Milk contract template to be released in April

Milk contract template to be released in April

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Dairy farmers will be able to compare contracts offered by processors to a template due for release by Australian Dairy Farmers in April.

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PROJECTS UNDERWAY: ADF strategy and policy director, Craig Hough, has three major projects under development.

PROJECTS UNDERWAY: ADF strategy and policy director, Craig Hough, has three major projects under development.

Dairy farmers will be able to compare contracts offered by processors with a template due for release by Australian Dairy Farmers in April.

The template is one of three projects ADF has been working on, funded by a chunk of the $22 million windfall it claimed for farmers during the federal election campaign.

But, until now, precisely how most of the money would be spent had largely remained something of a mystery.

ADF strategy and policy director, Craig Hough, said the organisation was currently working on three projects valued at just over $1 million: the standard form template for milk supply contracts, an online trading platform for raw milk and a blockchain model.

Contract template

Dairy's mandatory code stipulates that processors must offer farmers a standard milk supply agreement and any other contracts between the two must meet many technical requirements.

"We're creating a template that translates the clauses in the mandatory code into something that's a lot more practical and usable," Mr Hough said.

"The big companies have the capability to sort of develop these things but this is an easy tool for farmers to compare their offers and even for for processors to use as a basis for developing their template."

Processors were currently being consulted on the template.

"The changes they could make were probably more around the look and feel because it is almost like a translation of the code in a way, so the capacity to change content is probably limited," Mr Hough said.

Coronavirus restrictions have prevented ADF from conducting a roadshow to present the template to farmers but there were plans to offer training, and the template itself, online.

Mr Hough said that as, part of the $22 million election pledge, Dairy Australia had been funded to the tune of $500,000 to provide contract, financial and legal advice for farmers during contract negotiations.

Real time payments

ADF hopes its planned blockchain project will be the first step towards farmers being paid in real time for their milk.

Currently, most farmers are paid for a month's milk at a time, a fortnight after the end of each month, meaning that terms vary from 14 to 45 days.

"What we're going to set up is more of a strategy followed by a small trial as well," Mr Hough said.

"We would like to see that when the tanker leaves leaves the farm, the payment comes straight away.

"And then, eventually, once we get the technology, we can put sensors into the vats that actually test the milk quality in real time so you can get rid of the cost associated with milk testing from the supply chain."

Blockchain technology would also be useful to assure buyers of provenance.

"Norco, for example, had problems with their product being counterfeited in China and wanted to prove the provenance and traceability back of their products," Mr Hough said.

ADF was planning an animated video to help explain blockchain's benefits to farmers and a standards guideline that would be useful to potential technology suppliers.

Mr Hough didn't want to speculate on how soon farmers might see real-time payments.

"The trial is really important because it's new and most businesses want to see the return on investment," he said.

"So you need a trial to kind of kick that off that can then be benchmarked against other dairy other regions to see what those productivity and improvements are."

Trading platform

Development of one of the biggest funding commitments made to dairy, the Australian Milk Price Initiative (AMPI) milk trading platform, was also underway.

Asked to describe the initiative, AMPI organiser Scott Briggs has previously told Stock & Land it would allow farmers to sell on the milk swap market.

"Basically, they will be able to sell milk to third parties, not just the processor that normally picks up their milk," Mr Briggs said.

"What we're suggesting is that we actually create an open market for the trade of milk by farmers to processes.

"That gives the farmer a hell of a lot more choice when it comes to who they're selling to, when they're selling, what price the farmer is receiving and the contract terms they're getting."

READ MORE: Milk price initiative explored

Mr Hough said work on the initiative was progressing quickly.

"By about mid-April, we're expecting to have detail around governance, initial market design and development," he said.

"We'll get into consultations and the detailed market design work over the six to nine months after that.

"The final step is to get the regulators to sign off before we can then go into a launch phase."

Timeframes were still a little uncertain but developers hope AMPI could be handling its first trades in the 2021/22 financial year.

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