MILK

Milk is one of those products that we tend to take for granted. We drink at least some every day, it doesn't cost much, and it's probably only when we don't have any in the fridge that we give it more than a passing thought. Yet the milk market is a market like any other, and it is currently going through a bit of an upheaval.

In Denmark, when you talk of milk, then you talk of Arla; the dairy giant has a huge share of the domestic market and is big in other countries such as the U.K. It also has a slightly unusual share structure for a big company, since it is owned by the farmers who supply it with its raw material.

Those farmers are hurting at the moment, since the price Arla pays them has fallen from kr.3.14 a litre in April to kr.2.41 today. That has reduced turnover for the average dairy farm by kr.88,000 (around £9,000) a month. Since they were barely making money at the higher price, it means that many farmers are under water, and could well go bust this winter.

Nor is this phenomenon confined to Denmark. The Global Dairy Trade index stands today at around 750, what it was at the beginning of the noughties, having been up over 1,600 in the middle of the decade and also a year ago. A major reason for the fall in prices this year has been the withdrawal of China and Russia from the world market. They represented 28% of world dairy imports in 2013, and their absence has created a big hole.

Cheap milk is good for consumers. However, sustained low prices will inevitably lead to bankruptcies, reduced supply, and rising prices later. Milk is a market like any other.

Walter Blotscher