Will global milk production continue to fall?

The EU recorded an increase of 0,4% in milk production for the month of March. This brings the supply to 13,67 million tons of milk. It is still a plus of 53.000 tons of milk, but a big step back compared to the pluses in the previous months.

Consciously produced less milk?
Does the sharp decline mean that dairy farmers have consciously started producing less milk? The answer to that question is necessary to answer the question of whether the remaining months of 2018 will continue to follow the current trend and whether the milk pool will therefore shrink.

In the first months of 2018, the milk price at the end of 2017 proved to be unsustainable and prices plummeted. For example, the milk price in the Netherlands for an annual supply of 600.000 kilos of milk is already between €30 and €35 ​​per 100 kilos halfway through the second quarter. The prices are lower, but not too low. Which means that there is no reason to slow down production. In addition, there are ample supplies of feed from dairy farmers feed prices which were still relatively low, especially in the first quarter.

Braking because of the milk price can therefore be crossed out. In the Netherlands, the introduction of the phosphate rights system can be used as an argument. However, this has not yet resulted in fewer dairy cows (compared to the last quarter of 2017), there was even a minimal plus in the first quarter of 2018. In addition, an increase in production per cow has been observed since the second half of 2017. At the same time, the regulations for France and Germany, the main producers of milk in the EU, are no reason to slow down.

The weather is disappointing
The reason why milk production in the EU shows only minimal growth is the weather. Although the EU is less dependent on grazing than New Zealand, its influence is significantly greater than in the EU USA (USA). A delayed spring, followed by periods of higher temperatures, has had an impact on grass growth, followed by the grazing season and finally the peak in milk supply.

The expectation was that the supply would increase Germany would break a record, but the high now remains near 2016 levels. Which is still one of the largest volumes of milk the country has ever produced. Braking in the supply was therefore not a conscious choice, but the result of disappointing weather.

Germany managed to recover in April, while the supply in France needed more time. Which gives the prospect of a stable plus in April and perhaps a slightly higher plus. This means that the supply in other countries, including Poland, remains good.

EU even more of a pacesetter
Now that the positives in New Zealand and the negatives in the US more or less balance each other out, the EU has become even more of a pacesetter. Meanwhile, parts of South America are experiencing setbacks in feed production (due to drought). At the same time, this also gives rise to higher feed prices in the EU. It could have resulted in less milk, but the rise in fat prices is starting to turn the tide the milk price to return again. 

The lack of further reductions, which will be exciting for some processors in June, is a clear signal that braking the milk supply is not immediately necessary. In the US one dominates lower milk price has been the playing field for some time, but for the time being the pluses in production per cow are making the decline in the livestock herd fade away. They also see that the market is in slightly better shape, which can stop further contraction.

Will there be less milk?
Will there be less milk in the coming months? Only if the weather causes setbacks, because there are no other arguments for less milk (to which a dairy farmer is sensitive). The downside is that there is no reason to believe that production will increase. The low milk prices of 2015 and 2016 have caused a lot of damage to the financial health of companies and the pain is not yet completely behind us everywhere.The growth in milk supply continues to decline every month.