Janet Rice (Victoria, Australian Greens) Share this | Hansard source

In 2016 milk prices were slashed, and farmers around Australia were devastated. Over the years I've heard many stories from farmers that were affected about the struggles that they are continuing to face, but I'd like to share a particular one from a dairy farmer from western Victoria, Karinjeet Singh-Mahil. She and her husband, Brian Schuler, were suppliers to Fonterra, and they faced enormous challenges when the prices were cut in 2016 even just in attempting to get some clarity and transparency about the sudden changes, let alone maintaining their dairy business. Ms Singh-Mahil said in a submission to the Senate in 2017:

In neither case has Fonterra been transparent about what the loan balance is, what the terms and conditions are etc. It is all bundled into the total milk price and we are unable to work out what our actual milk price is, what repayments are being deducted for the autumn offset and what interest is being deducted for the loans we didn't take.

They had a herd of 360 cows in 2016, and within a short period they'd cut it to 280, and they still ended up with a debt of over $100,000. They had to talk about what would happen if they lost the farm. Karinjeet has been brave in speaking publicly about the strains these challenges put on relationships and communities. She and her husband are still farming and are still concerned about what impacts processors have on the industry. They've been forced to diversify into other projects because of the enormous burden imposed on them by the sudden cuts.

Since that crisis in 2016, we have had the 2017 Senate economics committee report, which I participated in, and the 2018 ACCC report on the same set of issues, which was provided to government in September last year. But despite all the inquiries and reports, farmers are still struggling. There are farmers who are still paying off the debts that they were saddled with when processors cut prices in 2016—retrospectively cut prices, let me say. That's why we called for a ban on retrospective price changes in 2016. But the government has only just recently released its exposure draft for a mandatory code of conduct. Better late than never! But it is far, far later than it should have been and there is far less action than there needs to be.

Delays in responding to this crisis make it harder for farmers to negotiate with processors, to operate their farms and to deal with drought and the impact of our climate crisis. In turn, that impacts rural communities right across the country. The Greens support rural communities as a vital part of Australian society. We know that sustainable agriculture cannot be delivered without thriving, resilient rural communities, and we know that sustainable agriculture is fundamental to food security.

But despite how important rural and regional communities are for Australia, dairy farmers struggle when it comes to negotiating with the dairy processors. In turn, the processors struggle when it comes to negotiating with the supermarkets. To quote the ACCC there are

… significant imbalances in bargaining power at each level of the dairy supply chain. This begins with the relationships between retailers and dairy processors, and progresses down to the relationship between processors and farmers.

The ACCC continued:

… most dairy farmers have little bargaining power and limited scope to reposition their businesses or switch to a different farm enterprise to mitigate this.

Right back in 2011, Australian Greens' Senator Christine Milne, with other crossbench senators, made recommendations as part of an inquiry into the dairy sector. A key recommendation was that the federal government develop a mandatory industry code of conduct dealing with relationships between industry participants along the supermarket supply chain. We made that recommendation again in 2017, and in 2018 the ACCC confirmed that a mandatory code of conduct was needed to deal with the relationships between dairy farmers and dairy processors.

In this respect, the views of the dairy farmers and their peak bodies seem to be universally supportive. Some think that it doesn't go far enough, but we've yet to hear from anybody who thinks that the mandatory code of conduct is a bad idea. So it's astonishing how much this government have dragged their feet, having only just released their exposure draft. We need to take action, which is why we're here speaking in support of this part of this bill, at the very least.

But while all stakeholders support a mandatory code of conduct, their views on the proposal for a price floor are much more mixed. The peak organisation, Australian Dairy Farmers, is not supportive, reflecting the fact that industry supported deregulation 20 years ago. And in our conversations with farmers we've heard a range of things; some have fears about how a price floor may impact their ability to compete with farmers in New Zealand. But there is one consistent theme in all of our conversations, and that's that something needs to be done. Australian dairy farmers recognise that dairy farmers are doing it tough, with sustained high input costs and flat farmgate returns leading to increasing numbers of farmers exiting the industry. Similarly, we spoke to those farmers who were still paying off their debts years after the 2016 price drop. There is a range of views, but nobody thinks that the current approach is working.

Given this range of views, we believe that the best approach is actually not to go to a full price floor immediately but to adopt a price notification scheme. This is an approach where the ACCC would monitor prices, and if a relevant entity wanted to change its price then it would have to notify the ACCC. The ACCC could then object or allow the price to change. Price notification schemes are currently in place for services provided by Australia Post, by Airservices Australia and by Sydney airport. We think that, with slight modifications, it's a very useful model for dairy processors. Dairy processors would have to notify the ACCC if they wanted to cut prices below the prices that they had paid over the last 12 months. That would create a role for the ACCC in monitoring and, if need be, intervening on prices while being less drastic than suddenly imposing a price floor. Most importantly, it would ensure that a sudden and unconscionable price drop, like that in 2016, would never happen again. If the situation was repeated, the dairy processors would have notified the ACCC of their intent to decrease prices and there would be an opportunity to object, to intervene and to prevent the tragedy that occurred in 2016.

I foreshadow that, at the committee stage of this bill, I'm going to move amendments to put in a price notification scheme rather than a price floor. In moving these amendments and supporting dairy farmers, we are continuing our advocacy for policies that make a real difference for farming communities. We went to the 2013 election with a full suite of policies to tackle the supermarket duopoly and provide an effective set of competition policy laws, as well as back in increased powers for the ACCC and put in place laws and better legislation, standing up for small business and supporting farmers. Our 2013 policy explicitly mentioned the need to end unfair contract protections to farmers in business-to-business dealings.

In 2016 new laws were implemented to extend unfair contract dealings to protect farmers. In 2017, having campaigned on it for four years, we worked with the National Party and the Liberal Party to bring in what was one of the most revolutionary changes to competition policy in this country in a decade, which was an effects test. But for dairy farmers there have been enough reports, enough studies and enough recommendations. Rural communities are a vital part of Australian society. For a fair go for dairy farmers, to protect the weak from the strong, it's essential that this government, this parliament, acts and acts now.