FDBusiness.com

Farmer-owned Arla Foods has taken the decision to start to incentivise more farmers to convert to GM free feed. The market is increasingly willing to pay a price premium and Arla is in a favourable position to capture this new opportunity.

The decision to incentivise the use of GM free feed has been made by Arla’s Board of Directors on the back of recent developments in Germany, where retailers are increasingly demanding dairy products from cows which have been fed GM free feed and are willing to pay a price premium. The trend is likely to spread to other markets and Arla wants to capture this opportunity immediately to add value to its farmers’ milk.

According Chairman Åke Hantoft, Arla is well-prepared to meet the growing demand from the trans-European retailers for GM free feed.

“We own the biggest organic milk pool in the world, for which the feed is by default GM free. Our Swedish farmers have always used GM free feed. This means that around 20 per cent of Arla’s milk pool already meets this market demand. There is commercial potential in this that we can capture and build on immediately by attracting more farmers who are willing to convert to GM free feed,” says Åke Hantoft.

He underlines that the decision is based on the commercial opportunity and does not indicate that Arla’s owners are taking a new stand on GM.

“We welcome innovative solutions and new technology, which can improve farming and help feed the world’s growing population in a sustainable manner. We are not closing a door on GM and we will continue to monitor the scientific research into the pros and cons of GM going for-ward.”

Converting to GM free feed will be a cost for the farmers. However, following the price premium that the retailers and the consumers will be willing to pay, Arla will compensate the farmers as they convert. This model driven by market demand is also used for organic milk, for which the farmers are already compensated for the extra feed cost.

“Our immediate demand is up to 1 bn kg extra milk during the next 12 months and we expect to be able to pay an extra 1 eurocent per kg milk. The market driven compensation will also be paid to all our Swedish farmers, who already use GM free feed. We do not know exactly from when, but we are working fast to unfold the details,” says CEO Peder Tuborgh.

The practical challenges in the company and on the farm are still to be investigated.

“Currently, the demand comes from Germany, where we will immediately look into the practical issues such as logistics, separated productions etc. As the commercial opportunities arise in other markets, we will invite farmers to participate and gradually take on more farmers. But we still need to explore exactly how we can make this happen and how fast,” says Peder Tuborgh.

The genetically modified feeds currently used are in most cases limited to soy, which on Arla farms covers between 0 and 10 per cent of the total feed volume. All soy currently used at Arla farms is covered by certificates to support responsible soy production. Despite the fact that the cows are fed with these limited amounts of genetically modified soy feed, their milk is per definition GM free as the GM can’t be traced to the milk.