Vion starts pilot with long-term price

Vion Pork will test the long-term pricing system through a pilot from March. Closed companies can participate. The aim is to create a more stable feed profit.

Vion Pork already announced last year that it wanted to get rid of daily rates and quotations. She also indicated that she wanted a long-term pricing system (LTP). It concerns a fixed price over a period of 13 weeks. According to Vion, the pig farmer is then better protected against strong price fluctuations.

Vion therefore presents the LTP price as a risk management tool. By making agreements with the feed supplier for the same period about fixing the feed price, pig farmers can fix their margin for pigs in the pilot.

Good Farming Balance
The processor of pork, in particular, will start a pilot in March for closed companies that will work according to the LTP. It only applies to closed farms to prevent the system from becoming dependent on the fluctuating weekly piglet prices.

The new price system is part of the 'Good Farming Balance' introduced last year. This pricing system consists of the weekly quotation, the Vion price index guarantee (PIG), which is based on a number of international quotations and the LTP. 

13 week cycle
The LTP price is determined on the basis of historical feed profit. The price is based on the MAS Index. This is a transparent feed price analysis model, which is made on the basis of the quotations of the futures markets of Chicago and Paris. This index is combined with the average historical feed profit, measured over a period of 12 years.

Vion maintains a 13-week price cycle, as this is in line with the seasonal pattern in feed profit and pig price. In the first and last quarter, the feed profit is on average lower than in quarters 2 and 3.

Vion has developed the model for the LTP calculation in collaboration with experts in the field of long-term pricing, such as Joost Pennings of Wageningen University & Research. Figures from KWIN and Agrovision are the basis of the model.

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