Price of milk to rise less quickly in the long-term than expected

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Price of milk to rise less quickly in the long-term than expected

Gepubliceerd op
14 april 2015

The abolition of the milk quota on 1 April 2015 is leading to an increase in milk production. Milk production is expected to increase by around 17% in the next ten years in the Netherlands, and by 8% in the EU as a whole. This means that prices are rising less quickly than was first expected. In addition, a number of companies are facing the challenge of revising their strategy and implementing optimal and sustainable production development, taking into account the limiting conditions of the environment (manure). These are a few of the striking points in the study ‘What will happen after the EU milk quota system expires in 2015? An assessment of the Dutch dairy sector’, that LEI Wageningen UR published today.

The predicted increase depends on the expected market conditions (the trends in the price of milk in particular) and other factors that are decisive for the structure of Dutch dairy produce and an increasing demand in Asia. The prices for milk products have been on a higher level since 2006 and are expected to stay this way in the future. A higher rate of European production than was previously estimated by the OECD-FAO means that prices are rising less rapidly than was first assumed.

Milk production in Europe

Milk production is also expected to increase in the surrounding EU member states. Milk production is to increase in northern Europe in particular, with the exception of Scandinavia. The increase of milk production in Poland, Germany, Denmark, the United Kingdom, Ireland, Belgium and France is estimated to be at twelve million tonnes. There are also member states whose milk production will come under pressure. However, on balance, milk production in the EU will increase by approximately 8% in the coming ten years.

Fluctuating prices

As a result of production increase, the EU will export considerably more dairy products. This also means that the Dutch dairy sector will become more dependent on prices on the world market which can fluctuate substantially.