Fair pricing aim of new Code of Practice
THE FIRST Dairy Industry Code of Practice for milk contracts aims to ensure greater transparency and fairness in milk supply and pricing.
The voluntary code of practice was launched by the Australian Dairy Industry Council – the joint body representing farmers and processors – late last month after months of consultation.
ADIC said it is anticipated most of the milk fresh produced in Australia will be covered by the Code of Practice, with the vast majority of processors having signed up to it.
Although the Code is voluntary, it is designed to set out minimum good practice in terms of dairy contracts and will help ensure that supply agreements and contracts comply with the Unfair Contracts law that came into effect in 2016.
The unfair contracts legislation extends existing protections against unfair contracting practices for consumers to small businesses and is a practical step, that when coupled with the dairy industry Code of Practice, will provide dairy farmers with fairer and more transparent contracts.
ADIC Interim Chair and WCB director, Terry Richardson, said the Code would address a range of contractual issues which farmer organ- isations have been trying to address and rectify for years.
The code will include the following provisions:
A clear price or schedule of prices that will apply to suppliers (based on elements such as volume, quality and composition);
There will be no price change retrospectively;
An entitlement for farmers to accrue loyalty payments where they have supplied to the end of a contract term, irrespective of whether they stay supplier after their contract expires
A 90-day written notice period if a processor decides not to offer farmers on fixed term contracts a further fixed term Ability for farmers to supply additional milk to other processors if the primary processor does not wish to purchase additional milk
The Code will be monitored closely by all parties to ensure its intent is upheld, with a review in one year.
“The Code will give farmers, or their representative, the opportunity to have a standard form contract or supply agreement which better reflects a balanced supply chain approach between farmers and processors and not simply an agreement which is a ‘ take it or leave it’ approach to a farmer’s milk supply arrangements,” Mr Richardson said.
Dairy Connect CEO Shaughn Morgan said that on first-reading the Code appeared to be a good first step on setting out guidelines for commercial arrangements between value chain stakeholders in the dairy industry.
“The only caveat from our point of view at this stage is that it would be the application of the Code and how it was interpreted that would be its true test in the marketplace,” he said.
Lobby group Farmer Power had no input into development of the Code.
It said on initial observation, that because the Code is not mandatory, it is “therefore fairly meaningless”.
“If a processor doesn’t comply with the Code, there is little that can be done about it,” the lobby group said.
“So the Code is really an indication of what processors might do to improve their practices at some unspecified time in future, if they feel like it.
“If this is the industry’s best attempt at rebuilding trust between farmers and processors then it falls well short.
“However if the ACCC can use the document as a basis for a introducing a mandatory enforceable code, then it won’t have been a waste of effort.”
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