FARMERS and milk processors last night gave a cautious welcome to a possible breakthrough in the row over pricing.

Following hours of talks, both sides agreed to sign up to a new voluntary code of practice.

It means firms buying milk, such as big supermarkets, would give a "sensible" notice period when changing their prices – so farmers would have enough time to opt out of any deals.

Government officials say they could still bring in legislation at a later date if the code failed to work, but admitted ministers would still not be able to dictate prices.

The National Farmers' Union Scotland (NFUS) said that, while the initial move was encouraging, dairy farmers' representatives have pledged to keep up the pressure for both planned price cuts and those already in place to be scrapped, which together amount to 4p less per litre.

Last night there were warnings more action could go ahead next week if cuts per litre paid to farmers are not rescinded.

Dairy farmers are furious about cuts of up to 2p a litre in the amount they receive from major milk processors, and many fear the shortfall will force them out of business.

NFUS is calling all 1000 Scottish dairy farmers to a mass rally at Lanark Auction Mart on July 30 to update them on progress with prices, the code and routes to collaboration.

The meeting will help establish what further action Scottish dairy farmers want to undertake.

The two sides in the milk price dispute met face-to-face at the Royal Welsh Agricultural Show after a tense few days which culminated in several dairy factories being blockaded in England and supermarkets being picketed in Scotland.

Speaking from the show, NFUS president Nigel Miller said: "Work with retailers and processors to reverse cuts in milk prices will be ramped up in the coming days as we seek to ensure all dairy farmers – whether they are producing for fresh milk or dairy product markets – will receive a price that reflects the true worth of the milk.

"It is a clear reflection of the anger

and frustration being felt at farm level that so many Scottish dairy farmers have already taken the time to discuss their plight face-to-face with consumers, and having their backing has been gratifying."

Scotland's Farming Secretary Richard Lochhead said: "The agreement is a good step forward that addresses some of the most important issues, but our dairy sector is not out of the woods just yet.

"The test of success for our farmers will be when we see them being paid a decent return."