The two farmer-owned cooperatives are working together for the first time on the $58m plan, with Arla covering 20% of the funding.
Part of the joint venture agreement is the construction of the production facility in the western part of New York State, where the eight DFA-member farms that will supply the 70,000 tons of raw milk annually are situated.
The joint venture will be 70% owned DFA, which also holds the management role, 20% by Arla and 10% by the eight farmers who supply the milk. Thirty people are expected to be employed in the joint venture.
US production to enter cheddar market
Arla says that because the US market has a restricted import quota system for cheddar, its opportunity to export European cheddar is limited, therefore producing cheddar locally using American milk is a better solution.
The American market is one of six strategic growth regions identified in Arla’s corporate strategy ‘Good Growth 2020.’ Arla has stated that it aims to double its revenue from consumer sales by 2020, compared to 2014 levels.
Construction will begin in fall this year, with production expected to start in fall 2017.
Arla adding to US products
Arla’s current branded products in the US include Havarti, Gouda, Meunster, and Fontina cheeses produced at Arla’s US dairy in Hollandtown, Wisconsin, and imported cream cheese produced at Holstebro in Denmark.
“Adding cheddar to our US portfolio will make us more attractive to the retailers and help increase the sales of our European products made from owner milk,” says Peder Tuborgh, CEO of Arla Foods.
UK milk prices down
The announcement comes a day after Arla announced a reduction in its milk price in the UK, with effect from 1 April, by €0.01 ($0.01) per kg.
April also sees a new quarter’s (January – March) average exchange rate being introduced to the pricing mechanism and this has a 0.19 pence per liter negative impact on the milk price.
The reduction, coupled with the impact of exchange rates, reduces the UK standard liter price for conventional milk down by 0.94 pence (0.27 cents), to stand at 20.87 pence (29.6 cents).