Further Decline in Raw Milk Prices Feeds Through in Guaranteed Price for March: EUR 25.25 per 100 Kilos of Milk

This guaranteed price applies to 100 kilograms of milk with 4.41% fat and 3.47% protein and is exclusive of VAT. It is the price that FrieslandCampina guarantees to pay the member-dairy farmers for the milk they deliver in February 2009. This price is independent of the result of the FrieslandCampina company.

03/03/09 The prices that dairy companies in Germany, Denmark, the Netherlands and Belgium pay for raw milk are continuing to fall. As a result, the guaranteed price of FrieslandCampina will work out at EUR 25.25 per 100 kilograms of milk in March 2009. That is EUR 2.25 lower than in February 2009.

The guaranteed price of FrieslandCampina is the average of the year prices that dairy companies in Germany, Denmark, the Netherlands and Belgium pay on average for raw milk. In all these countries, prices have been falling sharply for months. The decline in the prices paid for raw milk in these countries was even stronger in January than FrieslandCampina had estimated. This was taken on board when setting the guaranteed price for March.

This guaranteed price applies to 100 kilograms of milk with 4.41% fat and 3.47% protein and is exclusive of VAT. It is the price that FrieslandCampina guarantees to pay the member-dairy farmers for the milk they deliver in February 2009. This price is independent of the result of the FrieslandCampina company.

This guaranteed price does not include the effects of additional payments and charges, such as the quantum supplement and additional seasonal charges and payments. The summer levy (EUR 2.30 per 100 kilos of milk) came into effect for the members of FrieslandCampina in March. The members receive a seasonal supplement of EUR 3.65 in the period from August to November and EUR 1.00 in December.

Guaranteed price

The guaranteed price that we publicise on the first Monday of each month is the guaranteed price we pay our member dairy farmers for the milk they supply that month.
This guaranteed price is not linked to FrieslandCampina’s result. We base the guaranteed price on the average ZMP milk price for Germany, the milk price of Arla Foods in Denmark, the milk prices of Bel Leerdammer, Cono Kaasmakers and DOC Kaas in the Netherlands and the milk price of Milcobel in Belgium. These prices for raw milk are representative for the country concerned. In order to calculate the FrieslandCampina guaranteed price, we weight these milk prices for the volume of milk processed in the entire country in question. In total, this involves about 45 billion kilograms of milk. We base these calculations on the milk prices in recent months and the expectations for the coming months on the basis of price movements in the dairy market.

Milk price and performance payment

The milk price FrieslandCampina pays its member dairy farmers for the milk they supply consists of the guaranteed price and the annual performance payment. Unlike the guaranteed price, the performance payment does depend on the financial results of FrieslandCampina and the approved reservation policy. In principle, we pay out 25% of the company’s net profit in cash to the members as the performance payment, based on the guaranteed price and after deduction of the payments on member certificates and bonds. The performance payment is paid out annually, in proportion to the value of the milk delivered, following approval of the financial statements.