Code changes send shockwaves through ACM suppliers

The processor last week sent emails to suppliers who had taken a 1-cent-a-litre sign-on incentive upfront in exchange for signing three-year contracts.

South-west Victorian farmer, Emma*, said the email from ACM on Tuesday had left her confused.

"At first, I thought they were offering a bigger advance on milk cheques," she said.

Instead, the email was explaining that the sign-on incentive her family had accepted last year at the beginning of their contract did not comply with the mandatory dairy code of conduct.

"In the circumstances, ACM proposes to convert the Sign-On Incentive, which is part of your existing Milk Supply Agreement (MSA) into a CAPL [Committed Advance Payment Loan] which is an interest free loan ... there will be no negative effect on your cash flow, as compared with the arrangement you have been used to until now," the email signed by ACM managing director Michael Auld, said.

A distressed Emma* told Stock & Land she was shocked to be saddled with a new debt.

"It just feels like a clawback," she said on Thursday.

But in a second email sent on Sunday afternoon, ACM moved to clarify the change.

"It was then the supplier's choice as to whether they wanted to receive the 1 cent pert litre on a monthly basis or have the Sign-on Advanced to them in their August payment," the new email said.

"The Sign-On Advance was interest free and was intended to assist suppliers with their cash flow by getting more cash up front."

In other words, Emma and her family had been unknowingly receiving a lower milk price than other suppliers in return for the upfront payment.

But the arrangement would fall foul of the new mandatory dairy code of conduct.

"Under the Code, optional incentives or payments cannot be included in the minimum farmgate milk price," the second ACM email said.

It meant ACM needed to find a new way to recoup the money paid upfront, so the processor created the standalone interest-free loan.

Emma owes ACM tens of thousands of dollars and can no longer access as much money in milk cheque advances.

"I was planning to get an advance to pay bills like fertiliser but because I now have effectively a new loan, we are really close to ACM's credit ceiling," she said.

"Cashflow is always really tough at this time of year because you need to pay autumn fertiliser bills but the whole herd's still not in."

ACM general manager commercial Peter Jones said the company was "supportive of the dairy code but needed to make some changes to comply and this has caused some confusion with a small percentage of our supplier base."

"The facts are: from a cash-flow perspective and obligation perspective nothing has changed.

"We still want suppliers to be able to access cash earlier and on an interest free basis but now it will be in the form of a loan and not linked to the supply agreement."

Mr Jones said ACM took its obligations to suppliers seriously.

"The confusion is unfortunate because ACM has always done the right thing by its suppliers and will continue to do so, code or no code," he said.

Established in 2008, ACM manages 500 million litres of milk to produce high-quality conventional, organic and A2 dairy ingredients and foods.

*Emma's identity has been protected.

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