Opening Price vs Market Price

Jun 16, 2017

Over the past week, we have seen several milk supply companies announce their opening milk prices for 2017-18. While there will always be some variances in the opening prices for different companies this price generally reinforces the relative strength of market price improvement.

Further reinforced by Dairy Australia in their recent Situation and Outlook report, the improved outlook for 2017-18 offers sustainably better returns with indicative prices for the year approaching $6 /kg ms.

Bega and Warrnambool both stated their opening price of $5.50/kg ms. Over the years both companies have been very consistent with their prices reflecting the world market, and their farmer suppliers have been paid accordingly. We can be confident that the opening prices of both Bega and Warrnambool reflect the steady upward improvements we have seen in world market prices over the past 6 months.

This week we also saw the release of Fonterra’s opening price for the coming year at $5.30 /kg ms, which is Fonterra’s true interpretation of the market price and reinforces the variances in opening prices between companies.

A short while ago Fonterra announced it was going to pay an additional 40 cents/kg ms to all its suppliers for the 2017-18 year to account for the step-down and claw back it applied to its suppliers last year.

While most Fonterra suppliers welcomed this news, there has always been concern that the 40 cents compensation payment would be marketed as part of their price for the 2017-18 year.

In a recent meeting with Fonterra, ADF was assured the 40 cents would be defined as a payment on top of their market price for 2017-18 and not actually part of the price. ADF was concerned that this compensation payment if marketed as part of their opening price to farmers, could be used to give Fonterra a perceived unfair advantage over all other companies.

We believe that companies who did the right thing by their suppliers for the 2015-16 year should not be accused of lagging behind Fonterra’s price for 2017-18. The announcement of the additional 40 cents as compensation was for the major step downs and clawbacks Fonterra applied to their suppliers during May 2016.

So, it was with considerable disappointment that we saw Fonterra’s announcement of their opening price and the supporting media release from Bonlac Supply Company. In their communications, they portrayed their opening price to incorporate the 40 cents to make the price $5.70 /kg ms, which makes them look like they are 20 cents/kg ms ahead of the competition.

Not only is this unfair to other companies which are above the Fonterra announced $5.30 opening market price, but it is also misleading to all their suppliers. It is a fact that the 40 cents/kg ms to be paid to all Fonterra suppliers this year is a compensation payment for 2015-16 – and should not, at any time, be characterised as part of the market price for 2017-18.

This past year, ADF and our state member organisations have worked in collaboration with companies to develop a Code of Practice on Contractual Arrangements. Most of the dairy companies participated in the development of the Code and agreed that one of the most important elements of the Code was the need for greater transparency in pricing for farmers.

By monitoring the application of the Code with farmers, we will be able to assess whether companies are conforming to the transparency principals outlined within the Code of Practice.

There is a real danger that Fonterra’s current characterisation of the 40 cents/kg ms being added to their market price for the year will give the wrong signal to all farmers and other companies that transparency only goes a small way.

It is important that all dairy companies remain fair and transparent in their pricing. The inconsistencies have indicated Fonterra and BSC are not being completely transparent with their suppliers. These types of contradictions are nothing but misleading at a time when the dairy industry has committed to rebuilding trust along the supply chain.

John McQueen

Interim ADF Chief Executive Officer

 

Where to from here - the 457 visa

Apr 21, 2017

Dairy is a highly dynamic industry offering lots of opportunities for career growth and development. However, it is no secret that we have domestic labour shortages in regional and rural areas.

Our preference is always to hire Australian workers, but there are not always enough experienced farmhands to meet the demand of our industry. This is despite more than a decade of offering training courses and pathway programs for Australian workers to enter the dairy industry.

ADF has continued to lobby the Department of Immigration and Border Protection (DIBP) for regulation amendments to visas allowing overseas workers to fill vital on-farm and off-farm roles.

This week, the Government announced that the 457 Temporary Work visa will be abolished and replaced with the completely new Temporary Skill Shortage visa by March 2018. ADF is concerned with the changes and is seeking clarification on many aspects from the DIPB.

We have now been advised that the current visa changes will have no impact on the Dairy Industry Labour Agreement, which allows dairy farmers to recruit senior farm hands. We have been assured that:

  • our existing labour agreements remaining in effect;
  • our existing visa holders not impacted unless they apply for another visa impacted by the changes outside of the labour agreement programme; or
  • new nominations that we intend to lodge/related visa applications are not impacted – including applications for occupations which have been ‘removed’ from the standard programme or are now subject to a caveat in the standard programme but remain specified in our agreement.

We also understand that under these changes, which come into effect immediately:

  • dairy cattle farmers are included on the short-term skilled occupation list and only able to apply for a 2-year visa;
  • 2-year visas can only be renewed once, which will lead to an increase in administrative burden and red tape on farmers looking to access these new visas;
  • dairy, like other agricultural commodities is not included on the medium to long term strategic skilled occupation list to access 4-year visas; and
  • changes have been made to the Employer Nomination Scheme (subclass 186) visa and to the Regional Sponsored Migration Scheme (subclass 187) visa.

We are still in the process of gaining clarification on what will happen to current visa applicants who are waiting on approvals and the additional occupations available to support regional employers. 

ADF supports the employment of overseas workers to fill vital on-farm roles. We will continue to liaise with government to ensure dairy farmers that need to employ overseas staff can do so.

John McQueen

Interim ADF Chief Executive Officer

 

ACCC now targeting Unfair Contracts

Apr 07, 2017

The new unfair contract terms law is a priority for the ACCC in 2017. It will ensure small businesses, including those which are farms, receive the right type of protection.

We have been advised that the ACCC will be taking enforcement action against a number of companies across a range of industries over business-to-business unfair contract terms this year.

For the past six months, ADF together with State Member Dairy Organisations and Processor Members of the ADPF have been working on the Code of Practice for contractual agreements between farmers and processors. The development of this code is instrumental in protecting dairy farmers from unfair clauses and protecting our processors from incurring millions of dollars in fines. Now with full industry support, the Code of Practice is due to be finalised shortly.

The ACCC has reinforced the importance that if you operate a small business, you may be required to enter into standard form contracts with other businesses for goods and services. All dairy farmers should check the contracts they have with suppliers of inputs, like grain, to ensure they conform to the new legislation. The Australian Consumer Law now prohibits unfair terms in most of these contracts.

In their communications, the ACCC stated that it was no secret that traders (typically larger businesses) put potentially unfair clauses in their agreements, such as terms that give them:

  • an unreasonable ability to cancel or terminate an agreement
  • broad and potentially unreasonable powers to protect themselves against loss or damage
  • the ability to unilaterally change the terms of the contract
  • unilateral discretion to reject or downgrade produce
  • an unreasonable ability to limit or prevent small businesses from exiting their contracts. 

To be 'unfair', a term must:

  • cause a significant imbalance in the parties' rights and obligations
  • not be reasonably necessary to protect the legitimate interests of the party advantaged by the term, and
  • cause financial or other detriment (such as delay) to a small business if it were relied on. 

If you come across terms in a standard form contract you have been offered or you have entered into, and which you think may be unfair, you can report it to the ACCC Infocentre

For more information, including the definition of a small business and the meaning of 'unfair' contract terms, please see the ACCC website

John McQueen

Interim ADF Chief Executive Officer

 

Making the most of Canberra

Mar 31, 2017

On Wednesday, Australian Dairy Farmers (ADF) were in Canberra to discuss a range of issues with Ministers and Members of Parliament.

Throughout the day, ADF had the opportunity to discuss what is working well within the industry and to discuss what else needs to be done.

Our advocacy and policy work is at the heart of everything we do and is essential to ensuring Australian dairy remains competitive and well aligned for growth.

These meetings give us the opportunity to pursue important industry policy priorities and to reaffirm relationships with Ministers.

The main issues discussed included:

  • The progress on the draft Code of Practice;
  • The impact of technical barriers to trade (TBT) on the Australian dairy industry’s international trading opportunities;
  • Access to overseas workers to fill our workforce labour gaps;
  • Pathways to permanent residency for New Zealand born dairy farmers; and
  • Reiterating our support for the Effects Test currently before Federal Parliament. 

ADF continues to advocate for policies which will support the industry and we will continue to seek Government support to help drive innovation, which increases productivity and profitability.

We’re committed to ensuring the voice of the dairy is heard by highlighting the issues to Government and working with them on important reforms.

John McQueen

Interim ADF Chief Executive Officer


 

 

Select Tags