Find out why Dutch milk supply is dropping while EU production is growing. What does this mean for European milk prices? Check out the latest trends and market changes.
As the Dutch dairy industry struggles with falling milk production, Europe faces a curious paradox: a ‘milk lake.’ This situation, where there is an excess milk supply, highlights the complex dynamics within the European dairy market and broader agricultural trends reshaping the industry. This article examines the contrasting developments in Dutch milk supply and rising milk production across the EU, as well as the ‘milk lake’ implications on market stability and pricing mechanisms.
While the Netherlands has seen a continuous decline in milk output due to factors like the bluetongue virus and regulatory changes, countries like Poland and Germany are witnessing growth. According to ZuivelNL, the EU milk supply has grown by 1.1 percent in the first four months of this year, whereas the Netherlands’ supply has dropped by 1.3 percent. These opposing trends raise questions about supply management, market stability, and pricing mechanisms within Europe’s dairy industry.
Unraveling the Drop: Biological Strains and Regulatory Chains Impact Dutch Milk Supply
| Month | Milk Supply (million kg) | Change from Previous Year (%) |
|---|---|---|
| January 2024 | 1,100 | -1.2% |
| February 2024 | 1,050 | -1.0% |
| March 2024 | 1,200 | -0.9% |
| April 2024 | 1,180 | -1.5% |
| May 2024 | 1,150 | -1.6% |
The decline in the supply of Dutch milk stems from biological challenges and regulatory constraints. Last year, the bluetongue virus outbreak in autumn significantly impacted livestock health, reducing milk yield. This effect is evident in the 1.6% drop in May 2023 and a 1.3% average decrease over the first five months of 2024.
Compounding these biological issues are regulatory changes, specifically the phase-out of derogation, which historically allowed farmers to use higher manure levels to boost production. With stricter nitrogen emission and manure management rules now in place, the number of dairy cows per farm is capped, further limiting milk output.
In summary, combining the bluetongue virus and regulatory shifts, such as the end of derogation, has led to a notable reduction in Dutch milk production.
Diverse Trends in EU Milk Supply: Poland’s Surge Amid Ireland’s Struggles
| Country | Milk Supply Change (April 2024) |
|---|---|
| Poland | +5% |
| Germany | +0.6% |
| France | 0% |
| Ireland | -8% |
The European Union’s milk supply has seen a notable rise, with a 0.6% increase in April and a 1.1% growth over the year’s first four months. Poland’s impressive 5% increase and Germany’s slight uptick have significantly boosted the EU’s overall supply. However, Ireland struggles with an 8% decline, and France’s growth has stagnated. These contrasts highlight the complexities within the European dairy market.
Stability Amid Complexity: European Milk Prices Buoyed by Sustainability Initiatives and Bonuses
| Company | Price in May (€ per 100 kg) | Change (€ per 100 kg) | Sustainability Premium (€ per 100 kg) |
|---|---|---|---|
| Milcobel | 44.10 | 0.00 | 0.78 |
| Laiterie des Ardennes (LDA) | 44.10 | +0.50 | 0.49 |
| DMK Deutsches Milchkontor eG | 44.10 | +0.51 | 0.50 |
| Hochwald eG | 44.10 | 0.00 | 0.80 |
| Arla | 44.10 | +0.45 | 2.44 |
| Capsa Food | 44.10 | +0.06 | — |
| Valio | 44.10 | 0.00 | — |
| Savencia | 44.10 | -0.09 | — |
| Danone | 44.10 | -0.03 | — |
| Lactalis | 44.10 | -0.18 | — |
| Sodiaal | 44.10 | 0.00 | 0.29 |
| Saputo Dairy UK | 44.10 | +0.05 | — |
| Dairygold | 44.10 | +1.08 | — |
| Tirlan | 44.10 | +0.15 | 0.50 |
| Kerry Agribusiness | 44.10 | -0.19 | 0.10 |
| FrieslandCampina | 44.10 | +0.47 | 1.21 |
| Emmi | 44.10 | -0.62 | — |
| Fonterra | 44.10 | +0.32 | — |
| United States class III | 44.10 | -0.29 | — |
Since January, European milk prices have remained stable, around 44 euros per 100 kg. In May, the average was 44.10 euros per 100 kg, a slight increase of 0.07 euros from April. This steadiness is due to sustainability premiums and bonuses, including rewards for participating in sustainability programs, GMO-free milk, and other environmentally friendly practices. Such incentives buffer producers from market fluctuations and contribute to the stability of milk prices.
Global Dairy Dynamics: Diverging Trends Highlight the EU’s Stable Milk Supply Amid Global Volatility
| Country | April 2024 Milk Supply Change (%) | January-April 2024 Milk Supply Change (%) |
|---|---|---|
| Poland | +5.0 | +3.8 |
| Germany | +0.8 | +1.1 |
| France | 0.0 | +0.5 |
| Ireland | -8.0 | -6.5 |
| Netherlands | -1.6 | -1.3 |
In the global dairy market, trends vary widely among significant exporters. Australia has recently shown resilience with a 3% growth. Conversely, the United States and New Zealand faced declines, with the US seeing a slight decrease and New Zealand a more significant 4% drop.
The situation is more severe in South America. Argentina’s milk production shrank by 16%, and Uruguay’s fell by 7% in April, highlighting regional challenges. In contrast, the combined volume of significant dairy exporters, including the EU, saw a modest 0.3% increase (0.35 billion kg) up to April 2024. These trends illustrate the diverse fortunes and impacts in the global dairy market.
Market Dichotomy: Butter Price Volatility Versus Skimmed Milk Powder’s Competitive Pressures
| Product | Date | Price (€/100 kg) |
|---|---|---|
| Butter | 3/7/24 | 670 |
| Butter | 29/5/24 | 668 |
| Butter | avg. 2023 | 476 |
| Skimmed Milk Powder | 3/7/24 | 241 |
| Skimmed Milk Powder | 29/5/24 | 248 |
| Skimmed Milk Powder | avg. 2023 | 242 |
The European dairy market paints a nuanced picture of butter and skimmed milk powder prices. Butter prices saw significant volatility in early 2024, rising sharply from mid-May to early June before stabilizing due to unexpectedly cool summer temperatures reducing cream demand. This stabilization has introduced uncertainty into the butter market.
Conversely, skimmed milk powder prices have been relatively stable but face competitive pressures from cheaper US and Oceania imports. Demand unpredictability, especially in Asian markets, has also contributed to minor price decreases through June, highlighting ongoing challenges in the market.
The Bottom Line
The European market presents a mix of trends as the Dutch milk supply declines due to biological and regulatory challenges. However, the EU sees growth, driven by Poland, while Ireland faces declines. European milk prices, buoyed by sustainability premiums and bonuses, remain stable amid global volatility. Globally, the EU’s stability contrasts with declines in New Zealand and Argentina. These contrasting trends underscore the potential for growth and the need for innovation and collaboration within the global dairy sector.
The dairy sector is currently grappling with biological strains, regulatory burdens, and economic challenges, all impacting profitability and market consolidation. Smaller farms are particularly at risk. In this context, strategic adaptive measures and support systems are crucial. It’s a call to action for policymakers, stakeholders, and farmers to unite, using sustainability initiatives to counter economic strains and ensure food security. The industry’s resilience is evident, but proactive regulation, sustainability, and financial support are essential. A combined effort is needed to enhance dairy farming. This analysis underscores the need for innovation and collaboration within the global dairy sector.
Key Takeaways:
- The Dutch milk supply has continued its downward trend, recording a 1.6 percent decrease in May 2024 as compared to May 2023, attributed to the bluetongue virus and changes in derogation policies.
- Despite the Dutch decline, the overall milk supply in the European Union increased by 1.1 percent over the first four months of 2024, driven by significant growth in Poland and slight increases in Germany, while Ireland’s output fell sharply.
- European milk prices have shown remarkable stability, averaging around 44 euros per 100 kg since January 2024, buoyed by various sustainability surcharges and bonuses across different countries and companies.
- Globally, major dairy exporters illustrated mixed trends, with Australia’s supply growing, while Argentina and New Zealand experienced substantial declines.
- The Dutch dairy product market exhibited volatility, notably in butter prices, while skimmed milk powder prices faced competitive pressures from cheaper US and Oceania products, leading to slight decreases in June.
Summary:
The Dutch dairy industry is experiencing a’milk lake’ due to a decline in production due to the bluetongue virus outbreak and regulatory changes. The EU’s milk supply has increased, with Poland and Germany contributing to the overall supply. Ireland and France are struggling with declines. Sustainability premiums and bonuses contribute to market stability and milk prices. Global dairy market trends vary among exporters, with Australia showing resilience with a 3% growth, while the US and New Zealand face declines. South America’s situation is more severe, with Argentina’s milk production shrinking by 16% and Uruguay’s falling by 7%. Policymakers, stakeholders, and farmers must unite to counter economic strains and enhance dairy farming.
