From Northern Ireland to Portugal, 89 farmers in the Atlantic area responded to a survey to assess the effect of external factors on the economic success of their business.
The online survey, addressed to the pilot farmers of the European Dairy4Future project, was carried out in spring 2020. A total of 34 Portuguese, 17 French, 16 Spanish, 11 Irish and 11 UK farmers were surveyed. Recruited for their technical and economic efficiency and their capacity for innovation, these pilot farms are not representative of the average dairy farm in their regions. Nevertheless, their answers highlight the challenges faced by European dairy farmers.
Type of dairy contract: the key to economic success for Irish and UK farmers
For the majority of surveyed farmers (64%), the type of dairy contract they have is favorable to their business. Several parameters that differ between countries and dairy operators must be considered when interpreting this result: the limited production volume, the price fixing mechanism, the period of commitment, etc. For example, all of the Irish farmers surveyed and ¾ of the UK farmers affirmed that they had no restrictions on the volume of milk they could produce. The answers also show disparities in the way prices are set. In Ireland and the UK, contracts with guaranteed milk prices or covering production costs have largely developed, while in France, Spain and Portugal they are still difficult to be deployed.
Bank loans: more or less favorable access conditions depending on the country
The decrease in bank interest rates is a favorable context for investments. The results of the survey show that 61% of dairy farmers say that the access to credit is favorable to their business. When asked about the qualifications of their bank advisor, French, Irish and UK farmers affirm that their bank advisor is at least specialized in the agricultural sector (or even dairy). In contrast, for ¾ of the Portuguese dairy farmers, the bank advisors are non-specialized. This result suggest a contrasting level of attractiveness of the dairy sector for banking organizations from one region to another.
High environmental constraints and a lack of political support according to Spanish and Portuguese farmers
Only one Spanish farmer in 8 considered that the current environmental standards are favorable to their business, compared to 75% of the surveyed Irish farmers. These contrasting results reflect the diversity of dairy systems and levels of intensification along the Atlantic area. In Galicia and the Spanish Basque Country, the large surplus of slurry is difficult to spread locally (few areas under cultivation) and it affects the profitability of farms (transport of effluents to other regions, investment in treatment infrastructures, etc.). The farmers’ responses also show a variable application of European legislative measures. Ireland and UK have a derogation from the ceiling of organic nitrogen that can be spread in vulnerable zones (170 kg N/ha), as defined in the Water Framework Directive.
As with environmental standards, there is a strong contrast in terms of the national policy’s effect on the economic success of farmers, depending on the country of origin. These results highlight very different national policy strategies since the end of quotas in 2015. Ireland, which has increased its national production by more than 40% in 10 years, has set up national strategy to support this expansion: establishment of training programs, creation of a health management organization, investments in processing plants, etc. A situation at the complete opposite of Portugal and especially the Azores, where all the farmers surveyed say that the national policy was not favorable to them and regret the lack of basic infrastructures (milking parlour, refrigerated tank, etc.).
Access to the land, agricultural equipment prices, availability of labor, public perception dairy farming: challenges faced by all livestock farmers
Access to the land is considered an unfavorable factor for the economic success of dairy farms, for 76% of the surveyed farmers. This result is closely linked to the price of land in the regions studied. In Spain, Ireland and the United Kingdom, the price of agricultural land is between 20 and 30 thousand euros per hectare. In the Azores, where 1/3 of the Portuguese milk production is realized, the cost of land reaches more than 40 thousand €/ha and the majority of the farmers are renting land.
Despite a favorable banking context for investments, the majority of the farmers surveyed also underline the high price of agricultural equipments (material, installations and buildings) which weakens the economic health of the farms.
Finally, farmers testify to the lack of recognition of their profession by the rest of society. The negative externalities of dairy farming are widely decried in the media, while the rendered services are poorly highlighted. This negative perception of dairy farming has serious consequences according to the farmers: lack of labor, decrease of attractiveness of the profession, evolution in the demand for dairy products, etc.
Dairy sectors that are organizing to support farmers
In response to the challenges faced by farmers, initiatives have been taken by sector stakeholders to improve the resilience of dairy farms. These are mainly solutions related to the nature of the dairy contract, for example by ensuring stability in the milk price paid to farmers, or by remunerating practices that meet consumers’ expectations ( increasing grazing time, GMO-free feed, improving animal welfare and biodiversity, etc.).
Regarding the financing of dairy investments, several original tools are being developed. In Ireland, for example, the development of flexible loans specific to dairy farming (e.g. MilkFlex) facilitates access to credit by adjusting repayment terms according to movements in the milk price.
Finally, research and development organizations also support farmers by helping them to make the transition to practices in line with societal expectations and/or regulations, and by enhancing the attractiveness of dairy farming to address the lack of labour.
[Survey] Are the following factors favorable or unfavorable to the economic success of your dairy operation?
Results expressed as % of respondents
For more information, please download the Action 5.3 report.
Download – 20210520_Dairy4future_D5.3