Australian Dairy Industry Council’s voluntary code of conduct, which was introduced in July last year, already has support from the industry.

The voluntary code provides guidelines for good faith milk supply negotiations between processors and farmers.

Increased industry regulation through a mandatory code would not allow farmers and processors to pivot quickly in response to market forces, Australian Dairy Products Federation president Grant Crothers said.

“Participants along the whole supply chain are already managing cost, compliance and market volatility pressures, we do not need additional regulation,” he said.

“Domestically, energy costs continue to rise, we are paying compliance costs to implement food labelling and quality standards, and dairy exporters are up against high tariff levels and technical trade barriers in trading with our major economic partners.”

The perishable nature of milk and its seasonality means a flexible relationship between all members along the supply chain is needed, Mr Crothers said.

“These relationships have been built over time, without government intervention, through a mutual respect for delivering value across the whole dairy supply chain. There is nothing to indicate that a mandatory code would do anything but open a divide between dairy farmer and processor,” he said.

A mandatory code would add additional costs, such as cost recovery fees and penalties for non-compliance with commission administration requirements, he said.

“It will lead to businesses – both farm sector and processor alike – becoming more risk averse, therefore limiting investment and stifling innovation.”

However, the federation agrees the existing code of practice should be strengthened, taking the findings from the commission’s dairy inquiry into account.

Agriculture and Water Resources Minister David Littleproud weighed into the debate this week, saying the commission’s report identified “market failure”.

“I asked the dairy sector to come to a united position on a response to the report and a mandatory code of conduct for the dairy industry. This has not yet happened,” Mr Littleproud said.

Instead, he suggested a temporary 10 cent levy per litre of milk could give the industry time to come to a united position on structural reform.