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Dairy Industry

All About the Milk Price

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26.11.2019
District Assemblies gathered throughout November with 52 meetings in all. The dairy’s performance, the nominations for honorary posts, DMK’s future topics and changes to the Milk Delivery Regulations within the Milkmaster program were all subjects of intense discussion

Wherever they took place, the district assemblies all were shaped by the current dissatisfactory milk price and the DMK Group’s performance. Regional leaders shared overviews of the current dairy market and forecast stable, positive developments in the coming months. That trend will have a positive effect on the milk price if market developments continue and consolidate. The regional board or supervisory board then presented the DMK Group’s current situation. In all assemblies, this point was the subject of intense and occasionally heated discussion. It became clear that the length of the processes which are starting to deliver have tried the patience of farmers, and in some cases continue to do so. Although much of the criticism in the discussion was rebutted and many open questions answered, nonetheless, the members’ frustration was clear concerning the current situation and the below average milk price. DMK’s management and elected officers take these concerns very seriously.


The voluntary elected officers openly addressed the payout different of -0,89 ct/kg accrued up to and including September 2019 and compared this with eleven rival dairies, underlining the unhappy situation. However, it was also clear that the lower price was affected by extraordinary costs which occurred in 2019 but which will not apply in 2020. These included:

     

  • Completion and start-up costs at the Strückhausen plant
  • Necessary investments to build up the wage models in Georgsmarienhuette and Nordhackstedt
  • The closure of the Bergen plant on Rügen
  • The construction of a drying tower for special products in Beesten
  • The takeover of the Alete brand
  • Taking over parts of DVN in the Netherlands
  • Necessary organizational adjustments due to the loss of milk volumes.
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On this subject, Thomas Stürtz, Chairman of the DMK cooperative management board, told the assembly in Lintig, “The extraordinary costs we saw in 2019 will not affect 2020. In the year ahead we are looking at an entirely different situation in terms of costs. For 2020, the only larger planned investments are the completion of our second plant in Russia. This is profitable, thanks to the positive development of the Russian market and of our business there. All that means that paying a competitive milk price is a very realistic goal.”

 

"All that means that paying a competitive milk price is a very realistic goal.”

Thomas Stürtz

The company is focusing on improving DMK’s performance and so raising the price it pays for milk. At the same time, DMK needs to ensure its foundations remain financially solid. In this context, the voluntary officers presented the measures pursued at each of DMK’s business units. These are all wholly aimed at improving performance. One important point is continually reducing costs, and the new head of finance, CFO Dr. Frank Claassen, is chiefly pursuing these efforts. The main points on his agenda were presented at the district assemblies:

     

  • Significant savings in purchasing volumes
  • Keeping expenditure structures stable for overhead costs
  • Continue to reduce investments compared to 2019
  • Keep new hires in administration reduced to a minimum
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In the second part of the assemblies, regional managers and voluntary officers presented the planned changes in how members and the dairy work together. These were also the subject of thorough and critical discussion.

 

DMK future topics: fixed price mode, Milkmaster 3.0 and “myMilk”

The active test phase with pilot farms to secure milk prices for the coming months started in early October - and enjoyed much demand. The pilot phase is planned for four to five months. The core idea is to gather input about securing fixed prices and to make improvements. If the pilot phase is completed successfully, the roll out will follow for all of the milk providers at DMK. Dirk Schröder, a board member, told the assembly in Waren an der Müritz: “The present model to secure prices will be very easy and straightforward for we as milk producers to use. We will be able to hedge market prices offered for part of our milk volumes for the current year. That will really help us plan business at our operations - it’s a real innovation by DMK.” Alongside the fixed price model, milk producers were presented with Milkmaster 3.0 and “myMilk,” the new service platform, two further areas where DMK is focusing on the future. Milkmaster 3.0 further develops the current program which dates back to 2016, in the interests of farmers. And “myMilk” lays the foundations for digital services, which will significantly expand beyond the milk producers’ website Webmelker. 

 

Farm-gate price: modified presentation

With the milk price in September this year, the individual prices paid to farms was visible at a glance, improving transparency in the farm-gate price. The surcharges are combined in the milk price calculation and shown as a total. Milk producers can see the individual amounts which are listed below.

Adjustments to the Milk Delivery Regulations

Alongside editorial revisions, changes to quality assurance, product quality, and analysis of the milk delivered were in focus in the reformulation of the Milksmaster Program (annex 4) and the implementation of the QM milk standard 2020. Also, current legal requirements covering animal welfare and other adjustments are included. The new Milk Delivery Regulations will be sent to all milk producers at the beginning of December, together with explanatory notes that go into the details of the changes. The new version of the Milk Delivery Regulations takes force on January 1, 2020.

Election of the nominees

Voluntary engagement by members of the cooperative forms an essential connection between the milk producers and the company. For that reason, the regular election of the nominees for representative, substitute representative or council member played an important role at the district assemblies. Guided by regional leaders and regional voluntary members, lists of nominees were made and later voted upon. A full list of all nominees for representatives or substitute representatives will be available next spring for election at the regional assemblies

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