FrieslandCampina is going to raise the sales prices for cheese. The sales prices for cheese, milk powder, semi-skimmed milk and butter are so low, that the production is making a loss.
Irresponsibly low sales prices
Bas van den Berg, COO of Royal FrieslandCampina and responsible for the business group Cheese, Butter & Milkpowder: ‘The milk price (guaranteed price) we pay to the member dairy farmers has been at an irresponsibly low level for months already. We now signal the first possibilities to raise the sales prices of a number of basic dairy products again. The demand is somewhat picking up and the milk supply is beginning to stabilise. The first signs of a change are noticeable on the world market as well. It is our responsibility to raise the prices again where possible.’
Dairy farmers produce way below the cost price of milk
The guaranteed price that FrieslandCampina monthly pays its dairy farmers decreased from 43.00 euro in January 2014 to 25.00 euro in May 2016. This led to a sharp drop in the earnings of the dairy farmers. They are currently producing way below the cost price of milk and a large number of dairy farms has run into financial difficulty because of this.
By raising the sales prices, FrieslandCampina wants to reverse the dropping market trend. This must result in a rise of the milk prices for the farmers. Bas van den Berg: ‘Because of our investments in our processing capacity, including the new milk powder production plant in Borculo, we can direct the milk even better to those segments that are most profitable at a certain moment. FrieslandCampina has lately produced less foil cheese and more milk powder. Milk powder was more profitable than foil cheese due to the market-regulating effect of the intervention scheme affecting the market in milk powder in the EU. Consequently, our stocks for foil cheese are limited and when the demand increases, this will create possibilities to raise the cheese prices. The global dairy market also shows the first signs of a change and fragile recovery as well.’
Bas van den Berg
The sales prices of, for instance, foil cheese were at a historical low level in the past few months comparable to the price level of 2009. By now, the prices have risen again to more than 2.20 euro. FrieslandCampina expects the prices to increase even further in this segment.
Dependent on the market development, FrieslandCampina will also raise the sales prices of other products as soon as contracts offer opportunities to do so.