Liquidity remains a challenge on dairy farms

Despite the increased payment prices in the Netherlands, Rabobank calls on dairy farmers to closely monitor liquidity. In the latest quarterly update, the bank indicates that it no longer expects major increases, while manure disposal costs remain high.

The increase in milk prices in recent months has 'given some relief' to dairy farms, but it is not the case that dairy farmers are currently making large margins. Feed prices have fallen, but this is offset by high manure disposal costs. Further challenges regarding manure disposal costs continue to loom, the bank writes. This situation requires individual dairy farmers to closely monitor their liquidity position.

Rabobank expects that the milk price will not make any major progress in the coming months. Small price increases are still possible, as were also visible in May at FrieslandCampina and Arla, among others. Including bonuses and premiums, the milk price can approach €50 per 100 kilos. Milk prices are also stable elsewhere in the world, in the United States and New Zealand. The margin is so tight for New Zealand dairy farmers that this can also cause liquidity problems there.

Milk supply
Despite the higher milk prices in Europe, milk supply will probably not change significantly from year to year. This is because dairy farmers in other countries are also confronted with uncertainty about future environmental and sustainability objectives and pressure on their liquidity due to the late start of the season, the bank analysts note.

In addition, the start of the grazing season in European countries has been delayed due to the high rainfall this spring. Specific to the Netherlands, Rabobank expects a smaller dairy herd, as the slaughter figure in the recent period was more than 6% than last year.

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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