Dairy giant Arla has announced that it is paying out its first ever half-year supplementary payment to farmer owners of €0.01 per kilogram of milk based on the milk volumes delivered in the first half of 2022.
Total group revenue at the European dairy cooperative amounted to €6.38 billion in first half of 2022, up 17% compared to the first half of 2021, driven by significant price increases in its retail and food service and commodity trading businesses.
The dairy giant saw branded volume revenue growth slowing down after two years of growth.
Arla’s performance price, which measures the value created per kilogram of owner milk, was €0.50, with profit share at 3%.
The average pre-paid milk price to farmer owners increased by 30.9% year-on-year in the first half of 2022 with further increases over the summer.
However, there has not been an increase in milk production due to the continued and significant increase in costs across farms and uncertainty created by the current global market conditions.
The price of fertiliser has increased by 145%, fuel by 134%, and feed by 36% on average, while global inflation is forecasted at 7.7% for 2022, the dairy cooperative noted.
Arla’s milk volume decreased to 6.8 billion kilogram compared to 7 billion kilogram in the same period last year, in line with global trends.
Arla Foods CEO, Peder Tuborgh, said, "It is an extraordinary time for both our farmer owners and the company as food and farming industries experience high levels of exposure to inflationary pressure.
"I am pleased that we have been able to move the pre-paid milk price up for our farmer owners to help them with their increased production costs. We are now also able to deliver on our first ever half year supplementary payment to support future investments in sustainable actions on their farms."
In the first half of 2022, Arla confirmed that its sustainability targets and plans are consistent with what is required to meet the Paris Agreement target of limiting global warming to below 1.5 degrees.
The dairy cooperative also signed its first major Power Purchase Agreement to build four new solar parks with an expected capacity of 250 GWh.
Elsewhere, Arla commenced a large-scale pilot with the methane-reducing feed additive Bovaer with 10,000 dairy cows across more than 50 farms in three countries.
Due to the ongoing economic situation, Arla expects the second half of the year to be more challenging with global milk production expected to decline further and contribute to sustained high dairy prices, which will likely further diminish consumer confidence and consumption.
Tuborgh added, "2022 continues to be characterised by volatility and inflation, exacerbated by Russia’s invasion of Ukraine. Changes in consumer behaviour continue to be multifaceted and difficult to predict and we expect our branded growth will slow down further.
"As a cooperative, we remain committed to be in a position to pay out the second instalment of our planned full year supplementary payment of a total of at least €0.015 per kilo of milk to our farmer owners."