Proposed merger of Arla Foods and Germany’s DMK Group, which will unite more than 12,000 dairy farmers in Europe’s largest dairy co-op, has come in for criticism from the European Milk Board.
Europe’s new dairy co-op giant, after the Arla-DMK merger, will not be welcomed by some dairy farmers on the continent.
Co-ops have ceased to be the representatives of producers’ interests they claim to be on paper, said Kjartan Poulsen, an Arla member, but also the president of the European Milk Board, which represents tens of thousands of dairy farmers through its 21 member organisations in 16 European countries (including ICMSA in Ireland).
“Co-operatives in their current form neither live up to their responsibility nor meet the standards they themselves set out,” said Poulsen.
He said obligatory contracts between agricultural producers and processors were currently being discussed at EU level, as an instrument for fair and transparent prices paid to farmers, but co-ops regularly demand exceptions to this obligation.
Meanwhile, co-ops cover large EU market shares, and the new giant Arla and DMK are creating is a prime example of this, said the EMB president.
“So, if co-operatives are exempted from contractual obligations, this means that a large part of the market, and thus the problem, is not covered. Fair prices and transparent contracts remain an illusion at the expense of producers.”
The proposed merger of Arla Foods, which is based in Denmark, and Germany’s DMK Group will unite more than 12,000 dairy farmers in Europe’s largest dairy co-op.
With members in Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands, the new group would have a combined annual revenue of about €19bn (based on Arla’s €13.8bn and DMK’s €5.1bn in 2024).
Arla and DMK believe the merger will provide resilience during the anticipated decline of the European milk pool. The European Commission predicts the EU dairy herd shrinking 13% by 2035, compared to the 2021-2023 average, and says EU milk production could decline 0.2% per year up to 2035.
The merger is subject to regulatory approval and the backing in June of the board of representatives in each co-op.
Kjartan Poulsen warned of a systematic weakening of democracy in co-ops, interfering with their goal to support the economic situation of members. He said individual members do not have the legal or economic knowledge, time or structural resources to really shape decision-making.
Many co-ops are run by management rather than members, who are often only involved via representative assemblies, according to the EMB president. “Crucial lines of business such as marketing are often outsourced, making control even more difficult.”
He said there was a particularly clear conflict of interest in the dairy sector between co-ops procuring the cheapest possible raw materials (low milk prices) and fighting for good milk prices paid to their members.
He called for contracts between producers and buyers, which have been put on the table by the European Commission, to apply equally to co-ops and other processors. He also called for members to have the possibility to be represented by producer organisations within co-ops.
The EMB has long campaigned for a milk price that covers the average milk production costs, and a crisis prevention instrument to prevent over-production of milk.
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