'Milk price can return to 60 cents'

During the podcast, Loeters sat at the table with Arjan Schimmel (chairman of ZuivelNl) and Marijn Dekkers (dairy sector manager at Rabobank). Under the theme 'Netherlands Dairy Country, the trio was asked about the future of dairy farming. Various topics of discussion were discussed, such as trends in the dairy market, the long-term milk price, nitrogen policy, the expected shrinkage of the Dutch dairy herd and the upcoming House of Representatives elections.

An increase in milk prices is desperately needed
"The dairy market is currently rising rapidly. Based on the current commodity prices for butter, cheese and milk powder, we again arrive at a milk price between 45 and 48 cents," Loeters indicates. He expects a steady market until the beginning of the first quarter of 2024. These market expectations sound good to Schimmel, but an increase in the milk price is also desperately needed, according to him. "Right now, many dairy farmers are struggling to make ends meet." According to Schimmel, the higher costs for interest, manure sales and feed are particularly burdensome for many companies. As a result, the cost price has increased by about 7 cents per kilo of milk produced. In addition, many companies still face a heavy tax bill due to the good benefits in 2022.

Dekkers also notes that liquidity on dairy farms is declining, as a result of the high costs. "In the past we were happy with forties as a milk price, but at the current cost price level that is too little." Especially if you also look at the higher manure sales this year. The current milk price level is also not enough to break even." Dekkers does point out that the milk price was better at the beginning of 2023, making this year still reasonable on average.

According to Schimmel, a milk price of 40 cents has now become the bottom of the market, while farmers would often sign for this two years ago. "This illustrates the impact that inflation has had on dairy farming." Loeters believes that the milk price will not often fall below this level in the future, because dairy prices will also be structurally higher. Despite the fluctuations, Rabobank continues to calculate the company's own five-year average for financing applications, Dekkers said when asked. "We still think this is the best prediction. Based on recent years that is about 43 cents, but with current costs that is quite tight."

Milk price can return to €60
In the long term, the panel expects the milk price to rise again to 60 cents, as happened in 2022. "In the past I would have considered this level unrealistic. But if you saw how easily the milk price rose last year, this could certainly repeat itself," Schimmel expects. Loeters also believes that higher milk prices will return, although it remains difficult to predict the time. "As a dairy farmer, I would not base my financing on it," he soberingly warns. According to Dekkers, much will depend on how much milk is produced worldwide and whether prosperity allows society to pay higher dairy prices.

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