the competitiveness of latvian dairy farmers on a european ... · net exporter) latvia milk price...
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29/11/2018 © IFCN 2018 | 1
The competitiveness of Latvian dairy
farmers on a European scale
IFCN Dairy Research Network, Kiel
Johanna Scholz,
Dairy Analysis Team
29/11/2018 © IFCN 2018 | 2
Outline
1. Production
2. Prices
3. Farm structure
4. Farm level – IFCN farm comparison data
5. Summary
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Change of Milk Production
Latvia EU-28
Quota abolishment
Quota
2018 drought: Latvian milk production drop stronger than EU-28 average
2015/16: Drop of milk volumes in Eu-28, Latvia ?
Milk price crisis
Drought
Quota
Milk price crisis
Drought
Data source: IFCN Monthly data, covering 62 countries + real time estimates (Data until Nov. 2018)
Year-on-Year Change, in %
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0
5
10
15
20
25
30
Malta
Cypru
s
Luxem
bourg
Cro
atia
Slo
ven
ia
Gre
ece
Esto
nia
Slo
vakia
Latv
ia
Bulg
aria
Lithuania
Port
ugal
Hung
ary
Fin
lan
d
Cze
ch R
epub
lic
Sw
ede
n
Austr
ia
Belg
ium
Rom
an
ia
Denm
ark
Spa
in
Ire
land
Italy
Pola
nd
Ne
therland
s
United
Kin
gd
om
Fra
nce
Germ
an
y
28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1
Eu-28 Milk Production
+13% -16%
+50%
*percentage growth 2017 vs 2007
EU-28 milk production in mill t ECM, 1997-2017 +14%
+13%
+14%
Latvia 2017:1 mill t ECM milk
produced (0.6% of EU-28)
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0
1
2
3
4
5
6
7
0
50
100
150
200
250
300
1996
1998
2000
2002
2004
2006
2008
2010
2011
2012
2013
2014
2015
2016
2017
t / h
ead
/ y
ear
1,0
00 h
ead
National herd size and average
milk yield (cow, buffalo)
Number of milk animals
Average milk yield0.0
2.0
4.0
6.0
8.0
10.0
12.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
milk
an
ima
ls /
fa
rm
farm
s in
1,0
00
Farm number and size
Farm number
Average farm size0.0
0.2
0.4
0.6
0.8
1.0
1.2
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
mill. t
EC
M
Milk production
Milk not delivered to dairies and milkfrom other animalsMilk delivered to dairies
Milk supply drivers
Latvia: Growth driven by yield
-86%
+312%
-45%
+95%
Delivery share increased to 80% in 2017
+14% growth in milk volume achieved via productivity growth (2017:6.7 t/head/year (EU-28:7.2))
Herd size and milk yield Farm number and size Milk production
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Average dairy farm size per country
Source: D3.7 – IFCN Annual Farm Structure Data with time series and forecast
2017 vs 2007
Latvia 10 +5
Lithuania 7 +4
Finland 40 +18
Germany 64 +23
France 59 +19
UK 146 +33
CZ 211 +50
Global average: 3 cows per farm
EU-28 average: 19 cows per farm
Latvia farm size below Eu-28 average
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Small farms “Household farms” Key characteristics: Small farms 1-3 cows, dairy is one income source,
50% of the milk is consumed on the farm, 50% sold.
Key driver: Selling milk provides daily cash for family needs.
Medium farms “Family farms” Key characteristics: Work is mainly done by the family,
size in developed countries 10 up to 100/300 cows?
Key driver: Generate an income.
Large farms “Business farms” Key characteristics: Work is mainly done by employees,
size in developed countries > 300 cows?
Key driver: Generate the expected ROI.
Source: D3.7 – IFCN Annual Farm Structure Data with time series and forecast
Farm ownership & their key drivers
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16% of world milking animals in >100
classes
225,000 Business farms in 2017
Family farms own 21% of world dairy
animals
Households dominate with a share of
62% of world dairy animals
2017
Source: D3.7 – IFCN Annual Farm Structure Data with time series and forecast
Farm structure status 2017 IFCN Farm Structure Database >90 countries
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Structural changes in dairy animal numbers % dairy animals per IFCN Standard Classes
EU-28 Latvia Estonia
Moving from family to
business farms
Status 2017:
Ø farm size: 198
Farms: 3,000
Source: D3.7 – IFCN Annual Farm Structure Data with time series and forecast
Moving from household to
family farms
Consolidation of business
farms Milk delivery share
HH farms
family farms
business farms
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World market price vs. national milk prices
Farmgate milk prices with estimates for last 3 months
US
D/1
00
kg E
CM
(4%
fa
t, 3
.3%
pro
tein
)
Latvia milk price on
average 6 USD below
EU-28 average*
*(Lithuania: 7; EU-13: 3)
Latvian milk price
follows global
commodity price
developments (Latvia as
net exporter)
Latvia milk price takes
lows but not hikes of
price developments
close to world milk price
=> higher competitiveness
Source: D3.4 - IFCN Monthly Real Time Data and Farm Economics – 08/18
Data until August 2018
Average Jan-Aug 2018:
PL: 142 PLN /100 kg ECM
US: 135 PLN /100 kg ECM
DE: 149 PLN /100 kg ECM
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farm economics: Production: Leap year adjustment. February adjusted to 28 days
very good good poor very poor
For selecting countries for the charts, please type in the numbers (country codes) into the yellow boxes below.
0
5
10
15
20
25
30
35
40
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
Ja
n-1
7
Ja
n-1
8
Nat. farm gate milk price
National feed price -15%
-10%
-5%
0%
5%
10%
15%
20%
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
Ja
n-1
7
Ja
n-1
8
% change to previous year
Average annual % change
0
5
10
15
20
25
30
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
Ja
n-1
7
Ja
n-1
8
Margin over compound feed costs(0.3 kg/kg milk)
Bound - average 2007-2017
Latvia monthly data
farm economics: Production: Leap year adjustment. February adjusted to 28 days
very good good poor very poor
For selecting countries for the charts, please type in the numbers (country codes) into the yellow boxes below.
0
5
10
15
20
25
30
35
40
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
Ja
n-1
7
Ja
n-1
8
Nat. farm gate milk price
National feed price -15%
-10%
-5%
0%
5%
10%
15%
20%
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
Ja
n-1
7
Ja
n-1
8
% change to previous year
Average annual % change
0
5
10
15
20
25
30
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
Ja
n-1
7
Ja
n-1
8
Margin over compound feed costs(0.3 kg/kg milk)
Bound - average 2007-2017
Change in milk production on
monthly basis Margin Over Compound Feed
Costs in EUR/100 kg
Prices in EUR/100 kg ECM
*Feed price: 2018 data is
approximated based on global
Soybean meal and Corn prices
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Participating countries 2017
Details of analysis
No. of typical farm types: 177
Example: NZ-397= Farm with 397 cows
Time period: Calendar year 2017
Coverage: 53 countries; 89 % production
ID
What? Detailed comparison of farms
annually from 2000 onwards
Why? Estimation of competitiveness and
future dairy trends
How? Method
a) Typical farm concept
b) Model TIPICAL
c) Validation loops & Quality check
How to use?
Milk processor: Where to source milk;
sustainability of the farms in a region
Farm input companies: Economic
situation of the farms in different regions
and behaviour in the future
Source: D5.1 - IFCN Farm Economic Data
Farm comparison analysis done 2017
Countries where IFCN Typical farms are analyzed
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0
50
100
150
200
250L
V-2
8
LV
-20
9
0.000
2.000
4.000
6.000
8.000
10.000
12.000
LV
-28
LV
-20
9
0
500
1000
1500
2000
2500
LV
-28
LV
-20
9
Latvian farms: Farm description
LV-28:
• Average family farm
• 1 employee and family work
• Stanchion barn
• Bucket milking machine
• Local crosses of Latvian Brown and Holstein Friesian
• 86.5 ha land
LV-209:
• Large family farm
• Most work done by employees
• Free stall barn
• Parlour milking system
• 392 ha
• Holstein Friesian
Farm Size Milk Yield
0
50
100
150
200
250
LV
-28
LV
-20
9
0.000
2.000
4.000
6.000
8.000
10.000
12.000
LV
-28
LV
-20
9
0
500
1000
1500
2000
2500
LV
-28
LV
-20
9
Milk Output
kg m
ilk (
SC
M)
/ co
w /
ye
ar
0
50
100
150
200
250
LV
-28
LV
-20
9
0.000
2.000
4.000
6.000
8.000
10.000
12.000
LV
-28
LV
-20
9
0
500
1000
1500
2000
2500
LV
-28
LV
-20
9
No c
ow
s /
fa
rm
t m
ilk (
SC
M)
/ fa
rm
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USD/100 kg milk (SCM*)
Cost of milk production – 2017 On large typical farms in USD/100 kg milk (SCM*)
Low cost (< 30 USD): New Zealand, Ukraine, Argentina, Uruguay, Peru, South Africa
Moderate (30 – 50 USD): Latvia, parts of Europe, Australia, US, South Asia
High cost (>50 USD): Canada, Japan, Switzerland, Scandinavia, China
Source: D5.1 - IFCN Farm Economic Data
*Solid Corrected Milk, 4% fat + 3.3% true protein
Maybe snip to EU scale
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Cost of milk production – 2017 On large typical farms in USD/100 kg milk (SCM*)
Low cost (< 30 USD): CZ, UA, BY
Moderate (30 – 50 USD): LV, PL, DE, FR, UK, IE, ES, IT, DK, NL
High cost (>50 USD): FL, SE
Source: D5.1 - IFCN Farm Economic Data
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Total costs + returns of the dairy enterprise
LV-28 had higher
production costs than LV-
209, especially for labour
subsidies are key for
profitability in EU
LV-28 and FL-138 not
profitable
Based on 2017 data
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Labour Productivity on large farms
• High productivity in Europe, North America, Oceania
• Low productivity in Asia and Africa
kg milk / hour
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Labour Productivity on large farms
High productivity in Europe
kg milk / hour
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Labour Productivity
Source: D5.1 - IFCN Farm Economic Data
Labour Costs Average wages on the farm Labour productivity
US
D/1
00
kg m
ilk (
SC
M)
US
D/h
ou
r
Kg m
ilk (
SC
M)/
ho
ur
labour productivity <100: Low (e.g South Germany,No,FL,AT,CEEC)
mo
de
rate
mo
de
rate
high
high
low
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Land Productivity
Source: D5.1 - IFCN Farm Economic Data
Land Costs Rent for dairy land* Land productivity
US
D/1
00
kg m
ilk (
SC
M)
US
D/h
a
Kg m
ilk (
SC
M)/
ha
*weighted average, arable and
pasture
high
m
od
erate
lo
w
mo
derate
lo
w
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Structural changes in dairy animal numbers % dairy animals per IFCN Standard Classes
EU-28 Latvia Estonia
Moving from family to
business farms
Status 2017:
Ø farm size: 198
Farms: 3,000
Source: D3.7 – IFCN Annual Farm Structure Data with time series and forecast
Moving from household to
family farms
Consolidation of business
farms Milk delivery share
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Three dimensions
• Environmental
• Economic
• Social
The SDGs
DSF Criteria
Greenhouse Gas Emissions
Soil Nutrients
Waste
Water
Soil Biodiversity
Market Development
Rural Economies
Working Conditions
Product Safety & Quality
Animal Care
SDG: Sustainable Development Goals; DSF: Dairy Sustainability Framework
Sustainability – How to measure?
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The cow’s life – a consumer indicator?
Productive life is defined as years
the cow is in milk production.
Productive life + Age at first calving
= average age of a cow at time of
culling
Lifetime production is a
function of the productive years
and the milk yield per year
Core messages:
1. We can measure
different aspects of
sustainability
2. We can put
numbers to stories
and anecdotes
3. We can develop
ideas + strategies to
improve
Average age of a cow Average lifetime production
Source: D5.1 - IFCN Farm Economic Data
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IFCN Sustainability Indicators
Economic sustainability Social sustainability
Source: D5.1 - IFCN Farm Economic Data
Indicator: Costs from profit
and loss account – non-milk
returns + opportunity costs
=Costs of milk production
only
Indicator: Farm income
(including decoupled
subsidies) per hour family
labour input in relation to the
national minimum wage rate
LV-28 close to
minimum wage rate
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to make this presentation possible.
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