'Europe will have a harder time than the US'

In terms of milk prices, 2018 will be a difficult year for the United States (US), but it could be even more difficult for Europe. That's what Mark Stephenson, a dairy analyst at Wisconsin University in the US, expects. "We are diving below €2018 per kilo in the first quarter of 0,30 and I think you will go even deeper."

With how much interest does an American analyst follow the European dairy market?
"With great interest. We have 'only' been active as an exporting nation on the dairy market for about 40 years. However, since that moment we have been following what is happening with you, and especially in New Zealand. In that country, we keep track of the weather reports on a daily basis, because we learned that the weather on the 'pasture-driven dairy island' has a significant influence on milk production. On average, Europe is slightly more like our production conditions."

"Logically, I mainly follow policy matters, such as the abolition of the milk quota and its effects. After April 2015, I was actually a bit surprised that so much more was being milked so quickly. Not specifically from countries such as Ireland and your Dutch, you could tell We expected, but that of all EU Member States together production increased so sharply so quickly. That the total supply on the world market could increase so quickly is something to learn from."

Like the rest of the US, the dairy sector has now been dealing with Trump's policy for 1 year. What is there to notice?
"The American government is not really aware of the dairy industry. Yet 2 Trump decisions have a significant impact. First of all, the immigration policy. How strict the policy is implemented differs per region. I hear many dairy farmers experiencing problems. Mexicans who work for them, do not always have the correct papers and they are arrested by checks, or they no longer come out of fear of this. Replacement staff is very difficult to get. New Mexicans logically hardly come anymore, unemployment is relatively low and the work on the dairy farms and in the dairies is not in demand."

"In addition, the cancellation (or postponement) of the trade agreements TTIP and NAFTA (North American Free Trade Agreement) plays a role. The first was immediately swept off the table. The second treaty is still being discussed, while many things had already been settled. Mexico and Canada are falling apart. under NAFTA and especially Mexico is an important buyer of dairy products. That sales market has really shrunk compared to 1 year ago, which is costing the industry a lot of money."

In the Netherlands, interest in trading via futures markets is growing. Something that has been commonplace in the US for years. What can we learn from you?
"In total, this concerns little product that is traded with futures, for example on the market in Chicago. However, it does offer us 2 advantages. It provides insight into the price formation and it works as an informal insurance policy. Dairy farmers do that here. especially through dairy cooperatives, comparable to the system that, for example, Glanbia has in Ireland. You can fix the milk price, for example for a maximum of 20% of your supply, for 1 year. Personally, I see it as a nice tool. We have learned that when once the dairy market is volatile, it won't go away. That's something you need to be very aware of."

Dairy companies in the Netherlands are looking for distinctive concepts. How do you think that relates to developments in the US?
"Organic dairy makes up about 5% of the market here (in terms of production). That's quite a lot, but the growth seems clear. Concepts are being fully developed, but most concepts remain a very small niche. GMO-free is also I have tried, but the same applies: it is a niche. For the time being, that is not really an issue here, just like with you in the Netherlands. Very different from, for example, Germany."

And the price formation of milk, how do you view it?
"I am pessimistic about that. The current average price here in the US in the last calendar year has been converted to an average of €33,35 per 100 kilos. That is a fairly good price. However, that price is clearly decreasing. The expectations are that we will amount to around €2018 per 293 kilos in the first quarter of 100. The price was good in the past six months, but it was difficult in 2015 and 2016. Not as difficult as with you and as in 2009, but the prices were too low to that is why most dairy farmers have been keeping more livestock for a long time. They earn little or nothing extra from a business economics point of view, but it is about bringing in cash. That is what keeps things going. worrying, but I do believe that my European colleagues are more concerned about your situation. You are exporting more and the demand for protein does not seem to match the current supply. In fact, we all have to,and the more exported countries the most, will feel more and more in price formation this coming year."

This article was recently published in 'Zuivelmarkt De Analyze 2017'. Click here to still receive the magazine.

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