Food ombudsman a distant dream

But a "plan B" now being formulated within the food sector could establish a strict industry-driven self regulatory code of conduct and punishments.

The National Farmers Federation (NFF) believes there is also a good case for the appointment of an Australian Competition and Consumer Commission (ACCC) "food commissioner" to monitor the food supply chain and address specific complaints about retail or processing sector conduct.

"A mandatory code of conduct like the UK model has been our preference, but my feeling is that the mood up on the hill (Parliament House) is still not supportive enough," said NFF executive director Matt Linnegar.

Despite fury among dairy farmers and other food producers and processors about returns being screwed down by supermarkets, Mr Linnegar said a broad political appetite for a government-based regulatory body did not appear strong enough.

"Individual politicians, backbenchers, the Greens and Independents are supportive but in general the will isn't there, especially while low prices continue to be delivered to consumers," he said.

Mr Linnegar said the UK model - introduced last year - was still in its early stages, making it hard to assess its effectiveness, but even the new supermarket ombudsman had admitted market forces were driving Britain's retail milk war (similar to Australia's) which had left farmers crying foul about being underpaid.

Retail milk prices in the UK are at a seven year low, forcing processors to cut payments to many producers to the point where costs for producing the milk in a two-litre bottle are about 12 pence above their payments which are 48pc less than milk sells for in the supermarket.

Mr Linnegar said a food industry working group in Australia involving retailers Coles and Woolworths, the NFF, the Australian Food and Grocery Council and other players in the sector now hoped to develop a prescribed code of conduct to deal with balance of power issues.

"This is not to say farmers do support the voluntary code at this point - we'll have to see what it looks like - but we need to consider all options for dispute resolution," he said.

He was heartened by recent ACCC's comments about its intention to toughen the rules on retail power.

He believed the prescribed code could knit with a more active ACCC, possibly establishing a food commissioner to address dealings between retailers processors and producers.

The first draft of the industry code has confirmed 10 basic principals including, being fair and reasonable; full disclosure of all critical market information; meeting delivery and payment commitments on time, and a confidential complaints resolution process.

Coles corporate affairs manager Robert Hadler said the audit and compliance powers of the ACCC would apply to breaches of the code, so the competition watchdog could take retailers or suppliers to court and seek fines or other legal sanctions for breaches.

"We believe the mandatory UK approach merely embeds an adversarial approach between supply chain participants," he said.

"A voluntary and co-operative approach developed by the industry stands a better chance of working and embedding a more constructive attitude in the longer term."

But NSW Dairy Connect chief executive officer Mike Logan said while the code was a good opportunity for supermarkets to show they were good corporate citizens, he feared the concept was becoming too watered down to be effective.

"It seems to be more of a charter of business intent," he said.

"It won't address the problem we have where there is no true market for fresh milk."

Mr Logan said supermarkets wielded enormous market power in NSW where 85pc of the state's milk was consumed as fresh drinking milk and their private label brands sold 44.3pc of that volume.

"That power in a market place would not be allowed anywhere else, and with it should come responsibility," he said.

"Unfortunately the ACCC has neglected the needs of true competition in the past and only considered the needs of consumers."