Dairy

ACCC taken to task over its dairy report

By Country News

The Australian Competition and Consumer Commission has been slammed for its 226-page interim report into the dairy industry, with submissions labelling it ‘‘disappointing’’, ‘‘poor’’ and ‘‘vague’’.

While the interim report recommended written contracts, milk processor Fonterra Australia refused to support the measure that obtaining signatures on an annual basis from its 1300 suppliers would impose an ‘‘excessive and unnecessary’’ administrative burden on all parties.

The processor also cautioned the ACCC against basing analysis ‘‘too heavily’’ on 2015/16 and reiterated that, in its view, Australian dairy farmers received a ‘‘comparable’’ milk price to other major milk pools, including New Zealand and Europe, during the milk price crisis.

‘‘(However) as the proposed sale of Murray-Goulburn shows, the failure to pay farmers a competitive milk price leads to a loss of milk supply which can be catastrophic for a processor, given its high fixed costs,’’ the processor’s submission said.

The interim report also pointed out growing inequality within the dairy industry, with the divide between the power held by processors and dairy farmers continuing to grow, according to the ACCC.

New South Wales Farmers Association dairy committee chair Erika Chesworth said while the report clearly acknowledged the imbalance of power, the proposed recommendations did not sufficiently address the issues.

‘‘The draft recommendations are focused on improving dairy farmers’ understanding of contracts, encouraging the removal of restrictive terms and facilitating dispute resolution,’’ its submission said.

‘‘These are small changes and the ACCC must focus on mechanisms to readdress the fundamental imbalance of bargaining power in the dairy supply chain.’’

With continued pricing pressure in the industry, Farmer Power has reiterated calls for a farmgate price of at least $6 per kilo milk solids, which, it said, many farmers were calling for.

‘‘The processors are flagging a likely drop in the farmgate price next year, which would be disastrous for many farmers, leading to further reduction in the national herd as stock is sold off to pay bills,’’ its submission said.

‘‘We would suggest that the simplest way of correcting this situation would be to determine that dairy products cannot be sold domestically at a price below the cost of production.’’

Pointing to growing concerns regarding power prices and the stability of the industry, the group also weighed in on the price of $1-a-litre milk, calling for more discussion regarding the indirect impact.

‘‘The report clearly shows how the price of name branded milk has followed that of homebrand milk in an effective race to the bottom,’’ Farmer Power said in its submission.

The final report is due to be handed down on April 30.