ADF answers questions about the dairy code

Australia’s peak dairy representative body, Australian Dairy Farmers (ADF), has not yet joined the ACCC and all but one of the state dairy bodies in calling for a mandatory code that would govern the interactions between farmers and processors.

I’m grateful to ADF’s President, Terry Richardson, for answering four questions about the ADF’s approach for Milk Maid Marian.

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Terry Richardson, ADF president

1. Does the ADF accept the ACCC’s finding that the voluntary code was not effective enough?
TR: ADF accepts the ACCC findings that the current industry Code had a positive impact on contracting practices but has been unable to secure participation by all processors, reduce risk and strengthen bargaining power for farmers, independently arbitrate complaints or penalise breaches.

When the Code was introduced, it was agreed that a review would occur twelve months of operation. This included an assessment of its strengths and weaknesses in the context of the ACCC report and industry feedback.

We were aware at the start of the code review process that the next version of the industry Code must have such procedures in place.

It is important to recognise that prior to 1 July 2017, there was no Code of Practice for Contractual Arrangements in the dairy industry, and Australian Dairy Farmers was pivotal in making this difficult yet important first step.

2. If you are still committed to the review of the voluntary code, what resources does ADF have that were unavailable to the ACCC and may have hindered its review?
TR: It is incorrect to assume that the ADIC is conducting its own review with the aim of coming to a different conclusion to the ACCC. The ACCC and ADIC reviews have different objectives.

The ADIC review is focused entirely on how the voluntary code operated, what elements were successful and what needs improving in a new Code of Practice.

We found that relatively little of the ACCC report considered the operation of the current dairy industry Code of Practice despite the shortcomings.

Our concern with the ACCC report was that in recommending a mandatory code of practice, the ACCC did not conduct an assessment against the Australian Government’s threshold test nor did it provide adequate analysis on how this new code would operate.

It is our understanding that it is difficult to amend or alter a mandatory code once it is enacted if farmers determine at some future time that they are unhappy with its operation.

It has been incorrectly assumed that continuing with the ADIC review is an indication that the Council or ADF is opposed to a mandatory code of practice. That is not true.

The ACCC report broadly discussed the different types of codes but we need to review all options and communicate to farmers the benefits and shortcomings of each.

These are significant decisions for the dairy industry and farmers should expect that ADF forms a view that is underpinned by detailed analysis

3. What steps has the ADF taken in response to the ACCC report?
TR: ADF, in conjunction with the Australian Dairy Industry Council, is using the ACCC report as a springboard to revise and strengthen the Code of Practice and act on the other recommendations contained in the report.

We are working with a legal firm who has considerable experience in working with industry codes. While this legal advice is in its early stages, we will work through number of key amendments that should be included in a new dairy industry code, including a dispute resolution mechanism and penalties procedure that would ensure compliance.

We are also using the ACCC Guide to Industry Codes of Practice to ensure a strengthened code is consistent with best practice.

4. What are the next steps and their timeframes?
TR: The introduction of a Mandatory Code would take 15-18 months, and with a federal election scheduled for the first half of 2019, this timeline could be extended as government moves into caretaker mode during an election.

Preparing a strengthened industry Code including dispute resolution procedures is the next step, and we expect this to be complete in the next couple of months.

This work is complex and ADF is proceeding one step at a time, recognising the urgency of moving this work forward.

Thank you, Terry Richardson, for explaining ADF’s approach to a dairy code!

3 thoughts on “ADF answers questions about the dairy code

  1. My bet is that the processors will be falling over themselves to sign the “NEW” voluntary code, because it still will not be backed up by legislation and they can choose to ignore it when it suits them.
    Who is going to arbitrate and who is going to apply a penalty and who is going to pay a penalty if the code is not legislated.
    Will it just be a sham to try to pull the wool over dairy farmers eyes????

  2. The ADF is ineffectual, remote and out of touch with its members. And that starts with the milk-pricing index. From my understanding what was proposed and envisaged was an index that gave farmers an indicative milk price, that took into account the weighted international dairy commodity prices available less the processors cost of production in Australia. That would of given farmers real clarity as to how much real value was being delivered or lost by the individual processors product mix, milk supply profile and pricing structures

    What the ADF have now put forward is a pale watered down imitation of the original proposal that does nothing for transparency. What is now proposed will be of little value in the real world. The ADF have also created a retrospective milk price index with an attached market report, well that’s already available via a major rural banks 1/4 industry up date. What farmer participation in all this will achieve is questionable apart from if it fails its not our fault.

    “The index is not a magic bullet, but if done right will importantly provide independent and transparent market information to dairy farmers that is easily accessible and useful in making decisions about their businesses,” ADF president Terry Richardson said. I would have to agree this is no magic bullet but the gun provided buy the ADF is shooting blanks.

    For years while this industry was self-destructing, ever since the Horizon 20/20 report .The ADF and others where more interested in the health of Dairy Australia than the farmers supporting it and driving the industry. They seem to think the bigger better and shinier it was they healthier the dairy industry would be. All about ego and the creation of industry icons to worship how wrong they where. The ADF words and actions ring hollow to the vast majority of dairy farmers and this issue is no different, as I have tried to explain to MR Richardson

    That strengthening was and is the milk price index, the code of conduct and a fairer and simpler milk pricing system.

    The milk price index along with the code of conduct, either mandatory or voluntary, was the cornerstone to better, more transparent and fair milk pricing. Without the milk-pricing index in its original form not the watered down one that now seems the ADF’s preferred outcome as the web sight indicates, the code of conduct is useless.

    When you sit down and analyse it the pricing index will have a far greater and long lasting effect on open and transparent milk pricing compared to what the mandatory code could ever have or hoped to achieve. The ADF has let us down because what they have delivered and agreed to is just window dressing, something that is intended to seem impressive but does not have any real effect.

    The question rightly then is what happened and why. This index is central to the ACCC concerns about sharing the risk between farmers and the processors. It is true it will put the spotlight on processors with regards processing efficiency and that can only be a good for the industry, if it is to stay world competitive and actually grow, to fill all that extra capacity the processors keep building at a cost not just to themselves but to farmers as well.

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