Milk inquiry leaves sour taste

A south-west Victorian dairy farmer has described the Senate dairy report as “remarkably disappointing.”

Crossley’s Karinjeet Singh-Mahil, who was among producers who were called to give evidence to the inquiry, was scathing about the report.

The Senate’s Economics References Committee released its report, ‘Australia’s dairy industry: rebuilding trust and a fair market for farmers’ late yesterday.

It was set up after farm gate milk price cuts, in 20015-16.

“Having waited for so long and having cost taxpayers so much money, it was a remarkably disappointing result,” Ms Singh-Mahil said.

“It was very general, uninformed and had a factually incorrect basis for some of of the Senator’s decisions.”

She said it appeared Senators still believed Fonterra could not reduce their price, until Murray-Goulburn (MG) did.

“They have that written there and it’s a real shame.”

Ms Singh-Mahil said the previous year Fonterra had stayed 20 cents behind MG, right until the end of the season. 

She said she was hit particularly hard by Fonterra’s actions.

“Why is it they believe the spin from the corporates but still don’t understand our industry?” she said.

Among the committe’s recommendations was a focus on the new voluntary code of conduct.

“Any review of the code of conduct for contractual relationships should be undertaken by an independent party that can objectively assess whether the code is working as intended and consider if a mandatory code would be more appropriate,” the report said.

The Senators also suggested the Australian Competition and Consumer Commission (ACCC) look at some of the issues, which were raised by farmers.

Senators suggested an “education campaign” to promote awareness about the industry, so consumers could make informed choices.

DISAPPOINTING REPORT: Adam Jenkins, United Dairyfarmers Victoria (UDV) president was among farmers disappointed with the Senate dairy inquiry report.

DISAPPOINTING REPORT: Adam Jenkins, United Dairyfarmers Victoria (UDV) president was among farmers disappointed with the Senate dairy inquiry report.

They called for ACCC to “specially address the issue of unfair contract terms within the dairy industry and provide guidance as to whether milk supply contracts, in principle, fall under the scope of unfair contract term laws.”

The Senators also cast doubt on a proposed milk dairy price index, which would allow farmers to track world price movements.

Gippsland farmer Marian Macdonald was more supportive of the Senate report.

“I think the Senate committee has done a great job of identifying the problem but what we are missing there are some meaningful solutions,” Ms Macdonald said.

She said the voluntary code and proposed milk price index “don’t seem to satisfy the committee.”

“I think the code needs to be mandated, but that’s not within the power of the people who drafted it, so I am not having a go Australian Dairy Farmers (ADF).”

Ms Macdonald said there needed to be penalties for breaching the code,  which requires 30 days' notice before cutting prices.

“One of the things they could have done is look at what other countries have done to safeguard their dairy farmers in similar situations,” Ms Macdonald said.

She said risk management tools were employed in New Zealand, something the Australian industry had not adopted or openly considered.

“It would have been nice to have investigated those options.”

Ms Macdonald also questioned why the Senators had asked processors to be conservative about opening milk prices, to reduce the risk of stepdowns.

“Why should farmers bear all the risk, why is that an expectation? We need to start challenging conventional thinking.”

But she said she felt the inquiry was very helpful but still “a mixed bag”.

“It has peeled back all the layers and made very public and very clear what problems are. It has made it more difficult for status quo to be reinforced.”

“It also doesn’t say there is light at the end of the tunnel it also doesn’t say here is light at the end of the tunnel, this is what could be done, to stop this happening again.

“It basically refers the big issues to the ACCC and I am not sure the ACCC has the power to fix them.”

The Senators recommended the ACCC evaluate the extent to which the code of conduct would reduce power imbalances between farmers and processors, and recommend improvements to the code may better achieve this outcome.

“Any outcomes from the ACCC inquiry should be incorporated in the proposed review of the code after its first year of operation,” the senators found.

The ACCC should also “specially address the issue of unfair contract terms within the dairy industry and provide guidance as to whether milk supply contracts, in principle, fall under the scope of unfair contract term laws.”

Ms Macdonald thanked consumers for creating the political heat to move the government to act.

United Dairyfarmers of Victoria (UDV) president Adam Jenkins said he was disappointed at the comments about the code of conduct and the dairy index.

“It’s good to see it finally come out –  but I think the industry or the ACCC has already embarked on a lot of the things they have recommended,” Mr Jenkins said.

“There is going to be some duplication with the ACCC inquiry, which has more powers.

“But if it is supporting that process, on behalf of farmers, that’s good.”

He said the UDV’s view was that “you have to start somewhere” on issues like the index.

“It may not be perfect, but as things develop over time and as people get behind them, we can make it work,” Mr Jenkins said.

“Too many people try and stop it right at the start - you are better to have something than nothing.”

He was also sceptical of calls for an independent review of the Dairy Australia and Dairy Services levy.

“They already do a review and a have an independent panel.”

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