The dairy industry moved on Friday to attempt to stop retrospective price cuts being imposed on farmers.
The Australian Dairy Industry Council, a dairy industry lobby group, has offered voluntary Dairy Industry Code of Practice covers off standard form contractual arrangements.
ADIC said it is anticipated most of the milk fresh produced in Australia will be covered by the Code of Practice.
ADIC Interim Chair, Terry Richardson, said the Code was designed to address a range of contractual issues which farmer organisations had been trying to address and rectify for a significant amount of time.
ADIC Deputy Chair, Grant Crothers said the organisation believed the Code would improve contracting arrangements between farmers and processors.
It would offer greater transparency through earlier and clearer pricing signals for farmers, which would mean less risk for farmers and more balance along the supply chain, Mr Crothers said.
Agricultural advocacy group Dairy Connect CEO Shaughn Morgan said on first-reading the move appeared to be a good first step on setting guidelines for commercial arrangements between value chain stakeholders in the dairy industry.
“The only caveat from our point of view at this stage is that it would be the application of the code and how it was interpreted that would be its true test in the marketplace,” he said.
“The Code appears to set a framework that is consistent with what Dairy Connect has been advocating for since the Murray Goulburn and Fonterra price meltdown and clawback in April last year.
“There has been a pressing need for an equitable and voluntary cross-industry code along the lines of the UK industry code.
“We have raised the need for this as often as we could with Federal and State Agriculture Ministers and industry stakeholders during the past 12 months.
“The ADIC Code raises the importance of transparency as well as indicating that prices must be clear and precise, with a price setting mechanism that is clearly understood,” he said.
Shaughn Morgan said point six of the code discusses exclusivity of supply, and says the contract between a farmer and processor must allow the producer to supply milk to other processors.
“It also states that ‘the code does not preclude a processor or a farmer negotiating exclusivity in their contract’. Any such clauses must be done on a level playing field,” Mr Morgan said.
“However, it is good to see that our initial push for a code similar to the UK Voluntary Code of Conduct to be adopted has led to this important first step.”
It will be also important for collective bargaining groups to be able to play a role and to have all parties negotiate in good faith.
Dairy Connect said they will monitor the code over the coming months and the way in which it is implemented, and provide appropriate feedback to government and industry bodies.