The new mandatory dairy code came into effect on January 1.
Federal Agriculture Minister Bridget McKenzie said following feedback received from dairy farmers on the draft, the new code prohibits retrospective pricing step downs.
It also prevents unilateral changes except in a narrowly defined set of emergency circumstances; it stops processors withholding loyalty payments from farmers who are changing processor; and it prohibits exclusive supply arrangements where other conditions would be to the detriment of dairy farmers.
“It also establishes a dispute resolution process, increases the powers of the Australian Competition and Consumer Commission in the space and introduces civil penalties,” Ms McKenzie said.
She said Australia’s dairy farming organisations had worked hard to develop a code that would support dairy farmers right across Australia.
“I want to thank each and every organisation for their constructive input in agreeing to the code,” Ms McKenzie said.
“The mandatory Dairy Code of Conduct was a key recommendation from the 2018 Australian Competition and Consumer Commission Dairy Inquiry which found contracting and industry practices were weighted heavily in favour of processors.
“That’s why it has been so important for state dairy farming organisations and dairy farmers, from across our eight unique dairy regions, to detail the protections needed and to agree what is, and what is not, acceptable conduct in negotiations and in contracts.
“The final code is different from the draft that was consulted on and is now a stronger, clearer document that delivers the protections it should for dairy farmers.
“Whilst the mandatory Dairy Code is an important step forward for our dairy farmers in protecting their interests, it will not be a silver bullet for all the difficulties they are facing.
“Our dairy farmers are under real and sustained pressure because of the drought, high input costs for electricity, fodder and water, and a power imbalance in negotiating a fair farm gate price from processors.”
Australian Dairy Farmers chief executive David Inall thanked the Federal Government for listening to the concerns raised by dairy industry representatives following the release last month of the exposure draft code of conduct.
“The final code of conduct addresses our concerns and provides important protections for farmers when negotiating milk supply agreements with their processors,” Mr Inall said.
“While the mandatory code will not be responsible for setting the farm gate milk price, it will go some way to improving the bargaining power of farmers and professionalising contract management in the industry.”
“Our goal is to ensure that farmers are protected by the mandatory code of conduct and to do all we can to avoid a repeat of the 2016 milk price step-downs,” Mr Inall said.
“The ACCC identified that farmers lacked bargaining power when negotiating contracts and we believe that this will be significantly improved with this mandatory code of conduct.”
All existing milk supply agreements must be compliant with the mandatory code within 12 months of the code coming into effect.