Mandatory dairy code: Farmers fear new clauses leave them exposed

A long-awaited mandatory code, meant to improve dairy farmers’ contract conditions with global milk processing giants, appears to have been watered down.

Farmers fear new clauses have been added to the original draft mandatory dairy code. Picture: Zoe Phillips

DAIRY farmers fear Federal Agriculture Minister Bridget McKenzie is about to appease milk processors by watering down a draft mandatory code of conduct developed under her predecessor David Littleproud.

The Weekly Times understands new clauses have been added to the original draft mandatory code that undermine its ability to improve contracting practices between farmers and processors.

Key dairy industry sources said Senator McKenzie had introduced clauses that allowed processors to unilaterally vary farmer contracts, under any circumstances.

Dairy Connect chief executive Shaughn Morgan said farmers “would be deeply concerned” at such a move.

“If the code comes out with such changes, it allows processors to say they can change (contract and supply agreement) clauses as they want,” Mr Morgan said.

The original mandatory code developed under Mr Littleproud’s leadership as Agriculture Minister:

PREVENTED unilateral changes to agreements (clause 6)

REQUIRED that on a set date each year processors publicly release a standard form agreement that includes the minimum price (and a pricing mechanism for longer-term agreements) and covers the term of the agreement (clauses 17—21)

PREVENTED retrospective price step downs (clause 22)

PREVENTED arrangements with exclusive supply and two-tier pricing (clause 32)

PROHIBITED processors from withholding loyalty payments if a farmer switches processors (clause 47—48)

INTRODUCED a dispute resolution process (clauses 56—57).

Senator McKenzie has dismissed farmer fears, saying the government was “implementing a Dairy Code of Conduct in line with the principles the dairy industry identified during consultation”.

“Far from watering down the code, the feedback has strengthened it. My track record when it comes to producers versus processors is very clear — I back our producers,” she said.

Development of the mandatory code has exposed major conflicts within the dairy industry.

The peak Australian Dairy Farmers lobby group, which up until recently had been reliant on processor funding, initially opposed a mandatory code.

MORE: ADF GIVE NOD FOR MANDATORY CODE

LIVESTOCK LOBBY GROUPS TURN THEIR BACKS ON FARMERS

PROCESSORS DEMAND FARMERS OPPOSE MANDATORY CODE

In May last year The Weekly Times reported, two processors warned ADF that if it supported a mandatory code, “your funding stops”.

But while the United Dairyfarmers of Victoria’s ADF members maintained a position of opposing the code, other state members demanded their peak body get behind it.

In the end ADF president Terry Richardson cast the deciding vote to bring the ADF in behind the code, while UDV members remained opposed.

However since then farmers, who support the code, have become increasingly nervous Senator McKenzie, was under pressure from global processing giants and some UDV farmers in her home state to weaken the code.