Analysis DCA Dairy Cattle Index
Corona causes dairy farmer's returns to drop sharply
The dairy sector has been hit hard by the coronavirus. This also has an effect on the returns of Dutch dairy farmers. In view of the traditionally expensive spring months, this is an unfavorable development.
At the end of 2019, the returns of Dutch dairy farmers took a positive turn. The DCA Dairy Cattle Index even managed to pass the 100-point mark (10-year average) for some time now. However, the good sentiment has turned like a leaf on the tree. The return fell well below the 10-year average after February. This trend has continued in the past month, so that the return is now well below the average at 64,8 points. That is a big downer compared to the past 5 years.
Coronavirus puts pressure on revenues
The dairy market is not yet yielding to the weight of the corona crisis, but it is heavy. The income side of dairy farmers is under pressure. Falling milk prices as a result of a lack of sales, and therefore building up stocks, are a thorn in the side of the dairy farmer. The average bare milk price has fallen below €33 per 100 kilos of milk, a decrease of more than €1,00 compared to last month.
Surpluses are not only created on the dairy market, but meat sales are also hampered. As a result, dairy farmers are left with calves that simply need to be fed. The calf price has been roughly halved. A month ago, a calf still yielded €100, now that is about €50.
Cost side continues to grow
The corona crisis is also counterproductive on the cost side. The calves that are kept longer also need feed and water. Also due to the previous dry summers there is only a limited supply of maize and silage on the feed market, which is why prices are high. More and more dairy farmers are forced to buy feed because the ration is running out.
With spring on the way, the most expensive season is also ushered in. The bills of contractors, among others, will simply have to be paid, as will the manure disposal costs. A bright spot in this regard is the upcoming drought, as this promotes the deposition of the manure. It does, of course, have a negative effect on the country's yields.
Outlook
The prospects are not good either. Although the decline seems to have stopped, the returns of dairy farmers will remain poor until the end of the year. It remains to be seen what will happen next.
Jorine Cosse
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