Northern Vics reject mandatory code

07 Feb, 2019 04:00 AM
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the department has no understanding of the Victorian milk price structure and how it can fluctuate..

Northern Victorian dairy farmers have again rejected a mandatory dairy code of conduct, proposed by the Federal Government.

The Department of Agriculture and Water Resources has held Victorian workshops on the proposed draft code

The code includes clauses on a minimum price, good faith negotiations, supply and pricing agreements, resolving disputes and prohibiting retrospective step-downs.

Related reading

  • Draft mandatory code released

  • NSW producers push for fairer code

  • Issues voiced at code meeting

  • The department’s Jo Grainger, who led the Victorian consultations, said the code aimed to clarify prices, terms and conditions.

    ‘You don’t have true market information; you don’t have a range of choices on the table,” Ms Grainger said.

    “What we are trying to get is more information about price and terms and conditions on what processors are offering.”

    She said a crucial point in the draft code was a standard form agreement.

    “It’s obvious there is support for a standard form agreement, which is the idea every processor will have to have a contract available, on the website, with a price on it," she said.

    “That will give people information about the terms and conditions of supply and the price they can expect, so there is just a better opportunity to compare the market and give farmers some more information, to make a good decision.”

    She told the Echuca, northern Victoria, forum, DAWR had come up with the concept of a minimum price, following one of farmers' biggest complaints that they did not know what they were going to be paid.

    A minimum price would give farmers surety as to the lowest price they would receive over a year.

    Ms Grainger said DWAR fully expected the price would go above the advertised minimum.

    Step downs

    The code also looked at prospective step-downs, proposing several options.

    These included prohibiting prospective step-downs, allowing farmers to terminate an agreement, without penalty, within 30 days' notice of the price cut and allowing producers to withdraw their termination notice within 21 days if they couldn’t find a new processor.

    Ms Grainger said processors might need a “pressure valve”, in the event of international trade problems, such as potential flooding of the market by the European Union, if Russia closed its market or a global financial crisis.

    “The really tough discussion is about whether step-downs would continue to be allowed, under the code, or whether we should take those step-downs out,” she said.

    Ms Grainger said there was significant support for some parts of the code.

    “Under this code, as proposed, a processor won’t be able to impose an exclusive supply agreement and a two-tier penalty regime – that would be outlawed,” she said.

    Clark Fehring, Cohuna, Vic, said the consultation raised more questions than answers.

    “I worry they will do all this work and not much will be changed, that’s my big thing,” he said.

    “Even if they were to introduce a mandatory code, there is still wriggle room enough for manufacturers to have clawbacks.

    “I don’t see how they can protect us from any shocks in the future.”

    He also questioned what was meant by “good faith” negotiations.

    “The devil is in the detail, but they say the road to hell is paved with good intentions, and I’m just concerned it won’t help as much as what they think it will,” he said.

    No benefits

    Katunga, Vic, dairy farmer Daryl Hoey said the Echuca meeting confirmed farmer’s concerns the code would not have any significant benefits for Victoria and could leave many worse off.

    “It’s fairly clear that, in putting forward their suggestions, the department has no understanding of the Victorian milk price structure and how it can fluctuate, throughout the year.

    “Their rational around that showed a lack of understanding of the industry.”

    He said there was potential for a lower milk price, under the code, particularly if processors were forced to pay a minimum price.

    “A company could still go through the same process as what happened two years ago (with step-downs and clawbacks) if they declared what the minimum price was for the year,” he said.

    He said that while farmers were fundamentally opposed to retrospective milk price step-downs, legislating to ban a prospective price cut was fraught with difficulty.

    “Potentially that puts businesses at risk of insolvency, which means farmers wouldn’t be paid anyway,” he said.

    It might also lead to processors being conservative in their open prices, so they didn’t back themselves into a corner by offering a price that could not be sustained.

    Voluntary code

    Undera, Vic, dairy farmer Gemma Monk said she would rather see a voluntary code.

    “The main reason for that is to ensure no processors are passing on the cost to farmers,” Ms Monk said.

    “A voluntary code would allow more flexibility, if something happens with the enterprise itself, the mandatory code might become a constraint.”

    She said she would also like to see flexibility in the length of contracts.

    “The whole country is too wide and varied to say everyone should be on a 12-month contract,” Ms Monk said.

    Gordon Nicholas, Corryong, Vic, said he was concerned a mandatory code would lock producers into rigid contracts.

    “If you chose to challenge the contract and you become a loser, there are quite significant dollars involved,” Mr Nicholas said.

    “A contract really does become a contract, under a mandatory code, whereas under a voluntary code, it becomes a little bit more face to face negotiations.”

    Cobram East, Vic, dairy farmer Paul Mundy said he remained opposed to the mandatory code.

    “It doesn’t appear anything has changed; it’s full steam ahead with what the minister wants to implement,” Mr Mundy said.

    He agreed there appeared to be no benefit from a mandatory code for Victorian dairy farmers.

    “It may not change much on day one, but whenever you have legislation, where it ends up or what the issues and complications down the track might be, no-one knows,” he said.

    If the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission had done their job, there would be no need for a code.

    “There is so much unease and hurt out there, in the industry, because we simply don’t get enough money for our product – the code won’t fix that,” he said.

    Ms Grainger said the feedback would be collated and put to the government, so it was fully aware of the broad spectrum of views, in the community.

    “Some people don’t support a code at all,” she said.

    'There are others where they don’t support a code, because it won’t include the retailers because it won’t regulate prices or perhaps cover milk swaps, or possibly they are looking for some different protections in the code, then we have in the model,” she said.

    Processors' role

    Federal Agriculture Minister David Littleproud said farmers would not carry any direct costs of a mandatory dairy code.

    “It will be paid by the processors,” Mr Littleproud said.

    “A mandatory code is supported by the Australian Dairy Farmers peak body, which represents dairy producers.

    “The code is being created to increase farmers’ bargaining power and will not restrict their opportunity to negotiate favourable terms while providing more clarity on their legal rights.”

    A spokesman also said it was inaccurate to say the code was proposed by the Federal Government, as it had been put forward by the Australia Dairy Industry Council.

    “We asked what they wanted, and they said they wanted this,” he said.

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    Andrew Miller

    Andrew Miller

    is a journalist for Stock and Land
    Twitter: @journoandy26

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