Farmers dig in to demand more in milk price row

Dairy producers threaten disruption to supplies during Olympics after emergency talks collapse

Farmers leaders vowed thousands would continue protests aimed at disrupting milk supplies this week after a Government-brokered peace deal failed to end the escalating dispute over "fair" prices.

Farmers for Action (FFA) and the National Farmers' Union (NFU) welcomed dairy processors' offer of more flexible contracts after talks with the Environment Secretary, Caroline Spelman, but re-stated demands for an urgent reversal of cuts of 4p a litre in farmers' contracts by next week.

During the past days, angry farmers have manned blockades that have been set up outside depots across the UK run by Robert Wiseman, Arla Foods and Dairy Crest, in protest at steep falls to the price, equivalent to a cut of 14 per cent. FFA and the NFU are demanding the processors back down by 1 August, when the latest cut of 2p per litre is due to take effect, or risk widespread disruption to supplies during the Olympics.

In an attempt to break the deadlock, the Department for the Environment, Food and Rural Affairs (Defra) hosted talks between the NFU and Dairy UK yesterday, which led to the sides reaching an outline agreement on a new voluntary code of conduct.

As part of the agreement, farmers will be able to negotiate issues such as pricing and notice periods and leave contracts "more easily" if they are unhappy with the price they receive.

Jim Paice, the Farming Minister, hailed the agreement, saying: "I welcome the commitment all sides have shown to reaching an agreement. The Government will continue to work with all parts of the industry to secure its long-term future, including promoting farmers working together in producer organisations."

However, farmers' leaders said that the agreement was too little, too late to prevent days of further demonstrations scheduled for this week.

Mark Evans, Devon spokesman for FFA, said: "This deal is a little way towards our campaign but until we get the powers sitting down at the table and agreeing a sustainable price our campaign will continue."

Fran Barnes, communications director for the NFU, said: "The voluntary code is something we have been lobbying for but the protests will continue because they are about the price cuts. We want them rescinded."

The farmers say hundreds, if not thousands of Britain's remaining 10,700 dairy farmers will go out of business unless processors reverse the cuts – and retailers and other milk users pay more for milk.

FFA, which has the support of the NFU, has threatened to target supermarkets as well as processors and bring supplies to a "standstill".

Jamie Oliver and Hugh Fearnley-Whittingstall, the TV chefs, raised the temperature further last week by calling for a consumer boycott of retailers paying below the 30p cost of production.

Marks & Spencer and Waitrose pay 32p and Sainsbury's and Tesco around 30p each, but others have been criticised for not paying a "fair" price.

In the past four days, after being targeted by the protesters, Morrisons and the Co-op raised the price they pay to 31p and 29p per litre respectively.

But Asda is still paying 27.5p and many other users of milk such as food manufacturers are paying around 25p – potentially putting them in the firing line.

Asda is still paying 27.5p a litre, below the 30p production cost of milk, putting it in the firing line