Åke Modig: Stable exchange rates benefit Arla Foods

“The best scenario for Arla Foods would be for all EU countries to join the Euro,” said Arla Foods’ Deputy Managing Director Åke Modig in the run-up to Sunday’s Euro referendum in Sweden.

“First and foremost, it would be beneficial to have a common currency in the countries where most of Arla Foods’ business is centred, i.e. UK, Sweden and Denmark. The second best scenario would be if these countries followed a fixed exchange rate policy and tied their currencies to the Euro as Denmark has done. This would make it easier for us to operate the business and manage a common price for milk producers,” said Åke Modig.

“We want to see long-term stability. When the Swedish krona floats, there are short-term gains. But that’s what they are - short-term. The disadvantages outweigh the advantages. When the Swedish krona falls, it means rising packaging and energy costs in Sweden and this affects both the business and the individual milk producer in Sweden. Danish farmers are also affected by rising imported feed.”

Åke Modig, however, warned against overdramatising the effect of the Euro referendum on Arla Foods.

“The Swedish krona will probably not fall a great deal if there is a “No” to the Euro,” said Åke Modig. “Moreover, Arla Foods does significant business in US dollars and British sterling, and the turnover in sterling will increase following the merger with Express Dairies. In this way, the milk price for Arla Foods’ Swedish and Danish co-operative members will be affected by the exchange rate fluctuations in USD and GBP. The exchange rate risk is substantial regardless of whether Sweden votes in favour or not, but a Swedish “Yes” will lessen the risk and make it easier to handle.”