Federal Agriculture Minister David Littleproud said the code would outlaw several practices which had been used by milk processors in the past but would not regulate farm gate milk prices or set the price that dairy processors and retailers charged for their products.
‘‘This won’t fix all the industry’s structural problems but it’s a good first step,’’ Mr Littleproud said.
‘‘The next step is to draft wording for the regulations in this code, in consultation with industry.
‘‘Giving farmers more flexibility to switch between processors will help create competition among processors for dairy farmers’ milk.
‘‘Allowing farmers to sell excess milk to a second company is a no-brainer — exclusive contracts stopping farmers selling off their extra milk to another company distort the market.’’
Advocacy group Dairy Connect welcomed the announcement, with its chief executive officer Shaughn Morgan agreeing it was a good first step.
‘‘Now is a good time for dairy industry stakeholders and government to begin finalising the contents for the mandatory code, due to be enacted on July 1, 2020,’’ he said.
Peak dairy farmer group Australian Dairy Farmers also supports the announcement.
‘‘A new code of conduct is an important step that will clarify and strengthen relationships between farmers and processors across all states of Australia,’’ ADF president Terry Richardson said.
The mandatory code of conduct will apply to a total of 5800 farms, but has copped criticism from a number of northern Victoria dairy farmers who have voiced concerns about the cost of a mandatory code, the failure to include supermarkets under the code and the cost of mediation.
A mandatory code for the industry was a key recommendation from the Australian Competition and Consumer Commission’s 2018 inquiry into the dairy industry.
The code will also improve pricing transparency in the industry and will work with the Food and Grocery Code to cover the supply chain.
Once the draft is complete, Mr Littleproud’s department will hold a third round of consultations to seek feedback.
The mandatory code of conduct will:
■ban retrospective price cuts to dairy farmers;
■ban mid-season price cuts except in exceptional circumstances;
■ban exclusive contracts which stop farmers selling their excess milk to another company;
■ban two-tier pricing which allows processors to pay different amounts for milk supplied by the same farmer; and
■ban processors withholding ‘‘loyalty payments’’ if a farmer moves to another processor.
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