Mandatory Dairy Industry Code

Filed under Agriculture, Government, News ~ by Press on  22 Dec 2019

The Minister for Agriculture, Senator The Honourable Bridget McKenzie, has announced a mandatory dairy industry code.

In October 2016, the ACCC was directed by then-Treasurer the Hon Scott Morrison MP to hold an inquiry into the competitiveness of prices, trading practices, and the supply chain in the Australian dairy industry.

The Dairy Inquiry final report was released on 30 April 2018. Recommendation 8 of the report proposed the introduction of a mandatory code of conduct for the industry.

A mandatory dairy code of conduct was a key recommendation of the ACCC’s 2018 dairy inquiry, which found significant imbalances in bargaining power at each level of the dairy supply chain.

The mandatory dairy code of conduct will require farmers and processors to be compliant by 12 months from the implementation date. Compliance with the code will be overseen by the ACCC.

Senator McKenzie said 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. 

In line with feedback received from dairy farmers the 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.

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.

Welcoming the announcement, ACCC Deputy Chair Mick Keogh said the dairy inquiry identified that imbalances in bargaining power between processors and farmers has allowed processors to transfer much of their risk onto farmers.

We also identified a lack of transparency in contract and pricing practices, limiting the ability of farmers to compare offers from different processors and hence reducing competition.”

We concluded that a mandatory code was the best way to address these systemic industry problems, so we are pleased to see that this has become reality,” Mr Keogh said.

We look forward to working with dairy farmers and processors as the new code is implemented. We will also be working closely with the members of our new Dairy Consultative Committee, to help ensure a smooth implementation.”

The ACCC will be responsible for enforcing the mandatory code, to come into effect from 1 January 2020. A review of the code’s role, impact and operation will take place after 12 months.

NSW Farmers’ Association also welcomed the new mandatory dairy industry code.

NSW Farmers’ Dairy Committee Chair Colin Thompson said the mandatory code is crucial for enhancing dairy farmers’ bargaining power with processors.

Farmers have insufficient power in their dealings with processors resulting in unfair contractual terms being imposed,” Mr. Thompson said.

This Code will start the process of rebalancing the scales and will provide a level of transparency for all farmers. The Code prohibits many unfair contract elements that farmers have had to endure over many years.”

The commitment to outlaw retrospective step downs and greatly restrict unilateral variations  is a huge positive for farmers. It’s also promising that penalties for breach of the code may be determined based on respective size of the processor or farm.”

NSW Farmers wants action on the market power of the retailer sector that it says is directly damaging the profitability of farmers. 

The irrational pricing of retailers has reduced the money available in the supply chain. It has placed pressure throughout the chain and this results in farmers’ milk price being squeezed.”

The sale of discounted dairy products must end. Consumers need to demand that retailers support farmers by selling dairy products for a fair price.”

We are calling for the price of dairy products to be lifted. We are pushing for a minimum price of $1.50 per litre for fresh milk and $9.00 per kilogram for cheese.”

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