German organic dairy producers are facing a cost shortfall of 24%
According to a report from the European Milk Board (EMB), organic milk producers were paid an average of 48.66 euro cents per kilogram of milk for the 2020/21 marketing year. However, production costs amount to 64.39 euro cents per kilogram when producers receive fair compensation for their work. This means producers were short 24% of the cost of production. The income of farm managers and family workers is only 34% of the applicable collective agreements.
Between the 2016/17 and 2020/21 production seasons, organic dairy farmers spent an average 51.98 cents exclusively on farming inputs and general operating costs without wages. This means that farm managers and their families were left with 8.07 cents per kilogram of milk in hand as remuneration for their work. Converted, this means that the producers receive only 34% of the income based on applicable collective agreements set in the cost calculation. According to these facts, organic milk is by no means socially and economically sustainable.
The data on milk production costs in the German organic milk sector has been compiled by the German Rural Sociology and Agriculture Office (BAL) and is updated every year.
The Milk Marker Index (MMI) for organic milk charts the evolution of organic milk production costs. For the marketing year 2020/21, the MMI for organic milk was 96. Production costs for German organic milk producers were reduced by 4% as compared to the reference year.
The price/cost ratio shows to what extent producer prices cover milk production costs on organic dairy farms. In the marketing year 2020/21, the milk price only covered 76% of producers’ production costs, which means there was a shortfall of 24%.
Across Europe, cost calculations are regularly carried out as an average of all dairy farms and are not limited to organic production. It is very clear that conventional dairy farmers are not being paid cost-covering prices either.
In response to these shortfalls, the European Milk Board has called for a legally defined crisis instrument. The Market Responsibility Programme (MRP) observes and reacts to market signals, for example by temporarily adjusting production volumes in times of crisis, said the EMB report.
Source: thedairysite.com
