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Groups divided on dairy code

By Dairy News

The Federal Government’s decision to move forward with a mandatory code of conduct has been met with disappointment by the United Dairyfarmers of Victoria , but welcomed by Australian Dairy Farmers.

The UDV is worried the code won’t deliver what is needed to ensure a “bright future” for the dairy industry.

Federal Agriculture Minister David Littleproud announced the mandatory code was making progress, but UDV president Paul Mumford said he remained unsure of how effective the code would be.

“One of the greatest issues faced by our industry in 2016 was a processor’s ability to claw back money from farmers or step down the milk price so significantly it was in effect a claw-back,” Mr Mumford said.

“We remain unsure if government legislation will resolve this or whether processors will still find a way to manipulate the system to suit their bottom line.

“The Australian dairy industry is extremely complex, supplying a variety of different markets from fresh milk to export products and a one size fits-all nation-wide code may not produce the best outcomes and protections for either domestic or export market suppliers.”

Mr Mumford said the UDV was disappointed milk swaps and the retail sector would not be included under a code, and the consultation process raised “more questions than answers”.

“The UDV calls for the establishment of an independent dairy ombudsman to assist farmers with disputes that may fall under the code,” he said.

“The ACCC (Australian Competition and Consumer Commission) will not investigate all complaints and an ombudsman can provide dairy farmers with information on the code, assistance in understanding and negotiating contracts for their milk supply, options to resolve disputes and access to mediation services.

“We call on the Minister for Agriculture and Water Resources and the Shadow Minister for Agriculture, Fisheries and Forestry to clarify their approaches in delivering the code.”

Peak dairy farmer group Australian Dairy Farmers supports the Federal Government’s commitment to pursuing a mandatory Code of Conduct for the industry.

ADF said its aim was to address the information asymmetries that currently existed in the industry and strengthen bargaining power for farmers, while respecting commercial realities and supporting innovation and market dynamics.

The ADF said the code would establish a dispute resolution mechanism to resolve contract disputes between farmers and processors.

A mandatory code will not, however, regulate farm gate prices or set the price that dairy processors and retailers charge for their products.

ADF, working under the auspices of the Australian Dairy Industry Council, last year released draft clauses, which was used by the Department of Agriculture and Water Resources as a basis for the department’s industry consultation process around a new mandatory code.

ADF’s support for a mandatory code of conduct follows an extensive review of the dairy industry’s existing voluntary code.

The mandatory code of conduct will:

a) require parties to deal with each other fairly and in good faith having due regard to the other party’s legitimate business interests

b) prevent unilateral changes to agreements

c) require that annually on a set date processors publicly release a standard form agreement covering the terms of supply and a price (and if applicable a pricing mechanism for longer-term agreements) that covers the term of the agreement

d) prevent retrospective price step-downs

e) prohibit prospective step-downs unless in specific circumstances such as force majeure, or exceptional market circumstances or major changes in global market conditions

f) prohibit exclusive supply arrangements in combination with two-tier pricing

g) prohibit processors withholding loyalty payments if a farmer switches processors

h) introduce a dispute resolution process for matters related to contracts between farmers and processors, and

i) alleged breaches of the code will be investigated by the Australian Competition and Consumer Commission with penalties available.