New regulations are set to be laid before parliament which aim to stamp out rogue milk purchasing businesses from abusing their position and exploiting farmers.
The Fair Dealing Obligations Regulations, announced in June, aim to promote fair business between milk producers and purchasers.
The legislation seeks to bolster the good practice many milk purchasing businesses have developed and acted upon since the introduction of the Voluntary Dairy Code in 2012.
The regulations are set to be laid before parliament following the summer recess and are expected to come into force within 24 months.
The Farmers' Union of Wales (FUW) welcomed the development, as it would help stamp out "underhanded business decisions and contractual loopholes".
However, the union said it may do little to improve financial stability within a volatile dairy industry where the price paid for milk was heavily influenced by both domestic and global markets.
Brian Walters, FUW's Milk and Dairy Produce Committee Chair said: "This Statutory Instrument that will go some way in protecting dairy farmers from unfair practices.
"Apprehensions remain on the scope of the regulations and how effective they will truly be in providing farmers with a fair price for their milk in light of rapidly changing and challenging markets."
However, he said it was evident that further work was needed to improve the working relationship and promote the fair trading of milk along the entire dairy supply chain.
Mr Walters said: “Farmers need to understand their obligation to seek legal advice prior to accepting any milk purchase agreement and their rights to negotiate various details of the agreement, and to not accept the status quo of a given contract without thorough consideration."
NFU dairy board chair Michael Oakes said the new regulations marked a significant step forward in the government’s efforts to increase fairness and transparency in the dairy supply chain.
"For a long time, unfair milk contracts have held British dairy businesses back, and these changes will give dairy farmers much needed business security and confidence, as well as helping to share risk along the dairy supply chain."
