Good news for farmers

Dec 02, 2016

ADF has long-advocated for change to tackle big business misusing its power and reducing competition in markets.

Yesterday, the last day of Parliament for 2016, Treasurer Scott Morrison announced the introduction of the s46 ‘effects test’ legislation 2016 into the Federal Parliament.

The introduction of an effects test is in line with competition policy around the world – Australia will be joining the clear majority of developed nations who already have established effects tests.

The provision, which will be included in section 46 of the Competition and Consumer Act 2010, will address the current unequal distribution of market power and encourage transparency to the benefit of producers, consumers and retailers.

The considerable amount of work, investment, planning and risk required to produce, transport, process, distribute and deliver a perishable product, fresh milk, on a daily basis is not reflected in the current discounted price of dairy by major retailers.

Supermarket discount tactics are directly affecting market supply and demand functions, effectively blocking processors from being able to provide necessary stronger prices to farmers to stimulate milk production.

We are looking forward to the ‘effects test’ legislation being passed early next year.

Another major development that occurred in Parliament yesterday was the resolution of the backpacker tax.

ADF have consistently said that we believe it is reasonable for backpackers to pay some tax, but 32.5 per cent was too high.

Led by National Farmers Federation (NFF), ADF and our state member organisations have lobbied for a decision over the past 18 months and we can honestly say it is a huge relief.

The impact of months of indecision have been felt across the dairy sector. What we really need now is to get the message out there that backpackers are welcome on our farms and they will receive a fair tax rate for their work.

We thank the NFF and our members for their hard work to get this across the line. We know that this has not been easy and the process was long, however, we adapted and united as an agricultural industry to secure a deal which benefits farmers, backpackers, tourism and regional communities.

It is important to note that although we are small team at ADF, we remain committed to driving strong policy to transform the way our industry operates for the better.

David Basham

ADF President

 

It is a win win situation

Oct 07, 2016

Collaboration is the key to get us where we need to be. Our industry relies on all the elements to operate effectively. Farmers need processors and vice versa – so the solutions require all of us to come together to ensure a positive future. It is a win win situation.

It is one thing to constantly pick apart the industry to highlight the problems, it is another to actually work together to bring about real solutions to ensure this never happens again.

Last week the Australian Dairy Farmers held an important meeting with state dairy organisation presidents and processors to address a range of contractual issues which farmer organisations have been trying to address and rectify for 15 years.

During the meeting we discussed a range of topics including the difficult circumstances of farm gate price reductions, the introduction of new legislation on unfair contracts which comes into effect in November and the outcomes from the August Symposium held by Deputy Prime Minister, Barnaby Joyce.

This meeting provided an ideal opportunity for the dairy industry to unite and develop a voluntary industry wide code of practice on contractual arrangements with farmers.

The code will include:

  - greater transparency in contracts and supply agreements

  - ensuring a pricing formula or a price setting mechanism is clearly defined within a contract

  - ensuring pricing adjustments to farmers throughout a contract are clearly defined and that there will be no retrospectivity

  - while acknowledging step ups do occur and step downs have occurred in severe circumstances, a principle should be incorporated into contracts which clearly outlines that as much notice as possible is necessary if a step-down has to occur

  - ensuring farmers should receive all payments that accrue over the term of a contract or supply agreement – the final payments of a contract should not be contingent on the farmer being a supplier when, for example, the June payment is made in mid-July

  - ensure that where a processor has a contracted volume limit or a different price for volume above a particular level then exclusivity of supply to that processor must not occur

  - ensuring there is a clearly defined mechanism for giving notice of termination of a contract

  - ensuring there is a clearly defined mechanism of how contract terms and conditions can be modified and the farmer having the right to a negotiated variation, not simply a request from the processor.

Incorporating these principles into a code of conduct will give farmers, or their representative, the opportunity to have a contract or supply agreement which is truly negotiated and not simply an agreement which is a “take it or leave” it approach to farmer’s milk supply arrangements.

The ADF together with the state member organisations have worked hard since the crisis unfolded to ensure future milk supply agreements are balanced, fair and transparent. It has been a long process to get to this stage and a major breakthrough for the entire industry.

State dairy farmer organisations have been working to achieve these improvements for many years. By having a national organisation which is well resourced the States can achieve things together that would be impossible to achieve on their own.

We plan on finalising the draft code as soon as possible, ahead of the new legislation and before the Australian Competition and Consumer Commission inquiry into the dairy industry is finalised next year.

Now more than ever, the dairy industry needs to remain focused and united in its goals to achieve a shared vision of improving the profitability and sustainability of dairy farmers and the entire dairy industry in Australia.

David Basham

Acting ADF President

 

 



Making Sense of the ACCC Inquiry

Sep 02, 2016

The symposium was a great opportunity to facilitate a discussion around how better to manage risk along the dairy supply chain, including managing the effects of world dairy prices.

A number of topics were covered including the outlook for the Australian dairy industry and options for improving milk price transparency, strengthening bargaining and restoring industry confidence.

One important outcome of the symposium was the announcement by Deputy Prime Minister and Minister for Agriculture and Water Resources Barnaby Joyce regarding the upcoming Australian Competition and Consumer Commission (ACCC) inquiry into the national dairy industry.

The inquiry under Part VIIA of the Competition and Consumer Act 2010, has provided the Commission with additional powers to obtain information from the entire value chain. What this means is the ACCC has been given extra investigatory control to undertake the inquiry, with the authority to dig deeper than it would have been able to in a market study.

Already investigating specific issues related to the dairy crisis, the ACCC will have the power to determine whether suppliers engaged in misleading, deceptive or unconscionable conduct by slashing prices leaving some dairy farmers with massive debts.

The inquiry will investigate sharing risk along the supply chain, supply agreements and contracts, competition, bargaining and trading practices in the industry and the effect of world retail prices on profitability.

Dairy farmers deserve fair returns at the farm gate, as well as transparency in milk price arrangements and supply contracts. ADF believes that the ACCC inquiry is a thorough and fair way to uncover inefficiencies and inequities that farmers face; and helps to identify a way forward.

From what we have been told the ACCC will release an issues paper and engage with stakeholders through public and private hearings starting in November. We encourage everyone in the dairy industry to contribute to the inquiry to ensure the ACCC gets the information it needs. There will also be confidentiality arrangements in place to protect commercial interests.

After the stakeholder engagement meetings, we will be encouraged to provide written submissions to the ACCC before they deliver a final report to government in the second half of 2017.

This inquiry will shed some light on the bigger picture by analysing the broader dairy industry to identify structural and behavioural issues that affect the industry’s performance. By engaging with stakeholders, the ACCC will have a better chance of identifying and understanding the key issues in the industry and we look forward to being a part of the solution.

Further information about the inquiry, including about how you can be involved, will be made available following the receipt of a Terms of Reference from the Treasurer.

The government will continue to work with dairy farmers and processors to strengthen the industry, including our election commitment of up to $2 million to establish a commodity milk price index, while the ACCC’s findings from this inquiry will be a vital source of information when looking at options for the index.

Further information on the ACCC’s inquiry, including its terms of reference, will be made available at www.accc.gov.au/agriculture shortly.

David Basham

Acting ADF President

 

Important Outcomes From The Symposium

Aug 26, 2016

The symposium was held yesterday in Melbourne and both the Australian Dairy Farmers CEO John McQueen and myself attended.

Firstly, I would like to thank the Deputy Prime Minister and Minister for Agriculture and Water Resources, Barnaby Joyce for organising and chairing the symposium as well as other government officials who were in attendance.

I would also like to thank our state members - QDO, NSWFarmers, SADA, TFGA, UDV, WAFarmers and industry partners for their work prior to the symposium which gave us the opportunity to narrow our message down to focus on four important key areas.

Lastly I would like to thank the processors and retailers who were at the symposium to hear from concerned farmers, owners of small businesses and people who produce a quality product that many people in Australia rely on.

For me, the symposium provided an opportunity for the dairy industry to have an open discussion with key stakeholders to address the challenges facing the Australian dairy industry.

Our main points include no $1 milk, no late season drop in milk price, fairer contracts, commodity milk price index with an educational program and critical need for farmers and manufacturers to find the solutions rather than depend on government.

These points illustrate the need by industry to ease the pressure placed on farmers by having to accept an unfair share of the risk and possible financial fall-out. We believe in greater transparency and look forward to working with the government on establishing the commodity price index tool which will help tip the balance back to the farmer.

Since 2011, we have said that the $1 milk devalues the product by taking substantial value out of the supply chain and has to stop if we are going to maintain a sustainable industry. There needs to be greater fairness in contracts and we have committed to working with processors to ensure all contracts comply with the unfair Contracts Legislation that begins on November 12, 2016. Also, the situation in Western Australia needs to be addressed immediately as we don’t believe it’s right that nine farmers may not have anywhere to take their milk.

In response, Minister Joyce urges the need for industry to work together to better balance risk along the dairy supply chain, especially when it comes to managing the effects of lower world prices. He wants to see improved Farmgate returns for dairy farmers, an openness in milk price arrangements and fair and transparent milk supply contracts; plus, the development of a commodity milk price index which he committed up to $2 million in government funding to establish. Also, for industry to find a compromise to the $1 milk situation otherwise he will need to take action and push for an immediate solution.

However, he also acknowledged that these things will only happen if there is buy-in from industry and a willingness from key stakeholders to hear each other out and develop solutions together.

A surprise announcement made by Minister Joyce at the conclusion of the symposium advised that Treasurer Scott Morrison has request the ACCC to undertake an inquiry under Part VIIA of the Competition and Consumer Act 2010 providing the Commission with powers to obtain information from the entire value chain. What this means is the ACCC has been given extra investigatory powers to undertake the inquiry, with the authority to dig deeper than it would have been able to in a market study. The inquiry, which will begin in November, will investigate sharing risk along the supply chain, supply agreements and contracts, competition, bargaining and trading practices in the industry and the effect of world retail prices on profitability.

Yesterday’s dairy symposium delivered on Minister Joyce’s election promise to get key stakeholders together to address challenges facing the Australian dairy industry and discuss ways to improve the industry’s prospects going forward.

One of the ways the Coalition Government is delivering assistance to dairy farmers is with a $579 million support package to help manage through the current low price environment. The funding been allocated to four main areas including access to Dairy Recovery Concessional Loans, Farm Household Allowance (FHA), the Rural Financial Counselling Service and an additional $900,000 for Dairy Australia to roll out ‘Tactics for Tight Times’ one-to-one farm business advice.

If you have any questions relating to whether you are eligible for the concessional loans, the government has released a dairy question and answer section on their website (click here). However, we suggest that you also contact a financial counsellor or the relevant state delivery agency as they will be able to help you with information and the application process.

 

David Basham

Acting ADF President


 

 

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