Read the DAIRY CODE here.

Commencing on 1 January 2020, the Federal Government has enacted a mandatory Dairy Code to regulate processors purchasing milk from dairy farmers.

Section 172 of the Competition and Consumer Act 2010 (the Act) provides that the Governor-General may make regulations prescribing matters to give effect to the Act’s intent of promoting competition and fair trading. Section 51AE of the Act provides that the regulations may prescribe an industry code under the Act.

The Dairy Code is designed to set enforceable minimum standards of conduct for business practices between dairy farmers and processors of milk (including a retailer where they are the first purchaser of milk).

The Dairy Code does not regulate the relationship between processors and retailers of milk.  This relationship is covered by the voluntary Food and Grocery, see the Grocery Code. Nor does the Code regulate the retail pricing arrangements for the sale of dairy products.

The key provisions of the Code:

  • require parties to deal with each other fairly and in good faith having due regard to the other party’s legitimate business interests
  • prohibit retrospective price step downs
  • prevent unilateral changes to agreements by processors except where there are exceptional circumstances, allowing the farmer to terminate the agreement
  • require that on 1 June each year processors publicly release standard form agreements covering the terms of milk supply and a price at which they will purchase milk for the term of the agreement
  • prohibit exclusive supply arrangements between farmers and processors in combination with either two-tier pricing (where the second tier is less) or volumetric limits by processors
  • prohibit processors from withholding loyalty payments to farmers if a farmer switches processors
  • introduces a Dispute Resolution process for matters arising in connection with a milk supply agreement.
NOTE:   The Transitional Provisions mean that most of the Dairy Code does not apply to any existing Milk Supply Agreement entered into before 1 January 2020.