Arla increases the milk price for co-operative members

On the backdrop of strengthening world market prices, the on account price paid to Arla Foods' co-operative members will be raised by 0.128 DKK.

2nd half year earnings are expected to be positively affected by current conditions in the global dairy market where milk is now in short supply, causing prices for dairy products to rise significantly.

As a result, Arla Foods' Supervisory Board today increased the so-called "on account" price by 0.128 DKK with effect from July 30, 2007. The on account price is the ongoing payment that each co-operative member receives per kg milk supplied.

"After several tough years of real deflation in the price of dairy products, we now see an opportunity to increase the milk price for our owners. Currently, it's the milk powder market that is driving the upward trend, but we also expect global market prices for cheese and butter to rise significantly. The initial, recently announced price rises form the basis of the increased on account price," said Peder Tuborgh, CEO Arla Foods, who does not dismiss additional adjustments to the on account price.

"It can't be excluded that this is just a first step and that we may announce further price increases to customers soon as a result of the milk shortage in Europe. In which case, the resulting profit will go to our owners. This means that the on account price will be more flexible in future."

This is the first time in the company's history that Arla Foods has calculated an on account price that does not include EU restitutions, which were abolished earlier in the year.

"We're pleased to send a positive message to the company's owners and thus stimulate increased milk production. As it's now more expensive for our co-operative members to produce milk compared to just a few years ago, it is particularly encouraging that our earnings potential allows us to raise the on account price," said Arla Foods' Chairman Ove Møberg, who underlines that the Supervisory Board will continue to follow the market development carefully and assess the on account price on an on-going basis.

Loyalty should be rewarded
In light of the resignation of some milk producers during the summer, contrary to the Articles of Association, Arla Foods' Supervisory Board decided to revise the rules governing members' resignation and re-joining.

"We can expect greater-than-usual fluctuations in milk's utility value, which, in turn, will increase the temptation for milk producers to try to obtain short-term additional income. It is clearly unacceptable for the majority of Arla's owners if some suppliers are allowed to come and go as they please. The Supervisory Board agrees that loyalty to the company should be awarded," said Chairman Ove Møberg who expects a draft for an adjustment to the rules to be presented at Arla Foods' Board of Representatives meeting in October 2007.

- - - FACTS - - -

• In the first half of the 2007 financial year, Arla Foods achieved a profit of 382 million DKK.

• With the rise of 0.128 DKK, the new on account price for Arla Foods' co-operative members will be 2.24 DKK

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