Milk Supply Agreements

Milk supply agreements and considerations for dairy farmers

This section provides a list of milk processors supplied by NSW dairy farmers and links to their Milk Supply Agreements containing their minimum milk price. It also provides information about the Dairy Industry Code of Conduct and considerations for dairy farmers who are evaluating milk supply agreements.

The Dairy Industry Code of Conduct (the Mandatory Code or the Code) is an industry code regulating the conduct of farmers and milk processors in their dealings with one another. The Code came into effect on 1 January 2020 and aims to improve the clarity and transparency of trading arrangements between dairy farmers and processors.

The Code has implications for new Milk Supply Agreements (MSA) from July 1, 2020. By 1 January 2021 all contracts must be compliant with the Code. The ACCC is responsible for enforcement of the code.

Some sections of the Code do not apply to the farmer or a processor if the processor is a small business entity (annual aggregated turnover of less than $10 million in the previous financial year).

Please visit the ACCC website to see full details of the Code including ‘What the dairy code means for farmers’.

Dairy Australia has developed useful checklists for farmers to help understand the Code and Milk Supply Agreements, including Talking points for contract discussions. They are all available on the Dairy Australia website.

It is a requirement of the Code that Milk Supply Agreements must include:

  • a minimum price (the lowest price payable under the agreement) and be published on the processor’s website by 2pm on the 1st June
  • a cooling-off period of at least 14 days
  • a procedure for handling complaints

Other important aspects of the Code:

  • Retrospective step-downs (where the processor reduces the minimum price with respect to milk already supplied) are prohibited in all circumstances
  • Prospective step-downs (where the processor reduces the minimum price for milk yet to be supplied) are permitted only under a narrow range of exceptional and temporary circumstances.
  • Exclusive supply agreements are not prohibited by the code. However, processors are required to offer a standard form non-exclusive option when they publish their contracts on 1 June.

When comparing processor prices, it is important to take the following into consideration:

  • Your farm has its own volume supply, supply curve, quality and components which will affect the actual milk price received.
  • You must read the Milk Supply Agreement closely to understand other payments such as loyalty and sign on payments that aren’t factored into the milk price announcement.
  • You must also familiarise yourself with the processor’s Statement of Circumstances (a statement setting out the circumstances in which the processor would enter into the standard form MSA). If seeking a higher milk price, ensure any benefits are not outweighed by the cost of producing that milk.
  • Speak directly with any processor you are considering supplying and obtain an Income Estimate. This is the best way to understand the price that will apply to you. Do your due diligence, it is your business.
  • Milk Supply Agreements will have an impact on your business – you should discuss your circumstances and options with your advisor.
  • Under the Code, farmers and processors need to keep a written record of milk supply agreement, any variations or terminations of the agreement, as well as other specified records, for at least six years.

The table below lists processors and their relevant websites to assist you in understanding what each processor is offering. In most instances this requires you to read the relevant Milk Supply Agreement.

Milk processors and retailers supplied by NSW dairy farmers and relevant websites

Processor

Website link

Australian Consolidated Milk (ACM)

https://www.australianconsolidatedmilk.com.au/suppliers

Bega and Tatura Milk

https://www.begacheese.com.au/farm-services/milk-supply-agreements/

Coles NSW

https://www.supplierportal.coles.com.au/csp/wps/portal/web/DairyFarmers

Dairy Farmers Milk Cooperative

https://dfmc.org.au/raw-milk-supply/#new-south-wales

Fonterra

https://www.aufarmsource.com.au/pricing

Freedom Foods

https://ffgl.com.au/do-business-with-us/#Standard-Form-Milk-Supply-Agreements

Kyvalley Dairy Group

https://www.kyvalleydairy.com.au/suppliers

Lactalis

https://lactalis.com.au/milk-supply-agreements/

Lion Dairy and Drinks

https://dairysuppliers.lionco.com/dairycodecontracts/

Norco

https://www.norco.com.au/supply-milk-agreements.php

Real Dairy Australia

http://www.realdairy.com.au/warehouse/2020/06/milk-supply-agreement_20-21-version1-2.pdf

Richmond Dairies

https://richmonddairies.com.au/dairy-code.asp

Riverina Fresh

https://www.riverinafresh.com.au/farmers/

Saputo - NSW-Sydney Milk Region

https://www.saputodairyaustralia.com.au/en/milk-supply-agreements/nsw-sydney-milk-region

Saputo - Southern Milk Region

https://www.saputodairyaustralia.com.au/en/milk-supply-agreements/southern-milk-region

Woolworths

https://partnerhub.woolworthsgroup.com.au/s/article/Documents-published-under-the-Competition-and-Consumer-Industry-Codes-Dairy-Regulations-2019

The information sourced for this table has been compiled from publicly accessible websites (as required by the Code). Any omissions are unintentional and can be updated.

More information

For more information please contact Sheena Carter, Development Officer Dairy Farm Business Management: