Lion’s milk price tops rivals

The Japanese-owned processor says its farmgate price reflects confidence in the market and its turnaround strategy.

Lion says it does not believe in retrospective price cuts, unlike some of its rivals.

The Japanese-owned Lion Dairy & Drinks claims it will pay the majority of its direct farmers in the southern region the net weighted average price of $5.67 per kilo of milk solids next season, well above its industry rivals.

Lion pays its 400 dairy farmers in Victoria, Tasmania and South Australia a broad range of fixed and variable farm gate pricing options for contracts of varying lengths.

Lion said today its three-year fixed price is $5.50 per kilo of milk solids, while the one-year fixed price is $5.10 per kilo of milk solids and the one-year variable price is $5.00 per kilo of milk solids.

It comes after Fonterra said late on Thursday that it would open the new season with a price of $4.75 per kilogram of milk solids, but told suppliers the $4.75kg included 2 cents kg to pay interest on loans. So the weighted average opening cash price was $4.73kg.

The price was higher than many expected and well above the opening price of $4.31 a kilogram — or 33c a litre of milk — announced this week by embattled co-operative Murray Goulburn.

But it is below the opening $4.80 milk price offered by Warrnambool Cheese & Butter two weeks ago and the $5 a kilogram set last week by Bega Cheese.

Lion Dairy & Drinks Managing Director, Peter West, said: “Our 2016 opening pricing is a sign of Lion’s confidence in the dairy market, and in our turnaround strategy. We continue to focus on driving profitability in key dairy categories through our premium dairy brands and market-leading innovation.

“Lion’s range of pricing and contract options is designed to help farmers better manage market volatility. We are proud to offer southern farmers one, three and five-year contract options with the ability to fix pricing on up to 50 per cent of volumes for up to three years.

“Since pioneering our flexible model, we’ve seen strong take up by farmers of our fixed pricing options. Lion’s pricing model allows farmers to select the blend of risk and certainty that’s right for their business. We believe it helps farmers to plan for the future.’’

“Unlike some of our competitors, Lion does not believe in retrospective price cuts. Instead, we are committed to building long term partnerships that give our farmers the confidence they need to invest and grow in partnership with us,” Mr West said.