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Arla farmers' milk output to grow even faster than EU average

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Farmers supplying milk to Danish-based dairy giant Arla Foods are to expand output even faster than the average for the European Union - which is expects to see the quickest growth of any of the top exporters.

The co-operative, the world's seventh largest dairy company, forecast milk output from its 12,700 farmer owners rising by 2.5bn kilogrammes to 16.5bn kilogrammes by 2020.

This increase in output equates to compound growth of a little over 3% - well above the 0.8% growth the European Commission has forecast for the EU as a whole, and which it described as market-leading expansion.

"Among the world's main exporters, it is the EU that is expected to see the highest increase in production and exports," the commission said last week in a report, highlighting the bloc's removal in April of production quotas.

"Production is no longer constrained by quotas and production capacity is strong," backed by "very good agronomic and climatic conditions for milk production, big processing capacity... and significant yield growth potential".

'More growth opportunities'

In fact, the Arla's footprint includes some areas, notably Denmark, where the commission forecast milk production growth expanding faster than the EU average.

The co-operative has long viewed large output as a support for its fortunes, saying earlier this year that "large milk volumes are a prerequisite for scalability.

"They provide the basis for innovation, product development and branding, and lead to value creation."

Arla said on Wednesday that the rising output into 2020 would give it "more growth opportunities than ever before", and support a revised strategy it outlined on Wednesday.

Organic growth

Arla has been growing rapidly, thanks to a series of mergers with other milk cooperatives in Central Europe, the UK, and Sweden.

However, Arla chief executive Peder Tuborgh said the cooperative "will focus even more on organic growth" in the next five years.

Arla also unveiled a strategy of focusing on a range of products, including a number of value-added and speciality goods.

He also said that Arla would provide "innovation that focuses on what consumers and customers want and need.

"This will help us create the most profitable growth with our farmer owners' milk," he added.

Dairy producers have been focusing on a move up the value chain, in the wake of the low milk prices, with FrieslandCampina buying cheese business Fabrelac this year, while New Zealand cooperative Fonterra opened a new mozzarella factory last spring.

Bucking the trend

Arla's comments on milk output come at a time of enhanced focus by the international market on EU production which, thanks to the lifting of quotas, has remained strong despite low prices.

Indeed, speaking to Agrimoney.com, industry sources have identified Europe as the main threat to a dairy price recovery.

Thin farmer margins have pressured production in the likes of New Zealand, the world's top milk exporter.

Production was down 2.7% year on year in October, which usually marks the country's seasonal production peak.

By William Clarke and Mike Verdin

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