Dairy markets are returning to normal after months of supply-driven high prices, according to the managing director of Arla Foods.

The soaring prices of dairy commodities have hit profits at a swathe of packaged food companies and led Arla to pay out DKK4.8bn (US$946m) more to its suppliers.

"We've never experienced such price increases on our unprocessed products before. Increases have costs us billions of crowns," Peder Tuborgh told a conference of Denmark's farmers' organisation, Dansk Landbrug.

However, Tuborgh sees some light at the end of the tunnel. The summer of turbulence had restored Arla's competitiveness, he said.

Tuborgh said Arla's 8,800 Danish and Swedish cooperative suppliers had received increases totalling DKK0.8 per litre since August. Now, however, bulk dairy product prices were retreating, while butter and yoghurt prices were still rising, Tuborgh said.

"So all in all we're quickly getting back to a normal situation where it's more profitable to sell processed products," said Tuborgh.

Milk suppliers are still leaving Arla, however, tempted by higher prices offered in Germany. Some 187 have torn up their contracts, taking 300m litres of milk with them.