Hofstetter P.1, Haas Th.2, Sutter F.3,4, Albisser G.3 and Höltschi M.2
1Vocational Education and Training Centre for Nature and Nutrition (BBZN), 6170 Schuepfheim1/6276 Hohenrain2, Switzerland; 3AGRIDEA, Swiss Association for the Development of Agriculture and Rural Areas, Profi-Lait4, 8315 Lindau, Switzerland; pius.hofstetter@edulu.ch
Abstract
The autonomy with which Switzerland (CH) pursues its own agricultural policy imposes increased competition. In Central Switzerland (C-CH), 32% of the full-time farms are in the valley region (VR), 20% are in the hill region (HR) and 48% are in the mountain region (MR). In 2014 the average yield of the 3,275 Central Swiss dairy farmers was 7,913 kg of milk (ha and year)-1. A full cost analysis carried out from 2010 to 2014 at 421 farms showed that VR farms were more productive than HR and MR farms (75 vs 64 vs 46 kg of milk h-1 (working hour) respectively; P<0.01). The production (i.e. full) cost was lower in the VR and in the HR than in the MR (P<0.01). Labour income was higher in the VR and HR as compared to the MR (15 vs 15 vs 11 € h-1; P<0.01). In C-CH, creameries and small holder cheese factories play an important role in creating added value. A promising avenue of adaptation to today’s challenging conditions is the prospect of improving the efficiency of the value chain, i.e. by reducing production costs and producing niche products, including specialities (e.g. organics products) and brand merchandising.
Keywords: dairy industry, dairy farming, full costs analyses, productivity, value added chain, sustainability
Introduction
Central-Switzerland (C-CH) consists of six cantons. Forests cover 29.6% of the total C-CH area of 4,483 km2. Another 40.5% of it is covered by agricultural land, 6.4% is occupied by settlements and 23.6% is categorized as ‘unproductive land’ (Swiss Federal Statistical Office SFSO, 2015). In 2011, 4.4%
of the total working population (or 471,763 individuals) in C-CH was engaged in the primary sector (agriculture, forestry and fishery), 29.1% in the secondary sector (industry and handicrafts) and 66.4%
in the tertiary sector (LUSTAT, 2015). In Switzerland, especially in C-CH, the dairy industry plays an important role. The aim of this study was to investigate the evolution of the dairy industry from 2010 to 2014 and to evaluate, in particular, the production costs of dairy farms in C-CH under different geo-economic conditions.
Materials and methods
Data on agriculture, dairy farms and cheese factories were gathered from Milchstatistik (2014, 2010), TSM (2015) and the Central Switzerland Dairy Farmers’ Association (ZMP, 2015). Full cost accounting data was processed in accordance with VOKO-Milch + Schweine by AGRIDEA (2014). Statistical analysis was conducted in accordance with the R Core Team (2013). In order to make comparisons, the groups were reported by Bonferroni-Holm adjusted P-values.
Results and discussion
Analysis of farm size and structure: In 2014, 72% of all farms in C-CH were full-time farms. The average agricultural area of these farms (16.7 ha) was lower than the national average (21.2 ha), similar to Austrian and Norwegian farms and lower than the average European holding (Eurostat, 2015). These farms consisted of 86.4% of forage area, mainly grassland, and 11.8% of open arable land. In C-CH, the share of full-time farms in the valley region (VR) was 32%, made up of 4.8% organic farms. In the hill region
(HR), there were 20% full-time farms with 8.2% of them being organic and, in the mountain region (MR), there were 48% full-time farms with 12.5% of them being organic.
Dairy farms: From 2010 to 2014, in Switzerland the number of dairy farms decreased by 29% to 22,597, and milk delivery per ha increased by 6% to 6,089 kg ha-1. The average farm area also increased by 8% to 24.8 ha.
In the same period, in C-CH, the number of dairy farms decreased by 11% to 4,796. The yield achieved by the 3,275 ZMP milk producers rose 27% to an average of 147,713 kg (farm and year)-1 and by 17% to an average of 7,913 kg of milk (ha and year)-1. These numbers reflect the high productive intensity of C-CH dairy farms.
Full cost accounting: Milk yields and labour productivity (kg of milk h-1) varied across all regions (Table 1).
More direct payments in the HR and the MR could partly compensate for higher full costs, i.e. overheads (machinery, buildings and equipment) and internal overheads (wage entitlement) in these regions (data not shown). Labour income was significantly higher in the VR and the HR than it was in the MR.
Agricultural income from dairy farming was significantly lower in the MR when compared to the VR.
In the MR, there was a higher return from by-products (calves or culled cows) as compared to the VR.
In the VR and the HR, less than 25% of the dairy farmers earned more than 20 euros h-1. In the MR, less than 10% of the farmers earned more than 20 euros h-1. By calculating earnings at EUR 25.4 h-1 for the farm managers, the distribution of profits and losses shows that only about 12.5% of the dairy farms in the VR were profitable businesses, with even lower figures in the HR (10%) and in the MR (5%). In the HR, Table 1. Full cost analysis of dairy farms (mean ± SEM) in the valley region (VR), hill region (HR) and mountain region (MR) of Switzerland (without group farming).
Bookkeeping data from 2010 to 2014 VR HR MR Significance1
About half of these farms are in C-CH2 198 dairy farms 87 dairy farms 136 dairy farms VR vs VR vs HR vs
Costs and income per kg milk3 mean ±SEM mean ±SEM mean ±SEM HR MR MR
Farm size (ha) 29 0.9 25 1.3 22 0.9 * **
Number of cows (cows dairy farm-1) 35 1.1 28 1.2 21 0.9 ** ** **
Main forage area (are LAU-1)4 54 0.9 62 1.5 84 2.1 ** ** **
Working hours (labour) (dairy) (h y-1)5 4,031 83.8 3,847 123.8 3,800 86.2
Milk sold (kg farm-1 y-1) 249,720 8,656 186,700 9,478 119,645 5,613 ** ** **
Agricultural income dairy farming (€ farm-1 y-1) 47,351 2,526 43,692 3,200 37,451 2,657 *
from animal by-products (€ farm-1 y-1)8 6,094 460 7,689 680 9,381 803 **
Agricultural income total (€ farm-1 y-1) 76,868 3,425 76,437 5,186 57,727 3,396 ** **
1 *P<0.05; ** P<0.01%.
2 CH-C = Central Switzerland.
3 Actual currency 1 CHF = EUR 0.908.
4 LAU = large animal unit.
5 y = year.
6 i.e. direct, overhead and internal overhead costs.
7 By calculating EUR 25.4 per working hour for the farm manager.
8 Calves and culled cow returns.
VR and MR, the share of total agricultural income acquired through other on-farm productive activities, such as pig or chicken production, solar electricity, forestry or rented flat, was 43, 38 and 35% respectively.
From 2012 to 2014, the labour income (€ h-1) generated by full-time grazing systems in the VR, HR and MR was higher than that of feeding systems with half-day pasture by 53, 56 and 17%, respectively (Haas and Höltschi, 2015; data not shown). In the VR, organic farms generated labour incomes that were 53% higher than on conventional farms (e.g. with an ecological performance certificate). The labour income on farms with hay conservation systems (for cheese factories) was 25% higher than on farms with silage. In the HR, organic farms and farms with hay generated higher labour income by 47% and 29%, respectively. In the MR, the labour income on organic farms was higher by 18%, whilst on farms with hay conservation systems it was higher by 9%.
Milk processing and cheese factories: In 2014, within CH, 85% of the total milk production (4.1 million t) was processed. In C-CH, 545 million kg of milk was processed, mainly by two large creameries, in the form of cheese (54%), milk preserves (33%) and yoghourt and fresh products (7%). The rest was used for other products. However, the number of small cheese factory cooperatives has decreased from 139 in 2000 to 49 in 2014. Most notably, there was a reduction in hard cheese factories. This precipitous decline in hard cheese factories was due to changes in the behaviour of soft and semi-hard cheese consumers, which was in turn stimulated by the exportation of hard Swiss currency abroad and a shift in farm conservation systems from hay to silage, or the abandonment of milk production altogether in favour of beef production.
Limitations: The farms participating in the full cost analysis were not randomly selected. These data were collected from farms whose managers were attending further vocational training in dairy farming. We suspect that these farms may have an above average performance rate.
Conclusions
Small to medium-sized dairy farms have been placed under considerable strain by high production costs.
Productivity in all regions must improve in response to rising competition. For example, farms must shift to a pasture-based system, to organic farming, or to more cooperation, particularly with respect to farm mechanisation and the use of buildings. With increasing demand for meat worldwide, animal by-products will play an important role in the coming years. Furthermore, high returns from by-by-products and high income resulting from other branches of production will mitigate the income risk posed by high milk price volatility.
If cheese factories can create milk-based specialities and improve their merchandising in the worldwide marketplace (e.g. Emmi Kaltbach Switzerland), they could generate an above average milk price. Such a milk price would partially compensate for higher production costs.
References
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