Milk quota

How should EU farmers invest in a post milk-quota world

After more than 30 years of milk quotas in the EU, a new world is approaching for European dairy farmers. We have known about the lifting of quotas for some several years and plenty of predictions have been made but reality is about to hit. Here are the likely outcomes from a DeLaval perspective.

It is worth noting first some overall trends that are widely accepted in the farming community.

Milk prices will continue to be a major factor and their current low levels will probably keep growth at a modest level in Europe this year even without any legal restrictions on production. In the longer term though we expect EU countries to benefit from higher dairy exports. It’s worth noting that there is a strong international demand for dairy products from key important regions and European farmers can benefit from that.

Farm consolidation is another trend that is only likely to continue. Small family farms will continue to decline but most experts don’t expect that reduction to be any different to the general trends that we’ve seen over the last 30 years when quotas were in place.

Production goes up on efficient farms with low production costs

EU production is expected to become increasingly concentrated in regions with lower production costs and where farmers and dairies have invested most in additional capacity such as Denmark, Germany, Ireland, France, the Netherlands, Poland and the United Kingdom.  More milk in Europe means more capital investments in milking systems and cooling tanks, equipment and software that improves productivity and allows for bigger herds and an entirely new farm set-up driving further farm consolidation.

Due to the larger farm sizes expected across Europe, DeLaval foresees an increased demand for the automation of milking, herd monitoring and feeding processes with a need for integrated solutions in roughage feeding, cooling and herd management to improve control and increase farm profitability.

Dealing with high labour costs

In Denmark, the Netherlands and possibly the UK, higher labour efficiency is a key driver for further investment. However, in countries such as Denmark, the existing production infrastructure may well be sufficient for large production growth. As the price of land and labour increases, the milking industry will require more automation and farm management systems.

Central Europe

Dairy farmers in Central Europe are expected to increase demand for turn-key projects, ie a new farm built from scratch or a complete overhaul of an old farm. These new projects will likely include integrated farm management systems, service concepts and labour-efficiency solutions. Delaval expects European farmers to further invest in infrastructure and equipment to become more efficient.

Europe’s biggest beneficiaries

Dairy farming developments in Germany, Ireland, the Netherlands and Poland are expected to be the most dynamic.

In countries such as France, Germany, Ireland and Poland, production growth can largely be achieved by higher levels of specialisation and higher cow stocking rates.

Environment and Sustainability

Environmental constraints will play a major role in further farm consolidation in the intensive dairy farming regions of Europe. Attention to animal welfare and sustainable dairy farming will further support investments into products, consumables and consultancy services.

The main driver for higher yields overall will be the increasing number of milking robots. The sustainability of our customers’ operations can be improved even if they become more productive.

How should each individual farmer decide how to invest

Every farm has its own unique situation with specific preconditions and factors. The lifting of the quotas will affect all farmers in Europe and even outside of the EU and the above trends are a useful hint to help farmers consider their options. DeLaval offers today the entire range of products and solutions regardless of farm size, conditions or location. For more advice on what is most suitable for your needs, please contact your local DeLaval representative. For further questions regarding milk quotas, contact our business intelligence team at DeLaval