Rabobank: milk price artificially maintained

According to Rabobank, the fact that milk processors are looking for new members or suppliers is one reason why milk prices have still not been reduced. But in the end, a fall in the milk price is a matter of postponement instead of cancellation, the lender indicates in the latest market update.

2022 is an exceptional year for dairy farming, the bank concludes, referring to the high payout prices. And although the costs have also increased sharply, the bank speaks of a high return. Milk prices this year rose above €60 per 100 kilos, far surpassing existing records.

Although dairy prices have fallen, milk prices will end the year at a high level. According to Rabobank, this is because many processors are looking for new members or suppliers to secure the raw material position for the future. In the future, Rabobank envisages a dairy farm that will be smaller in size, with fewer emissions and a more extensive set-up. 

Early 2023 drop in milk price
In order to bind members or suppliers, setting a high milk price can contribute to the decision to switch, the Rabobank says. But postponement does not bring adjustment. Rabobank expects milk prices in the Netherlands to be adjusted downwards in early 2023. Due to price reductions on the dairy market, a decline cannot be avoided, although the milk price remains at an above-average level. In 2023, milk prices are expected to be between €45 and €55 per 100 kilos of milk. This means that major corrections are lurking in the coming months. Rabobank also expects falling milk prices at a global level.

The pressure on dairy prices is partly due to the increased milk supply. Particularly in the Netherlands, dairy farmers have increased production. In addition, consumption is under pressure due to high inflation. Another cause of pressure is the lower export figures to China. The Asian country is importing fewer volumes due to higher stocks and the stagnating economy.

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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