From the Experts

Opinion: Farmers deserve mandatory code of practice

By Stephen Cooke

There’s an emerging issue occurring in the dairy industry between advocates of the industry’s current voluntary code of practice and a proposed mandatory code.

The voluntary code of practice was adopted last July by the Australian Dairy Industry Council (the umbrella group for the national dairy farmer representative group, Australian Dairy Farmers, and the processors) and signed by a majority of processors.

The code sets guidelines regarding pricing structures, loyalty payments and dispute resolution, and applies to contracts between farmer and processor.

A decision by ADIC to hold a 12-month review of the voluntary code has upset those who want a mandatory code, backed by the Australian Competition and Consumer Commission.

State farmer bodies from all dairy states are also signatories to the code but most have now called for a mandatory code to be adopted, following the ACCC’s call for a mandatory code as part of its recommendations from its 18-month review of the dairy industry.

ADIC Chair Terry Richardson has said the review was scheduled when the voluntary code was implemented and will proceed.

Its opponents say there is no time to waste and that a mandatory code is the only system that will keep processors – who do not want a mandatory code – honest.

Fonterra hasn’t helped with its recent decision to announce a closing forecast price (with a 70 cents/kilogram milk solids range mind you) but not an opening price.

In the same breath its MD, René Dedoncker, said the company was keeping its promise to provide farmers with “clear market-based signals in advance of the new season to allow them to budget and plan”.

With farmers seeking clearer price signals, which is what the code of conduct is meant to deliver, Fonterra’s timing was incredible and farmers are clearly unimpressed.

Again, it is the middle of June and the two largest processors in the country, Saputo Dairy Australia (formerly Murray Goulburn) and Fonterra have not announced their opening price for the 2018/19 financial year.

In addition to this, Bega has extended the current price until September, and more processors are adding sign-on bonuses, loyalty incentives and other methods to make it harder to compare prices between processors.

Processors are heading down this path deliberately. It is of benefit to them and them alone as it deliberately confuses farmers.

The voluntary code has been in place now for 12 months and things have not changed for those it’s meant to protect.

The proposed mandatory code would not be perfect but it is more likely to improve the current system than what is in place and should be implemented.