FrieslandCampina members consider proposal to include lactose valuation in milk price

5 February 2013

In addition to protein and fat, lactose is becoming increasingly important for dairy cooperative FrieslandCampina, particularly for products such as infant and toddler nutrition and dairy drinks. Moreover, it is an essential component in ingredients for the pharmaceutical industry and other food companies worldwide and forms the basis of FrieslandCampina’s route2020 growth strategy. The composition of the milk supplied by the cooperative’s member dairy farmers must therefore meet market demands. In light of this, the members of the cooperative will be deliberating in the coming weeks on a proposal to value lactose in addition to the protein and fat components.

Lactose is of prime importance for the production of infant and toddler nutrition, one of FrieslandCampina’s key growth categories. The addition of lactose is necessary, as mother’s milk contains 7% lactose but cow’s milk only 4.5%. Lactose is also needed for dairy drinks and base products. It is exported in powdered form to FrieslandCampina locations in Asia and Africa where it is again processed into end products.

With the abolition of the milk quota at the beginning of 2015, the present system in which fat and protein play a dominant role is no longer fully in line with current market demands. The proposal is to pay dairy farmers on the basis of the kilograms of protein, fat and lactose supplied with a fixed kilogram : price ratio for the components protein : fat : lactose of respectively 10 : 5 : 1. This means that the protein price will always be twice as high as that of fat and ten times higher than that of lactose. The negative base price will be abolished.

‎If the Members’ Council agrees to the proposal, this ratio will apply for a period of three years. This three-year period will give member dairy farmers the opportunity to adapt their business approach in the field of feed, for example, and/or breeding to the new situation. The Members’ Council will be announcing their decision on 17 December 2013. If the new system is approved, it will take effect from 1 January 2014. ‎