New dairy code launched, addresses farmgate crisis

The Australian Dairy Industry Council (ADIC) has launched the first Dairy Industry Code of Practice for standard form contractual arrangements.

Although the code is voluntary, it is anticipated most of the milk produced in Australia will be covered by the code. Significantly, following the last year’s farmgate crisis, it includes a provision that processors will not retrospectively cut what they pay dairy farmers.

In addition, there are provisions to ensure all farmers receive payment entitlement that accrued over the term of a contract or supply agreement (including any ‘loyalty payments’); and that if a farmer produces more milk than required or contracted to their primary 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 processors.

Through consultation with state member organisations, farmers and processors, the ADIC developed the code to help ensure greater transparency and fairness in milk supply and pricing.

ADIC Interim Chair, Terry Richardson said it is important that contracts are fair, simple, realistic and easily understood by both parties.

“The Code will address a range of contractual issues which farmer organisations have been trying to address and rectify for a significant amount of time.

“Both farmers and processors sat down to work together cooperatively and in good faith to establish this code”, said Mr Richardson

ADIC Deputy Chair, Grant Crothers said, “we believe the Code will improve contracting arrangements between farmers and processors; and offer greater transparency through earlier and clearer pricing signals for farmers, which means less risk for farmers and more balance along the supply chain.”

The Code was initially drafted on 27th September 2016 at a workshop attended by processors, farmers, Mick Keogh from the ACCC and representatives from the Small Business and Family Enterprise Ombudsman.

It aims to address issues with dairy contracts in a way that works for both farmers and processors and will apply to standard form contracts between processors and farmers, but does not preclude a farmer negotiating an individual contract with a processor.

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