The Australian Dairy Industry Council has launched the first Dairy Industry Code of Practice for standard form contractual arrangements which will urge processors to end retrospective price cuts.
Through consultation with state member organisations, farmers and processors, the ADIC has developed the voluntary code to help ensure greater transparency and fairness in milk supply and pricing.
It is anticipated most of the milk produced in Australia will be covered by the code.
ADIC interim chair Terry Richardson said it was important contracts were 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,’’ Mr Richardson said.
‘‘Both farmers and processors sat down to work together co-operatively and in good faith to establish this code.’’
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 will include provisions that will end retrospective price changes, ensure farmers receive payment entitlement that accrued over the term of a contract or supply agreement and, 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.
The code was initially drafted in September last year at a workshop attended by processors, farmers, Mick Keogh from the Australian Competition and Consumer Commission 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.
‘‘By incorporating these principles, 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 farmers’ milk supply arrangements,’’ Mr Richardson said.
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 last November.