After consulting with state member organisations, farmers and processors, the ADIC has developed the voluntary Code, for standard form contractual arrangements, to help ensure greater transparency and fairness in milk supply and pricing.

It is anticipated most of the milk produced in Australia will be covered by the Code.

ADIC Interim Chair, Terry Richardson said it is important that contracts are fair, simple, realistic and easily understood by both parties.

“The Code will address a range of contractual issues which farmer organisations have been trying to address and rectify for a significant amount of time.

“Both farmers and processors sat down to work together cooperatively and in good faith to establish this Code,” Richardson said.

ADIC Deputy Chair, Grant Crothers believes the Code will improve contracting arrangements between farmers and processors and offer greater transparency through earlier and clearer pricing signals for farmers, which means less risk for farmers and more balance along the supply chain.

The Code will include the following provisions:

• there will be no price changes made retrospectively
• ensure all farmers receive payment entitlement that accrued over the term of a contract or supply agreement (including any ‘loyalty payments’); and 
• If a farmer produces more milk than required or contracted to their primary processor and the processor does not want to purchase the additional milk, then the contract between the farmer and processor must allow the dairy farmer to supply the additional milk to other processors. 

The Code was initially drafted last year and aims to address issues with dairy contracts in a way that works for both farmers and processors.

Although the Code is voluntary, it is designed to set out minimum good practice in terms of dairy contracts and will help ensure that supply agreements and contracts comply with the Unfair Contracts law that came into effect on 12 November 2016.