Farm Ireland
Independent.ie

Tuesday 23 October 2018

The Dutch dairy dilemma - How dairy farmers in the Netherlands are coping with new phosphates regulations

Phosphates regulations led to 100,000 cows being culled in the Netherlands last year and may ultimately force some dairy farmers out of business

Jorrit Postma (31) has to make a vital decision in the next few months
Jorrit Postma (31) has to make a vital decision in the next few months

Chris McCullough

Phosphates regulations in The Netherlands are causing huge problems for around 800 farmers who face the harsh decision whether to invest in more phosphates rights or indeed sell up.

Jorrit Postma (31) is one of those who has to make that vital decision in the next few months, otherwise he will be forced to cut back his herd again and is fearful the banks will come calling in his loans that exceed €1.5m.

Back in 2008, Jorrit (pictured) took over the running of his uncle's dairy farm at Longerhouw in the Friesland province, after an accident claimed his uncle's life.

At that time the farm carried 30 cows with a 300,000kg milk quota but Jorrit was determined to expand his business and a few years later he got that chance.

Following the abolition of the EU milk quota system in 2015, Jorrit decided to expand the herd, taking out a loan of over €1m to build a new barn and install three Lely A4 robotic milking machines.

Today, Jorrit and his wife Frederika (29) milk 160 cows on their farm which extends to 47 hectares of land and run their 65 young stock on another farm that contract rears them.

However, with the herd's current phosphates production levels, Jorrit has 50 cows too many to meet his quota hence the young farmer's dilemma.

"When my uncle sadly passed away, my ambition was to grow slow and increase the herd to 200 cows," said Jorrit. "That was my goal. However, the most recent phosphates regulations have smashed my dream as I now find it impossible to expand and in reality I face the prospect of having to sell up just when I am really getting going.

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"The Dutch dairy industry has produced too many phosphates since milk quotas ended, so in a bid to reduce these levels the government allocated phosphate rights to each dairy farmer based on their 2015 herd sizes.

"By then I had started to expand and was allocated 5,000kg of phosphate rights, which was enough for 110 cows.

"As it stands, a cow produces around 45kg of phosphates per year so in reality I need 9,000kg phosphates rights for 200 cows.

"However, at the moment I have 160 cows which requires phosphates rights of 7,200kg so I really have 50 cows too many in the barn.

"With phosphate rights trading at €220 per kilogram I would need to invest another half a million euro in phosphate rights just to stand still with current numbers, but I cannot afford to do that."

Jorrit receives 35c per litre for his milk and estimates his costs at 33c per litre. Both he and his wife work outside the farm to try and increase income in order to make the farm viable.

"I work outside the farm as a consultant making €25,000 per year and my wife works, too. We receive €160 per hectare from the EU in subsidies which is around €8,000 per year. I employ two part-time staff which costs me a total of €40,000 per year.

"I have already acquired bank loans of €1m to build the barn which has to be paid back in five years, plus I took a loan of a further half a million euro to buy the farm from my uncle's family.

"My feed costs are around €1,200 per cow per year so when I add everything up and take €25,000 for my salary, I would have around €300 left to pay bills, which is impossible. What do I do?" he said.

Jorrit has sat down with his wife to ponder over the choices open to them but none of them are an easy option.

Investment

"On one hand I need to invest in more phosphates rights," said Jorrit, "but there is no guarantee my investment would be required long-term, even if I could afford it.

"I can reduce my cow numbers but then I would be in a position where I could not repay my loans with a smaller herd.

"Another option is to sell the dairy herd and go into sheep or goats or even rent the farm to a beef producer for a number of years.

"Or I could simply sell up, pay off my loans and walk away and rely on the incomes from my job and my wife's.

"However, this farm has been in the family for generations and it would be sad to see it go. On the other hand, who has the money to buy the farm and stock it?

"We have a huge problem here in The Netherlands and it's not going away any time soon," he added.

 

Young farmers the biggest losers from the phosphate quota system

Dutch farmers culled 100,000 cows last year in order to bring numbers down to meet the phosphate quota.

The initial target was 160,000 cows but farmers exported young stock and sold heifers to bring the total down to 100,000. This year, individual farmers may cull more to meet their own phosphates rights.

While critics say the current phosphates restriction 'quota' is entirely the Dutch farmers' fault as they were the ones who agreed to them in the first place, that does not help those new-entrant young farmers who are facing possible closure because of it.

When the milk quotas ended, Dutch dairy farmers immediately started to pump out more milk from their herds from more cows which in turn produced more phosphates.

The government struck a deal to stop the overproduction of phosphates in 2015. This agreement was made in order for Dutch farmers to retain their derogation which allows them to use 250kg of nitrogen per ­hectare instead of the normal 170kg per hectare.

On January 1 this year, the Dutch government allocated each dairy farm phosphate rights based on the number of cattle each individual farm carried on July 2, 2015 - the date on which the system was announced, less the previously announced generic reduction of 8.3pc.

Rights

Land-based farms with plenty of land in proportion to the number of cattle on them were exempt from this reduction, which was deemed necessary to keep phosphate production below the European maximum.

The phosphate rights can be traded, meaning that farmers wishing to keep more cattle will have to purchase these rights from dairy farmers who are reducing their livestock or ­terminating their dairying businesses.

The system of phosphate rights follows the Phosphate Reduction Scheme, which saw trade associations and the Dutch government agree to curb phosphate production in 2017.

Considerable reductions in livestock have already been made over the past year through this plan.

The most recent figures, from October 2017, indicate that the Netherlands was on course to reduce phosphate production below the national ceiling by the end of 2017.

According to the latest figures from 2017, there are 17,500 dairy farmers in the Netherlands milking 1.63 million cows, producing around 14 billion litres of milk each year.

Milk production last year averaged 8,706kg of milk per cow at 4.36pc butterfat and 3.57pc protein.

In total, Dutch dairying utilises 864,000 hectares in the country with each farm averaging just under 50 hectares each.

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