The new report from UK charity Action Aid, ‘Milking the Poor’, claimed that EU farm subsidies are harming farmers in the developing world, with Arla a direct beneficiary of anti-competitive subsidies.
Action Aid claimed that Danish-Swedish dairy firm Arla received almost €1bn in EU subsidies since 2000, “allowing it to establish a strong position in the Bangladeshi dairy market” despite recent subsidy reductions.
The charity believes that EU dairy support helped Arla undercut local producers (which led to public protests from Bangladeshi farmers in 2009) with local prices now below the cost of production.
Arla’s milk powder imports under its Dano brand – amounting to 3,700 to 6,000 tonnes of milk powder in recent years – deterred local producers from satisfying demand for local milk, the charity claimed, where agriculture accounts for 20 per cent of Bangladesh’s gross domestic product.
“Arla’s literature does not mention the adverse impact that its milk powder imports have on Bangladeshi dairy farmers,” Action aid said, with the firm’s most recent press release simply claiming that Dano was a “real hit” with the country’s consumers.
Desperate local producers?
But an Arla Foods spokesman rejected Action Aid’s assertion that its €112m global milk powder business – with sales primarily in the developing world – harmed local Bangladeshi producers.
“The criticism of Arla in this case is misunderstood and is based on incorrect conclusions that the report’s facts themselves contradict,” he told DairyReporter.com.
“The facts coming out of their own research report show that Arla’s products are priced 30 per cent above local products,” he said.
“We fail to see how that can push prices downwards, when our prices are above local prices.”
Moreover, local production was growing in Bangladesh and had been for several years, he added, “which indicates that more people in the country’s dairy industry see it as a profitable business”.
The spokesman added:“Whatever EU subsidies are given or not given to farmers – in this case Denmark, Sweden – has no effect on the prices we put on our products.
Instead, prices were determined according to product quality and “basic market mechanisms” such as supply and demand, he said.
Arla defends CSR record
But asked whether Arla would pay more to farmers if EU subsidies did not exist – thus leading to higher end-product prices, he said:
“We pay, and will always pay, our farmers the highest price possible. Our opportunity for higher product prices is not greater simply because different farmers have a different financial situation.”
Action Aid also attacked Arla’s Corporate Social Responsibility (CSR) record in Bangladesh, taking a sideswipe at the company’s “only CSR project in Bangladesh”.
This aimed to provide ‘teaching, food and milk’ at a cost of around €134,000, but Action Aid claimed that Arla’s primary donation to the project was its own imported milk powder, which the former cited as another measure detrimental to smallholder dairy development
But the Arla spokesman said that the CSR criticism was unfair, since Arla Foods was a global company with products in over 120 countries.
“Obviously, the level of investment we make in certain countries is proportionate to the size of business in that country,” he said.
In Bangladesh, our business is important but at this stage it does not make sense to have local production there, although we do have a packaging facility there employing over 100 people.
The country also paid a considerable amount of import tax on products in Bangladesh, the spokesman added. “But we want to do business there,” he said.
“We also have many other local activities in the country where we want to make a difference, but we don’t conduct these for the sake of positive coverage about it in the press.”