Fair Dealing Obligations (Pigs) Regulations 2025
(2 days ago)
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Baroness Hayman of Ullock
That the Grand Committee do consider the Fair Dealing Obligations (Pigs) Regulations 2025.
Relevant document: 21st Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lord, these regulations use powers contained within the Agriculture Act 2020 which enable the Government to address power imbalances within agricultural markets. These fair dealing powers allow for regulations that impose obligations in relation to the contracts of those businesses—usually larger businesses—that purchase from smaller producers. The fair dealing powers in the Agriculture Act, and their first use in the Fair Dealing Obligations (Milk) Regulations 2024, have previously been debated in this House, with important contributions made. I therefore know that many noble Lords will agree that these powers can play a significant role in promoting fairness in this sector and beyond.
I should first say that the pig sector is a British success story, characterised by effective relationships between producers and processors. It is a sector that delivers high-quality products, enjoyed across the UK and around the world. However, where power imbalances exist, relationships are not always as fair as they should be. As a result, farmers have too often felt that they bear a disproportionate share of the risk when market challenges arise.
A public consultation in 2022, seeking views on contractual practices in the sector, highlighted several challenges faced by producers. Defra has developed these proposals in response to the concerns raised and in close collaboration with industry, aiming to ensure fairness for producers while taking account of the practical concerns of processors. I am pleased to report that many stakeholders believe we have struck the right balance—protecting farmers while supporting existing good practice.
There will be opportunity for detailed discussion, but I would like to begin by outlining some key provisions. First, I will say a word on existing structures that already serve to protect farmers. We heard from many producers that the collective negotiation undertaken through marketing groups is highly valued. These regulations preserve this arrangement, allowing collective sellers, who purchase pigs from more than one farmer without processing them, the same protections as individual sellers.
At the heart of the regulations is the principle that written contracts should be the norm. While many transactions already use written agreements, this is not consistent across the sector. Establishing written contracts as the default provides a vital safeguard for farmers’ rights and promotes greater transparency in commercial relationships. Although industry supported this approach, it was also clear that not every transaction requires a protected contract. The pig sector includes a functioning spot market, where pigs are traded off-contract, an important mechanism for managing supply. In these cases, and others, the regulations allow producers to issue a notice to disapply the requirements for certain purchases. However, in most cases, both farmers and processors benefit from certainty. When no notice to disapply is given, farmers must be offered a fully compliant written contract, which cannot be varied without their consent. We heard clearly that farmers often felt that changes were imposed on them unilaterally, and this is not in the spirit of an open and balanced relationship.
One of the key priorities raised was the need for clarity around agreed volumes of supply. Clear terms in this area will support better planning and ensure that both parties fully understand their responsibilities and the consequences if those commitments are not met. In the pig sector, pricing is already often linked to published data or other shared information, offering a level of transparency that benefits both parties. The regulations encourage this approach by placing fewer obligations on processors who base their prices on such information.
At the same time, we were clear that flexibility must be preserved. It is for producers and processors to decide together how prices are calculated, reflecting what works best for their commercial relationship. However, when pricing mechanisms use data or factors which are not clearly accessible to producers, it is right that contracts include provisions to allow farmers to verify that pricing is fair and consistent with the agreed terms.
In addition to volumes and pricing, the regulations require that contracts clearly set out all terms relating to the purchase, as well as essential elements of the agreement that define how the relationship will operate in practice. These include matters such as payment terms, delivery arrangements, and how and when the contract can be terminated. While the specific details of these terms can be negotiated between the parties, this clarity helps protect farmers by reducing the risk of sudden or unfair changes, ensuring that both sides understand their rights and responsibilities throughout the contract. Importantly, all contracts must include a dispute resolution procedure. This will promote dialogue and help sustain the successful relationships already present in the sector.
The regulations extend the enforcement powers of the Agricultural Supply Chain Adjudicator. The ASCA will investigate complaints about compliance with these regulations, as it already does in the dairy sector, on behalf of the Secretary of State.
Before I conclude, I should note that these regulations make an amendment to the Fair Dealing Obligations (Milk) Regulations 2024. After those regulations came into force, the Government were made aware of unintended consequences regarding tiered pricing in exclusive agreements. We received representations from businesses with shared ownership structures, explaining that exclusive supply is central to their model, and that the prohibition on tiered pricing was inadvertently penalising arrangements that actually benefit producers. These regulations therefore introduce a limited amendment to allow such practices in cases where a shared ownership structure is in place.
In summary, I hope I have demonstrated to noble Lords that these regulations represent a significant step forward for fairness in the UK pig sector. They respond directly to producer concerns, protect practices that work well, and will promote more balanced and transparent contractual arrangements. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I welcome the regulations before us this afternoon and thank the Minister for giving us the outline. It is an interesting backdrop, in the sense that pig prices seem to have been at their highest for a while now. I have come straight from a meeting with some Danish businesses—none of them farmers. While I am half-Danish, I wish to help only the British farmer, I should explain.
I am a big supporter of auction marts. How will this provision impact on sales through such marts? Will they be left pretty much as is allowed at the moment? Presumably, the regulations will come into their own at a different time, when the prices are particularly low and when the farmers, or pig producers, are not covering the full costs of their production.
Having been an MEP in an area with intensive pig farming and then having gone on to be an MP in another area with equally intensive pig farming, it was very sad to see the impact of foot and mouth disease on pig production. Many farmers will simply not go back into pig production again. Anything that we can do, like the content of these regulations, is very helpful indeed.
The Minister referred to the role of the Groceries Code Adjudicator, and I pay tribute to it. I still believe that we should go further and allow the adjudicator to look at the market and at particular supplies off its own initiative. If there is an imbalanced relationship that it is there to resolve—and overwhelmingly it has worked well—there is no way that someone is going to jeopardise it. That perhaps relates more to different sectors than to pigs, such as the dairy sector and fruit production. If you are in a contract and you are being unfairly discriminated against, it is difficult for you to jeopardise that contract by being identified as a complainant with the adjudicator. I take this opportunity to ask the Minister whether the Government will continue, please, to keep that under review.
Mindful of the fact of movement—which I do not think is covered by the regulations, but perhaps the Minister could write to me about this—we have a number of agricultural shows coming up at this time of year, right through to the autumn, and they are immensely important to the agricultural sector. Again, this probably covers sheep and lambs—I have not seen too many pigs at the Great Yorkshire Show, I have to say. Will the department give advice on movement of animals? I know it is on the case as regards avian flu, but some imports have already been banned because of foot and mouth existing in parts of the European Union. Will she make sure that the department gives advice at the earliest possible opportunity, well in advance of the shows taking place? That would be very welcome indeed.
I cannot let this opportunity go without singing the praises of the Malton pig factory. Again, while not directly within this remit, we have a bed and breakfast for pigs in North Yorkshire, and they are just as well looked after as we are at the famous bed and breakfasts that many of us stay in. One of the outlets for the bed and breakfast pig industry is the Malton Bacon Factory. It exported a huge amount to China, which takes pig’s trotters and other parts of the anatomy that I will not go into, which we do not enjoy in this country. That was a multi-million pound contract, and that might have gone by the wayside. The regulations focus probably more on those that do not necessarily have an initial contract.
One thing that struck me in the regulations—I am very grateful to the Secondary Legislation Scrutiny Committee’s 21st report—is that it seems very odd in this day and age that many contracts are still not made in writing. Will the Government insist on that through the course of the regulation? The committee highlights in paragraph 44 that the requirements will
“include that all contracts are made in writing, contain clear pricing terms and set out how the price is determined”.
That relates to my initial question about how this will impact—presumably, the auction marts will be left alone and this will relate just to those contracts that are done individually. I would be very interested to know what proportion of the market is intended to be covered by the regulations. I welcome the regulations this afternoon and the opportunity to raise those issues.
Lord Jones (Lab)
My Lords, it is always instructive to follow the noble Baroness, Lady McIntosh. I thank the Minister for her persuasive, well-informed introduction. I do not quite know how George Orwell—Mr Blair—would view these regulations, because he had it in for Napoleon. But the Explanatory Memorandum is very helpful, and clearly Mr Andrew Powley has played a blinder in the department.
In another place, for some 31 years, I visited perhaps six farms a year, and one was hospitably received—bacon sandwiches were often on the farm menu. Indeed, I was once an Agriculture Minister in the lovely land of Wales. I cannot be the only one of your Lordships who regularly tunes in at 5.45 am to Radio 4’s informative farming programme. Pigs feature therein, and I am sure our Minister listens quite regularly to that programme—after prayers, of course.
Baroness Coffey (Con)
My Lords, I support these regulations but I have a few questions about them.
First, I give credit to the Government for bringing them forward. The gestation period of a sow is three months, three weeks and three days. This issue was first raised with me as an MP back in 2021 and the announcement was made in 2023, so heaven knows how many piglets have been born while we have been getting to this stage.
I want to get a sense of aspects of the contract and enforcement. So that noble Lords know, this came about during the Covid times, when we started seeing a shrinkage in the number of abattoirs. Farmers were starting to be constricted in which abattoirs were open. It was largely the large abattoirs, although not exclusively. As a consequence, farmers saw that, all of a sudden, prices changed, and it was take it or leave it.
There were further issues, and I will ask a question about size. Contracts were being written in a different way about the size of the pig that was being taken into the abattoir and whether it was slightly over in weight—obviously, while you are waiting for the pigs to go into the abattoir, they keep being fed. Farmers I knew were getting 10% of what they had expected, never mind the cuts that were being brought in.
I am conscious that it is very difficult to write the contract; we can see how long this one SI is in trying to reach the principle. On the review that is set out in the regulations, will the Minister perhaps share with the Farming Minister some thoughts on how the contracts are formed at the moment, to see how we start to accommodate for that? If we are getting into a particular situation, we might end up with the cancellation of the receipt of the pig in a way that forces a different way in which farmers are not properly compensated.
The first person who brought this up with me was the marvellous Jimmy Butler of Blythburgh Pork. I see my noble friend Lord Deben is here—we both know Jimmy well. Of course, there are other great pig farmers. On the Suffolk coast, there is Dingley Dell, with the Hayward brothers, and there are many more around the country, as we have already heard. The threat of blacklisting was very real, and it is why we went to Victoria Prentis—who will soon be introduced to this House—which brought about the July 2022 consultation.
Who will undertake enforcement of the regulations set out today? The powers are attributed to the Secretary of State, but, as the Minister will know, we have seen, sadly, breaches of animal welfare just in the last month in an abattoir the name of which I have forgotten, and in other abattoirs as well. Often, these abattoirs want help from the Government, who are not always listening when we go to them for help for farmers. Will it be the Food Standards Agency, which probably has more interaction with abattoirs than any other part of government, bearing in mind the regulations and the listening? It would be useful to understand who is lined up to do that.
I am also quite keen to understand this: at one point, there was consideration around referring the number of abattoirs that were there to the Competition and Markets Authority. I am sure that this will have been considered, bearing in the mind the regulations laid out today. I appreciate that the Minister is not formally responsible for farming but, if she has anything on that, I would be grateful to hear from her now or by letter.
I have a final point. The concentration of abattoirs has happened, as I say, for a variety of reasons, and I do not want to get into the animal welfare issues in that regard. It meant that the previous Administration set up a small abattoir fund. That came to an end in September last year. I would be grateful to have an understanding of that. Again, I appreciate that this is not directly in the regulations, but it could inform in due course the review that is under way on effectiveness of the provision of that funding. I am conscious that it was a difficult decision for the Farming Minister today, in an announcement made in a Written Ministerial Statement, to reopen SFI 24 for farmers who had started their application. I think that, in the review, it would be useful to consider whether the expansion of abattoirs has actually happened. It is vital that, whether mobile or small, we try to make sure that there is a healthy market in this country.
As I say, I applaud the Government for finally bringing these regulations forward. They will be much welcomed, but there are still a few details on which I would be grateful to hear from the Minister.
Baroness Grender (LD)
My Lords, my thanks go to the Minister for her explanation of this statutory instrument, which we in the Liberal Democrats support. It represents a positive and necessary step towards addressing the deep-seated issues of fairness and transparency that have plagued our vital, world-leading pig sector. It is a welcome change in the wake of the painful crisis that gripped this industry from 2020 to the spring of 2023—a period marked by, as we have heard from other noble Lords, the Covid period, acute Brexit-induced labour shortages at processing plants, and soaring feed and Putin-induced energy costs outstripping farm gate prices and pushing producers to the brink. The statistics are stark, with losses exceeding £750 million collectively, as well as that awful period when more than 60,000 healthy animals were culled because they could not be processed.
Although the pig sector has a history of volatility, that particular crisis exposed a critical weakness at its heart: a risk/reward imbalance underpinned by commercially unclear and potentially harmful terms, especially for smaller producers, hindering their ability to budget, manage price fluctuation or invest for the future. These regulations are rightly designed to address this imbalance. They mandate written pig purchase contracts between buyers and sellers, setting out clear rules for pricing, contract duration and dealing with market fluctuations. This framework is crucial in rebuilding for them security, clarity and fairness.
The instrument makes necessary amendments to the Fair Dealing Obligations (Milk) Regulations 2024, addressing the unintended consequence described by the Minister that impacts on businesses with an internal democratic structure—typically co-operatives—and allowing for volume-based or tiered pricing in that specific context. We urge Defra and the Agricultural Supply Chain Adjudicator, which will enforce these regulations, to monitor this amendment closely to ensure that it is applied in the true spirit of internal democratic structures. I thank the National Farmers’ Union’s dairy team and the National Pig Association for their valuable briefings on this issue, which have informed our understanding of it. They have asked for specific reassurances on this issue.
While these regulations are welcome and necessary for the pig sector, they highlight a broader need. The Groceries Code Adjudicator was introduced—we are very proud of this—by the coalition Government. It was taken directly from the Liberal Democrat 2010 manifesto, but we regret that its powers to enforce were not sufficiently established when we left Government in 2015, and it still comprises only a handful of people.
Given the clear and continuing power imbalance between producers, processors, supermarkets and the food service sector, does the Minister have any plans to enhance the enforcement powers and capacity of the GCA, given that it is the potential referee in the supply chain? Indeed, will she consider the need for the GCA to be able to intervene in deals between farmers and processers, not just those directly linking to retailers? Producers must be able to raise issues, and we believe that anonymity is vital, given the potential fear of repercussions. We believe that third parties such as the NFU should be empowered to raise concerns and truly hold the more powerful parts of the industry accountable, so the adjudicator therefore needs some more effective tools.
As ever, I thank the Secondary Legislation Scrutiny Committee for its scrutiny of these matters. It would be interesting to get some clarification from the Minister on an issue raised by my noble friend Lord Pack, which was also in the committee’s report. It said:
“Defra has used a specific definition of what constitutes an electronic signature, rather than using or cross-referencing to what we understand is the more standard definition under section 7(2) of the Electronic Communications Act 2000”.
In other words, there is some kind of different use of electronic signature here. That is a technical query that it would be great to understand. The committee continued, saying that:
“The Department was unable to explain … the rationale”.
I am having a second go at that question, and I thank the Minister in advance for even struggling to find the answer.
Finally, we must avoid simply passing this SI and then moving on. Regulations such as these need to be subject to regular review to ensure that they remain fit for purpose. The flexibility within this SI must not be abused, and the Government must ensure that these regulations genuinely work for an industry of which we can rightly be proud.
Lord Roborough (Con)
My Lords, in speaking to these regulations, made under Section 29 of the Agriculture Act 2020, I draw attention to my entry in the register of interests, in particular as a dairy farmer and landowner. This is the second use of these powers following last year’s regulations in the dairy sector, and I am most grateful to the Minister for introducing this SI today.
These regulations represent a step towards rebalancing commercial relationships in the pig sector. For too long, small and independent producers have operated under contracts that lack clarity, fairness or enforceability. Many have found themselves at the mercy of buyers wielding considerable market power and facing reductions in volume, unilateral contract changes and dishonoured pricing agreements. These practices have created uncertainty and risk at the farm gate, and undermined confidence across the supply chain.
As the Minister outlined, the instrument requires that all contracts between qualifying sellers and business purchasers be in writing and include transparent pricing terms. It prohibits unilateral changes to contracts, mandates dispute resolution mechanisms and sets clearer parameters around termination clauses. These provisions will enable producers to request a written explanation of how prices are determined if not based on objective and accessible criteria. The Minister also highlighted the usefulness of the notice to disapply in agreed circumstances.
The need for such reforms has been well evidenced. Our previous Government’s 2022 consultation received 374 responses, of which 89% supported mandatory written contracts and 64% said existing agreements were not consistently honoured. These regulations reflect this feedback and follow a constructive sector-specific approach.
Baroness Hayman of Ullock (Lab)
My Lords, I am grateful for the broad support for the regulations and for the contributions that have been shared on this instrument. There seems to be consensus that, even in a market that often functions well, as we have heard, it is essential to protect the smaller producers in the supply chain, so I welcome the support.
The specific requirements that are set out in the regulations—on volumes of supply, pricing, contract variation and termination—represent a significant step forward for the pig sector. Dispute resolution provisions will also support continued dialogue and collaboration across the supply chain. At the same time, the regulations are designed to protect and support existing good practice. I am confident they will strengthen the many successful relationships that already characterise the industry.
I turn now to some of the specific points that were raised. Some noble Lords talked about the different flexibilities that we have built into the regulations. I want to be clear that we are confident that they will not be easily misused. The reforms deliver a real and meaningful improvement in transparency for pig producers, which has often been lacking in the past. If the reforms are to be effective, they have to be proportionate and reflect the realities of how the sector operates, which is why we have built in flexibility. That does not mean we are going to be hands off in the approach to it.
I assure noble Lords that implementation is going to be closely monitored. If we find that the flexibility is such that the notice to disapply is being abused, or if the behavioural changes we expect do not materialise, we will not hesitate to revisit our approach and take further actions. The noble Lord, Lord Roborough, asked if we are going to be keeping an eye on it, and the answer is yes.
The noble Baroness, Lady McIntosh, asked about auction marts. First of all, pig sales through auction marts are quite limited but they will not be impacted. This is one area where the notice to disapply may be appropriate to use. If a notice to disapply is given to the business purchaser by the producer, the regulations do not need to be complied with for that specific purchase. I hope that helps to clarify that.
The appalling pig crisis of 2021 and 2022 was mentioned, particularly by the noble Baronesses, Lady Coffey and Lady Grender. Everyone in the sector wants to make sure that that does not happen again. As we have heard, at the time, there were a number of related factors, including the Covid pandemic, a lack of skilled butchers and declining export demand, and we ended up with a backlog of pigs on the market, which is why we had the awful cull that we witnessed. That was quite unusual, though, and it was quite difficult to avoid what was almost the perfect storm that built up at that time. We need to learn from it, which is why these regulations will make sure that farmers do not bear any disproportionate levels of cost when market challenges come up in the future.
The regulations outline that both producers and processors need to be clear about the levels of supply that they can expect in advance. That will be subject to negotiation between the parties, to maintain flexibility, and those agreeing a contract would be able to agree any tolerances for over and under supply levels. The new rules outline that contracts should say in advance what the remedies would be for either party when agreed levels of supply are not met by the other party. This could be a financial remedy, a change in future volumes that would be supplied, or a suspension of existing penalties; we need to look at each individual situation. What is important is that it will be open for negotiation between the parties, written down in advance and subject to change only by mutual agreement of both the farmers and processors alike. The whole point is to ensure certainty and transparency across the marketplace.
The noble Baroness, Lady Coffey, referred to the Cranswick incident and the difficulties around animal welfare and the breaches at that particular abattoir. The Animal and Plant Health Agency is investigating—it investigates every allegation that is reported to it. Obviously, I cannot comment on that because it is ongoing, but I reassure the noble Baroness that APHA is looking at that.
Lord Deben (Con)
Should we not be extremely pleased at the immediate steps taken by supermarkets and others when they heard about this allegation? And it is an allegation at this stage. It shows that we now have a very much more acute understanding of how animals should be looked after and what welfare really matters, which is crucially important for those of us who believe that eating meat is a satisfactory and proper thing to do.
Baroness Hayman of Ullock (Lab)
The noble Lord is absolutely right to draw attention to the work the supermarkets did. They do not always get the credit that they should. That swift reaction was really important. It shows the industry coming together, right across the board, when something really appalling happens that is breaching regulations. I absolutely agree.
There were a number of questions about the Groceries Code Adjudicator and the Agricultural Supply Chain Adjudicator. The noble Baronesses, Lady McIntosh and Lady Grender, and others mentioned that. For those covered by the groceries code, the GCA has prioritised communication of the statutory requirement to maintain supply confidentiality. The GCA has relaunched the Code Confident campaign, launched a confidential reporting platform called Tell the GCA, and published a code compliance officer commitment to confidentiality, which we hope will help. The GCA’s fourth statutory review is currently ongoing. That is being led by the Department for Business and Trade and will also allow for feedback to be provided in this area and in others.
For those covered by the Agricultural Supply Chain Adjudicator, a complaint does not need to be made from a producer for ASCA to investigate and perform enforcement functions where necessary. The current Agricultural Supply Chain Adjudicator has confirmed that it will always seek confirmation from the producer that they are content for a complaint to be formally investigated before contacting a purchaser and sharing any information. It has also recently launched the Contact ASCA in Confidence service, learning from the GCA’s Tell the GCA scheme; this allows producers and anyone else to raise issues with ASCA confidentially. Although ASCA will not be able to open a formal investigation without an actual complaint, the information provided will help inform its activities.
On who will enforce this, which a number of noble Lords asked about, the option to expand the remit of the Groceries Code Adjudicator was explored in a formal call for evidence back in 2016. This concluded that the extension of the GCA’s role further along the supply chain would not be appropriate. Part of this is because the Groceries Code Adjudicator has a very specific remit: regulating the relationships between the largest grocery retailers in the country and their direct suppliers. These regulations focus instead on the contracts that pig farmers hold directly, which are almost exclusively with the processing companies. We are therefore confident that the Agricultural Supply Chain Adjudicator—obviously, it also handles enforcement for the dairy sector, as noble Lords will be aware—is the most appropriate means of enforcing these regulations. It will continue to focus on regulations made under Section 29 and this first important stage of the supply chain.
I mentioned dairy sector enforcement. The noble Lord, Lord Roborough, asked whether this will be sector by sector. It will be introduced sector by sector going forward.
I was asked whether the Agricultural Supply Chain Adjudicator has sufficient resources. ASCA was relatively recently established. Enforcement for the dairy regulations began only in July 2024—less than a year ago—and existing contracts are not being covered until July this year. Currently, the office is sufficiently resourced to fulfil its remit of enforcing the regulations in the dairy sector and, soon, in the pig sector. However, we will monitor resourcing requirements as the regulations take effect, so that we can respond accordingly if need be. Similarly, we will continue to do so as further reviews are conducted and as more sectors come into scope.
Why did we choose this route instead of reforming the GCA? We have talked about the fact that we did the consultation but, particularly for pig producers, this is a highly consolidated part of the supply chain. Just four processors account for the vast majority of pig purchases. We believe that, to deliver the greatest benefits in fairness and transparency, it is right that we focus on this primary relationship between producers and processors.
These regulations were developed with extensive engagement with industry, and stakeholders were invited to comment on detailed drafting—including the text of the statutory instrument itself—to confirm that they found the whole approach workable. We are committed to using the fair dealing powers wherever they are needed. We are now working with industry on the proposals for fresh produce and the egg sectors, which will be the next areas that we look to bring in. We will continue to work with stakeholders as we do that.
My noble friend Lord Jones asked about the size of the pig herd. We do not actually know how many pigs there are, but we know that the UK pig industry is worth £1.6 billion at the farm gate and £5 billion at retail. Considering food service, external sales and export values, we think it is worth over £14 billion in total. I hope that that helps him to understand the size of the industry.