Co-op bosses: Milk price pressure to last two years

Bosses of Europe’s two biggest dairy co-ops have warned milk prices will remain under pressure for the rest of 2014 and into next year.

Farmer-owned businesses Arla and Royal FrieslandCampina delivered half-year results yesterday, reporting that revenues were growing but profits and returns to members would be tighter in the months ahead.

Arla, part-owned by 3,000 British farmers, saw revenues rise 11% to £4.4bn in the first half of 2014.

Its performance price, the value generated by each kilogram of milk, hit a record 36.8p/kg – 15% higher than a year earlier.

But the co-op said it has lowered its performance price predictions for the rest of 2014.

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Last week, Arla cut its milk price for the fourth time in five months, blaming still-weak global commodity markets and Russia’s ban on Western food imports.

Arla chief executive officer Peder Tuborgh said the milk market would see an 18-24 month period of unpredictability that would put prices under severe strain.

“The increased milk volumes that we expected to see after the abolition of the milk quota system at the beginning of 2015 are already coming through, not just from Arla farmers but for those across the EU who are taking the opportunity to grow their business,” he said.

“The extra milk is flowing into our production sites and putting us under positive pressure to deliver a long-term competitive milk price for growing volumes.”

Arla’s main European competitor Friesland Campina reported a 3.5% rise in revenues, totaling €5.7m (£4.5bn) for the first six months of the year.

But net profit fell 36.6% to €104m (£82m), due to higher farmgate prices, falling sales in Asian markets and a strong euro.

The co-op, owned by more than 19,000 dairy farmers in the Netherlands, Germany and Belgium, paid farmers a 14% higher guaranteed price of €42.07/100kg milk but said it could not make firm predictions about the rest of the year.

Friesland Campina’s outlook statement said it expected world milk supplies to increase further and how demand would develop was uncertain.

“In a number of European countries the markets will remain under pressure,” it said.

“FrieslandCampina cannot make any concrete statement regarding the expected result for the whole of 2014.”