The long-awaited Dairy Code Of Conduct, which aims to build a better relationship between dairy farmers and milk processors, was officially launched on Friday morning.
It will come into effect on January 1.
Federal Agriculture Minister Bridget McKenzie told reporters the new Code would not be a “silver bullet” to fix the many woes of the dairy industry but it would help to create a fairer process.
“We know right now in Queensland there are dairy farmers being pushed into five-year contracts and not knowing what the price of their product will be at the end,” Ms McKenzie said.
The Code aims to provide a fairer process for negotiating contractual arrangements between dairy farmers and dairy processors by balancing the relative bargaining powers.
It will replace the previous voluntary industry code.
The new Code also includes dispute resolution and mediation processes.
It was developed after consultations with both dairy farmers and processors.
The Australian Competition and Consumer Commission (ACCC), which conducted an 18-month inquiry into the dairy industry, welcomed the announcement.
A mandatory Dairy Code of Conduct was a key recommendation of the ACCC’s report – released on April 30, 2018 – which found significant imbalances in bargaining power at each level of the dairy supply chain.
“Our dairy inquiry identified that imbalances in bargaining power between processors and farmers has allowed processors to transfer much of their risk on to farmers,” ACCC Deputy Chair Mick Keogh said.
“We also identified a lack of transparency in contract and pricing practices, limiting the ability of farmers to compare offers from different processors and hence reducing competition.
“We concluded that a mandatory code was the best way to address these systemic industry problems, so we are pleased to see that this has become reality.
“We look forward to working with dairy farmers and processors as the new code is implemented. We will also be working closely with the members of our new Dairy Consultative Committee, to help ensure a smooth implementation.”
The ACCC will be responsible for enforcing the mandatory code.
A review of the code’s role, impact and operation will take place after 12 months.
“The final Code is different from the draft that was consulted on and is now a stronger, clearer document that delivers the protections it should for dairy farmers,” Mr O’Dowd said.
“In line with feedback received from dairy farmers the Code prohibits retrospective pricing step-downs.
“It also prevents unilateral changes except in a narrowly defined set of emergency circumstances.
“It stops processors withholding loyalty payments from farmers who are changing processor, and it prohibits exclusive supply arrangements where other conditions would be to the detriment of dairy farmers.
“It also establishes a dispute resolution process, increases the powers of the ACCC in the space and introduces civil penalties.”