Turnover in dairy farming sector up

04/12/2017 15:02
Turnover in the Dutch dairy farming sector rose by 30 percent on average over the previous three quarters compared to the same period last year. This is shown by a pilot study conducted by Statistics Netherlands (CBS) in which turnover was estimated on the basis of VAT declarations. The new research method makes it possible to identify current turnover developments in agricultural subsectors.

Total turnover by dairy farms increased by 40 percent in Q3 2017 relative to the same quarter one year previously. The two preceding quarters showed turnover growth as well. In Q2 2017, dairy farming turnover rose by 28 percent, versus a year-on-year increase of 22 percent in Q1.

Abolition of milk quota, plunging milk prices

On 1 April 2015, the milk quota system for dairy farms was abolished. This led to a substantial increase in milk production and number of kilograms of milk delivered to dairy plants. At the same time, the world price for milk dropped in the face of stagnating demand while the supply of milk (products) on the global market went up, especially from New Zealand. On average in 2015, the price of milk fell 22 percent below the level one year previously.

Milk production rose by nearly 7 percent in 2015 while the overall revenue from milk sales declined. As a result of lower milk prices, annual turnover in the dairy farming sector declined by 14 percent over this period.

Further increase in milk production

The production of milk continued to grow in 2016, when a record amount of 14.3 billion kg was delivered to the dairy factories. As prices continued their decline throughout 2016 (by on average 7 percent relative to 2015), total annual turnover in the dairy farming sector remained virtually unchanged (a 0.5 percent decrease). Over the course of 2016, the price of milk picked up again and it continued to recover in 2017.

Decrease in dairy herd due to Phosphate Reduction Plan

The sharp growth in dairy herd numbers following the abolition of the milk quota system led to phosphate limits being exceeded. In 2017, the Phosphate Reduction Plan came into force in the Dutch dairy farming sector. This should put a halt to further dairy herd growth and dairy farmers will need to reduce the size of their herds. Preliminary figures taken from the Agricultural census of 1 April 2017 show that the number of dairy cows has dropped by over 50 thousand; female young cattle have been reduced by approximately 120 thousand head. In 2017, milk production decreased by on average 0.7 percent up to the third quarter. Due to rising milk prices, the dairy farming sector saw an increase in turnover of 30 percent on average in this period, compared to the year before.

2017: fewer large dairy farms due to reduced size of herds

Due to dairy farm expansion, the share of farms with 120 dairy cows or more in total dairy farming turnover has increased further. This share of large dairy farms rose from 38 percent in Q3 2014 to 49 percent in the same quarter of 2016. In Q3 2017, the share subsided again as a result of farmers reducing their herd numbers: to 47 percent.