Dairy

Dairy farmers say no to a mandatory code of conduct

By Alana Christensen

‘‘No mandatory code, full stop.’’

That was the message from one dairy farmer as a consultation about a mandatory code of conduct for the dairy industry was held in Shepparton last week.

It was a sentiment echoed by many in the room, with a majority of farmers in attendance saying they do not support the measure.

A 40-strong crowd, including about 20 dairy farmers, attended the consultation, run by the Federal Department of Agriculture and Water Resources, yet many remained bemused and frustrated about the timing of the consultations, the small number of meetings being held in Victoria and the absence of a draft code to make comment on.

A key recommendation of an Australian Competition and Consumer Commission inquiry into the dairy industry, a mandatory code of conduct has received support from Federal Agriculture Minister David Littleproud.

But many dairy farmers say it cannot, and should not, go ahead.

A mandatory code of conduct would seek to address a number of issues including cooling-off periods when entering and terminating contracts, implementing a dispute resolution process, prohibiting retrospective step-downs and limiting exclusive supply clauses between processors and farmers.

Cobram East dairy farmer Paul Mundy was among those who voiced concerns at the meeting.

‘‘It seems absurd that this discussion has gotten his far,’’ Mr Mundy said.

Some farmers said it did not matter whether the mandatory code of conduct allowed farmers to walk away from their contract when a step-down occurred, as no other processor would take their milk in a downturn.

Katunga dairy farmer Bridget Goulding said she was disappointed at the amount of time spent on rectifying the effects of the 2016 milk price crash.

‘‘All this expense because two dairy companies couldn’t get it together,’’ she said.

‘‘Just pay us a fair amount ... you don’t need a damn thing if you pay farmers fairly.’’

While the department said the introduction of a mandatory code was yet to be agreed to, it did little to calm the crowd.

If recommended, a mandatory code of conduct would need to be endorsed by Federal Cabinet and passed through parliament, with any future changes to a mandatory code needing to also be passed through parliament.

Many in the room expressed concerns that changes could take ‘‘years’’, yet the costs and potential consequences of a mandatory code were still unknown.

Following ACCC reviews into a number of issues — including petrol prices, telecommunications and energy prices — Katunga dairy farmer Daryl Hoey was pessimistic about the prospects of success.

‘‘Why would I have any confidence in them to handle this?’’ Mr Hoey said.

It took more than four months for industry to agree to support a mandatory code, with processors, the Australian Dairy Products Federation and the UDV among those voicing concerns.

A draft outline of the code is expected to be released in late December or early January.

Step-downs, claw-backs and a fair price

With anger still seething from the 2016 milk price claw-back, it was no surprise that step-downs dominated the conversation at a consultation meeting about the mandatory code of conduct in Shepparton last Tuesday.

With all options on the table, the 40-strong crowd were pressed on their preference for whether a code should outlaw step-downs all together, or allow a ‘get out of jail’ step-down for extreme instances — such as the Global Financial Crisis.

Run by the Federal Department of Agriculture and Water Resources, the facilitator of the meeting cautioned that outlawing step-downs could result in a more conservative opening price and, if a repeat of the GFC occurred, the law wouldn’t allow processors to reduce their milk price, forcing them to shut their doors and leave many dairy farmers looking for a home.

‘‘We’re still stuck in a mindset and trying to guess what the future might be like,’’ Katunga dairy farmer Daryl Hoey said.

For Katunga dairy farmer Bridget Goulding, it ultimately comes down to dairy companies offering a fair price, calling on processors to ‘‘behave’’.

Concerns were only further exacerbated by the question of who would have to pay for the implementation of the mandatory code of conduct.

Although costs are expected to be minimal, a price tag has yet to be put on the potential code.

‘‘This is all because Murray Goulburn and Fonterra did what they did ... Are farmers going to have to foot the bill (for the code)?’’ Ms Goulding questioned.

The lack of clarity surrounding what a code will entail and the specific issues — including the possibility of not requiring exclusive supply under a standard contract, implementing cooling-off periods if step-downs are put in place and potential exemptions and penalties — all continued to be question marks for many in the room.

The accessibility and costs of settling contract dispute through dispute resolution methods were also a point of concern.

Under the Horticulture Code, the cost of entering into dispute resolution is as much as $330/hour, a figure farmers said could not afford to be replicated under the dairy code.

‘‘It’s more money that farmers literally can’t come up with,’’ Ms Goulding said.

Ultimately, farmers said they could offer little in the way of suggestions or advice moving forward without a draft document to work off.

‘‘This has been completely and utterly rushed and is just a brain fart,’’ Cobram East dairy farmer Paul Mundy told the room.