Background Australia
What exactly is the Australian Dairy Code?
Six months ago, on January 1, 2020, the Australian 'code of conduct' for dairy farmers was introduced. The dairy code must ensure that dairy farmers are paid a fair price and that dairy processors work openly and transparently.
Dairy farmers in Australia have been dealing with harsh working conditions for some time now. In addition to the drought, they have been producing at or just below cost for years. As a result, more and more dairy farmers are forced to downsize or even stop their business. To create a better position, the '$1-dollar-a-litre' consumer price was abolished last March. Supermarkets must offer dairy products for a fair price, which would give the dairy farmer at least $0,10 per liter more.
The $1-dollar-a-litre problem was mainly between dairy farmers and supermarkets. In addition to this relationship, another relationship had been tense for some time, namely that between dairy farmers and processors. In order to generate a better position for the dairy farmer, a 'code of conduct' (dairy code) has been drawn up on the advice of the Australian Competition & Consumer Commission (ACCC).
Why was there a demand for a dairy code?
Besides the fact that too little income from the supermarket chains returned to the dairy farmer, the relationship with the processors was also relatively skewed. For years, processors were able to do their own thing, transparency around milk prices and contracts was really hard to speak of. In order to make this transparent, the code of conduct has been set up in collaboration with the entire dairy sector. With this, various parties, such as the Ministry of Agriculture, hope that the dairy farmer can generate a better income. Transparency should make it easier for dairy farmers to make the choice to switch to a better-paying dairy processor, if they so wish.
What does the dairy code mean?
The most important part of the code is the fact that processors must be transparent about their contracts and milk prices. In order to guarantee this, all annual milk prices are released by the processors on the same date and time. In addition, all contracts can be viewed. As a result, the dairy farmers know where they stand. Processors also include supermarkets and buyers, etc. All prices have now been released simultaneously for the first time. That happened yesterday (June 1) at 2pm Australian time. A good side note here is that the Australian milking season is different from our Dutch one, as the seasons are reversed. Winter begins in Australia in June and summer begins in December. As a result, the milk season in Australia covers two years, the new season runs from the beginning of June 2020 to the end of May 2021.
What are the benefits for the dairy farmer?
Due to the transparency, the dairy farmer is therefore better aware of his own price and contract, but also of prices and contracts of other processors. This indirectly forces processors to come up with realistic prices. Where the dairy farmer used to know little about contracts with other processors, this is now the case, which may mean that the dairy farmer chooses to go to another processor because it pays better. In addition, it is now mandatory for processors to include a minimum price in their contract. In this way the fancier is assured of a certain price, where it was previously on loose legs. The code brings the processors and dairy farmers back to the same level in the bargaining position, instead of dominating processors.
What does the consumer notice about the code?
In a direct sense, the dairy code has no effect on consumers. There is, of course, a good chance that the consumer will feel something. Because processors have to set a minimum price, they can't usually keep lowering them, which they could without the code. Because the processor (most likely) wants to compensate this price, there is a good chance that the consumer price in the supermarkets will rise. Incidentally, this has already happened after the abolition of the $1-dollar-a-litre price.
Are such initiatives also visible in other countries?
In addition to Australia, there is also in Britain a reform underway. The way of concluding contracts was also examined here. An investigation revealed that unfair practices are regularly observed in the UK dairy sector, led by processors. The situation is similar to the situation in Australia. British processors turn out to be changing prices in contracts even without the knowledge of their dairy farmers. The British government is therefore looking into whether this can be solved by legislation so that dairy farmers receive a fair price for their milk.
Jorine Cosse
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