In a major shake up for the industry, processors will only be able to buy milk from farmers with whom they have a milk supply agreement.
The Australian Competition and Consumer Commission last week detailed processors’ publishing obligations under the code.
The new code came into effect on January 1, but did not apply to contracts entered into before that date.
The real interest will be in the new milk supply agreements – including minimum prices – that processors must publish on their websites by June 1.
Standard agreements must be published for all the circumstances in which the processor intends to buy milk.
The agreements cannot be removed from the website before July 1, 2021.
Each milk supply agreement must be accompanied by a statement of circumstances setting out when the processor would enter into it.
Processors are banned from having exclusive supply agreements that contain tiered pricing or set a maximum amount of milk that a farmer can supply.
Where an exclusive supply agreement is offered, the processor must also offer a non-exclusive standard form option, although the price and terms can be different.
The code requires a statement of the processor’s justification for any minimum price specified in the standard form agreement.
This justification may include the factors that lead to the consideration of the prices offered but does not need to include commercial-in-confidence material such as currency hedging.
Milk supply agreements
All milk supply agreements must comply with the code. They must:
Include a minimum 14-day cooling-off period.
In most cases, specify the supply period of the contract, including a final calendar date.
Specify quality and quantity requirements, including testing procedures.
Specify a minimum price paid for the milk.
Not allow for price step-downs except for prospective step-downs in limited circumstances.
Not allow for unilateral variation of a milk supply agreement, except in the case of a change in a Commonwealth, State or Territory law and only to the extent necessary to comply with that change.
Specify what services the processor may or must perform, and specify the fees payable for those services for the first year of any supply period.
Specify when transfer of ownership of the milk supplied occurs.
Provide for payment of a portion of the loyalty payment in circumstances that a contract is terminated before the end of its supply period, if an agreement provides for a loyalty payment to a farmer.
Contain a dispute resolutionprocedure, including an internal complaints handling procedure and mediation.
Publication of reports on disputes
Processors are also required to publish a report on June 1 about disputes with suppliers.
This must detail the number of disputes that were the subject of mediation or arbitration and information about the nature of these disputes, the time taken the resolve them and the outcome.
A report is required even if there were no disputes.
