Milk production worldwide came to a standstill due to the price fall in 2016. Supply and demand are now better balanced, but that balance is fragile. This is apparent from Rabobank Nederland's first Quarterly Dairy Report 2017, which will be published on Thursday 6 April.
The supply of milk decreased in Europe. This is a consequence of the European milk reduction plan. Production in the Netherlands also decreased slightly for the first time, namely by 0,7 percent in February 2017. Milk production also fell in other countries, but that happened before. In the second half of 2016, the decline in international dairy production was sharper. This has led to price increases widely.
The bank expects prices to remain stable for the coming quarter. This is due to the growing demand in Europe, the United States and China. Depending on the global supply increase, the market may remain in balance.
Record price difference between fat and lean
The price difference between butterfat and protein is most striking. The difference between skimmed and full-fat milk products has not been as great in the past 10 years as in the first quarter of 2017. This influences the payout prices of processors.
Dekkers observes a relatively large difference between processors. He notices that in the past six months more and more dairy farmers are refocusing on their sales. This trend is also fueled by the low milk price. The demand for milk fat is high, while the demand for protein is nil. Dekkers: 'We don't know what the drivers of the demand for butterfat are. We are still investigating this.'
Impact phosphate
The impact of the phosphate reduction plan on Dutch milk production is manageable. Dekkers expects that milk production this year will fall 5 to 6 percent, while the cattle population should fall by 10 percent. 'In the first quarter we see that there was hardly any less milking. That will gradually change in the coming months.'
Read here the complete Dairy Quarterly Bulletin.
watch here the interview with Marijn Dekkers.
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