Analysis DCA Dairy Cattle Index
Dairy farmer's returns continue to falter
The milk price increases that were implemented in September are not sufficient to maintain the yield increase for livestock farmers. This is apparent from the DCA Dairy Cattle Index for October. Is corona getting a grip on the primary business level?
At the end of September, the DCA Dairy Cattle Index a big step up from 82 points (week 37) to 86,20 points (week 38). This was before most milk prices had increased. Unfortunately, the Index failed to sustain its upward trend. Until week 43 the number of points remained stable at around 86, but in the last week of October the Index nevertheless fell. In this week the return scores at 84,5 points, almost 2 points lower than in the week before.
With the development of the last weeks, the Index had moved towards the level of the 5-year average. Because the number of points is now deviating again, there is again a larger gap between the current level and that of the 5-year average. It is no longer 15 points difference as was largely the case this summer, but still just under 10 points. Is there a prospect of recovery?
Milk price increase
The decrease is striking in view of the milk price increases that have been implemented. Every milk processor from the Boerenbusiness Dutch Milk price calculator added a little extra to the September milk price. Despite this positive price change, the yield failed to maintain its upward trend. The price increase therefore does not outweigh the costs incurred by dairy farmers.
Dairy market and costs
There is still insufficient reason to state that corona is starting to get a grip on primary companies. However, the dairy market is clearly under the influence of corona. The lockdowns are doing another attack on the demand for dairy and to date there is little prospect of recovery. This problem eventually permeates at the company level, although this is still not a clear reason for the decline in returns.
It is possible that the prevailing uncertainty in the dairy country is having a negative effect on returns. It is also still not clear which definitive nitrogen measures will be rolled out for dairy farming. What is clear at the moment is the rising feed costs. For example, feed prices increase almost weekly. The roughage prices are relatively high for the time of year and also the chunk prices have been on the rise since October. The latter is because the prices of raw materials shot up at the beginning of this summer.
Outlook rotated 180 degrees
The outlook has looked positive in recent months. In the forecast of the DCA Dairy Cattle Index the points total rose to over 90 points in 2021. The tide has now completely turned and a trough is visible that will be able to recover more until mid-2021.
Jorine Cosse
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