Dairy farmers step up protest over price paid for milk Most dairy farmers are tied into 12-month contracts and have no say in setting the price they are paid for milk. More than a thousand dairy farmers are blockading milk plants this weekend as the dispute intensifies over cuts in the price they are paid for milk. Following protests at a number of dairy complexes on Thursday night during which farmers held demonstrations at sites run by Arla, the owner of the Cravendale, Lurpak and Anchor brands, union representatives said they had no choice but to continue their action. "A lot of farmers are desperate," said Andrew Hemming, vice chairman of Farmers For Action and a lifelong dairy farmer from Solihull. We don't want to go down this route but we need to make our voices heard. Hemming, who was at a 400-strong peaceful protest outside the Arla plant in Ashby-de-la-Zouch in Leicestershire until the early hours of Friday morning, added: "Farmers are angry. We are angry at the way we have been treated ... but we have got an amazing amount of unity. The farmers' unions are working together. At the heart of the dispute are the contracts between dairy farmers and milk processors. In the sector, the processors, such as Arla, Robert Wiseman and Dairy Crest, set the price they pay farmers for their milk. Most farmers are tied into a 12-month contract and have no say in the price-setting process. The farm-gate milk price was cut by 2p per litre (ppl) in June. Now more cuts are due to be applied from the beginning of August. Robert Wiseman Dairies and First Milk have both dropped the price by 1.7ppl, Arla by 2ppl and Dairy Crest by 1.65ppl. The major firms say they have no choice because the price they can sell cream for on the commodities market has fallen sharply in the past 12 to 18 months. But farmers claim this is a shabby excuse. Robert Newbery is the chief dairy adviser for the National Farmers Union. He said: "Farmers are being affected very seriously. Their cost of production is around 30p per litre but after 1 August the price won't even cover their costs of production. Newbery said milk processors had been selling liquid milk to supermarkets at vastly reduced prices in order to secure lucrative contracts. This means even a slight fluctuation in cream prices affects their balance sheets and therefore their ability to pay farmers. Large businesses are not acting responsibly. The consequence is that farmers risk going out of business this winter," he said. Stephen Franklin, a dairy farmer near Ripon in North Yorkshire, was at a demonstration outside an Arla plant in Leeds on Thursday night with 500 other farmers. "A 2p price drop represents about an 8% drop for us," he said. The processors are hell-bent on getting these supermarket contracts. And supermarkets are lapping it up. Farmers' unions say Asda and Morrisons, who are both supplied by Arla, do not ensure farmers receive a sustainable milk price. They also single out the Co-op. Although the recent cuts will not affect farmers supplying Tesco, Sainsbury's, Marks & Spencer or Waitrose, the NFU estimates that the drop will have an impact on a quarter of the milk market volume in this country. In the long run, consumers could end up paying more for their pints. While the government says it cannot intervene in the setting of milk prices, the Department for Environment, Food and Rural Affairs has convened a number of meetings with farmers' unions, processors and retailers next week. It hopes all parties will come together and agree a voluntary code for the industry. According to those involved in the negotiations, the code is intended to address grievances over the length of contracts and short-notice price changes. Jim Paice, the farming minister, said: "These price cuts are a severe blow for dairy farmers. Government cannot and should not set prices but I will do everything in my power to get all levels of the supply chain to make the real changes needed to guarantee the industry's long-term future. Farmers and processors need to work together through an industry code of practice on contracts, and retailers have to help shift the focus away from short-term practices which are completely unsustainable. A spokesman for Dairy UK, which represents milk processors, said it was working towards a voluntary code but maintained that the current dispute had been prompted by a fall in the international price of dairy products. He said: "These markets are extremely competitive and enormously volatile. We cannot insulate ourselves from world market trends. When contacted by the Guardian, Arla, Robert Wiseman and Dairy Crest agreed they understood the strength of feeling among dairy farmers but were unable to restore milk prices. Both Asda and the Co-op said they would increase the premium they pay to farmers. But unions said this would still not be enough to cover the farmers' cost of production. A spokesman for Morrisons said the supermarket hoped to be able to give an update at the beginning of next week. At present there are more than 14,000 dairy farmers in the UK. The sector is worth an annual £3.3bn.