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Contract commitment: ADF developing code-compliant form

THE mandatory code of conduct has been in place for a few months now, but the real test of its effectiveness comes with the negotiation of new milk supply agreements in the lead up to the new season.

All contracts signed after January 1 this year must comply with the code, while prior agreements have 12 months to transition to become compliant.

The federal government made a commitment in the lead up to last year’s election to develop a standard form contract that meets the requirements of the mandatory code and can be used by processors and farmers in negotiating supply agreements.

The government contracted Australian Dairy Farmers to develop this template, which will provide a foundation for the obligations of both farmers and processors under the code with the least cost to industry.

Farmers and processors won’t have to spend time becoming experts in the code or contract manage- ment nor will they have to spend time developing new agreements from scratch. ey can simply adopt the template, or develop their own contract using the template as a basis.

The template will also help to resolve a number of issues identified by the Australian Competition and Consumer Commission in its Dairy Inquiry report.

The competition watchdog made several recommendations related to contracting practices, including that milk supply arrangements should be acknowledged in writing, processors should provide farmers with all contractual documents before the start of their contract, and that those contracts should be simplified.

Many farmers have had no contracts with their processors or contracts that may have contained complex terms. e new standard form contract will ensure that all farmers will have a contract with acceptable and meaningful conditions.

ADF’s goal is to ensure that farmers have a stronger bargaining position when negotiating contracts with processors. One of the key findings of the ACCC Dairy Inquiry was that contract arrangements between processors and farmers have been favourable to processors and exacerbated most farmers’ weak bargain- ing power.

The template was developed by comparing the mandatory code and other legal requirements to current contracts in the marketplace. It will be made widely available on the internet for anyone wanting to use the contract or even to compare with their own milk supply agreements.

Of course, ADF expects that many farmers will have questions about the template and it will seek to answer those through a series of webinars and other online tutorials.

The past few years have been difficult for the dairy industry, underscored by diminished trust between farmers and processors.

One of the key commitments of the Australian Dairy Plan is to improve trust and transparency along the dairy supply chain.

The new standard form contract will help this pro- cess. ADF will be encouraging farmers and processors to use this template and seek further information from ADF, either by attending one of the information sessions when they are organised or by contacting ADF’s office.

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