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Draft code to increase fairness

Cautious of conduct: Leongatha South dairy farmer Gordon Vagg is cautious about the eventual mandatory code of conduct.

THE draft dairy code of conduct was announced in mid January following continued consultation with processors and farmers from all eight Australian dairy regions.

The eventual mandatory code of conduct is expected to cover about 87 processors and 5800 dairy farmers, and whilst the draft phase continues and the mandatory code is developed, a voluntary code will remain in place.

“A mandatory code will be an industry-defining moment so I want all dairy farmers, processors and stakeholders to stay involved in shaping it,” Federal Minister for Agriculture and Water Resources David Littleproud said.

Throughout the past few decades, deregulation of the Australian dairy industry and decline of cooperatives has led to a more competitive and therefore risky business model for farmers.

The draft clauses would see changes to industry practice including prevention of unilateral changes to agreements; prevention of retrospective milk price step downs and the introduction of a dispute resolution process, among others.

A mandatory code will attempt to address issues including minimum standards for contracting terms; farmers’ ability to change processors; strengthening competition between processors and processors’ ability to change key trading terms, such as price.

It would also help balance the market power between dairy farmers and processors and to improve farmers’ bargaining power, according to the minister.

Pricing guarantees would require agreements provide a minimum price for the first year. For long-term agreements, a method to determine a minimum price over subsequent years would be required, preventing unknown milk prices for the full period of the agreement.

Though these changes are welcomed and long overdue, a mandatory code will not address farm gate milk prices; discounted dairy such as $1/litre milk and $6/kg cheese and the timing of milk price announcements. And it would not be in effect by next season, 2019-20.

Leongatha South dairy farmer Gordon Vagg is admittedly sceptical of a mandatory code, considering the mix up of the wool industry, and with both State and Federal governments involved in the subsequent code.

“I’m concerned about Minister Littleproud sticking with his Queensland constituents and the opposition minister (Joel Fitzgibbon) with his New South Wales constituents, leaving Victoria out,” Mr Vagg said.

“We’re in unknown territory now without a cooperative. Private companies are always at the mercy of shareholders.

“Prices reduced considerably during the global financial crisis, to about $4/kg, when Germany was dumping cheap milk into Asia.

“We’re at about $6/kg now but the way we are with grain prices doubling throughout the past 12 months and sky-rocketing electricity costs, we’re nowhere near the golden age of 1950s farming, when people bought everything with cash.”

Mr Vagg supplies Saputo but it’s too early to tell how prices will go throughout the year, although a step-up in their farm gate milk price for 2018-19 was announced on January 31.

The retrospective payment increase applied to qualifying Southern Milk Region suppliers from $5.95/kg of milk solids to $6.05.

If world markets plummet, as Saputo is predominantly an exporter, Mr Vagg is left literally “holding a baby.”

But with a cool American winter, he expects a good season ahead locally.

Short URL: http://thestar.com.au/?p=27892

Posted by on Mar 13 2019. Filed under Rural News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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