30 April, 2020
The unprecedented outbreak of COVID-19 has raised challenges for businesses across all sectors including agriculture.
It would be an easy assumption to make that the increase in produce being purchased in supermarkets would offset losses elsewhere in the industry. It is however becoming clearer that agriculture is facing new and unique challenges.
The dairy industry in particular is sensitive to volatile market conditions. This is largely due to the fact that milk is a perishable product and therefore only has a short window for supply from the farm to the place of sale and ultimately its end destination. Be this homes or places of work/leisure and the like.
One of the biggest impacts of COVID-19 on the dairy industry is the fact that the leisure and hospitality industry (hotels, cafes, restaurants etc.) has had a near total shut down and offices and other work places are operating with large reductions in staff. This has therefore resulted in a large drop in demand for milk and other dairy products. Added to this, restrictions on movement and contact between people has posed challenges for processors in respect of the collection and processing of milk. Recent headlines about farmers having to dump thousands of litres of milk are shocking and highlight the difficult current circumstances for the dairy industry.
In an attempt to alleviate the impact being felt by the loss of demand for dairy products, the Department for Business, Energy and Industrial Strategy (BEIS) and the Department for Environment, Food and Rural Affairs (Defra) have announced that certain elements of the competition law will be relaxed. The Competition Act allows the Secretary of State to exclude the prohibitions contained in the Act from certain agreements where the Secretary of State is satisfied that there are exceptional and compelling reasons in the public interest to support this. This is in addition to the already introduced relaxation of competition rules in respect of other retailers and suppliers to allow them to work together to redirect supplies and resources in an attempt to minimise and/or avoid products going to waste due to lack of demand. The hope is that these further measures will allow farmers and other producers to work together to minimise the loss of diary products and direct the same to areas where they are needed.
It is unclear at this stage how much assistance these measures will provide to the dairy industry and it is likely that further measures will be required depending on how the COVID-19 outbreak develops. One thing that is clear though is that collaboration over competition appears to be the best way to maintain demand and supply in the diary industry.
For more information contact Michael Rutter in our Agriculture department via email or phone on 0333 207 1147. Alternatively send any question through to Forbes Solicitors via our online Contact Form.