DMK offers supplier a fixed milk price

From November, the German dairy cooperative DMK offers suppliers the option of having 30% of the milk supplied paid out at a fixed price. With this, DMK tries to reduce liquidity risks at the suppliers. This step is not new in Germany, but until now major players did not offer this option. For the members of DOC Kaas, the fixed milk price is not yet an option. 

DMK signals increasing volatility in the European dairy market, which leads to fluctuations in the milk price. This creates liquidity risks for dairy farms. Since May 2019, DMK has therefore been experimenting with a fixed milk price. Since then, a pilot project has been running, in which 26 companies participate. The experiences are positive, which means that from November all 7.700 suppliers can store 30% of the monthly milk deliveries at a fixed price. 

Futures market
The fixed milk price is based on the futures market where butter and skimmed milk powder are traded. Based on the underlying value of the futures contracts, a fixed milk price is created that can be fixed for a period of 12 months. The suppliers do not have to act themselves, this is done by DMK with the help of third parties.

Not yet in the Netherlands
The southern German dairy cooperative Hohenloher Molkerei already offered the option of a fixed milk price. In Belgium, Colruyt Group offers dairy farmers a fixed milk price for part of their production for a period of 5 years. Fixed milk prices are also on the rise in Ireland and France. In the Netherlands, the fixing of milk prices is also increasingly discussed, but until now processors do not offer this option.

Also at DOC Kaas, which merged with DMK in 2016, a fixed milk price is not yet an option. "In the coming year we will gain experience in Germany. Depending on these experiences, we will see whether we can roll this out to the Netherlands. We will do this in consultation with the board and the members' council," says Geert Hartlief, manager of cooperative affairs at DOC. 

Wouter Job

Wouter Baan is Head of Meat & Dairy at BoerenbusinessAt DCA Market Intelligence, he focuses on dairy, pork, and meat markets. He also monitors (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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