THE competition watchdog will launch a three-month investigation into the power imbalance between farmers, food processors and supermarkets.
The Australian Competition and Consumer Commission (ACCC) will consider if supermarkets should face tougher regulations when dealing with the farmers who supply their fresh produce.
Agriculture Minister David Littleproud said the aim of the inquiry was "to make sure that supermarkets are not abusing their power in their dealings with farmers".
"This isn't about regulating prices, this is making sure farmers are treated fairly," Mr Littleproud said,
"When you have two supermarkets that have over 60 per cent of the market, that adds some complexity and gives them some bargaining power that could be abused.
Farmers and agricultural organisations have long called for an investigation in to the bargaining power within the agricultural supply chain, particularly with Coles and Woolworths controlling the lion's share of the market.
Mr Littleproud said he couldn't care less what the response from the supermarket sector was.
"Supermarkets are big enough and ugly enough to look after themselves," he said.
"They are the ones that create this culture, particularly in the dairy industry, of destroy livelihoods of so many farmers across the country with this $1 a litre milk stuff."
Mr Littleproud said the ag industry was plagued with stories about supermarkets using their market power to get farmers in to contracts, "then pulling them out from under their nose".
"They've made significant capital investment, and it's sent them broke," he said.
"We don't want to kick this into the grass. We're going to do this, and sort this out once and for all."
Mr Littleproud indicated that should the investigation find abuses of power, the government could force a mandatory code of conduct upon supermarkets.
While there is already a Grocery Code of Conduct, it is voluntary and only focused on big companies, not small family farms.
"These small family farms don't have much power and don't have any legal recourse because they don't have the financial means in which to prosecute," he said.
In a statement, Member for Mallee Anne Webster said lamb and chicken farmers would be able to give evidence to the ACCC as well as dairy, beef and fruit growers.
"This inquiry is not designed to regulate food prices. Instead, it will identify problems and recommend policy options - including a possible all-encompassing Agricultural Code - if appropriate," she said.
"Importantly, the ACCC has guaranteed that the Inquiry will accept confidential submissions so that farmers can provide evidence of harmful practices without the fear of punishment and retribution by the major supermarkets."
The inquiry begins Monday, August 31, and is due to deliver its report before the end of the year.
- With Stock and Land.
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