Federated Farmers are proposing new standards for the arable industry to help prevent costly contract disputes and create a level playing field for growers and other players.
With disputes becoming more common, the industry needs new standards that make various contractual and fair price obligations plain and clear, Federated Farmers national arable chair David Birkett says.
“There are some areas when what’s expected in terms of good practice in the industry doesn’t always happen.
“Disputes over contracts are popping up more regularly now because economic conditions are getting tighter and tighter.
“The new set of standards we’re proposing will help prevent these, and they’ll have benefits for everyone in the sector.”
Even if there’s a signed contract between parties and there’s a breach of the terms, or bad faith, the offending party can sit there and do nothing, knowing the other guy will have to take them to court, Birkett says.
“That can easily cost tens of thousands of dollars. We’re trying to get away from that situation where people rely on the costs involved in legal action to cover them off.”
With tighter contracts with less wiggle room, and industry agreed standards on what’s fair and reasonable practice, disputes that do end up in court should be cut and dried, Birkett says.
He gives the example of the Seed Crop Isolation Distance (SCID) system, which enables merchants to enter on a map what crops farmers are growing and where, and see what neighbouring farmers are growing or have grown in recent seasons – all with the aim of avoiding cross-contamination.
SCID has no legislative backing but has operated well for years, Birkett says.
“When something does end up in legal proceedings, the court will ask, ‘what’s the industry standard?’ and the SCID system has considerable weight.”
“So, it does develop teeth over time, and that’s what we’re looking to do with these proposed new standards.”
One set of standards Federated Farmers is keen to see is around credit, Birkett says.
“There are times when a company owes a farmer some money – maybe you’ve returned surplus bags or seed or pallets – and they’ll just sit on it as a credit rather than paying that to the farmer.
“But if it’s the other way around, and I buy something from a company, I’m expected to pay the bill by the 20th of the month.”
Back in 2021, Federated Farmers arable leaders and others expressed concern that restrictive new buying practices for milling wheat were undercutting market competition.
More recently, growers have had gripes that purchasers of harvested grain are leaving it in on-farm storage for longer periods, with the fee not covering the cost.
“All that is part of what the proposed standards will deal with,” Birkett says. “For example, we see a need for an end date on contracts. Without it, buyers can just hold off on when they take your crop and pay you.
“In most places around the world, you might sign a contract at the beginning of the year but by the December 31, that’s it – it has to be delivered and paid for.”
Birkett emphasises the standards being proposed aren’t just to benefit growers.
“It’s about having a fresh look at how things are working, and looking for improvements everyone can live with.
“It cuts both ways – there are expectations that growers need to fulfil too.”
Since the standards would apply across the industry, Federated Farmers has taken its proposal to the Arable Industry Food Council, which has the broadest grouping of companies and industry players, including merchants, millers and feed manufacturers.
At the Council’s March 12 meeting, it was agreed the various representatives would consult their respective members over the next months on what they want to see in the standards.
Workshops or on-line meetings will be held to thrash out the final wording.
The aim is for the standards to apply from the beginning of 2025.
Birkett anticipates disagreement on some issues but says there are areas of commonality too.
“At the March meeting I was expecting some pushback on certain things, but actually, we got support.
“Everyone it pretty keen to come up with something to get the industry on the same page.”
Federated Farmers, New Zealand’s leading independent rural advocacy organisation, has established a news and insights partnership with AgriHQ, the country’s leading rural publisher, to give the farmers of New Zealand a more informed, united and stronger voice. Feds news and commentary appears each week in its own section of the Farmers Weekly print edition and online.
