Milk production falls due to phosphate regulations

Rabobank indicates in the update that the drought and the introduction of the phosphate rights system have shaken up dairy farming. The result of this is that total milk production will most likely decrease by 3% and will not exceed 2018 billion kilos in 14.

Rabobank also reports that the European milk price has risen in recent months to €35,71 per 100 kilos in October. However, this is still €1,82 per 100 kilos lower than in the same month last year. On the other hand, the bank expects that there is room for price recovery in the first quarter of 2019. This does not apply to the price of the milk fat, which is likely under pressure remains standing.

Milk production in the Netherlands is stagnating
The phosphate rights system has caused milk production to decline, the bank reports. In September, about 4,5% less was produced than in September 2017, but that decline has only increased further in recent months. Production in November was 6,8% lower than in the previous year. Over the entire fourth quarter of 2018, 5% less was produced. 

When we look at milk production in the European Union (EU), there is a visible decrease of 0,2% from September to October. The Netherlands appears to have the largest share (-5%). Production has actually increased in Poland, Ireland and the United Kingdom. Ireland even recorded an increase of 14,7% compared to last year. The bank expects production in Europe to decline further, by an average of 0,5% per quarter.

Exports from the EU also showed a decline; for example, cheese exports fell by 1,1%. However, this decrease is relatively small when compared to the decrease in butter exports, which amounted to 17,2%. The export of whole milk powder also fell sharply (-17%). The export of skimmed milk powder goes against this trend and actually shows an increase (+10,1%).

What about outside Europe?
Global milk production increased by 0,6% in the last months of this year. The growth mainly comes from New Zealand, where production in the first 5 months of the year was 6% higher than last year. The United States showed an increase of 2018% in the third quarter of 14, partly due to the favorable dollar. However, it is expected that American production in 2018 will show the lowest increase since 2013 (+1%).

Chinese dairy imports are expected to rise by 8%. Although that is much lower than the previously predicted 14%. Growth in Chinese dairy imports is also predicted for next year. Rabobank expects an import growth of 11% in 2019.

External effects
The dairy market suffered this year from the trade war between the US and China. As a result, cheese exports to Mexico (from the US) have fallen by 11%. In addition, total dairy exports to China decreased by 22%. 

However, last summer's drought also played a major role. As a result, Rabobank expects that Dutch milk production will also decline in the last quarter of 2018 and the first half of 2019. This has 2 causes: the suspected (rough) feed shortage and the high number of slaughters last year.