Agriculture Minister Bridget McKenzie's promise to deliver by January the mandatory code of conduct, to give farmers more power to negotiate favourable prices with milk processors, is coming off the rails.
Industry leaders say the draft code backtracks on its stated purpose, to empower producers when cutting a deal for milk price contracts, and it appears likely it will need a significant overhaul if its to gain a working industry consensus.
The draft was released to public consultation in late October.
Previous Ag Minister, David Littleproud, developed the dairy code policy in the lead up to the May 18 election, with a commitment to write the policy into law by July 2020.
Last month Senator McKenzie promised to bring forward by six months the deadline to enact the new code.
Her pledge was made to placate One Nation Senator, Pauline Hanson, threatened to withhold her vote from non-essential legislation unless the government did something to support dairy farmers.
Following widespread criticism of the draft dairy code, Senator Hanson yesterday introduced a Bill to set a mandatory milk floor price, which was narrowly defeated 31-30.
Her Bill echoed the policy Labor took to the election and continues to advocate for - a mandatory milk floor price set just above the cost of production relative to the various dairy regions across the country.
Centre Alliance's Rex Patrick voted with the government, which was just enough to outnumber the other crossbench and Labor Senators who backed the bill.
The draft code's most controversial element is a clause that allows processors to renegotiate contracts, potentially lowering farmers prices, if they are impacted by circumstances that are "beyond reasonable control".
Australian Competition and Consumer Commission deputy chairman Mick Keogh was sceptical about the contract renegotiation clause.
"That concept is somewhat unclear and as we understand it, untested at law," Mr Keogh said.
Labor agriculture spokesman Joel Fitzgibbon, said in its current form the code would be worse than having no new regulations and Senator McKenzie needed to answer questions "that industry are asking about the mandatory dairy code of conduct".
"She needs to tell dairy farming communities who it was that recommended to her the code of conduct for the dairy industry be watered down," Mr Fitzgibbon said.
Senator Hanson has called for Senator McKenzie to resign.
Senator McKenzie rejected the accusation the code had been watered down.
She said a floor price created "false hope" that one policy measure could solve the myriad problems impacts farmgate returns, such as processor contracts and rising input costs from electricity and water.
"Setting a minimum farmgate milk price would do nothing to fix the current power imbalance between dairy farmers and processors and would do nothing to drive down input costs," she said.
Queensland Dairyfarmers Organisation president, Brian Tessman, said there were many problems in the code.
"We certainly are disappointed with where we have got to with the code of conduct. There are issues around terms and pricing of contracts," he said.
NSW Farmers dairy committee chairman, Colin Thompson, said a code of conduct on its own was not enough to make the dairy industry economically sustainable for producers, in the long term
"We need some kind of intervention now to turn things around and put industry on a more sustainable footing," he said.
United Dairyfarmers of Victoria vice president, John Keely, said a mandatory floor price would not be viable for farmers whose produce is exported.
"From an exporting states' perspective, in Victoria and Tasmania, we are competing on a world market. If the floor price is above the world market, the processors won't hang around, there'll be nothing in it for them."
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