In a letter to their member dairy farmers, FrieslandCampina’s Board addresses the way of working and consequences of the Dutch national phosphate rights system. FrieslandCampina calls on all its members not to produce more phosphate than is covered by the phosphate rights of each dairy farm and to spread the milk supply throughout the year as much as possible. This will prevent not only a potential imbalance between milk supply and processing capacity, but also a potential standstill of the milk supply.
Effective 1 January, 2018, there will be a phosphate rights system for dairy cattle in the Netherlands. The challenge will be for each dairy farm to annually align its dairy livestock and the phosphate production per cow to the available – and purchased – phosphate rights, and to spread production over the year as much as possible. If the phosphate production is too high in the first half-year, it will have to be compensated by a lower phosphate production and, hence, a lower milk production and/or a smaller livestock in the second half-year.
In August, FrieslandCampina carried out a survey among its member dairy farmers as to the expected milk production for the period from 1 October 2017 through 1 October 2018. The survey shows that the number of phosphate rights the member dairy farmers aspire to take over is many times higher than the number of rights actually for sale. Furthermore, they indicated that they wished to increase the number of milk-producing cows at their farms by adjusting the share of their young livestock.
FrieslandCampina’s processing capacity and the capacity it has contracted from third parties in 2018 appear to be sufficient to be able to process the milk supplied by all its members, based on the assumption that all FrieslandCampina members will stay at or below the statutory level of the phosphate rights system and that they will succeed in reducing the peak supply from January through May 2018 by ensuring a more steady milk supply throughout the year.
Since the abolition of milk quotas on 1 April 2015, the supply of farm milk has risen sharply in the Netherlands. FrieslandCampina has invested considerably in processing capacity these past years, consistent with its route2020 strategy. In 2018, its processing capacity will again exceed that of 2017.
Should it turn out not to be possible to prevent any imbalance between milk supply and processing capacity, FrieslandCampina will announce a temporary standstill for the supply of milk. The details of a possible standstill scheme will be developed over the coming weeks.