ACCC to investigate dairy market crisis

Murray Goulburn's recent controversial decision to slash farm-gate milk prices that was followed by other milk processors has now attracted formal recognition by Australian Competition and Consumer Commission.

Today, ACCC Chairman Rod Sims said his group had been following the public reports in relation to the recently announced price cuts to dairy farmers by Murray Goulburn and Fonterra.

Mr Sims said the ACCC had been making preliminary enquiries and taking information from key stakeholders and had now “escalated the matters for investigation” which will include more detailed information gathering.

He said the issue was linked to contractual arrangements but the ACCC was interested in the timing and notice of the cuts and the period in which farmers had been given to consider their options.

All of this was against the backdrop of supply arrangements that placed a lot of risk on farmers, he said.

“The ACCC will consider whether the changes have involved misleading conduct or whether there are elements of unconscionable conduct,” he said.

“These will not be straight forward enquiries or assessments and it is not clear that there will be matters we can take forward.

“This said, they clearly warrant consideration and given the strong public interest we consider it appropriate to confirm our investigation.

“Noting the pressures placed on farmers, the ACCC will be progressing this matter in a timely manner but we will need some time to get the facts and consider the issues in the context of the provisions of our law.”

The ACCC did not provide a deadline for the release of its findings of the milk price downgrades or how that could progress to charges under the Competition Act.

The ACCC’s agricultural powers have been boosted by the recent addition of an Agricultural Enforcement and Engagement Unit and dedicated Commissioner to investigate market power abuse like in the red meat supply chain where a market study is already underway and due to report in November.

Ms Joliffee – a dairy farmer from Wagga Wagga in NSW, said he group now looked forward to working with the ACCC and had already been in contact and had discussions with them about the unfolding crisis.

“There is an absolute need for a viable and competitive fair market for our farmers as we move forward and this is why we have regulators and they need to do their job,” she said.

“At the end of the day, if the processors are found to have acted unconscionably then they must take responsibility for that.”

Ms Joliffee said dairy farmers operated in a global environment and understood they were exposed to seasonal, market volatility.

But she said they were already preparing themselves for new season prices and some softening of returns on the back of what had already been an extremely challenging seasonal climatically with a dry conditions and high water prices for those in northern Victoria.

However, news of the farm gate price cuts over the last two weeks had angered, frustrated and come as a shock to farmers.

“The difficulty for us at ADF is that there are no easy solutions for the challenges that the industry is currently facing,” she said.

“From day one our priority has been to support farmers and particularly to do what we can to meet their immediate needs and provide support.

“We have worked closely and collaboratively with Dairy Australia and State organisations like the United Dairyfarmers of Victoria to ensure we have a coordinated response to provide measures that can help farmers make informed decisions to help them cope better with the current situation.”

Ms Joliffee said the ACCC investigation was more of a medium to longer term solution which was to be applauded, to help mitigate issues presented to farmers.

“It will ensure processors are held accountable if that’s what’s found - but the priority now is to help provide support measures in the here and now for farmers in need,” she said.

“It’s a really challenging situation and there are no easy solutions and as we investigate avenues for solutions they need to be tangible and realistic.

“This is an opportunity for the dairy industry to find a long term solution that provides stability and sustainability as a united industry, into the future.”

The issue as sparked several resignations from the board of farmer co-op Murray Goulburn - and CEO Gary Helou - which accounts for about 40pc of the milk processed in Australia.

The Australian Securities Investments Commission has also made moves to investigate the co-operative’s recent activities and market disclosure statements.

Australian Greens agriculture spokesperson Rachel Siewert said the crisis facing dairy farmers deserved “serious examination”.

The WA Senator said her party was concerned about the impacts of price changes on dairy farmers across Australia and a sustainable agricultural sector was fundamental to food security, environmental sustainability and health regional communities.

“The Greens want to see a sustainable dairy sector that’s fair to farmers, benefits the environment, and helps contribute to food security,” she said.

“I am deeply concerned by the impact of price changes on dairy farmers.

“I particularly share concerns around the timing of price changes and how these were communicated, when farmers may have budgeted based on earlier prices.

“These issues deserve serious examination.

“The Greens will continue to listen to farmers’ concerns and work to make sure there’s a sustainable agriculture sector.”