Arla Foods is to unveil a new ‘green’ milk-pricing system for all of its farmer-suppliers over the coming weeks.
The news was broken by the co-op’s CEO Peder Tuborgh. He spoke at the publication of Arla’s accounts for the first six month period of 2022.
Tuborgh explained: “The new pricing system will reflect farmers’ ability to reduce the carbon footprint of their businesses.
“This is in line with Arla’s overall objective of achieving a net carbon zero position for the company as a whole.”
Oil-fuelled drying plants at Arla
However, by way of contrast, Tubough went on to confirm that Arla is in the throes of re-instating oil fuelled-drying plants at a number of its milk processing operations across Europe.
“This is in response to the threat of gas supplies being unavailable to us at some stages during the coming winter months,” he stated.
“Switching back to oil may be seen by some as a retrograde step, from an environmental perspective. However, this will only be a short term measure and is a direct consequence of the ongoing conflict in Ukraine.”
The Arla CEO characterised the last six months as a period of extreme volatility, from many perspectives. Gas prices had risen by in excess 1,000% while, on farm, feed prices had increase by 60% during the same period.
He also indicated that the continuing disruption of supply lines, particularly those involving China, cannot be underestimated.
“Covid-19 lockdowns remain a key issue in that country,” he commented.
Farmgate milk price
The average farm gate prices paid by Arla during the first half of this year was 49.6c/L.
“This has since risen to 58c/L,” Tuborgh further explained.
“Our revenues during the first half of 2022 were greatly boosted by the fact that international commodity prices within the dairy sector increased by some 50% during this period.
“Commodity markets have also been strengthened on the back of global demand for dairy continuing to increase, while milk production levels around the world flatlined.”
Tuborgh believes that continuing uncertainty over future feed, fertiliser and energy prices will discourage dairy farmers throughout Europe and beyond from increasing milk output over the coming months.
“But inflation is also a key factor within retail markets,” he commented.
“Consumers are fast reaching the point when they will not be prepared to pay more food in the shops. At that point, world dairy markets will come into balance.”