Cooperative Arla Foods says it is looking to increase the supply of milk from its member farmers to tackle growing concern over organic supply, particularly in its Swedish and Danish markers.
The Nordic manufacturer, which claims to be the largest producer of organic milk, says it is hoping to offer improved incentives for farmers to ensure it can offset a production shortfall.
Arla says that before 2011, it is aiming to annually produce 375m kg and 266m kg of organic milk in Denmark and Sweden respectively for use in drinking milk and other traditional dairy products like cheeses and yoghurts.
The group says it remains currently 55m kg behind its goal in Denmark, while output in Sweden is 100m kg short of its target.
To better meet its needs, the group says it will be raising payouts for organic milk as of 1 July 2008 by 10 Danish oere (€0.01) per kg of the product to 65 (€0.08) Danish oere (€0.08) per kg.
On the Swedish market, where the company says demand is even more tight, the national payout will increase by 28.4 Danish oere (€0.03) per kg.
The new calculations for payment will no longer reflect the added cost of organic production for farmers, but the actual organic milk requirements of Arla Foods' operations, according to the company.
Group spokesperson Theis Brøgger told DairyReporter.com that growing demand, particularly in Denmark for all things organic and the high potential of the German market, had highlighted the need for a new more reflective pricing system.
While Brøgger added that the system could feasibly lead to lower payouts for organic milk, he said that current hikes in demand, not just from consumers, but by the entire industry, meant that such a situation was unlikely in the current market.
The sentiments were reflected by group chief executive officer Peter Tuborgh, who said that he expected organic milk needs to continue rising requiring a greater number of producers to ensure the segment continues to thrive.
"We want to be known as a dairy that does most to promote organic in Europe so that it becomes accessible and relevant to a large group of consumers. But this requires more organic producers," he stated. "If organic becomes a niche product that is only intended for a narrow group of consumers with high disposable incomes - it's meaningless."