It is a pity that it has come to this

In Australia, we have a very unhealthy retail situation where the retail food industry is concentrated into a small number of big operators, with Coles and Woolworths operating a virtual duopoly.
Despite any propaganda to the contrary, these corporate giants are driven by purely by profits and market share. The supermarkets know that, through their market power, they can do what they want – and they do. It has been a common theme of farming organisations for many years that this inevitably results in the supermarkets screwing farmers.

Unfortunately, a reasonable return for Australian farmers is not on anyone’s radar, least of all the retail sector. Farmers are the bunnies at the bottom of the supply chain. They take what they are given in terms of price and are told to be grateful.

Through our peak organisation, the National Farmers’ Federation (NFF), we have been working for some time to gain support for a voluntary code of conduct aimed at delivering a fair deal for farmers. However, unfortunately, the retail giants don’t make any concessions voluntarily. NFF president Jock Laurie said earlier this week that, despite the fact negotiations with food processors and retailers have been conducted in good faith, NFF is not confident of reaching an agreement suitable to farmers.

A mandatory code was probably always inevitable, combined with changes to competition and consumer law. Accordingly, this week the NFF has asked the Australian government to intervene to examine the issues within the sector and establish compulsory sanctions or limitations on how supermarkets conduct their business with both suppliers and consumers. NFF has committed to working with the government, parliament, the broader industry and the regulator in developing the detail of such a code. At the same time, NFF will be seeking changes to the relevant legislation (Competition and Consumer Act) to ensure a more balanced supply chain approach in the longer term.

Mr Laurie summarised it in this way:

“…any mandatory code could include measures to safeguard against a misuse of power between all the major retailers and suppliers; address concerns around contract negotiations between farmers and retailers; and provide an avenue for dispute resolution, including a confidential complaint process and an independent dispute resolution mechanism through an ombudsman or commissioner.

“And it must be done in a way that does not add unnecessary costs into the agricultural supply chain. Farmers are price takers, so it is essential that any additional costs are not passed on to farmers.”

It goes without saying that, being price takers, farmers are both at the top and the bottom of the food chain. There is no domestic food retail sector without them – but they have no power within the market to demand fair prices.

The high-level principles underpinning this approach would need to:

• Be legislated in the Competition and Consumer Act or similar;
• Guard against the misuse or abuse of market power by retailers and ensure greater transparency in the food supply chain;
• Apply to retailer and supplier relationships – ideally focused on the areas of concern but this is to be specifically defined;
• Not add unnecessary cost across the supply chain;
• Ensure abuses of market power and unconscionable conduct are able to be identified and where identified, appropriate sanctions or penalties apply;
• Provide transparency and ensure full disclosure of all critical information;
• Provide a confidential and supportive complaints and dispute resolution process;
• Be overseen by an industry ombudsman with sufficient powers to enable meaningful oversight; and
• Carry penalties of sufficient magnitude to deter abuses of market power and unconscionable treatment of suppliers.

It is a pity that it has come to this. There should be an ethos of trust and mutual support between farmers and those who process and retail their produce, but there is not. That’s not a good outcome for anyone.