A new dairy code of conduct will create balance and transparency along the industry supply chain, with farmers to gain more control during contract negotiations with processors.
The Code, a collaboration between the United Dairyfarmers of Victoria, Australian Dairy Farmers and other state dairy farming organisations, will come into force on July 1 2017, and includes provisions to ensure pricing mechanisms such as price variations and loyalty payments are managed openly and fairly.
“It’s important that contracts are fair, simple, realistic and easily understood by both farmers and their processor,” UDV President Adam Jenkins said.
“For too long there has been a ‘take it or leave it’ mentality when it comes to negotiating supply agreements, and the Code aims to fix this attitude as part of our plan to rebuild trust and confidence within the dairy industry.”
Among the stipulations to be abided by processors and farmers are:
- A clear price or schedule of prices that will apply to suppliers (based on elements such as volume, quality and composition);
- A 30-day written notice period in the event of any milk price step-downs;
- An entitlement for farmers to accrue loyalty payments where they have supplied to the end of a contract term, irrespective of whether they stay supplier after their contract expires; and
- A 90-day written notice period if a processor decides not to offer farmers on fixed term contracts a further fixed term.
The Code has been endorsed broadly along the supply chain by dairy groups, processors and retailers.
“It’s an achievement of the dairy industry that in tough times we’ve been able to work together to come up with real solutions to improve industry practice,” Mr Jenkins said.
“No one wants to see the milk crisis repeat itself, so it’s important we obtain clarity and simple clear pricing mechanisms in our future supply agreements and contracts.”
The Code will be monitored closely by all parties to ensure its intent is upheld, with a review in one year.