Arla, the Danish dairy co-op, has increased its prepaid milk prices for farmer members by close to 50% over the last 12 months as the global dairy market has recovered.

Reporting its financial results for the first six months of 2017, Arla said its performance price increased by 19% over the period to 35.8c/kg, compared to 30c/kg during the first half of 2016. This performance price measures the value Arla generates from each kilo of milk supplied by its farmer suppliers, which own 100% of the dairy co-op.

The co-op saw half-year revenues increase more than 3% to €5bn, despite significant currency headwinds. The depreciation in the value of sterling alone negatively impacted sales to the tune of €135m in the six-month period.

Europe remains Arla’s core market with €3.2bn or 63% of all sales generated across the EU in the first half of the year. The company’s strategy in Europe centres around branded sales, which continues to deliver. Despite lower milk volumes, Arla said it has captured more of the branded dairy channel in Europe during the period, despite increasing prices across its range.

While a smaller part of the overall business, Arla said demand from international markets continued to grow strongly in the period with sales increasing 10% to €792m. In particular, sales to sub-Saharan Africa and southeast Asia and China increased 32% and 36% respectively.

Outlook

Arla has maintained its outlook for its full-year performance. The farmer co-op expects total sales to be close to €10.5bn as a result of increasing milk fat and protein prices.

"We expect the positive price trends to continue and we have introduced further increases in our prepaid milk price to our farmers in July, August and September and expect to sustain this high level for the rest of the year,” said Peder Tuborgh, Arla chief executive.

Read more

Arla and First Milk announce milk price changes