NETHERLANDS - Dutch dairy co-operative Friesland Campina has announced it will be raising its cheese sale prices, due to improved balance of supply and demand.
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."
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 of milk production and a large number of dairy farms have run into financial difficulty because of this.
By raising the sales prices, Friesland Campina wants to reverse the dropping market trend, saying this must result in a rise of the milk prices for the farmers.
Bas van den Berg added: "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.
"Friesland Campina 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."
Dependent on the market development, Friesland Campina said it will also raise the sales prices of other products as soon as contracts offer opportunities to do so.
TheCattleSite News Desk