Australian broiler farmers will benefit from fairer contracts

The Australian Competition & Consumer Commission (ACCC) has called for changes to certain broiler breeding contracts.

Following a thorough investigation, the ACCC found that some agreements between the nation’s largest poultry processors and their chicken farmers included terms that were unfair to the farmers.

Some of the processors – who have not been identified by the organization – have agreed to modify certain contractual conditions.

Among the clauses of concern were those that allowed the processor to change supply terms during the term of the contract or to require the producer to make significant capital investments at their own expense. In addition, some contracts had a marked imbalance in termination clauses, the ACCC found.

These conditions could cause significant difficulties for producers, according to Mick Keogh, vice-president of the Commission.

“Several processors have agreed to modify certain contract terms to address some of the ACCC’s concerns,” he said.

The changes will involve re-balancing termination notice periods and clarifying the additional costs processors can impose on producers. Overall, the new contracts should provide producers with more certainty and transparency about trade agreements.

What the decision means for broiler farmers

According to the ACCC, its investigation follows the publication in 2020 of its report examining the Australian market for perishable agricultural commodities.

This has highlighted some sectors, including poultry meat, where contract terms have proven to be unfair to small producers and farmers. As a result, the ACCC said it found it difficult to investigate possible breaches of these agreements.

“We expect all chicken meat processors to continue working with producers and producer groups until the contracts they have in place are clear and balanced,” Keogh said. “We will be monitoring the industry to see if this happens and will review these and other contracts if unfair contract terms laws are reformed.”

Earlier this year, the previous federal government introduced legislation to strengthen protection against unfair contract terms in Australian consumer law.

The country’s new Labor government is expected to support proposed reforms to unfair contracts, reports ABC Rural.

Of Australia’s AU$3 billion (US$2.1 billion) chicken market, 70% is controlled by just two companies: Inghams and Baiada.

Among the changes previously made by processors that caused particular concern from the ACCC were abrupt changes to grower manuals. These cover the conditions under which the birds should be kept by the breeder. A sudden change in stocking density, for example, could significantly alter the producer’s production costs.

However, the ACCC’s decision does not address all of producers’ concerns.

The chairman of the New South Wales Poultry Committee pointed to variations in rising fees and length of contracts between states and between processors.

Due to the lack of transparency, 20 to 30 percent of producers have abandoned their businesses in the past four or five years, he told ABC Rural.

Poultry processors have not publicly commented on the ACCC’s decision.

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