FrieslandCampina forecast a sustained period of volatility in milk markets, after a year in which the prices paid to its farmers slumped by more than one-quarter, while the co-operative's profits jumped 35%.

The dairy co-operative, giving results for its first year since being formed from a tie-up of Friesland Foods and Campina, said that the pattern of milk price peaks and troughs, evident in 2007's rally and last year's slump, looked set to continue.

"Volatile selling prices of dairy products and, hence, milk prices for dairy farmers can be expected for 2010 and subsequent years as well," FrieslandCampina, which has 15,300 dairy farm members, said.

The Dutch-based company added that it was declining to make forecasts for its 2010 performance, saying that even small fluctuations in dynamics for, in particular,  milk powder, cheese and butter markets would wreak "substantial consequences" on group profitability.

Profits vs milk payouts 

Last year, the guaranteed price paid to farmers tumbled by 26% to E26.99 per 100 kilogrammes, reflecting declines at other European milk groups, such as Denmark's Arla and Belgium's Milcobel, to which FrieslandCampina pegs it prices.

The falls reflected, besides weak global prices, the strength of the euro, which lowered the competitiveness of European dairy exports.

"Consequently, a relatively large quantity of milk remained available in the European market and selling prices of milk powder, caseins and basic cheese were under heavy pressure in the first half of 2009," the co-operative said.

However, the weak price of milk led a 21% slide, to E5.09bn, in the group's bills for raw materials, helping support sales of its portfolio of consumer dairy products, which include the Betagen, Chocomel and Milli brands.

Profits rose by 35% to E182m.

Job cuts

Cees 't Haart, the FrieslandCampina chief executive, said the results also reflected benefits gained from its formation in January 2009, saying that the benefits of the merger had "already exceeded expectations", although failing to reveal a figure for synergies achieved.

The group in December raised its plans for job cuts following the merger.