More than 300 of Arla’s 3,800 Swedish members attended a meeting in Jönköping Thursday. But many of them came away frustrated. A drought in the United States has pushed up the cost of feed for animals. And many farmers cannot pay their bills. Several said they would have to shut down production if the price of milk does not go up soon.
“The situation is critical and close to a catastrophe,” said dairy farmer Kristoffer Eriksson after the meeting.
Berit Edholm was just as concerned.
“Even though they’re talking about a light at the end of the tunnel I’m afraid it’s the train we see coming straight at us. This is serious,” she said.
Arla management explained that increased production in New Zealand and the United States had pushed down world prices. But the supply is likely to go down later this year, said Åke Hantoft, chairman of Arla’s board.
“It will take six to eight months before the situation changes significantly. We hope it happens soon. The supply of milk in the world is too big and when it exceeds demand, we end up in the situation we are experiencing now,” he said.
More than a third of Swedish dairy farmers have been forced to close their operations in the last five years, and the farms that do remain are getting bigger and bigger. In 2006 there were about 8,000 dairy farmers in Sweden. Today there are less than 5,300.
Magnus Johansson, a farmer from Östergötland, told Swedish Radio News that the price he gets for milk has gone down by almost 15 cents a kilo in the past year, and unless the price of milk goes up, he can expect to lose almost half a million dollars in income this year.
“There is a risk that the price will continue to go up and down. It’s very hard for us to stay in the game,” Johansson, said.
According to Jonas Carlberg, head of policy at Svensk Mjölk, the industry organisation for Swedish dairy farmers, many farmers may be forced to shut down this autumn. At the same time, the organisation’s long-term forecast is good.
“Very good. Global demand for dairy products will stay strong, according to a report by the Food and Agricultural Organization and the Organisation for Economic Cooperation and Development. Swedish dairy farmers are well-poised to develop and meet that demand,” Carlberg said.
In the meantime farmers at the meeting said they want Arla to lower their profit margin goals and pay more.
But although the company has reported higher revenue and a healthy profitability, Arla’s management said paying higher milk prices is not an option.
“If we raise the price of milk the company would take a loss,” Christina Åberg, head of Arla Sweden said.
Åberg said Arla is working hard to make its operations as lean as possible and will have 500 fewer people on staff by the end of the first quarter next year.