Global Milk Supply Insights: the Netherlands

The EU abolished milk quotas in April, but what is the state of play in other parts of the world? Rhian Price and Charlie Taverner of Farmers Weekly investigated effects being felt in the Netherlands, as well as in New Zealand, Canada, and the United States.

*17,600 dairy farmers in 2014
* Produce about 12bn litres of milk a year
* 70% of milk is exported
*About 20 dairy companies with farmer-owned co-op Friesland Campina covering 75% of the market
* Were part of the EU milk quota system until April 2015
* In 2013-14 milk year the Netherlands was one of eight countries to overshoot quota, producing 4% more milk than allowed. As a result they had to pay €133m (£96m) of superlevy fines

Many Dutch farmers are cautious about expanding cow numbers, with strict fines imposed for overproduction.

Willem Hessels, For Farmers Technical Manager, of the Netherlands. Photo courtesy Farmers Weekly
Willem Hessels, For Farmers Technical Manager, of the Netherlands. Photo courtesy Farmers Weekly

Currently Dutch farmers face penalties amounting to €27/kilo if they go over production. With current milk price about 30cents (£19/kg) a litre (22p/litre) it is not a profitable risk to take, says For Farmers Technical manager Willem Hessels.

“Farmers don’t want to risk penalties because it is too expensive.”

He concedes some farmers are taking the risk and are expanding numbers drastically, but the general trend is to get better not bigger, he says. This is being driven by the fact many farmers in the country are restricted from expanding.

While market regulations are currently halting expansion in the Netherlands, come 1 April other factors will prevent many Dutch farmers from increasing production, he predicts.

“Growing is something farmers want to do but farmers are limited by different factors.

“Milk factories would take the extra milk. But we have phosphate limitations so you must have plenty of land or must get rid of manure via a manure factory. The quota we will have come 1 April is a phosphate quota.”

On top of this he says banks are unwilling to lend money unless farmers are able to prove they’re running good businesses and land is limited.

“We’re a small country and we don’t have much land. In some parts of the Netherlands ground price per hectare is €50-90,000/ha (£36,000-£65,000). It is impossible to start a farm from scratch.”

Instead he says Dutch farmers are turning to streamlining production.

“The focus is more on optimisation and increasing milk production by focusing on youngstock management and the transition period.”

Mr Hessels says many farmers are nervous about what the future holds come next month.

“Quota was very expensive and it limited production, but we were used to it and everyone was clear about how much they had.”

Quota five to six years ago cost €2/kilo (£1.46/kg), but now the value is €0.

“Now farmers don’t know what is going to happen and they feel a little insecure.”

While quota abolition will allow farmers to grow their businesses he says it will also bring about price uncertainties.

“We do expect a more volatile milk price in the future.”

By: Rhian Price and Charlie Taverner of Farmers Weekly