The Australian Competition & Consumer Commission’s (ACCC) Interim Report into the dairy industry, released last November, powerfully detailed how the dairy market has failed by highlighting many of the problems in the industry, however it failed to offer sufficient solutions to solve these problems.
As the market currently stands, Queensland dairy farmers lack suitable power when it comes to negotiating prices and terms dictated to them by processors in response to retailer pressures. In turn, processors too have had their returns slashed as a result of $1/litre milk and the market power imbalance.
In its Interim Report, the ACCC correctly identified the solution was not as simple as merely increasing retail prices because they won’t be passed on to farmers and increasing profits will only benefit retailers and/or processors. However the report failed to offer any other remedy.
To date, voluntary codes and other solutions have failed to rectify this market failure. These codes need to be made mandatory or strengthened at the very minimum. Introducing a mandatory code of conduct for retailers with clear anti-competitive and farm gate pricing provisions will go a long way in addressing the current market failure.
The final report must include recommendations so dairy farmers can be confident the flawed market can and will be fixed. Anything less guarantees the continuation of farm failures and emboldens the misguided campaign for industry re-regulation.
QDO is calling on the ACCC to use its powers and mandate to strengthen the final report by committing to a code with teeth for the whole supply chain. The government too has a responsibility to ensure the ACCC delivers upon the political and practical issues within the dairy industry that led to this investigation in the first place.