VICTORIAN dairy farmers are demanding processors take their share of responsibility for issues plaguing the dairy industry – or face possible Federal government intervention.
United Dairyfarmers of Victoria president Adam Jenkins said the group supported the findings of the Australian Competition and Consumer Commission report on the sector.
Recommending a new code of conduct to govern how processors deal with farmers, the ACCC’s final report from its dairy inquiry described a range of “market failures”, stemming from the power imbalance between large-scale dairy processors and dairy farmers who supply them with milk.
One key problem cited was an unequal availability of information between dairy processors and dairy farms, many of which are family owned.
Mr Jenkins said the UDV urged processors to have an even strong presence in delivering a more even playing field for their suppliers.
“This report gives us an opportunity to ensure stronger protective measures for farmers when dealing in contract negotiations,” Mr Jenkins said.
“We have always said that the imbalance of power throughout the dairy supply chain means the farm gate is wearing too much risk,” Mr Jenkins said.
“Processors need to understand that if they don’t come to the table and act on the recommendations made by the ACCC, the Federal Government could intervene and force a mandatory code on industry.”
MANDATORY CODE The report handed down by the Australian Competition and Consumer Commission also outlined a process for mandatory code development, which Mr Jenkins said confirmed the UDV’s concerns.
“A mandatory code, if agreed to by government, will take years to develop, draft, and register – and then has to get through each house of Parliament,” he said.
“We know a mandatory code limits flexibility for a market that needs to think on its feet and compliance costs will again ultimately be borne by the farm gate.
“Unless processors can heed the warning and seriously address damaging contracting practices long identified by industry, and now by ACCC, we will lose any control of the process and be left with the sticky fingers of government.”
REPORT DISAPPOINTS The final report still did not address the power imbalance between retailers and processors, a move the UDV president called “disappointing”.
“It doesn’t matter whether or not revenue gained from the removal of discount products would return directly to the farm gate; the value would still be captured by the supply chain,” Mr Jenkins said.
“The current industry practice of using milk as a loss leader prevents this,” he said.