'Critical milk price back in focus after peak years'

A milk price drop of almost €10 per 100 kilos in two months is rare. Does this mean the liquidity calculations are still accurate?
"At the moment, they're still accurate, but that will naturally change quickly in this market. Fortunately, the decline is occurring during the cheaper months of the year, although that doesn't apply to leasehold businesses, which can still expect a hefty bill. Many businesses also face a substantial tax assessment after a few years of good earnings, which should be taken into account."

Do you also take into account the high manure disposal costs?
"Yes. I hope dairy farmers have already arranged their 2025 manure disposal plans. If not, you can expect higher costs than usual if the manure has to be moved into winter storage."

How are dairy farms doing financially after a period of high milk prices?
"There's almost no clear answer to that question, because the average company doesn't exist anymore. I know entrepreneurs who made a lot of profit, but there are also companies that didn't succeed. However, the majority are well-positioned. Not all liquidity has been invested, and most dairy farmers have a buffer to absorb the drop in the milk price."

"As a rule of thumb, I often use €0,10 per kilo of milk. The question, however, is: will the milk price drop even further? If the milk price remains at its current level, things will be fine. But based on the dairy market, that's not realistic. At the trade fair in Hardenberg, I heard processors predict a milk price between €40 and €45 per 100 kilos. In that case, I assume the forecast is at the lower end of that range, to avoid an overly optimistic picture."

So we will go through the critical milk price?
"That is a plausible scenario. The guaranteed price FrieslandCampina's target for November is actually already below that. Last year, the critical milk price was €46,50 per 100 kilos. On paper, that figure seems to be €1,50 to €2 higher this year. It should be noted, however, that the critical milk price also includes maintenance costs. Dairy farmers generally only replace the silage slab floor, for example, if they have financial leeway. In other words, if the milk price drops in 2026, the critical milk price will likely drop again. In any case, dairy farmers are wise to develop sound liquidity plans to avoid surprises. Adjusting such a plan is always possible, but this provides a basis for when, for example, the buffers are exhausted.

Regarding the remainder of 2025: a relatively large number of farms are still short on phosphate allowance. The phosphate price has now risen to over €220 per allowance. To what extent do they face a dilemma, considering the rapidly declining milk price?
Due to the shift in the calving peak caused by bluetongue, milk production increases again after the summer. This means many cows fall into a higher production class than usual. For farms with significant shortages, the calculations will certainly be tough. Some farms have shortages of over 1.000 kilos. Time is running out for them. If you want to reduce phosphate levels by one cow place at this time of year, you have to cull six cows. So, you have to drastically reduce the herd size.

An interim solution is to reduce the use of concentrated feed to lower production. This is possible, as roughage reserves are generally of good quality and quantity. Regarding the purchase of rights, I advise against looking too closely at the daily market, as phosphate is purchased for the long term. Not buying is not an option, as that would constitute an economic offense. In that case, you run a significant risk of a hefty fine that is guaranteed to be higher than the current phosphate rights price.