Farmers are embracing plans for a mandatory code of conduct for the dairy industry, while also highlighting fundamental problems facing the sector they say are being ignored.
Federal Agriculture Minister David Littleproud announced a draft code this week, saying it would give farmers more power.
«A mandatory code will be an industry-defining moment so I want all dairy farmers, processors, and stakeholders to stay involved in shaping it,» he said in a statement.
«Milk levies come and go but the mandatory code would help balance the market power between dairy farmers and processors and improve farmers’ bargaining power.»
Mr Littleproud’s announcement comes after a series of roadshows around the country with farmers, processors, and others in the industry.
The draft code will ban retrospective price cuts and exclusive supply deals, and introduce a dispute resolution process.
What is in the draft code?
Phil Ryan milks 200 cows on his farm in the Bega Valley of New South Wales and said he was pleased to see the draft plan released.
«I’m glad that something’s happening but this really is only good if it’s the first step in a journey of industry reform that needs to be continued and completed quickly,» he said.
«The code of conduct addresses a few really important potential risks for dairy farmers, particularly retrospective step downs and ‘tier-two pricing’, where excess milk is priced at a very low price below the cost of production.»
The most significant change would see a dramatic shift to the way processors announced their farm gate milk price.
The proposed code will force processors on a set date each year to reveal a standard contract and minimum price paid for milk.
Farmers have long complained about complicated contracts, loyalty payments, and delaying tactics used by processors ahead of announcing the opening milk price each year.
Fears code will be ‘watered down’
The chief lobby group for New South Wales dairy farmers hopes processors will not try and have the Federal Government’s draft mandatory dairy code of conduct watered down.
Dairy Connect president, and Gloucester dairy farmer, Graham Forbes said he was worried the code would face pressure from processors.
«Let’s hope those things are not going to be watered down; that’s what we have to be careful of,» he said.
«I believe processors will be sitting there putting as much pressure on as they can because they are used to doing that.
«This is the most important thing since deregulation and the industry needs to embrace that.
«Certainly we don’t believe that it will be onerous on the industry — there was some comment that it was going to impact on costs.
«I think it a fallacy that the costs will impose on the industry.»
What is not in draft code?
Farmers are disappointed the code does not address issues raised in the consultation meetings held around the country.
Forget dollar a litre milk. The dairy crisis has more to do with global trade wars than it does with cheap supermarket milk.
«It doesn’t address a lot of other things that have basically been put in a ‘too hard basket’,» Mr Ryan said.
«Things like long-term farmgate milk price reform, the potential for an industry ombudsman, and milk swaps between processors.
«These are things that the dairy farmers across Australia really need [addressed].»
The draft code of conduct is focused on the relationship between farmers and processors, which means a number of suggestions have been deemed outside its scope.
Milk swapping between processors will not be addressed, despite frustrated farmers who believe it undermines competition among processors.
However, processors have long claimed that ‘milk swapping’ allows for companies to create transport efficiencies and is required in some instances to manage the perishable nature of raw milk.
Cheap supermarket milk not covered by code
The ongoing battle against supermarkets selling $1 per litre milk and other deals between supermarkets and processors will also not be addressed in the draft code.
«It doesn’t address probably the gorilla in the room which is the relationship between retailers and processors,» Mr Ryan said.
«That’s a really important part that’s essentially been left to the grocery code of conduct, which I don’t think works very well for farmers.»
Mr Forbes believes the draft code is a start but there work still needs to be done, such as in collective bargaining.
«Basically, at the moment the processors are in a take-it-or-leave-it mode in that regard,» he said.
Mr Forbes believes the Australian Competition and Consumer Commission (ACCC) should be involved in mediation of disputes.
«An ombudsman would be able to assist farmers and processors in being able to work things forward and come up with a mutually acceptable arrangement,» he said.
Public consultation sessions will continue to be held over the next few weeks and submissions are open till February 15.