The first ever Dairy Industry Code of Practice for standard form contractual arrangements between farmers and processors has been announced and farmers say it’s a good first step.
The Australian Dairy Industry Council (ADIC), along with consultation from state member organisations, farmers and processors, developed the voluntary code to help ensure greater transparency and fairness in milk supply and pricing.
‘‘The code will address a range of contractual issues which farmer organisations have been trying to address and rectify for a significant amount of time,’’ ADIC interim chair Terry Richardson said.
The council’s deputy chair Grant Crothers said he hoped the code would improve the relationship between farmers and their processors.
‘‘We believe the code will improve contracting arrangements between farmers and processors; and offer greater transparency through earlier and clearer pricing signals for farmers, which means less risk for farmers and more balance along the supply chain,’’ he said.
Blighty dairy farmer Malcolm Holm said the framework was necessary.
‘‘I think it’s good, it’s definitely a start. There does need to be a framework around how processors and farmers interact. I think when farmers have signed contracts it has been one way. Hopefully this framework will balance this up a bit,’’ he said.
Max Baker, of Nathalia, agreed it was a good starting point but was not convinced the initial code was enough.
‘‘I think it’s a good starting point. I don’t know if it’s enough. At the end of the day most of our product will go to the world market and price will be determined by that, whether a code is in place or not. I don’t think it will make a big difference in the big picture.’’
Katunga dairy farmer Daryl Hoey said despite the code being voluntary, changes had been made for the better.
‘‘It’s a solid document and solid starting point. It’s a way for farmers to get processors back to how we want them to act. It is voluntary but a whole lot of changes have happened in the last eight to 10 months, through (extra) legislation and the small business ombudsman being given a lot more power,’’ he said.
Farmer group Farmer Power welcomed the news but raised concern about the code being voluntary.
‘‘Farmer Power welcomes the reforms proposed in the newly released Code of Practice, though we have some concerns about its implementation. Our initial observation is that the code is not mandatory, and therefore fairly meaningless. If a processor doesn’t comply with the code, there is little that can be done about it,’’ Farmer Power executive officer Gary Kerr said.
Concern over voluntary nature of code of practice
The Australian Dairy Industry Council’s new Dairy Industry Code of Practice has been welcomed by industry groups and processors alike.
The first ever code, which will help ensure greater transparency and fairness in milk supply and pricing, is voluntary — something that has concerned Farmer Power executive officer Gary Kerr.
‘‘The code is really an indication of what processors might do to improve their practices at some unspecified time in future, if they feel like it. If this is the industry’s best attempt at rebuilding trust between farmers and processors, then it falls well short,’’ he said.
Despite this criticism, Fonterra was one of the companies to jump at the chance to join the new code.
‘‘We’ve been actively involved in the development of the code, along with members of ADPF (Australian Dairy Products Federation) and ADF (Australian Dairy Farmers), and we are already taking steps in our business to improve pricing signals so that farmers can have more certainty and plan with confidence,’’ Fonterra Australia managing director René Dedoncker said.
UDV president Adam Jenkins said the code was important for milk contracts.
‘‘It’s important that contracts are fair, simple, realistic and easily understood by both farmers and their processor,’’ he said.
‘‘For too long there has been a take it or leave it mentality when it comes to negotiating supply agreements, and the code aims to fix this attitude as part of our plan to rebuild trust and confidence within the dairy industry.’’
The Australian Small Business and Family Enterprise Ombudsman Kate Carnell had input to the code and said she would monitor its effectiveness during the next 12 months.
Among the stipulations to be abided by processors and farmers are:
■A clear price or schedule of prices that will apply to suppliers (based on elements such as volume, quality and composition);
■A 30-day written notice period in the event of any milk price step-downs;
■An entitlement for farmers to accrue loyalty payments where they have supplied to the end of a contract term, irrespective of whether they stay supplier after their contract expires; and
■A 90-day written notice period if a processor decides not to offer farmers on fixed term contracts a further fixed term.