the process of registering with the Rural Payments Agency to form the first EU Dairy Producer Organisation (DPO) in Scotland.

After the AGM, Rory Christie, Chair of MSA, commented: “The formation of a Producer Organisation was the logical next step for the MSA. We are becoming more deeply involved in the way that we manage the milk supply chain from farm to processor and we need to ensure that, with growing accountability, the organisation is properly prepared for the work we need to carry out.

We also hope that the move to forming a DPO, and its recognition by Lactalis, demonstrates a new, alternative way of collaborating in the dairy sector which will add value for both retailers and consumers and deliver new opportunities for the creamery and back on the farm.”

James Graham, Chief Executive of SAOS said: “Dairy POs were introduced to improve both transparency and efficiency in the supply chain. Dairy farmers and milk processors are entirely inter-dependent and the formation of a PO enables a properly functioning interface amongst them. I expect to see several more follow the MSA’s example, and I hope their move provides strong encouragement.”

Producer Organisations (POs) are legally-constituted groups of farmers or growers which assist in the distribution and marketing of farm produce. To enable a DPO to negotiate prices for members’ milk without falling foul of competition legislation, it must attain RPA recognition by constituting and organising its role in accordance with criteria laid down in enabling EU regulations.

They are long established in the fresh produce sector under the EU Fruit and Vegetable Regime, under which two members of SAOS, East of Scotland Growers and Scottish Borders Produce, have been recognised POs for several years. Following the 2013 reform of the Common Agricultural Policy, in particular deregulation in the dairy sector and the removal of milk quotas, DPOs have been encouraged across Europe.

The MSA is a group of 141 dairy farmers based throughout south west Scotland who supply a creamery in Stranraer owned by Lactalis, a leading global dairy business and the largest European milk processor.

Initially, the group acted on an informal basis with a board of invited farmers acting as a liaison committee, before the growing level of dissatisfaction about milk prices led to an initiative by local farmers to form the MSA in 2013.

This is an officially constituted Association with an elected Steering Committee which has the official backing of the members to work on their behalf. Their development was assisted by the Scottish Government and SAOS and supported by Lactalis.

The MSA is headed up by well-known Scottish milk producer, Rory Christie who, with a steering committee of five other producers, enlisted the help of SAOS to help develop the Association to build a collaborative working relationship with Lactalis for mutual benefit.

In total, the group supplies around 210 million litres of milk per annum and has worked with Lactalis to develop a new, more sophisticated milk pricing formula which is used as a basis to inform milk price negotiations. Both parties are also working to develop a new milk contract which is Voluntary Code compliant, incorporating a fully transparent and fair milk pricing process.

The key benefit delivered by the MSA is the professional representation of members’ interests to Lactalis. This has produced a culture of transparent collaboration where both parties work together to find new ways to deliver value and is crucially important when returns in the sector are so poor.

MSA and Lactalis are also developing a new volume management system to help align milk production more closely with the cheese markets serviced by the creamery. A supply chain project highlighted opportunities to improve milk forecasting and an innovative pilot supply chain review identified the benefits of applying lean methodologies at farm level.