Branded milk processor, Lion, is following the supermarkets’ lead, flagging a price increase in its Dairy Farmers and Pura white milk products to help farmers squeezed by soaring drought costs.
Hot on the heels of Coles and Woolworths announcing a 10 cents a litre lift in their house brand prices, Lion has confirmed its milk lines in supermarkets and convenience stores will go up in price, too, when a temporary 10c/litre wholesale value lift kicks in next month.
The full wholesale price increase on fresh milk sales will go back to dairy farmers and could typically translate to about two cents a litre lift in extra farmgate payments to suppliers.
Lion has been in talks with major supermarkets and more than 20 convenience store groups for five weeks to get support for price rises in Victoria, NSW and Queensland, with more retailers in the drought-affected states set to come on board.
“We are grateful for the support of major grocery and convenience customers who have indicated their acceptance of this wholesale price increase knowing it is going directly to the farmers who supply our milk
- Kathy Karabatsas, Lion
No specific indicator of new retail prices has been released given branded milk can vary in price depending on where it is sold, and wholesalers do not set retail values.
The increase applies to all Dairy Farmers and Pura one-, two- and three litre white milk products sold to participating retail outlets from October 1, for an unspecified time period.
Funds raised in each state during the period will be distributed to drought-affected dairy farmers in that state who supply Lion either directly or through its major supply partner, the Dairy Farmers Milk Co-operative (DFMC).
Funds will be split to farmers on a cents-per-litre of production basis.
However, given much of Lion’s milk is used in cheese, yoghurt, custard and flavoured milk production, the return from tahe 10c wholesale increase in Pura and Dairy Farmers white milk prices will only add roughly about two cents/litre more to a farmer’s milk cheque.
However, Lion said two cents/litre was an example only, as the final capital benefit to farmers depended on actual sales volumes and raw milk volumes produced in each region each month.
The company believed benefits to its dairy suppliers in drought affected areas would still be “material”.
“We hope consumers get on board and support it,” a company spokesman said.
The price rise initiative is part of a broader raft of support measures Lion already has in place for farmers in need.
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The company said it was committed to playing its part to help dairy farmers through the drought crisis.
Lion Dairy and Drinks managing director, Kathy Karabatsas, said with all NSW drought-declared, along with areas across northern Victoria and southern Queensland, farmer suppliers in those regions were enduring tough production conditions and escalating costs feed and water costs.
“We are grateful we have the support of major grocery and convenience customers who have indicated their acceptance of this wholesale price increase knowing that 100 per cent of the increase is going directly to the farmers who supply our milk,” she said.
Other assistance
Other drought assistance steps already adopted by Lion included offering its NSW suppliers impacted by the drought access to interest-free loans to purchase feed; offering access to discounted feed such as brewers’ grain and citrus pulp, from Lion’s alcohol and juice operations, and helping fund productivity improvements on farm.
Lion is also helping farmers improve all areas of business, from milk quality to effective business management, through an online self-assessment tool, and provides independent and confidential 24 hour counselling support service to farm families and staff.
Apart from the Dairy Farmers and Pura milk brands, the national dairy processor also owns Masters milk in Western Australia, King Island, South Cape and Mersey Valley cheese and Farmers Union yoghurt and flavoured milk.
It has about 400 farmer suppliers around Australia.
Lion’s farm services team would continue working closely with all Lion’s farmers in drought-affected regions to monitor conditions and do what it could to assist further.
Funds raised via the increase in wholesale pricing for white milk would be paid monthly to dairy suppliers in the impacted regions of NSW, northern Victoria and South East Queensland.
A committee will oversee the payment process and provide appropriate independence and transparency.
It will comprise a management representative from the DFMC, a Lion direct dairy farmer and Lion agricultural procurement director, Murray Jeffrey.
A representative from a professional auditing firm will be appointed as the scheme’s independent auditor and invited to meetings.
Bega payment trial
Meanwhile, United Dairyfarmers of Victoria has welcomed Bega Cheese plans to trial a simplified milk payment system for suppliers and wants more processors to consider similar initiatives.
Bega is giving suppliers the option of being paid one price for nine months of the year and another price for the spring months.
The trial will start in south western Victoria.
UDV said it wanted more precise details from Bega on its plans and updates as the initiative progresses.
President Adam Jenkins said the trial was a long-awaited, simplified step forward following significant advocacy efforts by southern dairy farmers.
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