David Gillespie (Lyne, National Party) Share this | Link to this | Hansard source

During the last parliament, many in this House argued for and successfully achieved policy outcomes of the agreement to get a mandatory dairy code of conduct. Two rounds of consultations were held around the country and lots of input was received from all corners of the dairy industry, particularly from dairy farmers. The processing industry had the ability to contribute as well, and I was very pleased that commitment was given. As you know, the machinery to get that code of conduct is out and rolling, and I'm looking forward to the final code being put out for exposure draft in the very near future.

But there are people out there advocating that this is somehow a regressive step. I just want to correct the record. The reason a mandatory code of conduct is required in the processing and dairy farming contracting space is that the voluntary code hasn't worked. Voluntary codes never seem to work. The ACCC has identified a range of market failures in their very good inquiry. The report and the commissioner highlighted the bargaining power imbalances. There is an imbalance in power between the retailers and processors for obvious reasons—when a couple of retailers control almost 70 per cent or 75 per cent or more of the retail space, they have enormous market power, so huge pressures are brought onto processors to comply with the needs of these retailers. Consequently, the pressures are then applied to the dairy farmer, and there is an imbalance at the next level down in the value chain—that is, the dairy farmer doesn't have the ability to trade with more than one customer once they commit to an agreement.

The exclusivity contracts of current milk-processing agreements between farmers and milk processors almost all require the dairy farmer to not trade with any other processor. There are not many businesses that call that a market. Some of these contracts are locked in for up to three years or even up to five years. During that time, so many variables can change, but all of the risk is ratcheted down onto the producer at the bottom of the value chain. As you know, they can't judge the risks, for example, whether they need to increase their production capability. They need to be able to forward price and they need to be able to be flexible, as processors are. With that power imbalance, farmers sell into a market on a fixed agreement price, but the price in the market changes and, if it goes up favourably, they don't get a chance to benefit from that. If they had more knowledge and there was transparency in the market and there were fair and equitable negotiating terms—which will be codified in the mandatory code of conduct—they would be much better off. There won't be exclusivity clauses. That is a universal agreement in the exposure drafts and the rounds of consultation. So I look forward to that happening. There are a lot of other clauses that are going to codify how these agreements are negotiated, what form of arbitration is possible and the procedures for that, and it will be a much better situation for dairy farmers.

One of the other commitments that we got running into the 2019 election, announced by the former minister for agriculture, was the Australian milk pricing initiative. Once this code of conduct comes through and allows a new fairer way of contracting, addressing the imbalance and the ability for farmers to trade their milk with more than one purchaser, the milk pricing initiative will take flower and everyone will benefit. With the ability to have an open and transparent market price available to everyone in the market, the right sorts of decisions can be made by all processors and all farmers. Trading over flexible time frames will deliver so much more benefit. (Time expired)

House adjourned at 17:00

The DEPUTY SPEAKER (Dr McVeigh) took the chair at 10:00.