There have been some recent changes to the industry code for dairy farmers that may affect your business. The amendments to the code are clearly intended to encourage better record-keeping in the dairy industry, and generate transparency for both parties about the terms of supply.
Supply agreements for sale of milk
The updated code requires that milk processors only buy milk where a supply agreement is in place. The supply agreement does not have to be formally executed in writing, but if a verbal agreement is made, the processor is required to:
- produce a written record of the terms of the verbal agreement;
- provide a copy to the farmer; and
- attempt to obtain a written acknowledgement from the farmer that the record is complete and accurate.
The obligations apply to any agreement to supply milk that was created, changed, or renewed after 1 January 2020. From 1 January 2021, those obligations apply to all milk supply agreements regardless of when they were created, including those that existed prior to the start of 2020.
What do we need to do?
Dairy processors should be conducting a review of all supply arrangements to ensure that they are compliant with the updated code. At a minimum, processors should be issuing written records of the agreed terms of purchase, though more detailed written terms would be best practice for ongoing contracts.
Farmers are now entitled to insist that terms of any milk supply agreement be written down, and from a contract management perspective we would recommend that they do so. Key factors to be taken into account may include volume, price and contract duration, but any other special arrangements between the farmer and the supplier should also be taken into account.
If you have any questions about dairy supply contracts, or would like to better understand your revised obligations under the regulations, please contact the team at Hazelbrook Legal on (02) 6225 7060 or email email@example.com.
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