The body representing farmers in Sweden has expressed concern that more farmers could quit dairy farming in the wake of Arla Foods’ decision to slash milk prices.
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The Federation of Swedish Farmers (LRF) said milk farmers in the country were facing a “difficult situation” as they react to volatile global milk prices.
Yesterday (8 January), the Arla board approved the company’s budget for 2009 and set out plans to pay farmers DKK232.4 (US$42.50) per kg of conventional milk and DKK300.3 for organic milk. Arla said the move took the price it pays farmers back to the level seen before milk prices shot up in 2007.
The Danish-Swedish co-operative, one of Europe’s largest dairy groups, said falling dairy consumption, trading down among consumers, a drop in global milk prices and currency fluctuations had prompted its decision to cut price to farmers this year.
However, the LRF’s Kjell Pettersen told just-food he is “worried” about the impact the price cuts will have on Swedish farmers, particularly those who invested in their farms on the back of previous higher milk prices.
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By GlobalDataPettersen said the number of Swedish farmers quitting the dairy industry grew faster in 2008 than in previous years.
“I don’t think things have been this bad. We were losing 1.5-2% of farmers from dairy every year over the last 30 years; in 2008, we lost 10%,” he said. “We are trying to learn that we are now on a world market. Swedish milk farmers are not used to it but it is the only thing we can do.”
Pettersen also expressed fears that the strength of Arla in Sweden’s dairy market – the company accounts for 65% of the sector – could lead to its smaller competitors cutting prices as well.
Earlier this week, farming groups in the UK also hit out at Arla’s price cuts.
“It’s hard to see the justification for any price cuts in liquid milk,” Gwyn Jones, dairy board chairman at the UK’s National Farmers Union said.
“I’m not blind to what’s happening on world and EU commodity markets and am well aware of the pressure being exerted on the cheese market by lower priced, lower quality imports, but for a large liquid milk processor such as Arla to drop its price so ruthlessly and then blame it on falling commodity prices is very surprising.”
