How the state farmer bodies and processors reacted to mandatory Dairy Code

How the state farmer bodies and processors reacted to mandatory Dairy Code

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CODE COCKIES: Federal Agriculture Minister Bridget McKenzie releases the mandatory dairy code.

CODE COCKIES: Federal Agriculture Minister Bridget McKenzie releases the mandatory dairy code.

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The mandatory Dairy Code of Conduct released today has been greeted with almost universal approval from farmer bodies.

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The mandatory Dairy Code of Conduct released today has been greeted with almost universal approval from farmer bodies but the processors are not so sure.

Australian Dairy Farmers (ADF), United Dairyfarmers of Victoria (UDV), NSW Farmers, South Australian Dairyfarmers' Association (SADA), Queensland Dairyfarmers' Organisation (QDO) and Dairy Connect were all pleased with the new code.

The Australian Dairy Products Federation (ADPF), which represents processors, released a statement of concern.

"We are currently working through the details of the Code that was released today and will be looking to understand how to best support our members deliver on the tight deadlines as stipulated," it said in a statement.

"We have some initial concerns regarding the changes made from the Exposure Draft to the Final version, and any unintended consequences there may be for both dairy farmers and processors."

It did not elaborate on which of those changes or consequences were of concern.

Dairy Connect celebrates

Dairy Connect chief executive Shaughn Morgan said he was very pleased with the outcome.

"It's a great outcome for us," Mr Morgan said.

"Unilateral variations are outlawed, except in two circumstances.

"One is if there's another global financial crisis or if there's legislative change, which is exactly what we asked for.

"If the processors want a step down in exceptional circumstances, it has to be looked at by the ACCC, so there's a safeguard in place.

"The ACCC will be the arbiter and, if they don't believe the step-down is justified, they can then refer it on for further review.

"Penalty units have changed, so there are 100 penalty units for farmers and 300 for processors.

"Everything we asked for, they've given us.

"The document is great and Bridget McKenzie is smiling from ear to ear."

UDV lauds outcome

United Dairyfarmers of Victoria (UDV) manager Ashlee Hammond said the outcome was achieved with the solidarity of the state dairy farming organisations (SDFOs) and Australian Dairy Farmers (ADF).

"It will bring back some balance of power between farmers and processors and set standards and commitments for each of them," Ms Hammond said.

Like Dairy Connect, the UDV was pleased with the adjustment to penalties.

"Is that perfect, no, but under a code, penalties were always going to have to apply to farmers as well as to processors," Ms Hammond said.

"Unfortunately, with legislative instruments like this, you can't have your cake and eat it too."

Ms Hammond was pleased to see the term "beyond reasonable control" that allowed unilateral variations by processors in the draft banished from the code.

"Unilateral variations to milk supply term clauses have been banned, which is what UDV was pushing for," she said.

"With regard to prospective step downs, we need to be realistic here - processors need to be in the business of processing milk for dairy farmers to continue producing milk - so we're glad to see 'beyond reasonable control' removed and clearly defined instances where prospective step downs may be allowed."

The opportunity to adjust the code was also welcome.

"And also, keep in mind, if this clause isn't working for the Victorian dairy industry, there's a chance to review the code at the 12-month mark and the four-year mark," Ms Hammond said.

The requirement for processors to offer non-exclusive as well as exclusive supply agreements would be beneficial for farmers.

"Really gives the farmer absolute flexibility if they want a processor to collect all of their milk every day of the year, they can have that option," Ms Hammond said.

"But, if they do want to take advantage of milk trading platforms and the like that are currently being developed, they have the option to take the non-exclusive standard-form agreement."

Also important to the UDV were the extension of 'good faith' clauses in the code, Ms Hammond said.

"UDV was really pleased to see the 'good faith' clause apply to processors of all size.

"If a farmer milking only 80 cows has to apply by the good faith clause, then processors with a turnover of up to $10 million should have to, too."

Another win included mandatory mediation.

"The UDV pushed for milk supply agreements must provide for mediation - previously that was optional," Ms Hammond said.

ADF praises government for listening

Australian Dairy Farmers chief executive David Inall thanked the federal government for listening to the concerns raised after the release of the exposure draft code of conduct.

"The final code of conduct addresses our concerns and provides important protections for farmers when negotiating milk supply agreements with their processors," Mr Inall said.

"While the mandatory code will not be responsible for setting the farm gate milk price, it will go some way to improving the bargaining power of farmers and professionalising contract management in the industry.

"Our goal is to ensure that farmers are protected by the mandatory code of conduct and to do all we can to avoid a repeat of the 2016 milk price step-downs."

NSW Farmers asks for more

NSW Farmers' Dairy Committee chair Colin Thompson said the mandatory code was crucial for enhancing dairy farmers' bargaining power with processors.

"The commitment to outlaw retrospective step downs and greatly restrict unilateral variations is a huge positive for farmers," Mr Thompson said.

It was still important to act on the impact the retail sector was having on the industry.

"The irrational pricing of retailers has reduced the money available in the supply chain," Mr Thompson said.

"It has placed pressure throughout the chain and this results in farmers' milk price being squeezed.

It called for the price of dairy products to be lifted.

"We are pushing for a minimum price of $1.50 per litre for fresh milk and $9.00 per kilogram for cheese," Mr Thompson said.

South Australia sees progress

SADA policy officer John Elferink said the code would help to protect farmers, even though it was not intended to set prices for milk.

"What it will do is create an environment in which the processor must approach the negotiations in good faith and, on top of that, all of the elements of the contract must be clear to the farmer before signing the contract," Mr Elferink said.

"There'll be none of this business of 'Just sign here and by the way you've got no choice, this is the contract you've got to sign'."

The abolishment of retrospective step downs together with stringent new conditions on prospective step downs gave farmers "a lot more grunt".

Mr Elferink said the dispute resolution process was also far more useful for farmers.

"Farmers and processors talk first," he said.

"If they can't resolve it, then there's mediation, which is really nice and cheap and then there's the option of arbitration, where both sides agree to put it in front of a referee who is not a court and they agree to abide by their call.

"These are much more expedient and cheaper outcomes than court cases."

SADA was also very pleased with the involvement of the ACCC.

"One of the things SADA pointed out was that the ACCC needed to behave much more like a policeman on the beat than like a detective in the station," Mr Elferink said.

"The detective in the station only responds when someone phones them but the policemen on the beat have a totally different role.

"Sure, the policeman on beat can investigate crimes but also, importantly, they have the function of saying 'Allo, allo, allo, Johnny, are you sure you want to do that?' and of course Johnny decides not to do that and doesn't commit the offence.

"We note that the ACCC is in the process of hiring a person to fulfil the role of dairy oversight as part of this arrangement and, as a consequence, the ACCC now have their 'policeman on the beat' who will stop Johnny - in this case, the big processor - doing something silly."

Queensland appreciative but still wishes retailers were caught

QDO marketing and communications manager, Sarah Ferguson, said the code showed government had listened to farmers but it would need to be carefully reviewed.

"You can't really judge a code until it gets tested, so that council will review any concerns that arise over the next 12 months," Ms Ferguson said.

"The fresh milk market is different and the key things we were concerned about were exclusivity clauses and how they handle pricing on multi-year contracts.

"How can you predict a price in 12 months' time?

She said the average farmgate milk price in in Queensland had risen from 57 cents a litre a year ago and was now around 69 to 70c/l, while a "sustainable and fair" farmgate milk price needed to be 73 to 78c/l.

"None of us could have predicted how bad the conditions would be or how high the cost of production would get so I don't know how you could have put that in a contract," Ms Ferguson said.

"The one thing - we've said it constantly and we know we're not going to get any relief on it - we are still disappointed in the fact that the retailers have got off scot-free in the mandatory code.

"From the behaviour of Coles in the past week, we all shake our heads and go, 'How did the ACCC still insist that they had no role to play in an imbalance of power?' .

"I have no idea but we have tried for the last 12 months but have been told time and time again that it is the one thing that is off the table, which is disappointing but they have worked really hard on everything else.

"They really actually bloody listened, which is great."

Farmer Power accepts imperfections

Victorian group, Farmer Power, expressed some reservations about the code.

"Though it may not be perfect, we believe, that it meets most of our expectations though some concerns still surround sect 28 of the Mandatory code and its possible interpretation," it said in a statement.

"The current mandatory code, however, is a far step from the voluntary code that many other bodies within the industry were pushing for.

"At least now we have accountability as well as transparency as a benchmark in the dealings between processors and our dairy farmers.

"Agricultural Minister Bridget McKenzie listened and heard our concerns when she met with Famer Power and gave us specific undertakings that the mandatory code would be what all dairy farmers needed it to be.

"This version of the mandatory code seems to deliver on much of this promise. For that we thank her."

The story How the state farmer bodies and processors reacted to mandatory Dairy Code first appeared on Stock & Land.

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