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DOC Cheese offers fixed milk price, interest limited
Since the beginning of this month, DOC Kaas has offered its member dairy farmers the opportunity to market part of their production at a fixed milk price. This is a first for Dutch dairy farming. The announcement also comes at an interesting time. In Germany, parent company DMK has been offering its members the opportunity to cover price risks for some time, although there is not yet much interest in this.
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The aim of the fixed milk price is to give dairy farmers more certainty in their financial management. Instead of a milk price that can fluctuate monthly, DOC Kaas offers the possibility to fix a maximum of 30% of the production for a period of twelve months. The system works as follows: first, the DMK Group calculates fixed prices for twelve months each time based on the market value of the milk. The supplier can then decide whether (and which quantities) he offers at the applicable fixed price.
Participating dairy farmers do not have to trade on the futures market themselves. DMK covers the risks. The advantage of this is that participants do not have to pay extra if the value of the position falls.
German members are not yet in line
In recent months, the system has been tested in a pilot with fifteen members of DOC Kaas. "We were able to gain valuable experience with our test companies and design the system in such a way that it is as user-friendly as possible," says Jan Jaap Kuipers, manager of Cooperative Affairs at DOC Kaas. In Germany, DMK has been working with a fixed milk price since 2020, which now forms the basis for the system in the Netherlands.
However, the interest is not yet very great. A spokesperson for DMK says when asked that 20% of the German members have registered in recent years to be able to trade. This does not automatically mean that they structurally cover part of the supply. At what price level members of DOC Kaas can fix their volumes, the spokesperson cannot say. The prices are snapshots and also vary per trading slot, it is indicated.
In rising market
Nevertheless, the step that DOC Kaas is now taking can be called groundbreaking. In the Netherlands, DOC Kaas is the only processor that offers its members or suppliers the opportunity to cover price risks by means of a fixed milk price. In a market where processors are fighting over the milk, that is an advantage. However, the question is whether it will immediately take off among the members of DOC Kaas. In theory, fixing the milk price is more interesting in a declining market, while the current market is actually rising.
In addition to DMK in Germany, the Irish dairy companies Tirlan, Kerry and Lakeland Dairies also work with a fixed milk price, as do some French processors.