The Economics of Dairy Farming in Germany S25
Hessian Department for Regional Development and Agriculture, D-34117 Kassel, Germany
|Livestock farming contributes about 60% to the
income of an average organic farm. Dairy farming is the most important livestock
enterprise on organic farms. Organic farmers are increasingly facing economic problems
because of the decrease of milk prices. Physical and financial performance has to be
improved. Data on yields and costs of organic dairy farming are required for farmers and
Physical and financial performance and total costs of production during the years 1993,1994 and 1995 are assessed on farms in Hessia and compared with those of farms in other regions A survey carried out among organic milk marketing organisations shows the range of prices and premiums for organic milk.The additional and total cost of organic production techniques as definied by rules and EC law are calculated for a sample of farms. Milk marketing through conventional outlets is compared with on-farm-processing and marketing of milk by farmers.
Athough organic farmers are increasingly facing economic difficulties, total cost accounting including implicit cost for labour and capital is still not very common on organic farms in Germany. Some farmers are not enough aware about the financial performance and total costs of their enterprise.The average premium required to cover additional production cost by organic dairies averages about 0,10 DM/kg of milk and does not fully cover the extra costs.The total costs of production excluding implicit costs in Hessia range from 0,45 to 1,2 DM/kg of fat corrected milk (FCM) with an average of about 0,60 DM/kg. The additional implicit costs for family labour and owner`s capital average about 0,25 DM per kg of FCM. The total costs of dairy production are very often not covered by the market price which averages presently about 0,72 DM/kg of FCM including organic premium. On a number of farms relying on dairy production, the long-term economic situation is critical.
The work leads to conclusions and gives recommendations how the gap between cost of organic dairy production and the price for milk can be filled. In few cases the financial performance can be improved by on-farm-processing of milk. The potentials for reduction of production costs and for increasing milk yields are high. Further on-farm-research and extension activities in financial and economic questions are of major importance.