Shutterstock

News Milk

Liquidity remains a challenge on dairy farms

May 7, 2024 - Wouter Baan

Despite the increased payout prices in the Netherlands, Rabobank calls on dairy farmers to closely monitor liquidity. In the latest quarterly update, the bank indicates that no major increases are expected, while the manure disposal costs remain high.

The rise in milk prices in recent months has provided 'some breathing room' for dairy farms, but it is not the case that dairy farmers are currently making generous margins. Although feed prices have decreased, there are high manure disposal costs to contend with. Furthermore, ongoing challenges regarding manure disposal costs remain a threat, as stated by the bank. This situation requires individual dairy farmers to closely monitor their liquidity position.

The milk price is not expected to take major steps in the coming months, according to Rabobank. Small price increases are still possible, as seen in May, including at FrieslandCampina and Arla. Including bonuses and premiums, the milk price can approach €50 per 100 kilograms. Milk prices are also stable in other parts of the world, such as the United States and New Zealand. For New Zealand dairy farmers, the margin is so tight that it could also lead to liquidity problems there.

Milk Supply
Despite the higher milk prices in Europe, the milk supply is likely not to change significantly year on year. This is because dairy farmers in other countries are also facing uncertainty about future environmental and sustainability goals and pressure on their liquidity due to the late start of the season, according to bank analysts.

In addition, the start of the grazing season in European countries has been delayed due to the heavy rainfall this spring. Specifically for the Netherlands, Rabobank expects a smaller dairy herd, as the slaughter rate in the past period was over 6% lower than last year.

Wouter Baan

Wouter Baan is the editor-in-chief of Farmerbusiness and a market specialist in dairy, pork, and meat at DCA Market Intelligence. He also tracks developments within the agribusiness sector and conducts interviews with CEOs and policymakers.