The Netherlands has pushed back the deadline its dairy farmers have to apply for the €615m voluntary extensification scheme that is to pay farmers for temporarily reducing cow numbers to January 2027.

The scheme will pay out up to €400,000 per farmer for a reduction of 10% to 20% of their dairy cows, with the payments aimed at cutting greenhouse gas emissions and lowering the country's slurry output as non-derogation stocking rates become mandatory for all farmers.

Those signing up must also relinquish the phosphate rights they needed to keep these cows.

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The herd must stay at the reduced size for a period of three years, with payments issuing annually and there have been 42 farmers that took up the offer since the beginning of June.

The scheme prevents participating farmers from increasing other livestock numbers beyond 2025 levels to compensate for lower dairy output and the farm’s grassland area must stay within 2% of the area it was before participation.

Payment per cow

Payment will issue at a rate of €1,606 per reduced dairy cow per year and phosphate rights compensation will be paid out a rate of €110 for each forfeited right.

The typical Dutch dairy herd of 110 dairy cows yielding an average of 8,300l per year can draw down payments totalling €187,000 over three years under the scheme if it cut numbers by 20 cows.

This would be split into three payments of just over €56,000 paid out each year for three years and a final sum of €18,000 after the three years conclude.

The farmer would be then free to either continue farming at the lower stock numbers after the final payment issued at the conclusion of the scheme or could return to the same cow numbers they had before the scheme started.

Herd rebuilding conundrum

The option of building numbers back up to pre-participation levels would necessitate the purchase of phosphate rights from the market.

Any trading of these phosphate rights has seen 30% of the rights taken out of the system by the Dutch government since 2025 when the trade occurs on the open market, as opposed to between family members.

Previous years’ trading regimes had taken away just 10% to 20% of traded rights.

Despite the extensification scheme only getting going, it is already expected that a chunk of the farmers participating in the temporary cow cull scheme will look to head to the market to snap up the production rights needed to rebuild their herds after the three-year scheme ends.

A new University of Wageningen paper examined this anticipated surge in demand and stated that the farmers looking to rebuild are more likely to be able to afford the rights than those looking to buy rights to expand, as those who are expansion-focused will likely need to invest in facilities to cater for higher numbers.

This paper states that the farmers due to be compensated for dropping numbers and surrendering phosphate rights may use their extensification payments to outbid farmers who didn’t enter the scheme to re-buy rights now to use once the scheme ends.

“Prior to confirming their participation in the extensification scheme, farmers are likely to anticipate whether they will rebuild their herds at the expiration of the scheme, and could include the expected cost to repurchase phosphate rights in their planning,” the Wageningen researchers said.

The demand for phosphates rights among the farmers who opted to temporarily cut numbers to avail of funding is anticipated to reach between 8 and 17% of the total annual openly-traded volume of phosphate rights.

The level of phosphates rights traded as a portion of all rights in existence generally ranges between 4 and 8.5% each year.