Dairy giant Arla has announced that it is making its first ever half-yearly additional payment to farmer owners of €0.01 per kilogram of milk based on milk volumes delivered in the first half of 2022.
The European dairy cooperative group’s total turnover was €6.38 billion in the first half of 2022, up 17% compared to the first half of 2021, driven by significant price increases in its retail, restaurant and commodity trading businesses.
First Half Highlights
The dairy giant saw revenue growth in branded volume slow after two years of growth.
Arla’s performance award, which measures the value created per kilogram of owner’s milk, was €0.50, with a profit share of 3%.
The average price of prepaid milk to farmer-owners rose 30.9% year-on-year in the first half of 2022, with further increases over the summer.
However, there has been no increase in milk production due to the continued and significant increase in costs on farms and the uncertainty created by current global market conditions.
Fertilizer prices have risen by 145%, fuel by 134% and animal feed by 36% on average, while global inflation is forecast at 7.7% for 2022, the dairy cooperative noted.
Arla’s milk volume decreased to 6.8 billion kilograms from 7 billion kilograms in the same period last year, in line with global trends.
Arla Foods CEO Peder Tuborgh said: “This is an extraordinary time for both our farmer owners and the business as the food and agricultural industries experience high levels of exposure to inflationary pressure. .
“I am delighted that we have been able to increase the price of prepaid milk for our farmer owners to help them meet their rising production costs. We are now also able to provide our first ever semi-annual additional payment to support future investments. in sustainable actions on their farms.”
In the first half of 2022, Arla confirmed that its sustainability goals and plans are in line with what is needed to achieve the Paris Agreement goal of limiting global warming to less than 1.5 degrees.
The dairy cooperative also signed its first major power purchase agreement to build four new solar parks with a planned capacity of 250 GWh.
Elsewhere, Arla has launched a large-scale pilot project with the methane-reducing feed additive Bovaer with 10,000 dairy cows on more than 50 farms in three countries.
Outlook for the second half
Due to the current economic situation, Arla expects the second half of the year to be more difficult, with global milk production expected to fall further and help maintain high dairy prices, which will likely decline further. consumer confidence and consumption.
Tuborgh added: “2022 continues to be characterized by volatility and inflation, exacerbated by Russia’s invasion of Ukraine. Changes in consumer behavior continue to be multifaceted and difficult to predict and we expect our brand growth to slow further.
“As a cooperative, we remain committed to being able to deliver the second installment of our planned top-up payment for the full year of a total of at least €0.015 per kilo of milk to our farmer owners.”
© 2022 European supermarket magazine – your source for the latest A-Brands news. Article by Conor Farrelly. Click on subscribe register for ESM: European Supermarket Magazine.