Battle for farmer erupts in rising market

The dairy market has developed positively in recent months. It is striking that the differences in advance milk prices have become smaller. Various dairy farmers appear to be taking advantage of the good market to placate their members with favorable milk prices. They want to bind dairy farmers to them or entice them to switch. "The battle for milk has clearly started," says Klaas Jan Osinga of LTO Netherlands. "For a farmer who is considering a switch, this period is the time."

It was only recently that the dairy market was in decline. Complaints were made everywhere, but on one farm the pain was clearly greater than on the other. Obviously, this is partly due to the cost, but certainly also due to the differences in advance prices that pay out to various factories.

Recovery
At FrieslandCampina, the recovery clearly started at the end of last year and Cono already paid a basic milk price of €2017 per 38,42 kilos for 100. This made the processor of milk into branded cheese also an emerging leader at that time. In fact, that price is higher than the basic milk price that Cono paid for July: €37,04 per 100 kilos of milk.
All right
FrieslandCampina pays its advance price as a guaranteed price, based on the payment of its competitors. The largest processor of milk and cheese in the Netherlands is therefore currently not on the top of the payment lists, but is coming along well. It will soon become interesting what the advance on the performance bonus will be when the half-yearly figures are presented.

Text continues below the graph.Payment prices in euros per 100 kilos of milk from 2015 to summer 2017 
Source: Milk & Feed Database of Boerenbusiness. Nl

Repair was needed
Major laggards at the beginning of this year were mainly DOC Kaas, Arla and Aware. Dairy watcher Mark Voorbergen explains: "The Russia ban, among other things, affected them and it takes time to repair that loss. Some companies had to go deeper financially to protect their members or suppliers against the consequences of the bad market in 2015 and 2016. When the market picks up again, some balance sheet repairs will have to take place before everything can be passed on to members and suppliers again."

Solid increases
DOC and Aware in particular are making significant adjustments from this spring, with significant increases in recent weeks. It is clear that the positive cheese market is doing these processors no harm. A dairy farmer like Vreugdenhil is currently having a relatively difficult time. With a basic milk price for July of €35,21 per 100 kilos, this party could not keep up with the pace of the competition. Vreugdenhil is therefore much more involved in powder, a market that is currently struggling.

Taking advantage
The fact that Aware and DOC are doing so well is because they are mainly active in the valorization of whey and in particular 'fast' cheese markets. These markets are currently doing very well. Parties such as Cono and Rouveen, which process more branded cheese, work on average with longer contracts and therefore benefit less or less quickly from the positive demand development.

Talking about taking advantage. The members of DOC and Aware are now also doing this. DOC and Aware are the leaders in August in terms of payout. Remarkably, these are also the parties that have been pulling the hardest on dairy farmers lately. Aware to gain some and DOC not to lose any more.

"Now is the time for switchers"
Both Mark Voorbergen and Klaas Johan Osinga, follower of the dairy market for LTO Netherlands, think this is not a coincidence but logical. "The battle for milk has clearly started," says Osinga. "For a farmer who is considering a switch, this period is the time."

"There is a very real chance that milk will be available in the coming years a relatively scarce one is going well," Voorbergen adds. "Especially with parties such as DOC and Aware, which still have capacity left to properly process and valorize more milk, it is logical that they try to retain farmers."