Dutch dairy farms getting ready for end of milk quota

Writing in the latest issue of the UF Dairy Update, University of Florida dairy scientist Albert De Vries, on sabbatical with the Business Economics Group at Wageningen University in the Netherlands, offered his view of dairy farming in the Netherlands, and the impending end to European Union milk quotas on April 1.


The Netherlands is prosperous country in Western Europe, home to 17 million people. The Dutch live on just over 16,000 square miles. With 1,054 people per square mile, it is one of the most densely populated countries on earth. In comparison, Florida has about 353 people per square mile. Holland is the name of the historically most influential western part of the country where cities like Amsterdam, Rotterdam and The Hague are located. Today, North Holland and South Holland are just two of the 12 provinces. Friesland, the ancestral home of the Holstein-Friesian dairy cow, is another province.

The Netherlands has a moderate maritime climate, with cool summers and mild winters, and typically high humidity. Average low is 33'F in January and the average high is 73'F in July. Rainfall is about 33 inches per year and is distributed relatively equally across the months. The clay and sandy soils are fertile which make grass growth during the spring, summer and fall abundant. No wonder dairy farming has always been part of agriculture here.

Dairy farming is big business in the Netherlands. The country is home to 17,800 dairy farms, 1.55 million dairy cows and 0.28 million dairy goats. They are housed on farms that occupy 4,633 square miles of grassland and maize (28% of the surface area of the Netherlands). The cows produce 2.7 billion lbs. of milk in a year, which is processed by 22 milk processing companies in 51 dairy factories. Dairying provides 60,000 jobs in production, processing, wholesale and retail. In 2013, 66% of Dutch milk was made into cheese and 65% of Dutch milk production was sold abroad, where the EU was the most important market.

The most common breed is the Holstein, which today has a large dose of U.S. genetics. Average production in 2014 was about 18,500 lbs./cow with 4.4% fat and 3.5% protein. The reason for the lower volume – but higher components – is the milk payment system that for decades penalized milk volume and rewarded components. The Dutch breeding program adapted to this pricing scheme.

Typically, cows are milked 2X where cows are milked within a few hours in the morning and a few hours in the evening. About 2,000 Dutch farms have adopted automatic milking systems (robots). Cows are housed indoors in free stalls from about November through April when grass growth has slowed down and it gets colder outside. From April to October, most cows are spending at least part of the day grazing and will consume a large part of their dry matter from grass. They may be housed indoors at night.

Currently about 30% of the cows are always housed indoors without access to grazing, mostly on the larger farms that strive for a higher milk production and more management control. The number of cows that stay indoors only is increasing, and was just 10% in 2001. The general public, however, is of the opinion that cows should be outside grazing, at least when it is not winter. Part of this desire is cultural, because most people are familiar with seeing cows outside in the summer. Another part is a strong public opinion about animal welfare and the belief that cows that graze live more in their natural habitat than cows that have to stay indoors all the time. Several larger milk processing cooperatives therefore give premiums of about 50¢/cwt. to farmers that graze their cows. Their goal is to secure a license to produce and market milk "from cows that graze."

Dutch dairy farms are preparing for the abolishment of the milk quotas in the European Union on April 1, 2015. Milk quotas have been in place since 1984. Because the EU policies stimulated milk production until that time, more milk was produced than could be consumed. Export subsidies became too expensive. The implementation of milk quota limited the growth of milk production and the cost of the EU dairy program. Based on their historical milk production, dairy farms were assigned a penalty free milk quota in 1984. EU legislation has increased the milk quotas several times to keep up with demand. Milk quotas also have been freely tradable and could be leased between farms. Virtually all dairy farms fill their milk quota annually. Surplus milk is penalized such that it is not profitable.

The abolishment of the milk quotas is expected to results in a slow and modest growth of Dutch milk production. The low milk price forecasts for 2015 will not immediately encourage an increase in milk production anyway, even if farms could. The main limiting factor, however, is the strict environmental legislation that is primarily based on phosphorus and increasingly also on nitrogen. Most farms are already limited by their farm's environmental constraints.

Recently a new law was passed that allows dairy farms to expand only when they have room to produce more manure within their farm's environmental plans, or when they process the extra manure. Processing entails that the extra phosphorus is eventually exported outside of the Netherlands. One example of how to do this is through the use of bio-digesters and the production of phosphorus rich pellets that can be easily and affordably shipped long distance. This process is still expensive and margins are currently not large enough to make it profitable for many farmers to have their excess manure treated.

Future legislation this year will likely also make a dairy farm's herd expansion conditional on the availability of enough land on the farm. This request for further legislation comes directly from farmer organizations which are keen to preserve the social license to produce milk and want to limit the intensification of the dairy sector.

My reading of all this is that dairying will remain strong in the Netherlands in the foreseeable future. The climate is favorable and the dairy sector is innovative, forced through high labor cost and strict environmental legislation. Dutch dairy farmers are optimistic about the end of the milk quota in April 2015.

Contact Albert De Vries at devries@ufl.edu.



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