The dairy industry has introduced a new code of practice aimed at protecting farmers from retrospective cuts to milk prices and ensuring processors give substantial notice of any looming price reductions.
The voluntary code, launched on Friday by peak national dairy farmers group, the Australian Dairy Industry Council (ADIC), comes after the dairy industry was plunged into chaos in April, 2016 when Australia's biggest dairy processor, Murray Goulburn, unexpectedly slashed the farmgate milk price, citing global oversupply and low prices for dairy commodities.
Murray Goulburn also introduced a controversial support package for dairy farmers which clawed back repayments out of future payments for milk - a scheme it later dropped.
Murray Goulburn, Fonterra Australia, Bega and Warrnambool Cheese & Butter are among processors signed up to the new code and ADIC deputy chair Grant Crothers said code will cover most of the milk produced in Australia.
"We believe the code will improve contracting arrangements between farmers and processors; and offer greater transparency through earlier and clearer pricing signals for farmers, which means less risk for farmers and more balance along the supply chain," Mr Crothers said .
The code requires farmers be given 30 days' notice of any cut in milk prices and allows farmers to sell excess milk elsewhere if their contracted processor does not want the extra supply.
The code covers standard contracts between processors and farmers but does not prevent a farmer from negotiating an individual contract with a processor.
Fonterra Australia has endorsed the code, saying it already was taking steps to improve pricing signals to give farmers more certainty and help them plan with confidence.
"We're committed to ensuring Australian dairy is sustainable and to working collaboratively with all those involved in it," Fonterra Australia managing director Rene Dedoncker said.
NSW Farmers' Dairy Committee chair, Erika Chesworth, said the code would help improve the supply chain and industry sustainability.
"Farmers need greater transparency and fairer contract terms to allow them to grow their own businesses," Ms Chesworth said.
