How Dutch milk shortage turned into oversupply

The dairy year 2025 misled almost everyone, especially in Northwest Europe. At the beginning of the year, the expectation was that less milk would come. And particularly in the Netherlands. The dairy farmers seemed a bit despondent due to all the obligations they have to meet. However, the opposite appears to be true, as there is an abundance of milk in our country this autumn. A multitude of rules, mandates, and prohibitions is like a burden for them. In the Netherlands, government buyout programs seemed to cause gaps in the production capacity of the dairy sector. This perception stood until about the beginning of summer. Then things started to change. Second peak The rising milk prices paid by processors encouraged more milk production. This led to a second supply peak. Feed has been and still is relatively cheap. The weather is very good and the negative effects of a bluetongue virus on milk production gradually diminished. Since mid-summer, prices for basic dairy products have also been declining. Regular milk powders have had a hard time finding a profitable market for a long time. Especially in light of the high payout prices from the dairy industry. Cheese production performed better. Prices remained good for a long time and a great market was also found for whey. This still holds true, but now cheese prices have also undergone a series of significant price drops. Butter prices seemed for a long time resistant to disappointing market prices and poor sales. After all, there were still low stocks? That perception is also shattered, along with the additional support from a high milk price due to fat. Commodities in decline What remains are, admittedly declining, but still relatively good milk prices for dairy farmers. The question is how long this will last. Based on the current spot prices for commodity products (milk powder, butter, cheese), the average payout price per kilo might still be about 10 cents higher. This is partly because not all milk is processed into commodity products, but also into dairy with added value. Furthermore, a significant portion of the dairy is also sold under longer-term contracts, but it cannot be denied that the returns in the dairy industry are under significant pressure due to the decreased market prices. However, the industry cannot and does not want to confront dairy farmers too harshly with this situation, as there is currently a surplus of milk, but that is a temporary situation. The outlook for the longer term is that gradually less milk will be produced, due to restrictive regulations, business closures, and tight margins. The dairy industry simply needs the existing dairy farmers for the coming years and must be willing to make some concessions. In the current market situation, perhaps slightly 'too high' milk prices. But even then, competition remains. Those factories will be winners that can continue to pay the highest milk prices in the long run. Milk oversupply The current oversupply of milk also needs to be absorbed, although this causes problems as well. The large processors seem to be able to solve this easiest, although a company like FrieslandCampina is experiencing additional complications. Such as the temporary closure of one of the two factories in Borculo. As a result, a lot of milk needs to be sourced elsewhere. This is the aftermath of an incident on July 4 involving a wrongly unloaded cleaning agent. Factories that previously lost many suppliers or that already had limited own supply are now again overwhelmed with milk. For the smaller processors, it is more difficult to find a way out. Some of them are therefore also discussing long-term options, such as more intensive cooperation and even merging. Whoever it concerns, all available processing capacities are currently being utilized, but the margins are disappointing. It shows again that the dairy industry as a whole cannot handle significant supply fluctuations, especially not when most factories in neighboring countries are also filled with extra autumn milk. One question that remains is whether dairy farmers and/or the dairy industry could have done it differently? Especially since dairy year 2025 first unexpectedly brought euphoria, but subsequently ends with a hangover for various parties. How should it now continue in an increasingly deteriorated market for producers and processors?