Milk price almost doubled in a year

Dairy farmer Erwin Wunnekink has dived into the books. Wunnekink has been paid around sixty euros per hundred liters of milk since this month, almost double the amount compared to last year. He has not seen such a high milk price since the eighties. His father-in-law was still running the business at the time. At that time he received about a hundred guilders for a hundred liters of milk. “This is unprecedented. It’s a madhouse.”

The dairy farmer from Haarlo, Gelderland, runs a dairy farm with 100 cows on 50 hectares of land and is chairman of the Dairy Farming Department at farmers’ trade association LTO.

The rising prices are caused by the decline in milk production in Europe, says Alfons Beldman, senior researcher in dairy farming, sustainability and entrepreneurship at Wageningen University & Research (WUR). The main reason for this for the Netherlands is the lower quality of the grass that the cows eat. Due to unfavorable weather conditions (cold spring and dry summers), it contains less energy and protein. “Cows give less milk because of this,” says Beldman.

Research Rabobank

Milk production in the Netherlands fell 2.3 percent in the first quarter of this year compared to the same period last year, according to a study by Rabobank into the global dairy market. This increase will continue in the second quarter, according to Rabobank. In particular ‘in parts of Zeeland, Limburg, the east of North Brabant and the south of Gelderland’ the decrease in milk production is large.

Farmers do not automatically benefit from the rising milk price, because the costs they incur themselves have also increased recently. Energy costs – fuel for the tractor and other machines on the farmland, power for the milking machines, the cooling system and the milking robot – shot up, says WUR researcher Beldman.

And because their own grass contains less nutrients, some farmers feed their cows more concentrates containing soy, grains and residues from the food industry such as citrus juice pulp. But concentrates have also become more expensive recently, mainly due to the war in Ukraine. And the price of fertilizer has doubled in the past year, according to Beldman. Moreover, says dairy farmer Wunnekink, farmers are less inclined to further optimize their farms and make investments due to the uncertainty caused by the nitrogen crisis.

Expenses for extra feed

Wunnekink hopes that he will have a little extra from the rising milk prices, but then it will have to rain more in the near future, he says. Because if the drought continues, his maize harvest will be disappointing, and he will incur even more expenses for extra feed. “That worries me.” Normally Wunnekink is left with about 50,000 euros if he deducts all expenses from his turnover. But if the price increase continues for the rest of the year, Wunnekink will have about 20,000 euros extra on top of the 50,000 euros, his bank calculated.

Dairy company FrieslandCampina has more than doubled its net profit in the past six months to 139 million euros compared to last year, according to half-year figures it published on Thursday. Net turnover is 1.1 billion euros higher than the first six months of 2021, 6.6 billion euros for the first half of 2022.

Up to now, consumers in the supermarket have not noticed much of the declining milk production, says Hein Schumacher, the chairman of FrieslandCampina, when explaining the half-year figures. The prices of dairy products have barely increased so far. The company has made few price increases to the supermarkets, because it is afraid that buyers will not buy the products due to increasing inflation.

Dairy farmers Erwin Wunnekink is curious about what the price developments mean for the long term. Will consumers avoid dairy products if prices rise? It seems unlikely to Wunnekink. Milk is in so many products, he says: “Yogurt, desserts, cottage cheese, but also cheese on pizzas, butter, infant food and medical nutrition. Many products contain milk substances.”