New dairy code gets wary OK

Zach RelphCountryman
Any proposed code would apply to all milk supply agreements between all of Australia’s dairy farmers and processors.
Camera IconAny proposed code would apply to all milk supply agreements between all of Australia’s dairy farmers and processors.

The State’s dairy farmers are cautiously welcoming a draft mandatory code of practice, remaining wary of its power to leverage bargaining power in negotiations with milk processors.

On Tuesday, the Federal Department of Agriculture and Water Resources released its draft clauses for a mandatory dairy code of conduct to improve farmers’ ability to switch processors and negotiate better deals.

The mandatory code, a key recommendation in the Australian Competition and Consumer Commission’s dairy inquiry following 2016’s dairy oversupply, will cover about 87 dairy processors and 5800 dairy farmers nationwide.

The industry has until February 15 to provide DAWR with feedback on the draft which proposes:

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Preventing unilateral changes to agreements.

Enforcing a set date each year processors publicly release a standard form agreement that includes the minimum price, and a pricing mechanism for longer-term agreements, and covers the term of the agreement.

Preventing retrospective price step downs.

Preventing arrangements with exclusive supply and two-tier pricing.

Prohibiting processors from withholding loyalty payments if a farmer switches processors.

Introducing a dispute resolution process.

Calls for a mandatory code, instead of the existing voluntary code, increased after the ACCC’s dairy probe revealed an imbalance in power between processors and producers, and imbalances between processors and retailers.

However, WAFarmers dairy section vice-president Ian Noakes was reluctant to spruik it as a saving grace.

Instead, the Forest Grove-located milk producer said he was hopeful it would encourage Federal Agriculture Minister David Littleproud to advance industry reform.

“I’m not convinced it will help dairy farmers get better bargaining power,” he said.

“The code’s set date for contracts is an advantage after a having a non-alignment of when contracts were ending in WA, which made it difficult for farmers to swap processing companies.

“It gives farmers flexibility when negotiating new contracts and options to move to another company.”

Capel dairy farmer Mike Norton echoed Mr Noakes and it could be a step towards promoting a more competitive business environment.

“A mandatory code is better than nothing,” he said.

“How well it’ll work for the producers is unknown at this stage, but it is a start in the right direction.”

DAWR officials held forums at Brunswick and Margaret River last November as part of the first phase of direct industry consultation in the lead-up to the mandatory dairy code’s expected implementation.

Mr Littleproud said releasing the draft code marked the second stage of industry discussion to encourage farmers’ feedback and response.

The voluntary code will remain enforced while the mandatory code is developed.

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