Slaughtering dairy cow no guarantee for less milk

Prices for corn and soybean meal rose in the VS in April to the highest point in 2 years. The price of alfalfa even reached a 3-year high. In combination with a small improvement in milk prices, this results in a margin that is under pressure.

Hidden pain
As a result of the developments, the slaughter in the US shows a lead of 5,1% (compared to 2017) up to and including mid-May. The market is asking whether the pain in the farmyard is not underestimated. More and more dairy farmers are leaving the sector. At the same time, this lays the foundation for a healthy future.

In New Zealand the reasons for slaughter are completely different. Fonterra's forecast for the 2018/2019 season should actually spur an expansion of the herd. Although they defy the market experts with an opening bid of 7 New Zealand dollars, and caused quite a few raised eyebrows, it is good news for dairy farmers. Provided they can maintain that price during the course of the season.

The slaughters in New Zealand are the result of plans to introduce the bacterium mycoplasma bovis into cows exterminate. Of the approximately 150.000 cows that will be forced to be slaughtered, half are dairy cows. Although it is still not clear what the source of the bacteria is, the plans are being continued.

The first slaughters will take place next year. It is not yet clear what this will do to the milk supply. It is certain that the plans will have a significant impact on livestock farmers. It appears that dairy farmers will choose not to decide until the New Zealand spring when to slaughter infected cattle. This is in the hope that new insights will emerge.

China is driving growth
The size of the dairy cow herd is under pressure in both the US and New Zealand. At the same time, China has announced a new plan to increase the level of self-sufficiency. The government will help with the financing and insurance of dairy farmers, as well as with obtaining the land to keep the dairy cows. This is to improve the quality of control and to raise national standards for raw and sterilized milk. There must also be a high-quality 'track and trace system' for the entire production process.

A third measure mentioned is the introduction of high-quality breeding cows and the setting up of national breeding farms. There is also focus on the cultivation of fodder crops. Both things should contribute to a higher supply of high-quality raw milk. 

Timing not favorable
All together should ensure that the reputation and quality of Chinese baby food will have improved significantly in 3 years. It is not the first measure that China has taken and it will not be the last. Milk in China yielded €3,1 per 2,8 kilos in April (44,60% fat and 100% protein), according to the Italian Clal. It is a fairly average price, but one that decreases every month. In combination with rising feed prices, this actually turned against the plans. 

After China, eyes turn to Mexico. Traditionally an important buyer of American dairy. Although it was a bit quieter in this region for a while, there is now some rumbling between the two countries. It offers good opportunities for European sales pork, but also for cheese. Opportunities that the American sector sees evaporating, which could cause even more tension in the pricing of milk. For example, in Wisconsin alone, exports provide sales space for 1.500 dairy farmers.  

Trends that have already started, in combination with unexpected developments, have resulted in better maps for the European Union. However, we continue to pay attention due to the turbulent nature of the global market. Yet the starting position of dairy farmers in Europe appears to be slightly better than that of their colleagues in the US and New Zealand.