Rabobank sees improving liquidity on dairy farms

Margins in Dutch dairy farming are improving as a result of the increased milk prices in recent months. And the cake is not over yet, because Rabobank expects the upward trend to continue until the end of this year. The bank also expects a little more breathing space on the tense manure market, now that the spreading season has been extended by two weeks.

This is stated in the quarterly reporting that Rabobank published today. This shows that the more positive sentiment in dairy farming is not only limited to the Netherlands. Milk prices are also rising in neighboring countries due to the more favorable dairy market. Milk prices recently passed the limit of €50 per 100 kilos and are expected to rise further.

According to the bank, rising milk prices lead to a slight improvement in the liquidity position on dairy farms. Overall, this is acceptable, despite the high costs for manure disposal that many companies are confronted with. All in all, the tone of the bank is different from a few months ago, when Rabobank still wrote that liquidity was a challenge at many companies. 

Milk price increase needed
The bank expects that the extension of the spreading season on grassland until mid-September will lead to a slight decrease in manure disposal costs. This does not mean that every dairy farmer can actually remove enough manure to empty the pits. The increase in the milk price is also desirable on other fronts. Dairy farmers may have to purchase roughage more often this year. Due to the late sowing, Rabobank expects a lower silage maize yield this autumn.

Global market
Milk prices are rising not only in Europe, but also in the United States. The Class III milk price was almost $20 per hundredweight (approximately €42 per 100 kilos of milk) in June, which is the highest since December 2022. Fonterra has also recently increased its milk price forecast.

Although milk supplies in Europe are declining, consumer spending also remains under pressure due to persistent inflation. Rabobank also foresees a favorable development in terms of export prospects in China. Although milk production in China is still increasing, growth figures are showing a slowdown. The first half of 2024 ended with an increase of 3,4% on an annual basis and for the second half of 2024, Rabobank expects an increase of 2% on an annual basis.

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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