Retrospective milk price step-downs should be banned and contract disputes between farmers and processors handled through a thorough complaints and mediation process, according to Australia’s dairy lobby.
The Australian Dairy Industry Council (ADIC), which comprises industry bodies Australian Dairy Farmers (ADF) and Australian Dairy Products Federation (ADPF), representing farmers and processors respectively, has submitted a draft code to the Department of Agriculture and Water Resources to be considered during the consultation process.
Under the proposed ADIC Code:
- Retrospective price step-downs are banned, and processors must give farmers at least 30 days’ notice of any forward step down, including a reason for the adjustment;
- Contract disputes are to be managed by an independent mediator or arbitrator if the issue cannot be resolved between the farmer and processor;
- Dairy businesses must act honestly in good faith, without duress or pressure during contract negotiations, or risk fines;
- Agreements must be for a minimum of 12-months operating over a financial year or other term as agreed by both parties;
- Processors must offer farmers a standard contract with an opening price by June 1 each year, one month before the start of the next financial year;
- Processors must pay farmers by the 15th day of the next month for milk delivered under their contract; and
- Both farmers and processors must give 30 days’ written notice if they don’t intend to renew a fixed term contract and agree on a debt repayment scheme for outstanding payments.
“A new code of practice is an important step for the dairy industry that will clarify and strengthen relationships between farmers and processors across all states of Australia,” ADIC Chair Terry Richardson said.
“Our aim is to address the information asymmetries that currently exist in the industry and strengthen bargaining power for farmers, while respecting commercial realities and supporting innovation and market dynamics.”
The draft ADIC code is the result of an extensive review the organisation conducted into the dairy industry’s current voluntary code and addresses the recommendations handed down by the Australian Competition and Consumer Commission (ACCC) in its report into the dairy sector.
“The ACCC identified a number of areas that need fixing and our aim is to help the Government implement a code of practice that improves the relationship between all parties,” Mr Richardson said.
Farmers and processors are encouraged to provide feedback on the code, either by attending regional meetings being organised by the federal Department of Agriculture and Water Resources, calling 1300 044 940, or emailing email@example.com.
The Department has committed to release a detailed draft mandatory code for feedback later in 2018.