September 6, 2022
Arla expects prices for dairy to remain high
Arla, the fifth biggest dairy company in the world, said dairy prices are expected to remain high because of a drop in worldwide milk production and rising input costs, BBC news reported.
As a result of significant price increases, Arla reported a 17% increase in revenues during the first half of the year.
The Ukraine war, according to Arla, the biggest supplier of fresh milk and cream to the UK, has increased farmer costs.
Fertiliser and animal feed are two of the products that Russia and Ukraine export to the world on a large scale, but the invasion by the Kremlin has disrupted supplies and raised prices.
After COVID-19 restrictions were relaxed, the demand for energy increased, driving up fuel prices. However, the war's sanctions and severe shipments disruptions have caused them to rise even higher.
The UK's inflation rate, which measures how quickly prices rise, reached a four-decade high of 10.1% in July, largely as a result of the rising cost of basic foods like milk, cheese, eggs, and bread.
According to Arla, the substantial cost increases that its farmers had to bear led to an increase in the pre-paid milk price.
However, the company said that due to the ongoing and significant increase in on-farm costs and uncertainty created by the current global market conditions, this has yet to secure an increase in milk production.
Arla said the cost of energy had increased by 346%, fuel by 134%, feed by 36%, and fertiliser by an average of 145% since the previous year.
The business predicted that "ongoing inflationary pressure and political unrest" would make the second half of the year "even more challenging."
Revenues increased to EUR 6.3 billion (~US$6.3 billion; EUR 1 = US$1) during the first half of the company's fiscal year, Arla said, and this was "almost exclusively driven by increased prices," as the company's sales volume fell slightly in some markets.
Arla said the continued decline in global milk production is anticipated to contribute to sustained high dairy prices, which will likely result in further declines in consumption.
- BBC News