VICTORIAN dairy farmers have reached a major breakthrough in their relationship with milk processors, with all industry stakeholders agreeing to put forward a Voluntary Code of Conduct six months after major milk price cuts rocked the industry.
The United Dairy Farmers of Victoria (UDV) called for transparency in all future dairy supply contracts, which would be covered under the Code, at a meeting last week between dairy farmer organisations and milk processors.
“We’ve worked hard since the crisis unfolded in April to get everyone in a room to hash out our issues and put forward a case to ensure future milk supply agreements are balanced, fair and transparent,” UDV President Adam Jenkins said.
“It’s been a long process to pin down the processors and get them to agree to meet with us, but with intervention from the Federal Government, we’ve been able to achieve a major step forward for the dairy industry in ensuring farmers are never again forced to retrospectively repay their earnings due to milk price cuts.
“Now we’ll work together to develop a draft Code of Conduct which will improve transparency and business to business relations before unfair contracts legislation comes into force next month.”
The Code will include:
Greater transparency in contracts and supply agreements
Ensuring a pricing formula or mechanism is clearly defined within a contract
Ensuring pricing adjustments to farmers throughout a contract are clearly defined and that there will be no retrospectivity
Ensuring suppliers are given adequate notice if step-downs are to occur
Ensuring that farmers receive all payments accrued over the term of a contract
Ensuring processor exclusivity does not occur in cases where the processor has a contracted volume limit
Ensuring a clearly defined mechanism for giving notice of contract termination
Ensuring a clearly defined mechanism for modifying contract conditions, and giving farmers the right to negotiate variation
Mr Jenkins said the dairy industry planned to finalise the draft Code as soon as possible, ahead of the new legislation and before the Australian Competition and Consumer Commission hands down its report into the dairy industry next year.
“The ACCC has been given unprecedented powers in its enquiry to force companies into handing over information,” he said.
“But Deputy Prime Minister Barnaby Joyce has made clear to us that our industry needs to work together to resolve a number of key issues or else the Federal Government may introduce measures we don't want.
“No one wants to see the milk crisis repeat itself, so it's important we obtain clarity and simple clear pricing mechanisms in our future supply agreements and contracts.
The meeting was organised by national dairy advocacy body Australian Dairy Farmers and included all major dairy processors, ACCC Agricultural Commissioner Mick Keogh, and Deputy Australian Small Business and Family Enterprise Ombudsmen Craig Latham.
“We discussed a whole range of issues including claw backs, transparency, pricing, pricing mechanisms and adjustments, step-ups/step-downs, loyalty payments and many more. It is clear that moving forward, individual contracts will be much more transparent,” Mr Jenkins said.
UDV will continue to work with ADF and the processors to ensure that the voluntary Industry Code of Practice is developed to be mutually beneficial and share risk along the whole supply chain, along with putting milk price structure back on the agenda.