Dairy farm returns are on the rise

At first glance, the start of the new year is bad for the return on the dairy farm. Many milk prices tend downwards, while roughage and manure disposal costs are high. Nevertheless, the Countus Dairy Cattle Index foresees an increasing return in the near future.

The Countus Dairy Cattle Index has shown an upward trend again since the start of the new year. In week 2, the Index closed at 91,8 points, with 100 points being the 10-year average. At the end of December, the Dairy Cattle Index was still in 80 points. 

In practice, the uptrend is probably not yet experienced that way, mainly because the milk prices for January predominantly red. For example, the processors, who present the milk price in advance, have all implemented a reduction. Downsides were already visible in the fourth quarter of 2018.

Forecast points to higher returns
Nevertheless, the forecast shows that the return will return to the long-term average within a few months. On the market, the quotations of milk powders in particular show a rising† the price of skimmed milk powder (ZuivelNL) is clearly on the rise and has climbed this week by €50 to €1.880 per tonne. This is the highest point in almost 2 years. The price spurt is partly due to the fact that the intervention stock is almost finished. In addition, butter prices easily maintain the high levels.

These developments on the market are very likely to soon put a floor under milk prices. In combination with the lower milk supply higher milk prices later this year are not unlikely in northwestern Europe.

High manure disposal costs
Relatively little has changed on the cost side in recent weeks. Manure disposal costs in the south of the Netherlands are still above €20 per cubic meter and substantial price decreases will probably have to wait until the start of the spreading season. The roughage prices are also moving at high levels, due to tight supplies. Although lump prices still showed an increase in December, the expectation that the ceiling has now been reached.

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Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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