Peak dairy body Australian Dairy Farmers has done a U-turn on its contentious policy of opposition to a mandatory code of practice for the dairy industry.
After meetings on Thursday and Friday, ADF has advised the federal government it will support a mandatory code for processor-farmer contracts if it delivers coverage across the entire industry and improves bargaining power for dairy farmers.
The farmer organisation stressed a future mandatory code must include an independent dispute resolution procedure, with small claims to be investigated.
It must also outlaw retrospective milk price step downs, enforce contract and price transparency, and be reviewed within three years, including an assessment of the code’s effectiveness.
Until now ADF has been keen to see the recently introduced voluntary code of practice given more time to settle in and be upgraded, rather than support another government-enforced code.
The farmer body’s previous stance was, however, in stark contrast to the mood among dairy farmers in five states, and even a strong support base for a mandatory code within Victoria.
The Australian Competition and Consumer Commission (ACCC) has also firmly advocated a mandatory code of conduct, describing it as a vital reform needed to ensure long-term viability in the dairy industry.
Agriculture Minister, David Littleproud, was keen, too, to see a more robust set of rules established to secure better price and contract conditions between farmers and milk processors.
He applauded the ADF’s philosophical agreement agreeing the code should cover the entire industry, and has promised to take the proposal to Cabinet.
But processors, particularly big name businesses Fonterra and Lion oppose a mandatory code, as do many smaller dairy companies, including NSW’s Norco co-operative.
“This was a difficult decision and one that ADF did not take lightly,” an ADF statement said after its national council voted seven to six in favour of the mandatory code to improve contracting practices between farmers and processors.
“There are a broad range of views within ADF’s membership and these views are deeply respected and understood.”
It also warned there were still issues to be resolved around the implementation of a mandatory code of practice for the dairy sector.
“The competition watchdog, in recommending a mandatory code, didn’t disclose the costs of administration, investigation thresholds, performance standards, and accountability metrics.
ADF’s new position comes after several months of working with industry body the Australian Dairy Industry Council (ADIC), which led to the development of a strengthened code.
The farmer body now expects to play a leading role in the development of a new industry code, using the work undertaken by the ADIC as a foundation.
Key elements of the ADIC code, which is still in draft form from guidelines set by the Australian Competition and Consumer Commission (ACCC), include:
- retaining clauses in the current code where there is no stakeholder objection or issue; and
- adding clauses where there is universal agreement between states and processors, such as good faith provisions, standard contract timelines, protection for collective bargaining groups, independent complaints management and dispute resolution processes, penalties regime and improved administrative arrangements.
The organisation will urge Canberra to address these concerns through a Regulatory Impact Statement (RIS), to be disclosed to the industry as soon as possible.
“It’s hoped the introduction of a mandatory code will be a vital step in rebuilding trust and confidence along the dairy industry supply chain,”ADF said.
“The debate over the future of the industry has often been volatile.
“ADF is now calling for unity in dealing with the immense challenges facing the sector as we move forward through difficult times.
“Every step along the value chain depends on strong relationships, and farmers are encouraged to collaborate and support each other to influence positive change for the dairy sector.”
Back in April Agriculture Minister, Mr Littleproud pressured the dairy sector to come up with a united position on a mandatory code following the ACCC’s report into the sector.
Two weeks ago he told the sector it was time to come up with a position given four months had passed since the ACCC report was handed down.
“I told them it was time to lead on a mandatory code and the ADF has stepped up. I commend their leadership on this issue,” he said.
“I know this was a difficult process for them and they’ve shown the courage to take their industry forward.”
He noted the ACCC’s report early this year it said dairy farmers were at a disadvantage given processors had better access to market information.
“That’s something we’re working on through the milk price index, and we’ll continue to look carefully at the issues raised in the ACCC report as we work with industry on actions in response to the report,” he said.
“Now that we have direction from the organisation representing dairy farmers across Australia, we can move forward.
“I agree with ADF a mandatory code must deliver coverage across the entire industry and improve bargaining power for Australian dairy farmers.
“I will work with farm groups to get this code right.
“While a mandatory code should improve bargaining power it is unlikely to change milk prices.
“I look forward to working through this with farmers and industry bodies as we begin on the huge task of structural reform the sector needs.”