The Australian Competition and Consumer Commission (ACCC) will enforce the code, which will become effective from 1 January.
Australia Agriculture Minister Bridget McKenzie said that the code of conduct has been developed with input from dairy farming organisations and farmers across eight regions.
McKenzie added: “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.”
The code was an important recommendation of the ACCC’s 2018 dairy inquiry, which found imbalances in contracting, pricing and industry practices across the dairy supply chain. The ACCC found practices to be overly in favour of processors and to have led to a reduction in competition.
ACCC deputy chair Mick Keogh said: “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.
“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.”
In addition, McKenzie said that $10m in grants will be provided to dairy farmers to invest in or upgrade energy-efficient equipment for decreasing their energy costs.
The government is also investing $8.1m in the ACCC’s Agriculture Unit and the establishment of a dairy specialist.
Additionally, $1.5m has been allocated for contracting and legal advice to dairy farmers, including the design, development and testing of new milk pricing and trading concepts.