The Australian Competition and Consumer Commission (ACCC) has demanded concessions from the country’s largest chicken meat processors to make some of its contracts with farmers fairer.
Key points:
- The ACCC found that unfair contracts could cause “significant financial damage to producers”
- Chicken processors have agreed to make some changes
- Labor has expressed its support for the proposed reforms that would penalize companies for unfair contracts
The $ 3 billion industry is dominated by two large companies, with Ingham’s and Baiada Poultry supplying around 70 per cent of chicken meat to Australia.
The ACCC said the companies had too much power and that the contracts could cause “significant financial damage to producers”.
In 2020, the agency was asked to conduct an investigation into the imbalances in bargaining power in the supply chains of perishable agricultural products in Australia and prepared its report later that year.
Processors have now agreed to make changes to contracts to clarify the circumstances in which they may require producers to upgrade farm facilities and when processors could make changes to their producer manuals.
Some chicken producers are supplying processors without a contract. (Supplied by: Australian Chicken Federation)
Sudden changes to producer manuals could include things like changing bird density requirements in a shed, which will lead to cost bursts for producers.
Processors have also agreed to clarify the circumstances under which processors may impose additional costs on producers and balance notice periods for termination clauses.
The problems of chicken farmers do not end here
But the chairman of the NSW Farmers’ Poultry Committee, Peter Wojcicki, said there were other issues facing producers with the situation.
One of the most important is the variability of the growing rate between states and even between processors.
He said farmers would like to see some consistency in pay to do the same job.
Wojcicki said the terms of the contract had also varied.
“They were seven-year contracts, then they became five-year contracts,” he said.
“They have now been reduced to three-year, one-year contracts, and now, when some of the contracts expire, the producers grow without a contract.”
Wojcicki said there had been an exodus from the industry, with between 20 and 30 per cent of poultry producers leaving in the last four or five years.
He said he hopes to see more transparency and accountability in producer-processor contracts, because “they are secret at the moment” and poultry producers are in a weak position.
“We’ve found that anyone who wants to talk about the terms of these contracts is reprisals from the processors,” Wojcicki said.
“And because the farmers want to keep the contract, cling to their farms and their income, they are too scared to say anything about them.”
What happens now?
ACCC Vice President Mick Keogh said some progress had been made in obtaining processor concessions, which was a “good start”.
Nearly a third of poultry producers have left the industry in the last five years. (Supplied by: Australian Chicken Federation)
He said current laws allowed illegal clauses in contracts to be repealed, but it was a process that was beyond the reach of many farmers.
“As the law is being drafted at the moment, there is no sanction associated with having an unfair clause in your contract,” Keogh said.
“What can happen, however, is that a court can declare this clause null and void.”
But the process is detailed, lengthy and there are chances of delays in the courts.
Keogh said the ACCC sat down with the processors and encouraged them to remove the clauses in question, voluntarily.
Proposals for contract law reform – expanding its application and imposing sanctions for unfair contract terms – were presented to Parliament just before the election.
Keogh said all indications were that the incoming government was inclined to continue with these reforms.
Ingham’s and Baiada Poultry have been contacted for comments.