A draft mandatory dairy code of conduct has been released by the Australian government aimed at leveling the playing field between dairy producers and processors.
Agriculture Minister David Littleproud says the draft code had been released as part of the consultation to ensure everyone gets to have their say.
“A mandatory code will be an industry-defining moment, so I want all dairy farmers, processors and stakeholders to stay involved in shaping it,” Littleproud says.
“Milk levies come and go but the mandatory code would help balance the market power between dairy farmers and processors and improve farmers’ bargaining power.”
The proposed code will cover about 87 dairy processors and about 5,800 dairy farmers in an industry worth almost A$4.3 billion (£2.43 billion).
It will cover agreements of any length.
Changes to industry practice include preventing unilateral changes to agreements; a standard form agreement that includes the minimum; preventing retrospective price step downs; preventing arrangements with exclusive supply and two-tier pricing; and prohibiting processors from withholding loyalty payments if a farmer switches processors.
The Australian Consumer and Competition Commission would become involved in disputes if a breach of the code occurred. It would assess claimed breaches and award penalties.
The Australian dairy industry was deregulated in 1999. Since then, the structure of the industry has changed significantly as a result of the consolidation of dairy farm enterprises and the widespread privatisation of processors.
At the time of deregulation, more than 75 per cent of milk processing was controlled by farmer-owned co-operatives.
Now, most major processors are multinational or listed companies and four of them account for 55 per cent of the milk-processing market.
There have been relatively consistent findings of an imbalance in bargaining power between dairy farmers and processors, some standard industry practices deterring farmers switching to competing processors, and dairy farmer and processor bargaining power imbalance.