The European Commission says the European dairy industry is in a relatively weak competitive position internationally. In particular, it says Brazil and the United States have strong competitive positions because both countries have fewer obstructions that increase their production costs.
For example, the total cost of milk production in Holland in 2007 came in at about $26/cwt, estimate economists at Wageningen University and Research Centre. The good news is that those costs have actually declined 7% from 2006.
The problem, as in much of the world, is that milk prices have not kept pace. In 2007, milk prices in Holland averaged $23/cwt. But that's still nearly a 20% improvement over 2006, when prices averaged less than $20/cwt.
The solution, say the economists, is for Dutch dairy producers to expand herd sizes to spread their fixed farming costs.
That, too, is problematic, says the Dutch Centre for Agriculture and the Environment. Expansions will be limited due to environmental constraints. More cows mean more environmental losses of phosphorus, nitrates and ammonia.