Market on standby for Dutch milk cut of 5-25%

The Dutch dairy industry has told the European Commission it will lose only 5% of milk production in 2017, due to culling 190,000 dairy cows.

Dutch Agriculture Minister Martijn van Dam: under intense pressure from farmers who must cut milk production at least 5%.

Dutch dairy farmers waiting since 2014 for better milk prices now have to cut numbers, even as the milk price recovers, so that the country can try to become compliant with EU phosphate limits.

Having increased production in 2016 by 8%, at an average milk price of 29c, Dutch farmers now have reduce production by at least 5%, even though their milk price has risen to 34c.

But unless numbers are cut, Dutch farms could be forced by the EU to slash their milk production by a massive 25%.

The Dutch situation is one of five key factors to watch in early 2017 that have the potential to impact global dairy markets, said analyst Emma Higgins in the recently released dairy industry quarterly report from Rabobank, the global agri-bank which has its headquarters in the Netherlands.

She said dollar currency moves, dairy produce affordability, Chinese buying, the Dutch situation, and Californian environmental regulations, will affect the market.

The Commission’s Milk Market Observatory has been told by the Dutch dairy industry the country’s dairy herd will reduce 10%, to return to its July 2015 size.

The average Dutch dairy farmer has 102 cows yielding about 8,500 litres, having increased cow numbers 19% and milk production 25% since 2011. But this growth has exceeded the country’s nitrates derogation from the EU by more than 100%.

Dutch farmers are furious at their government for not foreseeing that the end of milk quotas would land them in phosphate trouble.

A phosphate ceiling has been in place since 2006, but dairy farmers were allowed to increase their herds, resulting in the Netherlands leading growth in 2015 EU milk production, after EU milk quotas were scrapped in April 2015.

But their expansion brought phosphates 4-8% over allowed limits on Dutch dairy farms, with overruns in several of the years since 2008, and imminent in 2017 also.

The increasing dairy herd produces too much phosphate in its effluent, which contaminates groundwater.

Dutch Agriculture Minister Martijn van Dam has come under intense pressure from farmers over the phosphates issue.

Unless the EU agrees with the Dutch plan to rein in dairy farming, one third of the 1.5 million cows in the country may have to go, a major blow to Dutch farmers, who are the EU’s fourth-largest milk producers, generating an estimated €12 billion per year for the Dutch economy.

Farmers were allowed produce too much phosphates, even though staying within limits was one of the main conditions of a 2006 exemption allowing farmers in the Netherlands to spread the extra nitrogen fertiliser on which their intensive dairy industry is based.

That exemption expired on December 31, and farmers now depend on EU officials renewing it.

Even if the answer is yes in Brussels, farmers still have to get rid of 190,000 dairy cows, starting in March.

If the answer is no, without a nitrogen derogation, they will have to get rid of an estimated 500,000 cows.

Farmers and dairy industries around the world are closely watching the outcome, because a worst case scenario could knock 2% off EU milk production.



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