Final report into dairy inquiry released

The Australian Competition and Consumer Commission (ACCC) recently released its final dairy inquiry report in which it analysed the performance of the dairy industry and the structural and behavioural features which contribute to this performance.

The dominant picture emerging from the report is one of significant imbalances in bargaining power at each level of the dairy supply chain. This begins with the relationships between retailers and dairy processors, and progresses down to the relationship between processors and farmers.

The ACCC’s key recommendation is that a mandatory code of conduct be introduced to improve contractual arrangements between dairy processors and farmers.

“We explored ways to address these concerns and found the existing provisions of the Competition and Consumer Act, the dairy industry’s voluntary code of conduct, or a prescribed voluntary code would be inadequate,” the Commission said.

“We also analysed the impact on the dairy industry of $1 per litre milk, first introduced by a major retailer in 2011.

“In examining the impact of this on farmgate milk prices, we found almost all contracts for the supply of private label milk allows processors to pass through movements in farmgate prices to supermarkets.

“Our view is that farmers are unlikely to receive higher farmgate prices unless they have improved bargaining power in their negotiations with processors.”

Further information, including the final report and a farmers’ guide to the final report, can be found on the ACCC website.