The dairy industry has launched its plan to stop retrospective price cuts being imposed on farmers again.
A voluntary code of practice for contractual agreements between farmers and processors has been developed by the industry over nine months, and released just in time for the new milking season beginning on Saturday.
The code will govern how milk processors treat their farmer suppliers, and lays out what dairy companies can and cannot do.
It is the industry response to the dairy crisis that started in autumn 2016, when multiple companies dramatically and retrospectively cut milk prices they paid their farmer suppliers.
Lobby group the Australian Dairy Industry Council, which represents farmers and milk processors, promised the code would:
- Ensure there will be no prices changes made retrospectively
- Ensure all farmers receive payment entitlement that accrues over the term of a contract or supply agreement (including loyalty payments)
- If a farmer produces more milk than required and is contracted to one milk processor, and the processor does not want to purchase the additional milk, then the contract between the farmer and processor must allow the dairy farmer to supply the additional milk to other companies.
Code of practice a first step to resolving conflicts
Processors that collect more than 80 per cent of the milk produced in Australia have signed up for the new code.
Parmalat is the only major processor that has not signed up.
"This is a first step," said John McQueen, interim chief executive of Australian Dairy Farmers, which represents farmers.
"This is an evolutionary step and we'll probably find that there will be conflict between farmers and processors over the course of the next year."
Mr McQueen believes the new code will finally give the chance for farmers and processors to speak about problems formally, and allow for transparency in the industry.
"It's more about farmers and processors working together to resolve the issues, and the code is really a series of principles in which to do that," he said.
The industry has committed to review the code in one year.
