A massive intake surge of 600 million kilograms of milk has pushed Arla Foods’ European dairies to the limit. While logistics have held up across Northern Europe, a combination of Brexit barriers and geographical isolation has forced the cooperative to discard milk in the United Kingdom.

In recent months, Arla Foods has been navigating an extreme operational situation in which an exceptionally strong harvest season in European agriculture has resulted in an intake increase of 600 million kilograms of milk across the group’s core markets. Arla Foods CEO Peder Tuborgh describes the pressure on processing capacity as unusually severe and told AgriWatch that plant utilisation rates were, for a period, extraordinarily high. Arla Foods Chair Jan Toft Nørgaard underscored the seriousness of the situation, characterising the milk surge as a ‘once-in-20-years event’.

Logistical bottleneck in the United Kingdom
While Arla’s extensive network in Denmark, Sweden and Central Europe has made it possible to redirect raw milk flows to plants with spare capacity, the situation in the United Kingdom has been more constrained. At times, Arla has been forced to divert small volumes of milk directly to biogas production. This is partly because England, as an island, is logistically separated, but also because Brexit has introduced regulatory barriers. Strict limits now apply to how much non-EU milk may be used in production on the continent, restricting the free movement of raw milk between British and European plants. Although the cooperative has attempted to ship concentrated milk to mainland Europe, there are limits to how much can be handled in this way.

Paradox between record intake and future shortages
The current milk surplus stands in stark contrast to long-term forecasts for Northern Europe. Rabobank has previously projected declines in the regional milk pool of between 13 and 20 per cent over the coming decade due to environmental regulation and structural change. Tuborgh, however, expects a more stable development, albeit with significant national differences. He notes that countries such as Denmark and the Netherlands face politically driven reductions, while others are set to expand. At the same time, he emphasises that competition for raw milk will intensify as global consumption continues to grow by approximately two per cent annually.

Policy frameworks dividing the market
For the dairy cooperative, diverging political directions across Northern Europe present a strategic challenge. While Denmark’s green tripartite agreement points towards a reduction in cow numbers, Sweden has introduced financial incentives to increase milk production – including a budgeted premium of SEK 1,000 per additional cow. On this basis, Tuborgh expects structural growth in Sweden in the years ahead.

By Maja Løvstrup
Source: FødevareWatch
Photo: Arla Foods