Arla issues 18-24 month warning on global milk prices

Arla showed strong performance in the first half of 2014 and delivered record earnings for its farmer owners. However, it warns that a significant negative development in the world market on price will force down the price paid to farmers for the remaining part of 2014.

Arla Foods’ CEO, Peder Tuborgh, said: “Arla has the right long-term strategy for meeting an increase in both raw milk supply and global demand for dairy products. Despite this, though, I believe that the market is looking at an 18 -24 month period of unpredictability and consequently prices are under severe strain.”

Arla Foods’ revenue grew by 11% to €5.4bn (DKK 39.8bn) in the first half of 2014 (from €4.6bn in first half year 2013) due to strong organic growth in growth and core markets and global price increases. This meant that the farmer-owned dairy company delivered a record performance price of 3.30 DKK/kilo milk to farmers owners during the period compared to DKK 2.87 per kilo milk in first half 2013.

However, it says the trends in global raw milk price are pointing downwards fast and Arla has therefore lowered its expectations to the performance price for the full year that were in the range of DKK 3.25-3.35.

CEO Tuborgh added: “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. 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. The current challenges must be seen in the perspective of a bigger and promising long-term outlook for dairy companies. The world’s middle classes are growing, more consumers can afford dairy products, and they create a stable demand for healthy, nutritious and safe milk products.”

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