FrieslandCampina with guaranteed price above 35 euros

FrieslandCampina's guaranteed price will rise slightly less than one euro in December. Part of this is due to the milk prices of the reference companies that were underestimated, and another part comes from the market.

To be precise, the guaranteed price increases by €0,94 to €35,19 per 100 kilos. This is the highest level since March when the corona crisis reared its head and shook the dairy market in Europe considerably. Compared to the guaranteed price a year ago, the difference is still small. When we get the pass on the guaranteed price, then leads to a basic milk price for the members of €34,42 per 100 kilos at 4,42% fat and 3,57% protein. Including the PlanetProof bonus, the payout price can reach just under €38.

€0,25 of the increase is due to slightly more favorable conditions for basic dairy products. It is difficult to estimate which product the cooperative is referring to. Cheese prices have been under pressure in recent weeks, while butter and milk powder mainly move sideways. The largest part of the increase is a result of underestimated milk prices of the reference companies in recent months. 

Reorganization affects subsequent payment  
The higher guaranteed price is a favorable development for member dairy farmers. All the more so because they do not have to count on a fat supplementary payment this year. The announced reorganization, which will cut some 1.000 jobs, will entail costs that will largely be borne by this year's result.

This extra cost item of €175 million, in combination with the lower profit due to the corona crisis, means that FrieslandCampina is heading for a historically low profit, or possibly even red figures. The management has indicated that it is quite possible that no supplementary payment will be made this year. 

Wouter Job

Wouter Baan is Head of Meat & Dairy at BoerenbusinessAt DCA Market Intelligence, he focuses on dairy, pork, and meat markets. He also monitors (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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