All dairy farmers and processors need to be aware of what this means for their businesses. Some of the important changes include long-term contracts, notice periods and needing a contract to supply milk. The code covers conduct between farmers (suppliers) and processors over $10 million.
Contracts signed before January 1 do not have to comply with the code. However, from January 1, 2021 all contracts must comply with the code. As a result, all long-term contracts that are set to expire after December 31, 2020 need to be renegotiated, made code compliant and signed by the farmer and processor. If this does not occur, it would appear the contract is null and void on January 1, 2021, farmers are uncontracted and free to sign with whoever they choose.
Farmers need to be wary of processors trying to use the code as a way of re-locking in existing suppliers on unfavourable terms. Farmers with long-term contracts are under no obligation to sign a code compliant contract with their current processor until January 2021. For farmers who are on contracts with a farm gate price well under the current market, it would be nonsensical to sign a new contract without vastly improved terms and a competitive milk price. Any farmers who are approached by their processor to replace an existing contract with a code compliant contract which has unfavourable terms should notify QDO immediately and not sign the contract.
With contracts signed from January 1, 2020, farmers are no longer required to give notice to change processors at the end of a contract. Many contracts historically had notice periods of three to six months to delay or stop farmers swapping processors. Now, the day after your contract expires, you are free to supply another processor.
Any dairy farmers who have issues or concerns regarding their contracts and the code should contact QDO. If we believe that processors are breaching the code, we will notify the ACCC to investigate. The code is there to address the massive imbalance of power that exists between processors and farmers and we need to make sure this occurs.
Eric Danzi is the QDO executive officer and sits on the ACCC Dairy Consultative Committee
