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By Ben Bennett, President, Australian Dairy Farmers.
When the Dairy Code of Conduct was introduced on January 1, 2020, it wasnât because everything in the dairy industry was working smoothly.
It was because farmers had suffered under a system that allowed processors to wield disproportionate power â leaving us vulnerable to retrospective price cuts, unfair contracts and a complete lack of transparency.
The Code wasnât a gift from processors; it was a necessary response to their unscrupulous behaviour.
Fast-forward to today, and now the processors whose actions resulted in the need for the Code are suggesting changes to it. The irony isnât lost on us farmers.
A Code designed to protect us from unfair practices is now under threat of being rewritten to better serve the processors. Itâs not right, and itâs certainly not fair.
The Code was born out of years of hardship and frustration.
For many of us, the 2016 price clawbacks by major processors like Murray Goulburn and Fonterra are still fresh in our minds.
Coming off the back of the $1 milk wars, those unilateral price cuts devastated farm incomes, forced many out of the industry, and eroded trust, many would say forever.
In the wake of that crisis, the ACCC launched an inquiry that exposed the power imbalances between processors and farmers.
The mandatory Code was introduced to fix these issues by implementing:
- Transparent milk supply agreements with minimum standards,
- Clear pricing information published annually,
- A prohibition on retrospective price changes and unilateral contract variations, and
- Dispute resolution mechanisms to address conflicts fairly.
The Code was a step forward, but itâs far from perfect.
Farmers still face challenges, but at least we know there are rules to prevent the worst abuses of the past.
Over the past few years, dairy farmers have finally started to see some decent returns for their hard work.
Many of us have been able to reinvest in our farms, pay back loans, improve efficiencies, and breathe a little easier.
But now, as processors feel the pinch, theyâre suddenly pushing for changes to the very rules that helped create some balance.
Letâs be clear: the Code exists because processors couldnât be trusted to play fair.
Yet, they are the ones now trying to dictate changes to it.
Their proposed amendmentsâsuch as delaying pricing deadlines, increasing their flexibility to adjust prices mid-season, and weakening dispute resolutionâare all designed to benefit them, not industry and certainly not farmers.
This push to move the goalposts is particularly frustrating because processors already hold the reins when it comes to pricing.
Processors decide the farmgate milk price, and as weâve seen recently with a cut of 10-15 per cent in opening prices, they set those prices with little regard for how it impacts farmers.
Processors argue these cuts reflect global market realities, but farmers donât have the luxury of such flexibility.
We have fixed costs, long production cycles, and depend on stable prices to keep our operations viable.
The Australian Dairy Products Federationâs argument for greater pricing flexibility sounds reasonable on the surface. They claim it would allow processors to respond better to market conditions.
But what does that really mean for farmers? It means more uncertainty. It means prices could be slashed mid-season, leaving us scrambling to make ends meet.
Farmers donât have the luxury of adjusting our costs to match a processorâs new pricing structure.
Once a contract is signed, we commit to producing milk at the agreed price.
We invest in feed, herd management, and labour based on that commitment.
Changing the price during the season would leave us carrying all the risk while processors protect their margins.
The same goes for their push to delay pricing publication deadlines.
Currently, processors must publish minimum pricing by June 1 each year, giving farmers time to compare offers and make informed decisions.
Pushing this deadline back would only benefit processors, reducing competition and leaving farmers with less time to negotiate better deals.
Farmers are price-takers in this relationship, and weâre the ones who bear the brunt of market fluctuations.
When times are tough, itâs farmers who suffer. When times are good, as they have been for the past couple of years, processors seem unhappy that farmers are finally seeing a fairer share of the pie.
Letâs not forget farmgate prices this season are down 10-15pc, but international markets are up.
Farmers endure droughts, floods, increased cost of living and ever rising production costs. Weâve adapted, innovated, and kept this industry alive through sheer determination.
The Code isnât perfect, but itâs a lifeline for farmers trying to build a sustainable future.
Giving processors even more flexibility and power would only push farmers further into uncertainty.
They shouldnât get to rewrite the rules to suit themselves â especially when those rules were created to curb their past excesses.
To those that are doing the rewriting, walk a mile in our gumboots, make the decision to send cows you canât feed to slaughter, watch them loaded on the truck, then see how writing Code changes from your desk feels.
The consultation on the Code will be a pivotal moment.
We canât let processors dictate changes that benefit them at our expense.
The Code exists because of their behaviour, not ours. Itâs there to protect farmers and ensure fairness in the supply chain.
The government must prioritise farmersâ voices in this process.
Strengthen the Code. Enforce the rules. And ensure that the dairy industry is a place where hard work is rewarded, not exploited.
Farmers deserve stability and fairness, not shifting goalposts designed to keep processors happy, while keeping farmers on the knives edge.
