Lion today announced a new pricing model for direct suppliers across Southern dairy states that will allow farmers to choose from three competitive options delivering enhanced transparency, visibility and security over the three year contract terms.
These options encompass a variable pricing model with a guaranteed safety net, a one year fixed price offer and a three-year fixed price offer which may apply to up to 50 per cent of a supplier’s total volume. Total contract terms of up to five years are on offer.
All options lock in pricing that is well ahead of the 2014 opening price recently announced by key competitors, providing a compelling mix of reward and security for Lion farmers.
According to Lion Agricultural Procurement Director, Murray Jeffrey, this move reflects Lion’s confidence in the dairy industry in South Australia, Victoria and Tasmania and the company’s recently announced three year strategy:
“Lion has a clear growth strategy focused on winning in priority segments, like milk based beverages and specialty cheese, and this is underpinned by secure and mutually rewarding partnerships with our farmers,” said Jeffrey.
“Managing Farm gate price volatility is a major concern for our suppliers and not knowing prices from year to year makes it very hard to invest and secure capital in an ever-changing environment. Lion’s three year fixed pricing program will deliver a huge benefit to suppliers to mitigate world commodity risk and enhance decision making knowing that 50 per cent of their volume has a fixed price.”
“Today’s announcement is a clear demonstration of our commitment to delivering competitive pricing, more security and above all enhanced choice to our valued suppliers,” he added.
The new pricing offer is open to all Lion direct suppliers and Lion’s Farm Services team will be working with Southern suppliers to understand what the new pricing options mean for their individual business over the coming weeks.
Highlights of Lion Pricing Model Options – Southern states
Option 1 – variable pricing with guaranteed safety net
- A variable price model, opening at $6.35/kg milk solids* – well ahead of key competitors’ opening price;
- Safety net pricing that delivers a guaranteed premium above key competitors’ pricing.
Option 2 – one year fixed pricing
- A fixed price for 2014/15 at $6.40/kg milk solids* – ahead of key competitors’ announced opening price and anticipated closing price;
- Allows farmers looking for near-term certainty to fix their price, plan and invest in their business – including the option of forward purchasing feed.
Option 3 – three year fixed pricing. Available for up to 50 per cent of a supplier’s total volume.
- A long term fixed price model at $6.14/kg milk solids* – ahead of key competitors’ opening price;
- Allows farmers looking for long term certainty to fix their price, plan and invest in their business;
- Demonstrates Lion’s commitment to long term partnerships.
*At Lion’s standard comparison.