'Serious, deplorable behaviour': Our chook farmers have been cooked

Chicken meat processors are in the spotlight, too, after a government initiated investigation found a mandatory code of conduct could be swiftly implemented to rectify a multitude of market failures, power imbalances and imperfect competition.

But while the timing of the recommendation could hardly be more convenient for the Albanese Government as it revs up its agenda to improve competition and market transparency, chicken producers are nervous about Canberra's seemingly lukewarm response to the report's blunt findings.

The 18-month inquiry concluded a mandatory code of conduct, similar to the 2020 dairy code, was necessary to rectify harmful trading practices against farmers in the poultry meat supply chain.

Farmed chicken production is a $3.5 billion industry in Australia, and worth $6.6b at retail level, but farmers earn just 3.5pc of the retail price.

The inquiry's national consultation with farmers found numerous "alarming concerns".

Processors were refusing to honour some contract clauses, or setting unfair contract terms such as requiring farm infrastructure investment, but offering farmers no extra remuneration.

The inquiry found farmers to be "genuinely fearful of commercial retribution" if they challenged any unfair business practices or contract terms.

Other key findings included farmers having little or no choice of processors to work with, or opportunities to compare prices paid for chickens produced; deliberate undermining of their collective bargaining efforts, and contract price increases not reflecting rising input costs.

The inquiry was prompted by a 2020 Australian Competition and Consumer Commission investigation of perishable agricultural goods markets which also identified concerning processor-producer relationships in the dairy and horticulture sectors.

Notably, the ACCC said poultry meat sector was "particularly concerning" and needed follow up investigations.

National Farmers Federation chief executive officer, Tony Mahar, said the "serious and deplorable behaviours" subsequently reported by growers in the latest investigation suggested a mandatory code was the only path forward.

"The final report concludes the poultry meat sector's challenges are beyond the scope of what current competition legislation can effectively address," he said.

The Australia-wide consultation was conducted by the NFF with planning and participation help from chicken producers, processors, the ACCC and the Department of Agriculture, Fisheries and Forestry.

Its findings showed supply chain practices were causing broad economic harm stemming from market power manipulation and exploitation of a lack of market transparency.

"These practices and ongoing use demonstrate real issues within the poultry meat supply chain and the Australian Government should act to address these economic harms," the report said.

"This report underscores the necessity of a mandatory code of conduct to rectify the prevalent supply chain issues ... with a robust code framework to enhance market transparency, equalise the power dynamics between various stakeholders and foster a fairer and more efficient industry environment."

While the NFF looked forward to the government's response to the strong recommendations, the Australian Chicken Growers Council was uneasy because the report had not triggered any notable response so far.

CEO Jo Sillince noted Agriculture Minister, Murray Watt, had simply said the report would be carefully considered, after previously telling the chicken industry the mandatory code issue was not on his department's immediate agenda.

"If ever there was something straightforward this government could do to show its support for farmers, this is a no-brainer," Dr Sillince said.

"The government's got itself tangled up in all sorts of contentious agricultural issues like biosecurity levies, Murray Darling water buybacks and live export bans."

"Surely a mandatory chicken industry behavior code would be an easy win - especially given it seems set to impose the same sort of code on supermarkets."

Although chicken was Australia's most popular meat protein, accounting for almost half our meat diet, the industry was dominated by just two companies processing 70 per cent - Ingham's Enterprises and Baiada.

Their market grip was not unlike the Coles-Woolworths supermarket duopoly's power base.

Dr Sillince said processors were now "working the corridors of parliament house lobbying hard against a mandatory code".

"Our industry has gone way beyond the point of fair competition," she said.

"Farmers are not even making small profits.

"Their situation is worse than dairy farmers before the dairy code became mandatory.

"They're being forced out of the industry by processor thuggery - 52 of Australia's 700 farms are currently for sale."

The Australian Poultry Industries Association, representing 95pc of the processing sector, declined to comment on the report, although previously made clear it opposed a mandatory code of conduct.

CEO Dr Mary Wu had said there was "no evidence of any material market failure to justify such a major regulatory intervention".

She claimed the report's investigation was biassed and did not uncover information not already reviewed by the ACCC investigation to justify further regulatory intervention.

"The NFF's proposal code would impose significant costs and burdens on the poultry sector for no material benefit to contracted growers," Dr Wu said.

She wanted NFF to do a cost-benefit analysis of a code of conduct.

Dr Wu said a code would add unnecessary expense and inefficiency to an otherwise highly efficient industry, driving up the cost of Australia's most affordable consumer protein during a cost of living crisis.

In Tasmania, poultry farmer, Nathan Richardson, had some sympathy for the processors, noting they, too, were victims of intense market power pressure from supermarkets.

While he believed chicken growers were "probably the worst-treated farmers in the land", he said big retailers used chicken as a loss leader, flexing their market strength to squeeze consistent price cuts from suppliers.

"In 2009 a cooked supermarket chicken cost $13 or $14, now the price is $9 to $10, and they've been even cheaper," said Mr Richardson, who produces about 500,000 birds a year near Devonport, plus lambs, cereal crops, poppies and potatoes.

He said family and corporate farms Australia-wide had subsequently been "on the receiving end of appalling tactics" while also copping massive cost increases, yet received "only a few cents in the dollar to cover those operating cost rises".

His energy costs had doubled in four years, insurance was up 500pc in six years and replacement plant and infrastructure costs had doubled in 10 years.

"Unfortunately, this is an industry where our investment is worth millions and millions - you can just jump in, or get out when your costs and returns don't add up," Mr Richardson said.

A poultry code of conduct was needed urgently, he said, noting how dairy processor behaviour and price transparency had improved with a code.

"But it's very, very disappointing that things have become so bad that we need Big Brother to enforce and manage the behaviour of the big end of town."